Shareholder agreements in publicly traded companies: a comparison between the U.S. and Brazil

Résumé

We know remarkably little about the use of shareholders’ agreements in publicly held companies. This article builds upon empirical evidence to advance the theoretical understanding in comparative law of how and why shareholders agreements are used by publicly traded firms. It also contributes to the existing literature on comparative contract design.

The evidence suggests great divergence in the incidence and content of shareholder agreements in both countries. Consistent with prior studies, we find that shareholder agreements are pervasive in Brazilian corporate culture, where they are used to coordinate corporate decision-making and bind directors’ votes. But while conventional wisdom suggests that U.S. public corporations do not have shareholders agreements, such understanding is inaccurate. Nevertheless, the existing agreements differ from their Brazilian counterparts in that they are usually used in order to achieve a specific corporate transaction.

Many findings of this study are surprising and challenge the current thinking in terms of contract design. For example, it finds no major stylistic differences between the agreements of the two countries, which contradicts the prevailing belief that U.S. contracts are necessarily longer than those of civil-law countries. Moreover, while arbitration appears as the preferred method of dispute resolution in Brazil, U.S. parties opt for judicial dispute resolution with greater frequency, mostly in Delaware and New York courts.