What Brazil Reveals About the Limits of Venture Capital Contract Transplants

U.S. venture capital (VC) has become a global model. But can U.S.-style VC contracts survive transplantation into other legal systems, especially civil-law jurisdictions? In a new paper, Raphael Andrade and Felipe Ferreira use Brazilian corporate law to test that question. Their analysis, building on the framework developed by Luca Enriques, Casimiro Nigro, and Tobias Tröger, does more than map local doctrinal frictions. It shows why the success or failure of a legal transplant depends not only on formal rules but also on the deeper interpretive commitments of the receiving legal system.

The Framework and Its Strengths

The Enriques-Nigro-Tröger framework asks whether a corporate-law subsystem enables or constrains VC contracting. In simplified form, a VC-friendly environment requires room for private ordering, judicial restraint in second-guessing bargained-for terms, and credible limits on abuse. Andrade and Ferreira show that Brazilian law presents obstacles at both the explicit and implicit levels.

Some of those obstacles are straightforwardly doctrinal. Mandatory shareholder rights and the prohibition on pacto leonino (the rule that no shareholder may be excluded from sharing in the profits or losses of the enterprise) may prevent familiar U.S. terms, especially liquidation preferences, from operating as intended. At this level, Brazil illustrates a familiar problem in comparative VC law: a contractual technology developed in Delaware may not map cleanly onto a legal system organized around different mandatory baselines.

But the paper’s more illuminating contribution lies elsewhere. Brazilian corporate law is also shaped by general clauses of good faith (boa-fé objetiva) and other open-ended standards that influence how formal rights are interpreted and enforced. The real constraint, then, may lie less in black-letter prohibitions than in the broader interpretive environment.

The Devil Is in the Metanorms

That point matters because the Brazilian case is not simply about one awkward statutory rule. Many of the principles at issue here, including good faith, duty of loyalty, and minority protection, exist across jurisdictions. Yet, as Enriques, Nigro, and Tröger show in their work on Germany and Italy, similar principles can produce different, though still constraining, outcomes. The same formal vocabulary can generate different degrees of friction depending on the legal culture in which it operates. 

That suggests that the core constraint in Brazil may not be any single formal rule, but a deeper normative commitment to fairness and equality among shareholders. As Andrade and Ferreira present the issue, that commitment exerts pressure against the highly asymmetric allocation of rights that makes U.S. venture contracting work. A legal system strongly committed to shareholder equality may therefore resist venture contracting not because it explicitly forbids particular terms, but because it interprets the entire corporate arrangement through a different normative lens. If that is right, Brazil reveals a limit in the transplantation framework itself. Formal rules can be amended; metanorms are harder to redesign. 

Rethinking the Link Between Corporate Law and VC

This, in turn, helps explain why the relationship between corporate law and VC has proven more complicated than traditional scholarship once assumed. The conventional law-and-finance intuition was that better corporate law, usually understood as stronger investor protection, especially for minority shareholders, should correlate with deeper capital markets. In VC, however, that expectation has not been borne out. 

Venture markets appear to depend on dense networks, talent concentration, credible exit opportunities, and a broader innovation ecosystem. Broad measures of “good” corporate law, by contrast, do not map neatly onto venture-market depth. 

But the converse does not follow. Even if corporate law does not reliably generate a venture market, it can still obstruct one. That is the real significance of Andrade and Ferreira’s account of Brazil. Their paper shows how domestic law can make imported venture contracts unstable, incomplete, or functionally weaker than their U.S. counterparts. 

The broader implication is that what counts as “good” corporate law may look very different in startups than in mature or closely held firms. Traditional corporate law is largely built around familiar agency problems: managers extracting private benefits at the expense of dispersed shareholders, or controlling shareholders exploiting minority investors. In those settings, equal-treatment norms, mandatory minority protections, and ex post judicial scrutiny often appear investor-friendly. 

Venture-backed startups are different. They are experiments under conditions of extreme uncertainty: most will fail, and a few must generate outsized returns. In that setting, the central legal problem is not constraining opportunism but structuring incentives for growth. The key question is not simply what protects investors against unfair redistribution, but what legal environment makes it possible to write and enforce contracts that allocate control and returns contingently, stage investment, and adapt through credible renegotiation as uncertainty resolves. Those features are what allow capital to fund risky experimentation and rapid scaling. For that reason, rules traditionally understood as protective may prove counterproductive in startups. 

Brazil in Perspective: Barriers, Workarounds, and the Limits of Law

Brazil sharpens the point, though it also puts it in perspective. In the short run, macroeconomic conditions may matter more than marginal doctrinal refinements. Brazil’s high interest-rate environment persists, and the country’s IPO market remains thin. 

At the same time, the widespread use of “Cayman sandwich” structures, where founders place a Cayman Islands holding company above the Brazilian operating entity to access more venture-compatible legal terms, suggests that sophisticated actors often route around local constraints. That shows both that domestic law can operate as a barrier and that legal friction does not always prevent venture activity; sometimes it merely changes its architecture.

Andrade and Ferreira thus show that the key question in comparative VC law is not just which rules obstruct transplantation, but why similar doctrines generate different outcomes across jurisdictions. The harder question is whether venture contracts can survive contact with a different legal imagination.

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Yifat Aran is an Assistant Professor at the Faculty of Law at the University of Haifa.

This blog is based on a discussion held at the Sixth LawFin Workshop U.S. Venture Capital Contracting Goes Global: Perspectives from Asia and Latin America on 18th March 2026. Visit the event page to explore more conference-related blogs.

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