Both sides of the private equity disclosure debate now believe that portfolio company information will remain confidential, but one Illinois legislator wants to make extra certain.
Rep. Barbara Flynn Currie (D-Chicago) is an unlikely ally of venture capitalists in the disclosure debate. She not only serves in a high-profile position as House Speaker, but she also sponsored the Illinois Freedom of Information Act (FOIA). Currie has received bi-partisan support for a new bill that would exempt any information deemed “trade secret” from being subject to Illinois FOIA. In other words, fund-level information like IRRs likely would be subject to public scrutiny while portfolio company valuations and revenue projections would be exempt.
“In those states with very broad rights, almost any document can be requested and required to be disclosed,” says Malcolm Nicholls, a Boston-based attorney with Testa, Hurwitz & Thibeault. “But in other states, statutes can be used to limit what is subject to disclosure.”
The Illinois bill – which essentially would act as an amendment to the Illinois FOIA – won State Senate approval in April, but was killed by the House in June. Currie hopes it will be revived during the next legislative session, but admits that it first needs some more powerful supporting documentation and greater clarity.
“The legislators were unsure about why we needed to do this at this point,” Currie says. “Those who did say they were worried about proprietary information getting out also asked why the current confidentiality sections in the partnership agreements didn’t solve the issue. They also asked if this is a problem, since they didn’t see any evidence that anyone is trying to access this information.”
The National Venture Capital Association is not actively backing the bill, but it has offered supportive advice to the Illinois Venture Capital Association. The IVCA declined to be interviewed for this story.
-Carolina Braunschweig and Dan Primack