Venture capital-backed firms, unavoidable value-destroying trade sales, and fair value protections

Casimiro A. Nigro*, Jörg R. Stahl

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)


This paper investigates the implications of the fair value protections contemplated by the standard corporate contract (i.e., the standard contract form for which corporate law provides) for the entrepreneur–venture capitalist relationship, focusing, in particular, on unavoidable value-destroying trade sales. First, it demonstrates that the typical entrepreneur–venture capitalist contract does institutionalize the venture capitalist’s liquidity needs, allowing, under some circumstances, for counterintuitive instances of contractually-compliant value destruction. Unavoidable value-destroying trade sales are the most tangible example. Next, it argues that fair value protections can prevent the entrepreneur and venture capitalist from allocating the value that these transactions generate as they would want. Then, it shows that the reality of venture capital-backed firms calls for a process of adaptation of the standard corporate contract that has one major step in the deactivation or re-shaping of fair value protections. Finally, it argues that a standard corporate contract aiming to promote social welfare through venture capital should feature flexible fair value protections.
Original languageEnglish
Pages (from-to)39-86
Number of pages48
JournalEuropean Business Organization Law Review
Issue number1
Publication statusPublished - Mar 2021


  • Appraisal rights
  • Corporate governance
  • Corporate law
  • Drag-along rights
  • Entrepreneurship
  • Fair value
  • Innovation
  • Law and economics
  • Law and finance
  • Private equity
  • Private ordering
  • Start-ups
  • Trade sales
  • Venture capital


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