Research On The Implementation Mechanism Of Share Repurchase Type Valuation Adjustment Mechanism

Prior to The Minutes of National Court Civil and Commercial Trial Work Meeting(hereinafter referred to as the "Meeting Minutes"),the validity of using the valuation adjustment mechanism between the investor and the target company had been controversial in terms of judicial determination,and courts and arbitration institutions at all levels had not formed a unified opinion on the treatment.From the "Hefei case" to the "Huagong case" and then to the "Meeting Minutes",judicial practice has gradually relaxed the attitude towards "using the valuation adjustment mechanism between the investor and the target company",and the focus of the regulation of the valuation adjustment mechanism has shifted from the validity of the contract to the performability of the contract,and the regulation of the performance stage is also more in line with the regulatory intent of the capital maintenance principle.The article is based on the performance stage of he valuation adjustment mechanism,and takes the equity repurchase betting as the object of study to analyze its reasonable performance path in the context of corporate law.The Meeting Minutes prescribes a capital reduction path for the performance of equity repurchase bets,and if the target company does not complete the capital reduction procedure,the investor’s repurchase request will not be supported.The purpose of the capital reduction procedure is to implement the capital maintenance principle so as to protect the interests of the investor’s needs,and the performance of the repurchase is obstructed by the violation of the capital maintenance principle,which should be regarded as a defense of the right to block,i.e.,a defense in a narrow sense,whereby the target company can temporarily block the exercise of the investor’s repurchase request,but the target company has the imputability,and the corresponding delayed default liability is not exempted,specifically The target company may be required to bear the repurchase condition when it meets the repurchase condition.With regard to the performance criteria of equity repurchase,two kinds of restrictions on the subject matter of repurchase and financial resources can be distinguished.The Meeting Minutes ties the repurchase to the capital reduction to a large extent because China’s company law takes the standard of the cause of repurchase restrictions,the equity repurchase can not find a breakthrough in the six causes of repurchase stipulated in Article 142 of the Company Law,the capital reduction repurchase also became a choice of no choice.The key to breakthrough is the introduction of the financial source restriction of repurchase,and to determine the fulfillment of repurchase as much as possible under the premise of following the bottom-line requirement of capital maintenance principle.At the same time,it should be clear that the financial resources of the repurchase restriction is different from the source of funds of the repurchase.The financial resources of the repurchase restriction is the specific embodiment and requirement of the capital maintenance principle in the field of repurchase,which is an abstract concept;while the source of funds of the repurchase is the specific funds available for the repurchase,which is more from the level of assets and cash flow.Therefore,the fulfillment standard of equity repurchase should be to expand the source of funds for repurchase as much as possible under the premise of following the financial source limitation of repurchase.In the field of equity repurchase,the main issue is the "legally available funds" and the subject of the specific repurchase program.The traditional judicial commercial judgment should give way to the commercial judgment of the company’s board of directors,and the core body of the company,the board of directors,should decide whether the repurchase and the specific repurchase program according to the reasonable commercial judgment.It is also an important manifestation of respecting the "organizational attributes" of the company,while giving investors the right to override the decision of the board of directors and reasonably taking into account the interests of investors.The board of directors should pay attention to the power of market intermediaries in the decision-making process,and the direct participation of intermediaries should bring the repurchase issue to the market logic and provide reasonable support for the "legally available funds" determined by the board of directors based on market quotations.The implementation of share repurchase should implement the concept of protecting the interests of creditors while taking into account the interests of investors,who are both shareholders and creditors and need to be protected.When the target company has sufficient funds or other legally available funds,they can be used for repurchase without going through the capital reduction process.In order to achieve the former goal,the financial resources limitation for repurchase should be introduced,replacing the subject matter limitation with the financial resources limitation,and expanding the sources of funds for repurchase under the premise of following the bottom-line requirement of the capital maintenance principle,and considering the proceeds from the transfer of the subject shares,capital surplus,surplus,undistributed profits,etc.as the funds for repurchase.If the controlling shareholders or directors and supervisors of the target company do not cooperate in the repurchase process under the premise of meeting the conditions of capital reduction,they can be held responsible in accordance with the relevant provisions of the Company Law to achieve the transfer of responsibility from the company to the shareholders.In addition,for the mechanism of the valuation adjustment mechanism as a whole,in addition to equity buyback and cash compensation,innovative ways of performance of the valuation adjustment mechanism can be considered,such as dynamic payment and adjustment of the equity ratio of the investor can be alternative options to enhance the performance of the betting agreement.