On The Legal Effects Of Valuation Adjustment Mechanism

Comparing with developed countries, China's capital market is immature. It is extremely hard for small and medium-sized private enterprises to get financing from traditional financing channels. However, the rapid development of the enterprises makes them feel very keen for capital. The rise of private equity investment in our country helps alleviate this problem to some extent. Along with that, Valuation Adjustment Mechanism as an investment tool is often used in capital market. In China, the absence of legal norm about Valuation Adjustment Mechanism leads that there is a major debate on the legal effects of Valuation Adjustment Mechanism in both theoretical and practical field.As the first case of Valuation Adjustment Mechanism in China, “Haifu Investment Case” has experienced the first trial, the second trial and the final trail, and the results of each trail are not the same. This case has theoretically and practically caused great controversies over the legal effects of Valuation Adjustment Mechanism, which is of great value for further research. This thesis takes “Haifu Investment Case” as a starting point to discuss the factors affecting the legal effects of Valuation Adjustment Mechanism in details from the perspective of Contract Law and Company Law.In this paper, except for the introduction part, there are a total of four chapters:Chapter I is the review about those basic facts of “Haifu Investment Case”. About the dispute between Haifu Company and Shiheng Company and the one between Haifu Company and Diya Company, the result of sentence of the court of first instance and the court of second instance were judged invalid. However, the reasons of invalidation of the first trail and the second trail were entirely different. Court of retrial adjudged the gambling agreement between Haifu Company and Diya Company was valid, and the one between Haifu Company and Shiheng Company was invalid. Considering the judgments of three levels of courts, both parties' causes of action, grounds of appeal and reply brief, the author believes that focus of dispute in this case is that the Valuation Adjustment Mechanism is valid or not.Chapter II discusses the basic theoretical of Valuation Adjustment Mechanism. Based on clarifying definition of Valuation Adjustment Mechanism, cause of formation and types, this paper sums up that the legal quality of Valuation Adjustment Mechanism is essential difference from conditional contract. It is typical Aleatory Contract. This paper also discusses the legal effects of Valuation Adjustment Mechanism from the angle of contract law and company law.Chapter III analyzes the case again. Based on the second part, this part shows the results of “Haifu Investment Case”. The Supreme People's Court did not totally negate the effect of Valuation Adjustment Mechanism in “Haifu Investment Case”. It recognized the gambling agreement between investors and stockholders, denied the gambling agreement between investors and target corp. The author holds part of the retrial is open to objection and later on elaborates it.Chapter IV is the insight of “Haifu Investment Case”. Through analyzing and assessing the related law section of Valuation Adjustment Mechanism in “Haifu Investment Case”, the author thinks that different types of Valuation Adjustment Mechanism involve different content. The legal effects of Valuation Adjustment Mechanism should be specifically analyzed according to relevant laws and regulations.