Research On Cash Compensation Clauses In Gambling Agreements In Private Equity Investmen

Valuation adjustment mechanism is a legal text widely used in private equity investment,and one of the core provisions of Valuation adjustment mechanism is the cash compensation clause.This clause is a very valuable strategic investment method in which the investment and financing parties need to reallocate or revise the current valuation and investment price according to the actual operation of the target company in the future according to the uncertainty of the valuation,in the event that there is a difference in the information between the invested parties and the investment expectations,in the event that the two parties are in dispute and unable to agree on the present value of the target company.This paper holds that based on the regulatory thinking of "returning to the source",the origin of the Valuation adjustment mechanism should be "equity investment",which can deduct that the nature of the cash compensation clause should be qualitative as "valuation adjustment" rather than "risk aversion or transfer",so judicial disputes involving cash compensation clause should follow this characterty and make corresponding judgments and judgments on whether the valuation adjustment is in line with the principle.The first chapter of this paper introduces the current situation of research.The second chapter on the relevant cases of data refining and analysis,through empirical analysis,the author believes that the current judicial practice on private equity investment on the cash compensation terms of Valuation adjustment mechanisms there are the following problems:First,the failure to explain the nature of Valuation adjustment mechanisms,is a pure equity investment,or equity investment with a creditor’s rights? Is it a shooting contract? Second,the purpose of the cash compensation clause has not been clearly defined,in addition to the widely accepted valuation adjustment purposes,does it also include the purpose of avoiding shareholder risk,ensuring shareholder investment income and so on? Third,the basis for the adjustment or limitation of cash compensation is not clear,and if the amount of cash compensation is limited,what is the theoretical basis? Is there a relatively uniform measure of judgment? Fourthly,it has not been necessary to establish a unified adjudicing path for the hearing of such cases.Chapter III analyzes and responds to the problems in judicial practice proposed in Chapter II,and tries to derive the corresponding adjudication path in Chapter IV: First,it is necessary to examine whether the investor has fulfilled the capital contribution obligation stipulated in the investment agreement to confirm whether the prerequisites for the application of the cash compensation clause have been met;The relationship between equity transfer and so on should be adjusted,third,the realization of performance commitments should be reviewed to clarify whether the cash compensation terms are actually triggered,fourth,to clarify whether the company,in addition to the valuation agreed upon by both investors,has an open and fair market value due to factors such as listing;Cash compensation shall be deducted from the dividends received;sixthly,the cash compensation shall not be in line with the share repurchase,if the claim is made that the share repurchase shall be at least deducted from the portion of the cash compensation received;and seventh,in the event that there is no special agreement,there is no need to review whether the investor is involved in the operation of the target company or to assist the target company;and no judgment should be made as to whether the performance commitments set out in the cash compensation clause are reasonable or whether the performance commitment criteria are abnormal.