Discussion On The Validity Of Valuation Adjustment Mechanism

The first VAM case has been through three trials and attracts a lot of attention.The Supreme Court has recognized the validity of the VAM signed between the shareholders and the investors while it has denied the validity of VAM signed between the company and the investors.Although China does not belong to the common law system and the cases cannot be deemed as ruling bases,in the condition that there is no ready norm regulating the validity of VAM,the first VAM case does end disputes to some extent.As a consequence,the standards and ways of judging the validity of VAM in the first VAM case have been followed by other courts afterwards.There exists a practical code of judging the validity of VAM,which recognizes the validity of VAM signed between the shareholders and investors while denies the validity of VAM signed between the company and investors.What is worth pointing out is that,the reasons for the verdict are not sufficient enough and some concepts and relations have not been clearly clarified,such as the reasons for infringing the creditors' interests and the rules leading to the invalidity of the VAM.Lack of essential analyses will lead to obscure or even wrong results.Based on the above-mentioned reasons,this thesis aims to find out the theoretical difficulties of the judging rules concluded from judicial practice,and to recognize the validity of VAM from the perspectives of contract law and company law.This thesis contains four main parts.The first part introduces the general situation of VAM,the roles it plays and the disputes caused by it.The second part explores the different results of judgment of litigation and arbitration.The third part analyzes the valid elements of VAM and further discusses the judicial rules that identifying VAM as invalid,which analyzes the pros and cons of the validity of VAM.On this basis,the fourth part concludes the rules and principles to judge the validity of VAM.