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30 Duke J. Comp. & Int'l L. 1 (2019-2020)

handle is hein.journals/djcil30 and id is 1 raw text is: 











     OLIGARCHS, FOREIGN POWERS, AND THE
        OPPRESSED MINORITY: REGULATING
    CORPORATE CONTROL IN LATIN AMERICA

                          CARLOS  BERDEJO*

     Corporate law and governance scholarship have traditionally focused
on understanding the agency costs that result from unresolved conflicts of
interest between shareholders and  management.  This agency  problem
becomes  trivial when corporate ownership is concentrated, as is the case in
many  countries outside the United States. In this context, the more pressing
agency  problem  results from  conflicts of interest between minority
shareholders and controlling shareholders seeking to divert resources at the
expense of the former.
     When  ownership  is concentrated, legal rules must seek to protect
minority  shareholders from   controlling shareholders,  rather than
shareholders from managers. In many countries, minority shareholders are
afforded this protection via tag-along rights, i.e., the right to be bought out
by any person that seeks to acquire a controlling stake in a company. The
effectiveness of such a mandatory bid rule has been the subject of vigorous
debate. This debate, however, has centered on comparing the approaches
followed by the United States and the European Union in regulating sale of
control transactions.
     Latin America offers an unexplored setting in which to address these
long-standing issues. The Article starts with an  examination of  the
shareholder  structure  of  Latin American   companies,   which  are
characterized by high levels of ownership concentration. Families and
foreign entities play a dominant role, a remarkable reflection of the region's
colonial past. Latin American countries have adopted unique approaches in
sales of control that attempt to protect minority shareholders without
deterring some of the efficient transactions that the traditional mandatory
bid rule prevents. A preliminary comparison suggests these local rules
outperform the US. market rule and the European mandatory bid rule.


Copyright 0 2019 Carlos Berdej6
    *  Professor of Law and J. Howard Ziemann Fellow, Loyola Law School, Los Angeles.


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