Analysis Of The Validity Of Valuation Adjustment Mechanism On The Target Company

The validity of valuation adjustment mechanism on the target company,the judicial and arbitration practice are inconsistent.Judicial referee is based on the principle of capital maintenance and the measurement of the protection of the interests of the main subjects.It always denies the direct participation of the target company in valuation adjustment mechanism;after the “Qiangjingyan.v.Hanlin.Co.Ltd case”,the target company is partially recognized as an indirect guarantee to participate in valuation adjustment mechanism.The arbitral award considers that valuation adjustment mechanism on the target company belong to the autonomy of the parties in the financing transaction,and does not fall into the “negative list” of the contract invalidity listed in Article 52 of the Contract Law.The content is legal and valid,and the law should affirm it.Combining the judgments of some typical cases,after the type analysis of valuation adjustment mechanism on the target company,it is found that in the compensation clause,the financing transaction arrangement is relatively fair and reasonable.And it does not involve the abuse of shareholders' rights,does not harm the interests of the relevant subject,does not violate the mandatory provisions of the company law.And the application of the results evaluation rules to deny the effectiveness of the compensation clause on the target company is not the optimal strategy.In the equity repurchase clause,that the limited liability company repurchase shares is not prohibited by the company law,the procedure of capital reduction also can be used for valuation adjustment mechanism,the redemption has a legal basis for valuation adjustment mechanism and is different from the malicious withdrawal.The warranty clause on the target company is in line with the overall interests of the target company and its minority shareholders,as long as the target company pass a resolution on external guarantee and the opposing party also exercise due diligence and basic review obligations,the warranty clause shall be deemed to be valid.On the theoretical path,the logic of capital transactions helps to restore the legal attribution of the premium increasing funds and the legal nature of the compensation claim.That the target company downward adjust the price of equity to compensate the investor is only to return the company's pricing to the original In some fairness levels,the original solvency of the target company has not been impaired.The conflict between internal and external creditor rights can also be solved applying to the principle of equitable.Separating the contractual behavior and performance can enable contractautonomy and capital control to coexist.It can effectively prevent the opportunistic behavior caused by the contract invalidation mechanism,and at the same time can maximize the respect of business judgment.Standing at the height of judicial review of financial innovation,the position of judicial review should focus on maintaining freedom of contract and autonomy of will,respecting the commercial judgment of market participants,and judicial intervention must maintain restraint;at the same time,the principle of capital maintenance must be used with caution to deny the effectiveness of valuation adjustment mechanism on the target company.The business entity should be allowed to move freely within the company's legal framework to provide an open,inclusive and dynamic legal system environment for financial innovation.