Research On The Nature And Effect Of The "Formal Equity-Essential Debt" Investment Agreement

In today’s society with the rapid development of market economy,the traditional investment and financing methods of stock or debt can not meet the needs of economic subjects.In practice,it has formed the investment mode of "Formal Equity-Essential Debt".It blurs the boundary between stock and debt in the present legal system of our country because of its dual attributes of "stock" and "debt".Its extensive application has caused a series of financial risks and legal disputes.At present,there are no corresponding laws and regulations to regulate it.Judicial judgment has different opinions on the nature and validity of the agreement.In the absence of the law,it is more important to sort out the judicial judgment of "Formal Equity-Essential Debt".First of all,the article summarizes the generally accepted meaning of "Formal Equity-Essential Debt" from the normative texts of financial supervision practice.And the author thinks that there are obvious differences in the connotation between "Formal Equity-Essential Debt" and related transaction systems such as VAM,equity transfer guarantee and preferred stock.According to the trading practice,the trading links of "real debt" should include equity investment,obtaining fixed income and capital withdrawal.Through the quantitative analysis of such cases in our judicial practice,it is concluded that there are great differences in the nature of investment and the validity of the agreement.Secondly,there are three kinds of judgments on the nature of "Formal Equity-Essential Debt" in judicial practice: the nature of creditor’s rights,the nature of equity and the nature of investment.Among them,the agreement between the parties on fixed income,whether to handle the registration of equity change and whether to actually participate in corporate governance are the main considerations for the court to determine the nature.Academically,the application of commercial externalism in the determination of the nature of "Formal Equity-Essential Debt" has aroused widespread concern.Through the analysis of the above judicatory path and result,the author sums up the way that the court determines the nature under the principle of distinguishing between inside and outside.As far as the nature of the investment relationship is concerned,we should prudently apply the commercial externalism.We can not simply judge the nature of the "Formal Equity-Essential Debt" by whether the investors participate in the management of the company and whether they have the qualifications of shareholders.Thirdly,under the background of strong supervision of the financial industry,the impact of the regulation of the financial industry on the effectiveness of the agreement is inconsistent.A considerable proportion of judgments held that the overall effectiveness of the investment agreement was invalidated due to violation of financial regulatory policies,and the equity repurchase clause in the agreement was invalidated due to violation of the capital maintenance principle.However,through the analysis at the level of natural science,it is necessary to meet other conditions to determine the invalidity of the "Formal Equity-Essential Debt" investment agreement in violation of financial regulations.Finally,in view of the discrepancy in judicial practice,as to the determination of the nature of the "Formal Equity-Essential Debt",we should unify the criteria for distinguishing the nature of investment and may not differentiate the nature of investment when necessary.If it does not directly involve the interests of a third party or the party concerned does not claim to determine the nature of the investment,the judge may not take the initiative to examine and distinguish the nature of the investment.If it is only on the performance of the contract disputes,we can determine the validity of the whole contract or specific terms to resolve the dispute.If it is necessary to distinguish the investment nature,the key and representative appraisal factors in the process of distinguishing between stocks and bonds shall be selected first.Secondly,we can reasonably use different standards,such as participation in operation can be used as a reference standard to identify equity investment,but without participation in operation can not be used as a standard to identify debt.Finally,should unify many kinds of reference factors,the synthesis judgment nature type.As for the determination of the validity of the investment agreement of "Formal Equity-Essential Debt",we should confirm the validity of equity repurchase clause,the linkage and parallel of legal judgment and strengthening financial supervision in a certain limit from the perspective of contract performance.