A Study On The Judicial Practice Of The Valuation Adjustment Mechanism

On the valuation adjustment mechanism(VAM)for Chinese economic development,in fact,is not a new matter.Looking back China's past 30 years of reform and opening up the process of economic take-off not only stimulated the rapid growth of GDP,but also created a myth of Chinese companies after another,such as Mengniu,Gome,Alibaba and other Chinese enterprises.This brilliant performance,in addition to hard work with the entrepreneurs,products and services,in fact,private equity funds can not be separated from the active participation of investment institutions.As an important transaction document in the private equity investment,the court has different legal character in dealing with these legal cases.Some courts have concluded that the VAM is a loan contract for the purpose of protecting the interests of the company,but this not only frustrates the purpose of protecting the interests of the company,but also adds to the company that has fallen into the operating performance crisis,at which time the company must bear the return Principal and interest obligations to a certain extent,has accelerated the operating costs of the invested companies;some courts will identify VAM as equity transfer contract,then the investee company will be higher than the bank four times the interest rate to Repurchase equity,which cash-drained enterprises,the greater the debt,the greater the blow.In the present case,there are totally inconsistent judgments in courts in different jurisdictions in China.The inconsistency of the court decision not only jeopardizes the applicability and stability of the law,but also makes it impossible for private equity investors to predict their own The legal consequences of investment,and thus to combat the enthusiasm of private equity investors,such as some private equity investors may be based on conservative purposes less investment or even investment,resulting in the investment company is difficult to obtain financing.The investment contents stipulated in the VAM essentially contain the dual nature of the equity and the creditor's rights,and the Chinese courts have certain reasonableness but regard the VAM as a contract of creditor's rights or equity transfer based on the present effective law,Protocol in another part of the content.By comparing the venture capital model contracts that are widely used in American private equity practice,the author finds that China's agreement on the preferential shares is missing in the VAM,and the preferred stock has the dual nature of equity and debt.If investment and financing The two sides agreed to use preferential shares in the VAM,this investment tool,so not only can solve some of the courts in the trial of VAM faced by the legal difficulties,but also make the VAM with China's legal system compatible,The operation and practice of the agreement,the VAM will be included in the legal jurisdiction of our law,to a certain extent,have to ease the VAM litigation.This paper mainly adopts the following structure:The first part of the capital market in China on the prevalence of VAM for the transaction agreement,a clear private equity investment as a carrier of the VAM.And summarizes the main contents of the VAM in China's private equity market,summarizes the types of VAM,the conditions for VAM,VAM Legal consequences and so on.Private equity investment in China's capital market today play a huge function,and the VAM as a private equity investment in the important transaction documents,private equity investment function is mainly through the agreement in the VAM related terms,and thus To achieve,I believe that the existing judicial environment is not conducive to the normal development of the VAM.In the second part,the author analyzes the cases of VAM,and divides these cases into two categories: one is the agreement between enterprises and investors,the other is between the original shareholders and the investors,And further analysis of the various specific circumstances,the VAM terms of the effectiveness of such issues,the courts of China in the trial of VAM cases of the basic views expressed by the case and the problems.In the third part,based on the problems in the second part of the article,the author reinterpreted the part of the Haifu case from the angle of the British Financial Assistance Ban and reaffirmed the importance of the principle of capital maintenance.Secondly,The status of private equity investment activities,as well as the arrangements for the VAM for the help and inadequate.