The Legal Effect Of Valuation Adjustment Mechanism Of Chinese Judicial Practice And Enlightenment

The academic community has different opinions about the effect of valuation adjustment mechanism(for short-VAM),especially,which kind of situation the VAM is effective or invalid.Although the Supreme Court’s judgment in “Haifu” case seems to give a conclusion about the effect of VAM,the Arbitral Commission does not fully endorse the result of judgement from Supreme Court’s trial.So it was suggested to the investor that it’s better to choose arbitration rather than litigation when the dispute happens or don’t make the VAM with the target company;the purpose is to ensure the validation of the VAM.It’s right about the this suggestion? Combined with the judicial judgment of the court and arbitration,it’s easy to find that the court pretend to protect the interests of the company and its creditors and the arbitration tend to protect the interests of investors.But the same way is that the investment market should follow the corporation law and should transact in fair.The court confirms that the investors violate the mandatory provisions of the company law,and The arbitration don’t think that the law is violated by the investors in specific cases.The reason why there are different opinions between both sides is that there are no specific description in cases but only conclusion.By analyzing many cases,the criteria for judging the effect of VAM does not depend on the contracting parties.This paper discusses the important issues of the legal effect of the VAM,and puts forward some suggestions on its legal perfection and the confirmation of the effectiveness of the VAM in the light of Chinese existing judicial cases and some American trial experience.The article is discussed in the following four chapters:The first chapter of this paper focuses on the development of the VAM.First of all,it’s need to analyze what is the VAM from the legal point of view of,that is,to explore the legal nature of the VAM.There are different views on the legal nature of the VAM and most scholars believe that it belongs to the Aleatory contract.At the same time,this paper clarifies the reasons and value of the existence about the VAM and the realistic and theoretical basis.At the end of this chapter,there is a disagreement between the Supreme Court and the arbitration about the effect of the VAM.The result of the judgement makes a great influence on the society and confuses the parties of contract about the effect of the VAM,which attracts a lot of think of the VAM.Most part of Chapter 2 is about the comprehensive analysis of judicial precedents.Combined with specific case,it’s not difficult to find the trial ideas and value bias of the Court and the Arbitration.The trial idea of the court is the combination of internal and external company Lysenkoism.Signing a contract with the shareholder should be regulated by “Contract Law” and with the target corporation should be regulated by “Company Law”.But the determine standard of the effectiveness about the VAM does not be specified by the court or the arbitration.The arbitral committee’s main idea is to respect the autonomy of the parties and determine whether there is a violation of the “Company Law” mandator provisions.But still there is no specific description of the standard about how to determine the effect of the VAM.This kind problem led to the analysis of the criteria about how to determine the effect of the VAM.The third section of this chapter is the conclusion about the influence elements and evaluation criteria of the validity of VAM.The effect of VAM depends on which parties make the agreement in VAM,which is the most important judgement standard.At the same time,the content,style and value orientation of VAM is regarded as auxiliary standard of the validity of VAM,which leads to a reflection of such a judgement standard in the third chapter.The first section of Chapter 3 of this paper is the reflection that the problems exist in the trial court and the arbitration and the judgement standard issues above.It’s not difficult to find that the reasons in the trial is not sufficient and vulnerable to be refuted.Besides,the different details of the cases have been ignored.Finally,not only the situation of transfer the company’s assets by VAM is ignored but also the interest of original shareholders and its creditors is ignored too.And in the end,combined with the current cases analysis,make a new analysis of the effectiveness about the target corporation or shareholders in VAM.The second section began to explore new judgement,which the parties in VAM is not the main criterion.Withdrawing capital contribution is the judgement of validity about the target corporation in VAM.If the shareholders makes agreement in VAM,the effective judgement standard of VAM need to consider whether the shareholders have special identity,whether need special approval procedures from government,whether damage the corporate shareholders of the company’s solvency.Only the specific financial situation of the company involved in the case has been considered;in accordance with the above analysis standards,the exact conclusion can be made.The fourth chapter of this paper suggests that the legal nature of the VAM should be confirmed through judicial interpretation and the judgment standard of the VAM should be clarified in specific case.The court or the arbitration of China should learn the trial skills in the “Thought Works” case of the United States,full reasons to show that point of view,in order to give the market a clear trial signal.On the one hand,the legitimacy of the VAM should be recognized;on the other hand the market should be informed how to determine the effectiveness of the VAM.The effectiveness of the VAM between the shareholder and the company cannot be denied with no reason,which should be combined with specific cases for analysis.if the Target Corp profitability sufficient to pay investors to bet the money back,does not constitute a withdrawal of capital,will not reduce the Target Corp’s solvency,so interest protection is still there,in this case can support and recognition of the Target Corp and bet on the effectiveness of the agreement;and should not be completely recognized between the shareholders bet on the effectiveness of the agreement,such as "Rui Feng case" in the typical "Sea rich" type of gambling really lack of "adjustment" valuation,the Shanghai intermediate people’s court believes that the former shareholders undertake the risk of gambling.I’m afraid of failure is wrong,but if the original shareholders as shareholders and corporate shareholders to bet the company to fulfill the obligations,the company’s solvency serious decline,the company’s minority shareholders and the interests of creditors have also been damaged,there will be a new injustice and litigation,but also continue to recognize the effectiveness of such a gambling agreement? Finally,learn from foreign judicial experience,recommended by judicial judgment to guide reasonable VAM;at the same time to reduce the risk of gambling,continue to improve the equity redemption system and information acquisition system,to protect small shareholders and creditors’ right.Let more shareholders and creditors to participate in advance in the process of VAM,to make multi equilibrium results from the agreement of VAM.