Legal Validity Of The Valuation Adjustment Mechanism In Private Equity Investment

The Valuation Adjustment Mechanism is generally signed as a subsidiary agreement in the private equity investment industry.In fact,the Valuation Adjustment Mechanism is the product of the combination of financial innovation and market economy of western venture capitalists.However,in the practice of China’s market,due to the contradiction between its provisions and many laws such as China’s “Company Law”,its effectiveness has become a dispute.Focus.The "World Heng case" decision seems to have put a stop on the application of the Valuation Adjustment Mechanism in China,but after that a series of judgments seem to give room for the existence of the Valuation Adjustment Mechanism.The significance of the Valuation Adjustment Mechanism to private equity investment is self-evident.It balances the interests of both the investment and the financing,and adjusts the differences in the valuation of the target company.In the vacuum state of the law on the effectiveness of the Valuation Adjustment Mechanism,it is particularly important to study the judicial precedent of the court.Through the empirical analysis of the collected cases from the four aspects of quantity,type,results and legal basis,combined with case and case study methods,it is proposed that the effectiveness of the gambling agreement in private equity investment should be focused on solving the problem.There are three problems in the identification of the effectiveness of the gambling agreement for the three types of lending,equity repurchase and cash compensation: the name is a gambling-based gambling agreement and the private lending is strictly differentiated,and the equity repurchase gambling agreement To solve the two problems of the application of the Company Law and the Contract Law,and the relationship between the gambling guarantee clause and the company’s capital maintenance principle,the cash compensation type gambling agreement should be distinguished from the breach of contract in the judicial determination and the situation change.The application of the principle in its validity determination.Therefore,the improvement of legal validity should be adhered to: the gambling parties should abide by the principle of honesty and credit,the financing party should implement the agreement with integrity management philosophy,and the investors should conduct due diligence honestly to avoid the use of gambling agreements instead of due diligence to pass the risk;The judicial judiciary maintains the inner logic of modesty and respect for the market.It is not easy to use judicial review to replace business decisions.The legislative concept of the legislature to change the company law should be close to the contract.