Research On The Legal Force Of The Valuation Adjustment Mechanism

With the development of the equity investment, VAM (often translated as ’gamble up’ agreement in practice) has attracted investors for its high ability on resisting risks as equity investment has the characteristics of long cycle and high risk. However, this agreement which is widely-used in practice, got forbid by the Supervision department Because its legal force is still a controversial issue. The legal force of VAM is in a state of uncertainty, this will seriously affect the stability、 transparency and predictability of the entire equity investment process, hinder the process of development of China’s capital market. Our country should confirm t he legal force as soon as possible, improve the relevant laws and regulations of China’s capital market, improve our capital market practice mode, promote the healthy development of China’s capital market.This thesis is divided into five parts.In the first part, the writer defines the concept of VAM, then analyze its characteristics by discussing its development process in order to differ from the other related terms. The second part analyzes the legal framework and classification of VAM and grasp its practical application by some typical cases. The third part reveals VAM’s vague state in legal, exemplified by some classic court sentences and management attitudes of CSRC. The fourth part is the aggregate analysis on the legal force from two sides:Ideally status and real status. Including the provisions of the agreement and relevant domestic and foreign contract law, company law and comparative analysis of contract law, company law, law and Economics Analysis on the legal force of VAM. The fifth part aim at the reality that the legal force of VAM is unknown puts forward some countermeasures for how to protect the benefit of investment and financing both sides, and shall give the corresponding suggestions on how to design the future regulatory system.Equity investment plays a promoting role in the adjustment of economic structure and development model, diversifying the channel of absorbing foreign capital, strengthening domestic enterprise independent innovation ability, and alleviating the problem of financing difficulty of SME.