Legal Analysis Of The Implement Dilemma Of The Valuation Adjustment Mechanism And Improvement Suggestions

Investors such as venture capital or private equity investment,in order to avoid the estimated deviation of the target company’s business development,equity value and the resulting investment risks in equity investment transactions,use the VAM agreement to agree in advance the contractual obligations that the parties need to perform at that time under the different possibilities of the target company’s future operating conditions,which intended to realize the valuation adjustment of the equity of the financing company in the future.Regarding disputes over VAM agreements,whether in theory or judicial practice,the validity of the VAM clauses signed by the investor and the target company has been controversial a period of time,and the clauses involved in a large number of cases has also been denied for a long time.Since the “Minutes of the Ninth People’s Conference”clearly hold the point of distinction between contract validity and contract performance on the issue of VAM disputes,the debate has turned to the discussion of contract performance.The validity of the VAM agreement is finally rectified.However,since the “Minutes of the Ninth People’s Conference” adhered to the view that the target company’s directional repurchase of equity from investors to fulfill its contractual obligations hindered the principle of capital maintenance,it simply regarded capital reduction as a pre-procedure for equity repurchase,which not only increased the difficulty of repurchasing,and confusing the logical relationship between repurchase and capital reduction,which is not a good choice for the protection mechanism of creditors’ interests.In addition,there is no mention of such important issues as the source of funds for equity repurchase that are likely to arise in practical disputes,and whether the agreed price for equity repurchase is reasonable.Therefore,although the Official’s attitude towards the identification of VAM has changed,there are still obstacles to its implementation,which requires a fundamental transformation of the concept of company law and a systematic reform of the system in the future.Therefore,following the basic idea of finding problems,analyzing problems and solving problems.By introducing the legal meaning of the VAM and the practice of commercial application,on the basis of summarizing the “Minutes of the Ninth People’s Conference”,and combining the amendment of the Company Law,and summarizing the judgment ideas of judicial cases,the paper will focus on legal risks and obstacles of the VAM over share repurchase and monetary compensation that may be encountered during the implementation,and with depth analysis of the legal elements of the relevant core clauses such as the nature and bottom line of cash compensation,etc.,and trying to find the balance point between the entities to remind future transaction entities of risk prevention before the signing of relevant investment agreements,and on this basis,explore countermeasures and put forward some suggestions,explore new ideas for equity repurchase performance,and constrain financiers actively perform contractual obligations and reasonably support the demands of investors,in order to benefit the company’s legislation,judicial practice,and rational development of capital.