Studies On VAM In Private Equity Financing

The full name of VAM "valuation adjustment agreement".With the development of the private equity market, the “VAM” has also been widely used, but it also causes a lot of legal disputes, because of its unclear legal status. In the current legal system in China, the VAM as a non-typical contracts are aleatory contracts, VAM is an aleatory contract, which differs from Conditional contract and Guarantee contract in nature. However, VAM does have some guarantee effect, which is the "safe harbor" for private equity investments. Under China’s current legal system, the application of VAM faces legality risk, anti-monopoly law risk, inability to go IPO and the loss of control of the company and other risks. Therefore, we should take measures to prevent the risk. The effective measures are as follows: to differentiate the management gamble and the company’s gamble; to set a reasonable goal after an accurate valuation; to set the control safeguard terms, and cautiously treat convertible securities and the like. In the legislation, we should contribute to the legislation of our category stock system and convertible securities, in order to improve relevant legal systems of VAM and promote the development of multi-level capital market system in China.