On The Dilemma And Outlet Of VAM In Private Equity

Private equity investment,which is corresponding to the public equity,refers to the investment that raise funds by non-public offerings.In the developed countries,such as France,Germany,Britain and the United States,to avoid the investment risk caused by asymmetric information such as the status quo of management of the invested enterprise,the quality of the management and the development prospect,after the valuation of the invested enterprise,they sign the Equity Transfer Agreement or Capital Increase Agreement,in which the conventions such as cash compensation or equity adjustment are agreed on the basis of profits,specific business performance or IPO,which is called "Valuation Adjustment Mechanism".China's investment market considered VAM to be irrational gambling.it was localized as "gambling agreement".Therefore,in order to be close to the trading habits,this article adopts the concept of "gambling agreement".Intending to explore the legal nature of various forms of VAM,and clarifies the position of all the parties in the overall operation process and eliminates more unnecessary dilemmas.Aiming at considering the original connotation of VAM at different angles,preventing abuse by opportunists,abandoning the traditional bondage and giving greater freedom and tolerance to the domestic capital market.In addition to the introduction and conclusion,the text is divided into three parts.The first part is about the analysis of the form and legal nature of VAM.VAM presents various contractual provisions due to the different forms of PE funds,subjects,targets,forms of compensation and adjustment options.PE funds usually come from equity transfer or capital increase.The subject not only includes the investors;the original shareholders of the invested enterprises,the management and the actual controllers,but also as the subject of VAM.Both sides of VAM set targets for betting through profits,performance and IPO listing,and the adjustment mechanism is not limited to cash rewards or shareholding changes.In order to avoid the high risk,the form of compensation for VAM gradually changed from one-way gambling to two-way gambling.Compared with one-way gambling,the investor bear more trading risk in two-way gambling.As for the legal nature of VAM,there are no conclusions about it,such as "the guarantee contract theory","the option theoryt","the aleatory contract theory",and "the conditional contract theory".According to the provisions of the Guarantee Law,VAM isn't be limited to a specific way and the investor has already started to bear the transaction risk after the agreement is reaclhed,therefore,VAM is different from the form and function of the guarantee contract.The rights and obligations of both parties in the option contract are not equal,and the purchase price is much lower than the option.This is also obviously different from the nature of VAM.Easier to be confused is the aleatory contract and the conditional contract,by carefully comparing VAM with the two connotations,VAM is definitefly not an accidental gambling and the "corporate profits,stock appreciation" win-win status is pursued.So,VAM is regarded as the atypical contract of "no specific name and legal rule" is more conforming with the market rules.The second part is about the analysis of the theory and practice dilemma of VAM.The blind use of the rules by both sides of PE has led to the failure of VAM,which has become a breakthrough by theorists to criticize VAM and has denied its legitimacy in violation of the principle of fairness.In IPO listing and judicial proceedings,it is too arbitrary to "clean up all the provisions of VAM","the interests of creditors must be protected" and "the trial of laws must be guided by law",the use of VAM is limited.The third part explores the way out of VAM.In fact,mishandling VAM does not constitute a sufficient ground for denying its essence.The investors" high risk of taking tenfold premium also meets the principle of fairness and provides the possibility of maximizing the economic benefits of the enterprise.The regulator is no need for completely denial of VAM,and the protection of interests of creditors and the thinking of legal regulation are not constant.Therefore,the regulators and the judicial adjudication need to recognize the diversification of VAM,to deregulation or refinement of the rules,to form commercial trial thinking,to provide maximum freedom for PE investment and corporate autonomy.