Penn State International Law Review


Francisco Reyes

First Paragraph

The wave of corporate governance reforms that has permeated all of the systems of Latin America has not significantly impacted the legislation applicable to closely held companies. This appears to be a misdirected approach since the region's economic reality is characterized by family control and concentrated ownership. Surprisingly, most legal reforms in this field have targeted agency problems more commonly arising in the context of dispersed equity ownership models. Corporate governance reforms such as mandatory independent directors, auditing committees, and certification of financial statements have become commonplace in securities regulations across the region. Albeit important in improving the legal framework of listed companies, most of these legal reforms disregard the basic underlying agency problem between controlling shareholders and their minority counterparts. Regulatory provisions for non-listed firms impose severe restrictions on private ordering and prevent parties from contracting around cumbersome imperative norms. In fact, provisions concerning all aspects of corporate governance, minority shareholders' rights, structural changes, mergers, dissolution, and liquidation are overwhelming. These suboptimal anachronistic approaches are justified on the grounds of public policy and defended at any cost by local legal operators.