Guard Against Legal Risks Of Valuation Adjustment Mechanism

For private equity investments,In the case of which it is uncertain that th e target company’s value and the future business activities,and which it is asy mmetry between information of the investment and financing,in order to protect investors return on investment and to actively encourage business financing,inv estors and financiers sign the contract on business conditions--If the agreed con ditions occur, investors certain rights maight be exercised;If not,enterprises coul d exercise other rights.The legal nature of the clause of valuation adjustment mechanism has two features.It is not only conditional,but also aleatory, and in which the latter is the essential characteristic.According to relationship between risk and uncertaint y,using the principle of which reducing the risk is by increasing the uncertaint y.,and using the role of uncertainty factors--time and information,they make a n arrangement about the rights and obligations of both parties.Thereby,in addit ion to market risk outside,it would fix all risks.This paper used the case study method, and analyzed the legal risks of the clause of valuation adjustment mechanism,aiming to prevent risk. In the first place,it introduced the background of this article,and explained the purpose and significance of this paper,and highlighted the Innovation,and then elaborated research status and defined related concepts about the clause of valuation adjustment mechanism.Secondly,this paper selected two classic cases of series of cases of the company whose name is A,emphatically to do the analysis,and combined with other cases,and sorted out identification existing Judiciary about disputed issue,and analyzed the legal risks which appears frequently in practice about the clause of valuation adjustment mechanism. And finally, it worked out the legal risk prevention system.This paper argues that the key risks on the clause of valuation adjustment mechanism are mainly as follows--litigant risk,content risk and implementation risk.There are these risks’ specific performance--valuation’ risk;performance targets’ risk;share repurchase’ risk;core competence’ risk;management behavior’ risk and market analysis’ risk.Based on the above studies,divided chronologically these risks into three types--before signing,signing and after signing,and developed appropriate measures.