Research On The Legal Issues Of The Valuation Adjustment Mechanism

With the rapid development of China’s capital market,the problem of financing difficulties for enterprises is increasingly intensified.However,due to incorrect information and other factors,investors cannot have a very comprehensive and accurate assessment of the development of financing enterprises,so they dare not invest.At this time,the betting agreement is introduced into China as a valuation adjustment mechanism.However,because there is no clear stipulation in Chinese law,it is difficult to judge the legal nature of the gambling agreement,so there are many disputes about the effectiveness of the gambling agreement in judicial practice.With the appearance of "Haifu case" in 2012,the Supreme People’s Court established the ruling rule that "betting against the target company is invalid,while betting against the shareholders is effective",which was later regarded as the ruling gist by the courts at all levels.However,in April 2019,the "Case of Chinese Industry" published by the China Judicial Documents Network began to shake this rule again,affirming the effectiveness of betting against the target company,resulting in the situation of "different judgments in the same case".Subsequently,the Supreme People’s Court issued the Minutes of the National Courts’ Civil and Commercial Trial Work Meeting(hereinafter referred to as the Nine People’s Minutes),confirming the ruling rules of the "Huagong Case" and making it clear that the betting agreement between the investor and the target company is valid in principle.But also followed a series of problems,such as: the legal nature of the gambling agreement is still not identified;It is difficult to perform the bet against the target company;How to divide the main responsibility of multiple betting obligations;After the failure of the bet,whether the investor can request the buyback of equity or monetary compensation,and what procedures should be followed for the buyback of equity and monetary compensation,etc.In order to solve the above problems,it is necessary to clarify the characteristics of betting agreements,improve due diligence in the early stage,formulate progressive dynamic betting targets,and innovate the performance mode of betting agreements,so as to promote the win-win situation between investment and financing parties and better promote the development of China’s capital market.