A Study On The Legal Issues Of Gambling

In the field of investment, The Gambling Agreement refers to a convention for future uncertain circumstances between the investor and project financer, when they reach an investment agreement. If the agreed conditions occur, the investor can exercise a right, if not, the project financer can exercise another right. The Gambling Agreement is a comprehensive investor contractual protection system, having the function of foreign similar systems. Its core is gambling of performance of the project, valuation adjustment. But it does not include valuation adjustment. As an innovative mechanism of investment and transactions, the Gambling Agreement is flexible and diversified. It can protect investors from transaction risk, incentive the project financer and constraints them. It also can facilitate transactions, save cost, and create values. As the role of "facilitator", it had the functions of "good wine", having promoted the development and growth of a large number of enterprises to IPO, like Mengniu, China Dongxiang, Robot&Automation, Welle Environmental, and so on. While it can play the role of "butcher", destroying many enterprises like Taizinai Group, China Paradise, Harbour Networks. It also was very poisonous. It has strong life validity and widely used, though its legal status is controversial. Banning to using it is not as good as proper regulation.Other than the introductory paragraph, the paper is divided into four parts.The first Chapter mainly introduces some typical cases, including successful cases and losing cases, and presents the major problems in the current using of Gambling Agreement. What is the Gambling Agreement and how to determine its validity?The second Chapter-A comparative analysis of the Gambling Agreement. There is no certain "Gambling Agreement" in foreign countries. But the investors’protection mechanisms are very comprehensive. Trace to its source, the saying that "the Gambling Agreement is Valuation Adjustment Mechanism" is wrong. Essentially, the Gambling Agreement is a conditional contract. Its main content includes the price, commitment of the project financer, compensation and adjustment clauses.In the third Chapter, the author tries to find why the Gambling Agreement exists. It mainly resolves the valuation differences resulting from serious information asymmetry. It is rational and necessary to protect investors from transaction risk while the traditional peremptory norms are not sufficient.The fourth Chapter-the focus of the paper, analyses the validity of the Gambling Agreement. Firstly, the value of the system, its rationality and necessity are basic to determine the validity of Gambling Agreement. Secondly, the judicial should do its best efforts to respect the corporate autonomy, including using the Gambling Agreement freely, unless such autonomy breaches of peremptory norms. Analysis from the nature of Gambling Agreement and on the view of protecting creditors, it does not necessarily harm the interests of the company and the interests of the creditors. The Principle of Change of Circumstances may be used in the Gambling Agreement when there are significant changes like financial crisis, industry crisis, making continuation of fulfillment of the agreement unfairly. Essentially, the minimum-guarantee clause is different from the Gambling Agreement. At the last, the paper concludes that why the Gambling Agreement encountered strict supervision and control when en enterprises apply for IPO and analyses its feasibility.