Legal Analysis Of Gambling Agreement In Private Equity Investment

The term “VAM” is an English phrase with literal translation of “ValuationAdjustment Mechanism”，which is a common investment tool in the internationalcapital markets. The term of “VAM” came from the practice of private equity. It is anagreement about a situation of uncertainty for the future convention, which is madeby the two sides of investors and financing. Nowadays, it has been widely used inprivate equity. VAM can satisfies the needs of both investors and financing, whoseexistence has economic and legitimate bases. When judges reveal the unique legalnature of VAM, they shall fully consider the financial environment to measure theinterests of both sides and reasonably distribute the rights and obligations of bothsides, rather than think the execution of VAM will damage the interests of companyand the creditors to deny the validity of VAM.By analyzing the first case of an agreement on gambling, this thesis clarifies thethe nature and the validity of VAM and reveals the unique legal nature of VAM.Firstly, this paper summarizes the basic content of VAM from the angle of privateequity. this part describes the origin and meaning of VAM, discusses the types ofVAM differently, and analyzes the roots and“double-edged sword” effect of VAM,which provide the foundation for the following legal analysis.Secondly, by analyzing the first case of an agreement on gambling, this thesisclarifies the facts of this case and the controversial issues, summarizes and commentson the different legal concepts defined by of the Lanzhou Intermediate People’s Court,Gansu Province Higher People’s Court and the Supreme Court.Thirdly, this part makes an in-depth analysis on the VAM from the legalrelationship embodied in the VAM and reveals the unique legal nature of VAM bycomparing and analyzing.Finally, this part demonstrates that the VAM is legitimate under Chinese lawsfrom the functionality and the principle of freedom of contract of two angles,analyzes that there are some legal risks in implementing the VAM under Chinese laws, and raises the feasibility suggestions of preventing legal risk. This part from themacro and micro levels puts forward the specific measures of preventing legal risks.That is the fundamental foothold of the paper.