On The Valuation Adjustment Mechanism In The Venture Capital Field

In recent years,the Valuation Adjustment Mechanism have been frequently used in commercial investment activities as an investment tool in the field of venture capital.This has also made the term “gambling” appear in the layouts of major media.However,since China has no clear laws and regulations governing the effectiveness of the Valuation Adjustment Mechanism,the controversy over the effectiveness of the Valuation Adjustment Mechanism has continued in practice.Until 2012,the Supreme People's Court arraigned the "Haifu Case" and issued a judgment.Since then,"the Valuation Adjustment Mechanism between the investor and the target company's shareholders and the actual controller has been valid,and the Valuation Adjustment Mechanism between the investor and the target company has been invalid." Become a judge in the judiciary on such cases.But later,in the case of CIETAC's hearing of such cases,there was a result of judgment different from that of the Supreme People's Court.CIETAC considered that "the gambling agreement between the investor and the target company is valid."Based on this controversy,this article first briefly outlines the definition and causes of the Valuation Adjustment Mechanism,and explains different types of the Valuation Adjustment Mechanism according to different classification criteria,so that everyone has a basic understanding of the Valuation Adjustment Mechanism.Then proceeding from the case,the author analyzes the conclusions of the above two different judges,and elaborates the reasons why the court and the arbitration commission made different determinations.The author's point of view tends to identify the Valuation Adjustment Mechanism between the investor and the target company as legal and valid from a large perspective,and based on the specific circumstances,the contract is invalidated when the specific agreement of the agreement violates the legal prohibition requirement.,and clarify the reasons for holding this view.At the same time,it pointed out that in the practice of the Valuation Adjustment Mechanism in China,problems such as corporate dishonesty and lack of system existed,and the legitimacy and significance of the Valuation Adjustment Mechanism existed.The risks of signing a Valuation Adjustment Mechanism were compared from both macroscopic and microscopic perspectives,and some corresponding preventive measures were proposed for the possible risks in these two aspects.Finally,regarding the legal regulation of the Valuation Adjustment Mechanism,China is still in a relatively backward exploration period.The rapid development of economic markets andthe generalization of risk investment are far faster than the sound and complete legal systems.Therefore,the author believes that we should promptly improve the system of preferred shares and establish a written legal system that is more conducive to the stability of the economic order and the vitality of the capital market,so as to protect the rights and interests of all stakeholders and maintain sustainable economic development.At the same time,it is necessary to strengthen the supervision of gambling activities in the venture capital field and establish a fair and just trading environment for the investment and financing parties.To sum up,the significance of this paper lies in the analysis of the legal validity of the Valuation Adjustment Mechanism between the investor and the target company from the legal level,and then to explore how to improve the relevant laws and regulations to promote the safety and efficiency of the company under the current capital environment in China.Use the Valuation Adjustment Mechanism to achieve a win-win situation between the investor and the target company.