Mandatory corporate law as an obstacle to venture capital contracting in Europe

In this chapter, we show how rigid corporate law regimes in Germany and Italy obstruct the adoption of U.S.-style venture capital (VC) contracting and constrain the development of vibrant VC markets. Drawing on our companion papers, we identify the implicit legal standards—often created by scholars, practitioners, and courts—that effectively block many core features of the U.S. VC deal architecture, even when not explicitly prohibited by statute. We argue that formal contracting matters, especially in downturns, and limited enforceability raises the cost of funding and deters investment. We reject the idea that incorporation abroad or using dual structures offers a practical workaround for early-stage startups. We conclude with policy recommendations aimed at expanding the private ordering space and enabling legal reforms that overcome entrenched doctrinal resistance to flexible contract-based VC funded firms’ governance.