Research On Validity Of The Target Company's Promise Clause

In VAM the target company is not only the foundation of equity valuations,object of contract and the carrier of promises.Compared to shareholders,target company's promise clause are more likely to develop legal risk,such as repurchase equity risk and damage to the interests of shareholders or creditors etc.The effectiveness of the target company commitment is controversial in theory.Comprehensive evaluation of the target company's promise clause should based on contract law and corporation law.The legal risk is not inevitable,so can't be the invalid reason in contract law.The exit of target company's promise clause would not breach the principle of risk-sharing and equity equal,possible harm to shareholders and creditors can be avoid through certain mechanism.Commitment of the target company conform to value of law.Principle of freedom claimed the freedom of subject in contract.Shareholders aren't directly related to the capital raising,the rights and obligations are imbalance,incentive effect can't achieve.Target company's commitment can constraints itself,all shareholders and senior executives,to optimize the incentive mechanism,greatly improve the efficiency.Corporate personality and limited liability also claim target company to undertake the obligation in VAM.If the target company are not allowed to be the promisor which had completely undermined the independent personality.In VAM,equity transfer premium valuation always Included in the capital reserves,Enjoy jointly by all the shareholders.It can not only supervise shareholders,as well as management,which greatly reduce the monitoring cost,build a scientific mechanism of incentive and constraint.To avoid risks,protect interested parties,it is necessary to limit the target company's promise clause,such as demands a shareholders' meeting,the disclosure information to shareholders and creditors.Through the program restrictions of agreement signing,along with the standard corporate governance,the target can be subject to the terms if the legal risk can be minimize.