Study On The Validity Of Valuation Adjustment Mechanism On Equity Investments In Target Companies

The valuation adjustment mechanism of target company equity investment is a valuation adjustment mechanism with the target company as the main body and the equity as the subject matter.If the target company is unable to reach the agreed target,it needs to buy back the equity held by the investor.As for the validity of the gambling agreement,the Minutes of the National Conference on Civil and Commercial Trials of Courts has made provisions,but the validity identification of the equity investment gambling agreement with the target company as the main body is not explained in detail,which is still controversial and discussed in the academic and practical circles.A sample of cases about the effectiveness of the equity investment valuation adjustment mechanism of the target company before and after the introduction of the Minutes of the National Conference on Civil and Commercial Trials of Courts is selected and studied,and how to identify the effectiveness of the equity investment valuation adjustment mechanism of the target company is discussed.After "Haifu Case" and "Huagong case",there are different judgment ideas about the effectiveness of the target company’s gambling agreement in the judicial cases.According to the induction and collation of relevant cases,it can be found that the most controversial focus on the gambling agreement is whether the target company can become the proper subject of the gambling agreement.The problems leading to this disagreement mainly focus on whether the equity investment valuation adjustment mechanism violates the principle of capital maintenance and whether the equity investment valuation adjustment mechanism damages the interests of creditors.There are the following main problems in the existing theories and judicial adjudication concerning the equity investment valuation adjustment mechanism of the target company: First,there is no clear stipulation on whether the standard company can be the subject of the equity investment valuation adjustment mechanism.Due to the particularity of the subject of the valuation adjustment mechanism of the target company,it may threaten the interests of creditors.Second,the target company equity investment valuation adjustment mechanism lacks the validity identification subdivision standard,the lack of specific laws and regulations will make the equity investment valuation adjustment mechanism as a new thing in the modern economic market,there is no corresponding basis for dealing with disputes.Thirdly,the validity identification of gambling agreement is easy to have impact on capital maintenance.The controversial focus of gambling agreement is undoubtedly the conflict between the application of capital maintenance principle and the provisions in the agreement,which may fail to implement the spirit of the Company Law.Finally,because the equity repurchase clause involved in the betting agreement has not been effectively stipulated,the fixed high price repurchase clause may be alienated into high interest lending.To determine the validity of the equity investment valuation adjustment mechanism of the target company,the conditions of whether the target company as the subject in the valuation adjustment mechanism is suitable should be supplemented first,and whether it meets the conditions of equity repurchase and capital reduction,and whether it damages the principle of capital maintenance should be taken as the dividing criteria.In this way,the target company as the subject in the equity investment valuation adjustment mechanism will no longer conflict with the principle of capital maintenance.Secondly,the validity of the valuation adjustment mechanism of the target company can be distinguished from whether the profit is enough to cover the buyback price.When the profit is enough to cover the buyback price,the valuation adjustment mechanism is effective,while the part of the buyback price exceeding the profit is partially invalid,so as to protect the interests of creditors.In addition,reshaping the capital maintenance principle to adapt to the application of the valuation adjustment mechanism helps to identify the validity of the target company’s equity investment valuation adjustment mechanism.Due to the continuous development of commercial behavior in modern economy,higher requirements are put forward for the application of the capital maintenance principle.The capital maintenance principle needs to adapt to practice constantly and keep pace with The Times.Finally,limiting the repurchase price of the target company’s valuation adjustment mechanism can effectively prevent the dissimilation of the valuation adjustment mechanism to high-interest lending and maintain market fairness and stability.