Research On The Effectiveness Of The Gambling Agreement Between The PE Investor And The Target Company

The gambling agreement,also called the Valuation Adjustment Mechanism,means that in the Private Equity(PE)field,the investment agreement signed by the investor and the target company's shareholder or target company,The rights and obligations of both parties are generally assigned according to whether the target company has fulfilled the agreed objectives.Since our country's legislation has not yet clearly defined the legality of the gambling agreement,disputes about its effectiveness have always existed.In 2012,the Supreme People's Court issued a judgment on the revaluation of the “Haifu Investment Case.” This decision conveyed to the public such a concept.It is simply summarized as: Investors and shareholders are effective against gambling,but they are ineffective against gambling with target companies.This judgment has a far-reaching impact on the judgment in the first case of the gambling agreement.Since then,courts at all levels have denied the effectiveness of the gambling agreement signed between the investor and the target company when encountering the same situation.It is worth noting that the China International Economic and Trade Arbitration Commission has confirmed its validity in relevant cases.This article's point is consistent with the arbitral tribunal,from the legal level analysis of why the gambling agreement between the investor and the target company should be legal and effective.