Performance Of Equity Buy-back Type Gambling Agreement

Before the promulgation of the Minutes of the Civil and Commercial Trial Work Conference of the National Court in 2019(here referred to as the Minutes of the Ninth People’s Court),the debate between the theoretical and practical circles on the issue of the gambling agreement mainly focused on the effectiveness of the gambling agreement,and no consensus was reached in the debate on the validity of the gambling agreement.After the promulgation of the Nine Minutes of the People’s Republic of China,the criteria for judging the effectiveness of the gambling agreement have been clarified for the first time,that is,the gambling agreement is effective in principle,except for the legal invalidity in the agreement,and the Nine Minutes of the People’s Republic of China has stipulated the performance of the gambling agreement,and established the judgment ideas for handling the disputes over the performance of the equity repurchase,but it will bind the performance of the gambling agreement with the capital reduction procedure.Take the capital reduction procedure as the precondition for performing the share repurchase.Article 5 points out that if the investor proposes to perform the repurchase obligation to the target company according to the provisions of the gambling agreement after the gambling fails,if the target company fails to carry out and complete the capital reduction procedure in accordance with the provisions of the law,its request will not be supported by the court.In judicial practice,when the investor requests the target company to perform the share repurchase according to the provisions of the gambling agreement and file a lawsuit with the court,the court will first review whether the target company has completed the capital reduction procedure according to the provisions of the Minutes of the Nine People.If the target company has not completed the capital reduction procedure according to the provisions,the court will not support the investor’s request.It can be seen that in the real gambling disputes,the interests of investors are difficult to realize.Although the effectiveness of the gambling agreement has been determined,due to the incompleteness of the relevant systems,there is a situation that the gambling agreement is effective but cannot be performed in practice,which deviates from the original intention of the Ninth People’s Minutes to affirm the effectiveness of the gambling agreement.The problems in the implementation of the equity buy-back type gambling agreement after the promulgation of the Minutes of the Ninth People’s Republic of China are mainly caused by putting the capital reduction procedure in front,and our country adopts the restriction of the repurchase reasons for the equity buy-back,which cannot fully list the situations of the equity buy-back.At the same time,the Minutes of the Ninth People’s Republic of China only affirms the effectiveness of the gambling agreement,and there are still deficiencies in the institutional provisions for the implementation of the gambling agreement.Due to the above reasons,in practice,the performance of equity buy-back type gambling agreements often ends in failure,and the interests between the investor and the target company and creditors are difficult to balance in the process of performance.To solve the problem of performing the equity buy-back type gambling agreement,the capital reduction procedure and the equity buy-back should be unbound,and the capital reduction procedure should be reasonably positioned;It also restricts the source of buy-back funds for equity buy-back.When the buy-back funds do not touch the company’s capital,the interests of creditors will not be lost,and the capital reduction procedure can be carried out,and then the equity buy-back type gambling agreement can be performed;At the same time,it is necessary to establish the rules of performance ability to better balance the interests of investors,target companies and creditors in the gambling process,so that the equity buy-back type gambling agreement can fully play its important role in the investment and financing market.