Looks like the NDA question may have to be taken up here? -
> A Domo spokeswoman says the company had asked Mr. Biederman to sign a nondisclosure agreement before providing financial records, but that he refused to do so.
I don't see anywhere in subsection 220 (I haven't read the rest) that allows Domo to require this of Biederman.
> The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other or further relief as the Court may deem just and proper.
Unless the court has told Biederman that he needs to sign that NDA, it doesn't seem that he has to and that Domo is still acting against subsection 220.
An NDA seems reasonable in this case. The article did state that Biederman objected to some of the stipulations which asked him to give up some of his shareholder rights. I suspect the lawyers will make some more money off this and then a more reasonable NDA will be signed.
Without knowledge of the law in this specific case, it still feels like there are reasonable grounds that a private, not-publicly-traded company should be allowed to keep its financials private.
Though of course, any such NDA should be revealed ahead of time, including the precise language of the NDA, so that investors (and yes, employees who receive equity in lieu of cash are investors) make a fully informed decision.
Sure they can keep their financials private by requiring a signed NDA before distributing shares. But if they're asking for an NDA after granting shares then it's too late. What incentive would the shareholder have to sign away certain rights in order to gain access to financial records to which he is already entitled? In order for an agreement to be valid and legally enforceable it generally has to provide some specific benefit to both sides.
...any such NDA should be revealed ahead of time, including the precise language of the NDA...
Is this a common thing with NDAs? ISTM it's rare that during the hiring process one would receive a folder containing all the NDAs one might potentially be asked to sign while working at a firm. One might receive an "initial" NDA, to sign before starting, but every time there is an ownership change one can expect a new round of NDAs, because apparently NDA terms are a rapidly-evolving area of contract law.
Requiring a new NDA as a condition (but not prom is) of continued employment is one thing; requiring it as a condition of exercising a statutory right is another.
But as part owner of the company through stock, the former employee is free to disclose whatever they like, unless specifically contracted to do otherwise, aren't they?
Don't want all your private company secrets legally broadcast to the public? Be careful who you grant shares of ownership to. Can't trust your employees? Guess you have to find something besides ownership to incentivize them with.
Sure, of COURSE asking him to sign an NDA is reasonable. But when he chooses NOT to sign it (for whatever reason, it doesn't matter why) what then?
The law in DE states that he has a right to see the data anyway if he has a valid reason, and "valuing my shares for tax reasons" is a valid reason. So NDA or not, the company needs to show him the numbers.
Assuming (purely for the sake of argument) that a case might be made for some form of NDA, it seems that the law does not permit the company to avoid its responsibility on the grounds that no NDA has been signed.
I think we'd need to see the wording for that NDA to understand why he refused. For example, many NDAs use wording along the lines of "must not disclose or USE..". It would be hard to agree not to "use" the information being disclosed in this case. There could have been other unacceptable conditions attached beyond the basic requirement to refrain from public disclosure.
He should refuse any NDA he doesn't get anything in exchange for. if the startup is already required to give him the financials then he's not getting anything "more" so would he agree to give up his rights?
> A Domo spokeswoman says the company had asked Mr. Biederman to sign a nondisclosure agreement before providing financial records, but that he refused to do so.