| The total amount of private equity grew up to 700 billion RMB in 2015, which reflects a huge demand of private capital market and the big potential of private equity. But the amount of disputes resulted from gambling agreement is rising, the author collected around 86 cases. Local courts hold different verdicts toward the gambling agreement as the vital document in the private equity. Some courts hold that the gambling agreement should be a loan contract in the light of protecting the companies’ benefits, while the others hold that it should be the share purchasing agreement from respecting their own free will perspective. In former cases, the company must repay the loan and interests to the investors, while in the later cases, it will perform the obligation of the share redemption at the price of higher four times than bank interest which will pose a more severe effect on the company. The different verdicts of courts will not only harm the application and stability of law, further impact the motivation of private equity investors because they can’t foresee the legal effect of their investments, but will be very difficult to balance the benefit between private equity investor and the company.In the light of high speed development of private equity, we should make the gambling agreement free into use which helps to make our capital market connect with international developed capital market, motivate the private equity investors, reduce the cost of company’s financing, clear out the gambling agreement widely used in practice and make it legally applied.The author finds that there is absent of preferred stock terms in the our gambling agreement by comparison between China and US. Venture contract.The term sheet in gambling agreement contains two different rights of share and loan. It is easy for courts to ignore another part when the courts hold it only as share purchase agreement or loan contract. Because of the special legal nature of the preferred stock, it will solve the legally application dilemma of gambling agreement if we can make it clear in company law.The structure of this thesis is as follows. Chapter one is to analyze the relevant concept of gambling and then emphasize the importance of dividing the gambling agreement and gambling clause, and make brief of main content of gambling agreement based on the practice of private equity investment in China. Gambling agreement acts as the main document in private equity and then plays its role only when it’s accepted by law.Chapter two is to make an introduction of two typical type of gambling case—stock redeeming and performance indemnity, make remarks of the courts’ legal base and reasoning, and then bring up the main legal problems of gambling agreement in China.Chapter three aims at how to solve these problems aroused from chapter two. It is worthy for law to think how to apply gambling agreement in high speed of development of private equity. The author finds our gambling agreement absent of preferred stock by comparison of venture invest contract in US and then analyze the necessity of preferred stock as a investment tool used in gambling agreement.Chapter four summarizes main problems by comparison analysis of preferred stock between civil law system and common law system, and the author further advise how to make the preferred stock better used in China.Chapter five summarizes the main idea of this thesis and then stresses the importance of making preferred stock widely used in gambling agreement stipulated in company law. |
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