Study On The Legal Force Of Valuation Adjustment Mechanism

With the development of the finance and the capital market,the VAM has been gradually implemented.In the western capital market,the VAM are generally used to solve venture capital and Management Buy-outs.As for the situation of China,the private equity is playing an increasingly significant role in the capital market,while the legality and validity of VAM has been drawn a critical attention.With an effective and legitimate economic function,the legal validity of the VAM should be specified by legislation,and the system of which is supposed to be strengthened gradually,in order to enhance the ability of serving the substantial economy.This thesis analyzed and studied the legal validity of the VAM.By combining theories together with demonstrations through case analysis,this thesis dissected the deficiency of legislation on VAM,demonstrated the legality of VAM from various aspects and cogitated upon perfecting the legislation and jurisdiction of the VAM.Divided into four parts.The first part has explained the nature of VAM,which included the context,the cause and legal feature of the VAM.The second part has thoroughly studied the perspectives and differences of our judiciary and other relevant institutions on the legal validity of VAM.In the author's opinion,the judgment of the Supreme Court has reflected an idea of rigid using of law.On the grounds of harming the interests of creditors,it denied the effectiveness of repurchasing equity,which was bad for maintaining the trade safety of commercial affairs.Moreover,this thesis introduced China International Economic and Trade Arbitration Commission [2014] China trade arbitration award No.0056,which affirmed that the VAM between investors and target companies are effective.The clause of repurchasing equity and performance commitment are considered to have the same nature,which is a sort of contractual protection,and incentive and responsibility restriction mechanism.Then,the thesis illustrated the attitude and disposal on VAM for which the CSRC and the small and medium sized enterprises have to enterprises that are plan to go public or be listed.At last,the thesis have summarized 5 main concerns when ensuring the VAM by judiciary and other supervision institutes.The concerns are as follows: 1.Whether the VAM violate the compulsory provisions of law and administrative regulations.2.Is signing the VAM an action that represent the meaning of both sides and meet the specification of Contract Law.3.Whether the VAM abuses the right of shareholders and damage their interests.4.Whether the VAM damage the interests of creditors.5.Whether the terms of performance compensation of VAM is a minimum-guarantee clause which invest nominally and loan actually.The third part contains the core of the thesis.By summarizing the issues and combing the cases above,this thesis analyzed the legal validity of VAM specifically.The VAM are considered to be legal and effective and won't damage the interests of creditors.The fourth part is the perfecting suggestion on VAM.As for the judicial organs and other regulatory agencies have different caliber,this thesis proposed a unified standard of identifying the legal validity of VAM in the bassis of the legislation,judiciary,supervision and industry level.