A Study On The Legal Effect Of Gambling Agreement

Private equity funds has been active in China’s capital market in recentyears,Private equity funds provide a huge sums of money support for a lot of privateenterprises in China, greatly promote the development of market economy in ourcountry.Private equity investment,in order to ensure human capital security andencourage the invested enterprise, will set valuation adjustment mechanism (VAM) inthe equity trading contract terms. But at present, our country legal system has notbeen perfect in the field of private equity investment, the legitimacy of VAM is notyet clear,this leads the problems that if VAM against the provisions of law has beencontroversial."Sea rich investments" in China PE industry is very famous, legaljudgment about the VAM brings the issue to the heights of controversy.This article makes a comprehensive and detailed discussion related to VAM, inorder to solve applicable law issues of VAM in the private equity investment. Thispaper will be divided into four parts, its main contents is as follows:In the first chapter, the writer preliminary discusses the definition, characteristics,causes and main types of VAM. In private equity transactions, investors,financiersand its shareholders signed and agreed target company business indicators at aspecific time in the future, if the target company to achieve the business objective inthe future, investors will continue to increase their investment to the target company,or pay part of the shares to the target company’s management;If you do not achievebusiness objectives, financiers and its shareholders need to compensate the investorsin accordance with the contract agreement.In practice, it has many characteristics,such as the particular subject, time, specific, with options. The reason for this is thatthe information on both sides of private equity investments is asymmetric, targetenterprise valuation is uncertainty, with the needs of security investment bottom lineand the incentive target enterprises.In the second chapter, we deep insight into the legal nature of VAM. VAMbelongs to the nameless contract of contract law in our country, the concrete nameshould be called Aleatory Contract.VAM comply with the stipulations of partyautonomy principle in the contract law, conform to the provisions of the company’sshares in the company law, free transfer principle, embodies the fairness andrationality of business transactions, do not violate social public interests. It has feasibility legitimacy on the macro and micro, our country law should confirm itslegitimacy.In the third chapter, through the" sea rich investment case",we makeinterpretations our country’s attitude to VAM. The supreme people’s court ruled thatthe VAM between the investors and the target company shareholders is legal and valid,VAM Between investors and the target company is invalid.In the fourth chapter, the writer introduces the attitude of CSRC(China SecuritiesRegulatory Commission)to the VAM exist in Going to listed companies and listedcompanies. CSRC recognize the legality of VAM, But in order to maintain thestability of the securities market, VAM required to be eliminated before listing.