The Legal Analysis On Dispute Between Haifu Investment Co., Ltd. Vs. Gansu Shiheng Co., Ltd., Disputes Over Capital Increase

With constant development of market economy in our country, the enterprise of our country needs to acquire a large amount of capital for production expansion and industrial transformation. However, subject to the economic development of our country and imperfection of related laws, regulations and policy systems, the problem financing difficulty of enterprise cannot be solved better. In order to acquire capital, some enterprises turn the eyes to international capital market. In such context, Valuation Adjustment Mechanism, namely VAM is thus introduced to our country. The introduction of VAM causes great shock to capital market of our country. No matter in theoretical research filed or druidical practice field, the controversy on the nature, effect and law application always exists. The Additional Share Dispute Case between Haifu Investment and Gansu Shiheng is called the first case of VAM in China. The verdict of the case has important guiding significance on the application of VAM in equity investment field.The verdict result on Additional Share Dispute Case between Haifu Investment and Gansu Shiheng judged by Supreme People's Court determines the basic principle that judicial organ of our country to VAM and liability bearing:that is, in VAM, the terms of VAM between investor and target company should be identified to be invalid; the terms of VAM between investor and original shareholder of target company should be identified to be valid. In the case that terms of VAM is identified to be valid, the form of liability born by original shareholders of target company is different owing to difference of agreement of VAM and it is suitable to bear general form of liability theoretically. However with further opening and deepening of capital market in our country, the identification of effect of VAM and liability bearing by judicial adjudication organization also changes. In practice, the case has happened that arbitral authority identifies the effect of VAM terms between investor and target company. Therefore, both parties of financing should realize the legal risk of VAM, take necessary measures and try to select proper content and form of VAM so as to promote development of enterprise and share income from investment jointly.