Research On Legal Regulation Of Equity Repurchase Valuation Adjustment Agreement

A series of VAM cases such as the "Mengniu Case" in 2003,the "Haifu Case" in 2008,the "Hanlin Case" in 2018,and the "Huagong Case" in 2019 have caused a lot of repercussions in both the capital market and the supporting legal service market.At the end of 2021,the scale of private equity and venture capital funds reached 12.79 trillion yuan,and the VAM agreement,as a financial innovation tool,greatly improved the investment efficiency of private equity funds and the financing efficiency of large and medium-sized enterprises.At present,there is no direct legal provision on VAM agreements in China,and the 2019 Jiumin Minutes,as the minutes of the meeting,talked about issues such as the validity and performance of VAM agreements,and became a guide for judicial judgments in cases related to VAM agreement disputes.VAM agreement,also known as valuation adjustment agreement,can be divided into cash compensation VAM agreement and equity repurchase type VAM agreement according to different valuation adjustment methods.Equity repurchase VAM agreements provide a channel for private equity funds to withdraw from the target company,and according to the different repurchase entities,the equity repurchase VAM agreement can be divided into two types of agreements: the target company’s capital reduction repurchase and the target company’s shareholders’ repurchase.This paper focuses on the judicial practice of equity repurchase VAM agreements,sorts out relevant legal norms,systematically considers the legal connotations,and provides assistance for the effectiveness and performance of equity repurchase VAM agreements.The introduction part of the first chapter mainly sorts out the development of VAM agreements in China and the research situation at home and abroad,and the domestic research on VAM agreements from the early legitimacy to the current ability to perform,there is no direct narrative about VAM outside the region.Clarifying the research content of this paper,that is,the validity and performance of the share repurchase type VAM agreement,is of great significance from the theoretical perspective of the intersection of contract law and organic law,and from the perspective of the reality that scientific judicial judgments can optimize the business environment.Chapter 2 is an overview of share repurchase VAM agreements.The concept of VAM agreement is introduced by analyzing the function of the VAM agreement,so as to determine the content and classification of the VAM agreement,and then pave the way for the discussion of the equity repurchase type VAM agreement.The equity repurchase VAM agreement is signed between the private equity fund and the target company or its shareholders,and triggers the equity repurchase obligation of the provider of the VAM target when the VAM indicators are not realized,that is,the target company or the target company shareholders are required to repurchase the equity held by the target company due to investment;it has the characteristics of inseparable investment and withdrawal stages,the integration of shares and debt,and the distortion of the transaction structure under the "dwarfing of the personality" of the target company.Chapter 3 deals with the legal regulation of the target company’s repurchase-type VAM agreement,and mainly discusses the situation in which the target company,as a direct equity repurchase entity,legally requires that the target company can perform its equity repurchase obligation through the capital reduction procedure.Such agreements involve the company’s capital maintenance system because of the special repurchase entity;when the target company or private equity fund is a state-owned enterprise,it also involves the state-owned asset management system,which may render the agreement invalid;and the enterprise to be listed needs to clean up such AVT agreement,which will lead to its "indirect invalidity".In this regard,an in-depth analysis from the perspective of contract law and organic law demonstrates the validity of the target company’s repurchase VAM agreement,and at the same time,analyzes the performance capacity of the target company’s repurchase VAM agreement.Chapter 4 deals with third-party liability in the performance of the repurchase VAM agreement,and uses the case of the shareholders of the target company to repurchase the VAM performance to clarify the third-party liability in the performance of the repurchase VAM agreement.The liability of the shareholders of the target company to pay the share repurchase payment may be multi-party joint and several entities,and the repurchase shareholder is a shareholder who has not paid the capital contribution within the capital contribution period of the company;the spouse and children in the marriage and inheritance family relationship if the repurchase shareholder is a natural person;and the situation where the target company is the guarantee subject of the repurchase shareholder’s repurchase.Chapter 5 is a legal regulatory proposal on equity repurchase VAM agreements,by diluting the dichotomy between equity and debt,distinguishing between effectiveness and management mandatory norms,clarifying the burden behavior and punishment behavior to change the judgment path of the target company’s repurchase of VAM agreements is invalid;focusing on the ability to perform such VAM agreements,canceling the pre-capital reduction procedure,clarifying the scope of the company’s assets for the performance of equity repurchase obligations,improving the rules for delayed performance,and ensuring the investment returns of private equity funds;and verifying the company’s internal governance documents.Comprehensively consider the performance ability of the original shareholders of the target company and ensure the performance of the original shareholders of the target company’s repurchase type VAM.