This afternoon I'm having a squabble with a very aggressive lawyer over the terms contained in his client's non-disclosure agreement. NDAs have become the bane of my existence.
In my venture capital days, managing NDAs was simple-- we refused to sign them. Like most VCs, we came across the same "unique" technology or concept too many times each year to risk signing up to a confidentiality agreement. We also believed that any decent venture investment opportunity should be hard to replicate and able to withstand some sunlight.
Private equity is a different game. Deals come from global investment banks, blue chip corporations, law firms, accountants. If you want the information memorandum, you've got to sign the NDA.
The Australian Venture Capital Association's standard NDA is just three pages long. And a few years ago most of the agreements floating around town were pretty innocuous. But the lawyers have been having fun and a twenty-page NDA is now common. Some of the terms (always defended with a wide-eyed "oh, but these are very standard") are just beauties.
Today I'm fighting two battles:
- Indemnity: Buried in the indemnity clause is a right for the information discloser to simply demand damages if they feel they've suffered a loss. The burden would then be on us to prove the damages unfair or unreasonable and try to get our money back. Come on!
- Term: There's no term at all, no sunset. In twenty years a confidentiality obligation would still be lurking in the file cabinet.
I hope we're not alone, that other private equity firms are pushing back on this stuff.
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