Legal Study On Vam

Valuation Adjustment Mechanism(VAM) is a new concept, which is introduced from foreign capital markets after the reform and opening up. As VAM is becoming more and more widely used in the field of investment and financing, the debate about its definition and effectiveness is intense. Referred to what exactly VAM is, different scholars have different views.In this paper, a new conception for VAM is defined, and relative essential factors of legal relationship of VAM are laid special stress of discussion.VAM is an anonymous contract, consisting two linked Conditional Contracts. VAM is not a right of option, that is to say, neither an Aleatory Contract, nor an Guaranteed Contract. According to the rules and principles of civil law relationship, the civil relationship of VAM is similar to other civil law relationships, but VAM has its own characteristics. For instance, the subject of VAM is investors and financiers, who prefer to invest with the aid of offshore companies, while the contents of the terms of VAM is unique for their special configuration of the pattern.Although domestic lawyers have argued about the effectiveness of VAM, but this debate is slowly calm down with a final judgment of the supreme people’s court in our country. Law and finance have gradually reached a consensus about the effectiveness of VAM. As long as the VAM doesn’t violate mandatory provisions of the law in our country, not damage the social and economic order in our country, not violate the interests of the state, the collective and other people, the VAM signed by investors and financiers management or the controlling shareholder should be lawful and valid.Capital demand is quite urgent for the development of small and medium-sized enterprise in our country. For the sake of idle funds having not been effectively used, VAM can be promising in such a situation. To realize the rational use of the VAM, a perfect civil, financial, administrative legal system should be set up. Such a system will bring considerable "by-products", for example, type stock system, regional property rights trading market and offshore company supervision system and so on. These "by-products" can play an important role in enhancing the vitality of Chinese capital market, promoting the competitiveness of the company and improving the socialist market economy system.A breakthrough point is needed for the healthy and rapid development of the capital markets, and perhaps VAM is such a breakthrough. Legal system needs such a breakthrough to lay the system foundation with laws and regulations as a weapon. We believe that in the future development of China’s economic, practice space of VAM will be more and more broad, and it will be one of the important power of the development of small and medium-sized enterprises in our country.