Research On The Implementation Of Share Repurchase In Valuation Adjustment Mechanism

VAM is a valuation adjustment mechanism in which investors and target companies adjust risks autonomously by contract in private equity investment to meet their respective needs.From "Haifu case" to "Huagong case",from denying the effectiveness of the investor’s bet against the target company to affirming its effectiveness and further turning to the feasibility of the implementation of the agreement.In 2019,the Supreme People’s Court issued the Summaries of the National Conference for Work of Courts on the Trial of Civil and Commercial Cases(hereinafter referred to as the "9th conference minutes"),which recognized the validity of the valuation adjustment mechanism and stipulated the judgment standards for its performance.So far,the valuation adjustment mechanism from the effect regulation to the performance regulation.Although the "9th conference minutes" stipulates the capital reduction procedure as the judgment standard for the performance of equity repurchase type valuation adjustment mechanism,the implementation of the agreement is still difficult.Because the implementation of the equity repurchase valuation adjustment mechanism not only involves the procedural level,but also includes the entity level.First of all,the exercise of the right of repurchase is the first step to start the share repurchase,but the nature of the right of repurchase is unclear in judicial practice and theory,which seriously affects the exercise of the right.Secondly,there are obstacles to the implementation of capital reduction buybacks,and capital reduction buybacks are not a good way to protect corporate creditors.Thirdly,the absence of the implementation procedure of equity repurchase in valuation adjustment mechanism directly leads to the difficulty of the target company’s repurchase obligation.Finally,due to the lack of the broad distribution concept in our country,the lack of financial resources of share repurchase,resulting in the agreement to perform the type and scope of the fund is difficult to determine.Based on judicial practice and legal norms,this paper makes an in-depth analysis of the root causes of obstacles to the performance of agreements.On the basis of the investigation of the extra-territorial legal norms and the experience of such cases,it is believed that the implementation of agreements should be improved from the entity and procedural level.On the entity level,first of all,clarify the attributes of the repurchase right.The limitation dispute of the repurchase right shall be applied to the applicable rules of the formation right by analogy.Secondly,improve the capital maintenance principle.The concept of asset credit should be implemented,and the concept and boundary of withdrawal of capital contribution should be clearly defined.Finally,the system of limiting the distribution of financial resources should be established.We should introduce a broad concept of distribution,build a unified distribution framework,and set up the financial limit of repurchase.At the procedural level,first of all,the procedural rules for protocol implementation are constructed.It should take the board of directors as the judgment subject,take the solvency as the judgment standard,and set up the responsibility mechanism for improper performance.Secondly,improve the distribution of burden of proof.As the main body of proof,the target company should bear the burden of proof for the lack of repurchase funds.Finally,the applicable rules of creditor protection should be improved.Ex post protection procedures can be used to treat creditors as the judges of the agreement,or a combination of formal capital reduction and allocable profits can be used to perform the agreement.