Non-disclosure agreement (NDA)
A plain-English guide to non-disclosure agreements (NDAs): what they cover, their types, and how they work in NZ.
February 2024 | Published by Xero
Published Thursday 23 July 2026
Table of contents
Key takeaways
- A non-disclosure agreement (NDA) is a contract that stops the people who sign it from sharing confidential information with anyone outside the agreement.
- A mutual NDA protects information shared by both parties, while a unilateral, or one-way, NDA protects information shared by one party.
- A clear NDA names the parties, defines what counts as confidential, and sets out how the information can be used and for how long.
- In New Zealand an NDA is enforceable as a contract, so breaking one can be treated as a breach of contract.
What is a non-disclosure agreement (NDA)?
A non-disclosure agreement (NDA) is a contract that stops the people who sign it from sharing confidential information with anyone outside the agreement. It’s sometimes called a confidentiality agreement.
An NDA legally protects financial information, intellectual property and data by committing everyone who signs it to keeping that information private. The agreement spells out exactly what information, or type of information, it covers.
Because an NDA removes the guesswork about what’s protected, it gives the people who sign it the confidence to have open conversations.
Types of NDA: mutual and unilateral
NDAs generally fall into 2 types, and which one you use depends on who’s sharing information. The difference comes down to whether one party or both parties need protection.
- Mutual NDA: both parties share confidential information, so the agreement protects each of them
- Unilateral NDA: only 1 party shares confidential information, so the agreement protects that party alone. This is also called a one-way NDA
Examples of when businesses use NDAs
Businesses sign NDAs whenever sensitive information needs to change hands safely. Here are 3 common situations where they come in handy.
One party asks another to sign an NDA
A business might be asked to sign an NDA before it receives sensitive information from a customer or collaborator. It might also ask another person or organisation to sign one before sharing information with them.
For example:
- a drinks company that has to share its recipe with a contract manufacturer secures an NDA first to protect its intellectual property
- a direct mail business signs an NDA before a charity shares its mailing list of high-profile donors
NDAs in negotiations
Before agreeing a deal, 2 businesses might sign an NDA so they can review each other’s financial information. For example, a manufacturer and a distributor may need to understand each other’s financial models to weigh up the risks and returns of a partnership.
NDAs in operating partnerships
Two organisations might need an NDA to deliver a project together. For instance, a non-profit could partner with a tech company to build a government-funded app, then sign an NDA so they can share data and insights throughout the project.
What an NDA should include
A useful NDA leaves little room for doubt about what’s protected and how. Most agreements cover a few key points in plain terms.
- The parties: who is signing and who is bound by the agreement
- Confidential information: what counts as confidential, such as financial records, customer data or trade secrets
- Exclusions: what the agreement doesn’t cover, such as information that’s already public
- Permitted use: how the information can and can’t be used
- Duration: how long the confidentiality obligations last
What it means when businesses sign an NDA
Signing an NDA is a commitment, so it helps to understand what you’re agreeing to. By entering an NDA, the people who sign it agree not to share certain information with anyone outside the agreement.
A business that signs an NDA can usually share the protected information with its lawyer, accountant or another agent. The business is typically responsible if an agent leaks that information, so a good NDA makes everyone’s obligations clear.
To stay compliant, businesses need to be careful about how and where they record protected information, including any details that feed into their financial reporting. In New Zealand an NDA is enforceable as a contract, so breaking one can be treated as a breach of contract.
What happens if you break an NDA
Breaking an NDA can carry real consequences, which is why it pays to know your obligations before you sign. When someone shares protected information, the other party can take legal action for breach of contract.
The remedies depend on what the agreement sets out and the harm caused. A court might order the person who broke the agreement to pay damages, or it might require them to stop sharing the information. Because NDAs need to identify clearly what’s protected, it’s worth working with a qualified lawyer, as a poorly written agreement may not hold up.
Keep your business information organised with Xero
Handling confidential information carefully starts with keeping your records tidy and in one place, and Xero helps bring your finances together in one place so you can see where things stand. To see how it fits your business, you can get one month free.
FAQs on NDAs
Here are answers to some frequently asked questions about NDAs.
What is an NDA?
An NDA is a contract that stops the people who sign it from sharing confidential information with anyone outside the agreement. It’s also known as a confidentiality agreement.
What is the difference between a mutual and unilateral NDA?
A mutual NDA protects confidential information shared by both parties. A unilateral, or one-way, NDA protects information shared by just 1 party.
What happens if you break an NDA?
The other party can take legal action for breach of contract. A court might order the person who broke the agreement to pay damages or to stop sharing the information.
Are NDAs legally binding in New Zealand?
Yes, a properly drafted NDA is enforceable as a contract in New Zealand. Breaking one can be treated as a breach of contract.
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.