On Judicial Treatment Of On Judicial Treatment Of Valuation Adjustment Mechanism

The litigation caused by the valuation adjustment mechanism(VAM)has its own rich content and particular conflict in interests.Due to the lack of contract law and company law,there are many different opinions in the academic circles.The people's courts face the mix of rights and obligations of the parties.How to balance the interests of investors,target companies and external creditors of the company,to meet the diversified and complex interests that the subject's appeal and to promote commercial transactions are very serious challenges.By combing the most influential gambling cases heard by the Supreme People's Court from 2012 to 2018,this paper finds that the main opinion of judging this type of case is weather denying the effectiveness of the VAMs reaching by the target company and the investor according to the company law path or considering the agreements valid according to the the guaranty law path.The problem is: when the Supreme People's Court hears such cases,the referee's ideas,opinions,and argumentation paths are beginning to change dynamically.But they do not explain the reasons for the changes and considerations even though it is difficult to be completely convinced by the statement-based reasoning.It is impossible to quell the controversy from the practical and theoretical levels.Based on the judgment of the referee,the problems such as the target company's external guarantee may be disguised,causing investors to obtain stable income from the target company which will infringe the company's and creditor's rights and interests,and whether the identity is the basis for determining the validity of the VAM are not resolved.This paper mainly learns from the method of distinguishing principles from the property law,and studies the VAM from two aspects which are the legal effect of the VAM and the legal obstacles to the agreement.First of all,the VAM does not violate the prohibition of the validity of the current effective legal norms in China,and cannot directly draw conclusions that the VAM is invalid.Secondly,it is worth noticing that under the premise that the VAM is valid,the target company will perform the specific obligations of the contract and return the direct company property to the investor when the target company triggers certain conditions such as performance compensation and equity repurchase agreed upon by the VAM.This may be contrary to the principle of capital maintenance advocated by China's company law.Therefore,in order to accurately understand and apply the principle of capital maintenance,this paper makes a necessary explanation for the theoretical value and practical significance of the capital maintenance principle under the capital subscription system in China.Finally,thinking about the concept and review criteria of the legally available funds and the company's ability to continue operations proposed by the US judicial authorities in the trial of Thoughtworks and combined it with the experience explored in China's judicial practice,which will provide a clear criteria for the people's court to review whether the VAM violates the principle of capital maintenance.