Can US Venture Capital Contracts Be Transplanted into Europe? Evidence from Germany and Italy

Venture capital (VC) plays a central role in financing early-stage, high-tech startups. In the US, this ecosystem has flourished thanks in part to a sophisticated contractual framework that leverages one of the hallmarks of Delaware corporate law: flexibility. Over time, this framework has become the global reference point for structuring VC transactions.

A substantial body of scholarship has examined whether VC investors and entrepreneurs operating outside the US can replicate the governance structures that have proven successful in Delaware. Some scholars argue that experienced investors can recreate the economic effects of US-style contracts across jurisdictions (eg, Kaplan et al., 2007). Others highlight the challenges posed by more rigid legal environments, particularly in civil law jurisdictions within and beyond Europe (Giudici & Agstner, 2019; Lin, 2021; Pereira, 2023).

However, much of this literature remains fragmentary. It tends to focus narrowly on individual clauses rather than the broader contractual architecture, and rarely distinguishes between statutory law and the law in action—that is, how rules are interpreted by scholars, applied by legal practitioners, and enforced by courts. It also often assumes that ‘functionally equivalent’ contractual solutions are available when US-style clauses prove unworkable.

In a new paper, we take a more granular approach to the matter. We examine whether VC investors and founders can replicate the allocation of rights typically achieved under Delaware law within the legal regimes of two major European countries—Germany and Italy. Crucially, we do not merely ask whether US-style terms can be used verbatim. Rather, we investigate whether economically equivalent alternatives are legally and practically viable when a mere ‘translation’ is precluded by local mandatory rules.

Our findings are sobering. Both German and Italian corporate law impose significant constraints on private ordering that largely limit the transplant of US VC contracts into both jurisdictions. With few, largely negligible, exceptions, VC contracts in these jurisdictions cannot include US-style provisions—nor can they rely on fully equivalent substitutes. Instead, parties must resort to inferior alternative arrangements, or contractual mechanisms that aim to replicate the function of US provisions but either fail to achieve the same practical outcomes or do so at a higher cost.

One illustrative example is the so-called bad leaver clause. In US venture capital (VC) deals, these clauses enable the repurchase of a misbehaving founder’s shares at a significantly punitive price if they engage in misconduct, such as fraud or gross negligence. These provisions serve as a self-enforcing governance mechanism, aligning incentives and deterring opportunistic behavior.

Germany and Italy, however, greatly limit the use of such clauses. While forced buyouts are not outright prohibited, they must adhere to mandatory ‘fair value’ pricing requirements. In Germany, courts can review the fairness of the buyout price, curbing the ability to impose punitive terms. In Italy, statutory minimum pricing rules apply ex ante, leaving little room for manoeuvring. These constraints not only limit bad-leaver clauses but also restrict similar tools, such as buy-sell agreements or call options, that contracting parties may want to use to bypass existing legal constraints.

As a result, investors in Germany and Italy must settle for weaker substitutes—mechanisms that may resemble US-style clauses but lack their deterrent effect in practice. This undermines the ability to discipline opportunistic founders and illustrates how rigid corporate law regimes can frustrate the effective transplant of key arrangements included in US VC contracts.

By examining the structural frictions that corporate law creates in the transplantation of US VC contracts, our study offers a novel, systematic perspective on the debate regarding the viability of transplanting US venture capital structures to other jurisdictions. Our research provides the first detailed evidence on whether the corporate law regimes in these foreign jurisdictions permit an allocation of control and cash-flow rights comparable to those available under Delaware law.

Together with two companion papers (available here and here, with blog posts available here and here), our analysis establishes the boundaries of what private ordering in VC can realistically accomplish under different legal systems. These findings illuminate how, at the margin, corporate law shapes VC investment and, by extension, entrepreneurial innovation.

The authors' full paper is available here.

Luca Enriques is a Professor of Business Law at Bocconi University.

Casimiro A Nigro is a Business Law Lecturer at Leeds University.

Tobias H. Tröger is a Professor of Law and Finance at Goethe University and the Leibniz Institute SAFE.