@article{d08b54d8fcfd4aea90f914e4461a4851,
title = "Venture capital-backed firms, unavoidable value-destroying trade sales, and fair value protections",
abstract = "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{\textquoteright}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.",
keywords = "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",
author = "Nigro, {Casimiro A.} and Stahl, {J{\"o}rg R.}",
note = "Funding Information: Professor Brigitte Haar was a great scholar, wonderful person, and generous spirit, with whom Casimiro A. Nigro had the honour of working closely, and whose absence is deeply felt. Haar?s brilliant scholarly career was marked, inter alia, with a fascination for the interaction between corporate and contract law, and in particular by the complexities of the contractual arrangements that are typical of venture capital financing (see, above all, Haar (2001), Haar (2004), Haar (2006), Haar (2008a) and Haar (2008b)). Her encouragement and generosity, which persisted despite her limited time and through to their very last meeting, was indispensable in fostering the development of the idea explored in this paper, as well as its eventual submission to this journal. It is altogether fortunate, therefore, that this piece, first presented during the Symposium held at the Goethe University on 25 September 2019 to commemorate her, is now poised to be included in the resulting special issue, contributing to her legacy in a more permanent form. For useful discussions and/or comments on a previous draft, the authors thank above all, Luca Enriques, Tobias Tr?ger, Curtis Milhaupt, Jahred Ellias, and Vincenzo Pezone, as well as Peter Agstner, Danny Blaustein, Sergio Gilotta, Paolo Giudici, Pedro Magalh?es Batista, Chiara Lacava, Demetrio Maltese, Alessandro Romano, Andrea Sacco Ginevri, Mathias Siems, Matthias Thiemann, Holger Spamann, and Cornelia Woll. Ian Leo Polakiewicz has provided outstanding linguistic assistance. The usual disclaimers apply. This research benefitted from the funding by the Deutsche Forschungsgemeinschaft?DFG (Project ?FOR 2774?). J?rg R. Stahl acknowledges also funding through grants UID/GES/00407/2013 and PTDC/EGE-OGE/30314/2017 of the Portuguese Foundation for Science and Technology-FCT. Publisher Copyright: {\textcopyright} 2021, The Author(s). Copyright: Copyright 2021 Elsevier B.V., All rights reserved.",
year = "2021",
month = mar,
doi = "10.1007/s40804-020-00196-7",
language = "English",
volume = "22",
pages = "39--86",
journal = "European Business Organization Law Review",
issn = "1566-7529",
publisher = "Springer International Publishing AG",
number = "1",
}