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

As a valuation adjustment mechanism,Valuation Adjustment Mechanism(VAM)is commonly used in private equity investment and financing means since imported from abroad.The legality of the contract has always been the core in these cases.There is no clear conclusion of the effectiveness of VAM according to the law,but an extensive controversy on the legality of VAM among academia and practice,the judicial practice abroad has also shown different tendencies and practices.After the trial of the First Judicial Case of VAM called Haifu Case by the supreme people's court,there is a judicial referee rule which is followed in practice in VAM cases,indicating that the contract signed by the investor and the target company shareholders is legal while illegal by the investor and the target company.However,with the capital market to further deepen and open,there is an opposite arbitration award which identified the legal validity of VAM signed by the investor and the target company.Therefore,the discussion of Haifu Case makes sense.On this basis,the author found out the defects of the referee thought and application of law in the judicial practice with the evaluation of the case.The author proposed that the judge should change the judicial referee which the only legal basis is the violation of the mandatory provisions of laws and regulations in the cognizance of legal effect of VAM,but demonstrates the specific case synthetically with the various factors and the purpose.In addition,this paper makes the transfer slowly from the "one size fits all" to "different cases" and"contract effectiveness" to "contract fulfillment" with the Science of Construction of Law,rather than a completely negative attitude to the legality of VAM signed by the investor and the target company or a completely copy from aboard,laying the legality of VAM aside.