A Study On The Legal Problems Of Valuation Adjustment Agreement In Private Equity Investment

The so-called valuation adjustment agreement (Valuation Adjustment Mechanism),that is, in private equity investments, investors sign a kind of financing agreement whichrequires the invested enterprises to reach a goal within a certain period of time with thefinanciers, if the invested enterprises be able to achieve this goal, the financiers shall beentitled to exercise certain rights of their own beneficial to compensate investors becauseof the underestimate the value of the loss of the invested enterprise.But if the investedenterprise fails to reach the goal, then the investor is entitled to exercise the rightsvaluation adjustment to compensate overestimate the value of the invested enterprisebrought losses. In the western capital markets, valuation adjustments protocol is a kind ofcommon agreement in the private equity investments. It always be used to solve problemsin the process of financing investment, financing for the two sides were unable to reach aconsensus of investing the valuation of the invested enterprises. However, due to theattribute of "import" valuation adjustment agreement has, its application in China is notvery smooth. The industry is also doubting its legitimacy and rationality. This papermainly research the valuation adjustment agreement from the following four sections.The first chapter, the valuation adjustment agreement in practice use. Mainly throughthe summary of the successes and failures of both practical cases, the analysis leads to thefollowing issues need to be studied.The second chapter, the legal analysis of the valuation adjustment agreement. It’smainly about the main concept of valuation adjustments protocol analysis, features, legalrelations, legal nature and other infrastructure issues.The third chapter, the legitimacy of valuation adjustments agreement. The mainproblems of the legitimacy in the country’s controversial agreement is discussed. And theauthor also researched the “Haifu Case” which is the most important case of VAM inChina, and by studying this case, the author analysis the pros and cons of using VAM inChina.Chapter IV, valuation adjustments protocol risk prevention. Through the analysis ofthe legitimacy of the valuation adjustment agreement, the author gave some suggestions in the practical application of risk prevention to valuation adjustment agreement.