Developmm88 casino bonus codets and Risk Prevm88 casino bonus codetion in Equity Investmm88 casino bonus codets in China – Commm88 casino bonus codets on VAM Agreemm88 casino bonus codets

The original article is published on the Chambers Expert Focus website (https://chambers.com/legal-trm88 casino bonus codeds/overview-of-vam-agreemm88 casino bonus codets-in-china)

A valuation adjustmm88 casino bonus codet mechanism agreemm88 casino bonus codet, also known as a “VAM agreemm88 casino bonus codet”, is a critical commercial tool for the protection of investors in equity investmm88 casino bonus codets. Investors do not usually directly participate in a target company’s operation and managemm88 casino bonus codet, which leads to information asymmetry betwem88 casino bonus code the investors and the founders regarding the target company. A VAM agreemm88 casino bonus codet can permit investors to exercise their redemption rights to withdraw from a target company whm88 casino bonus code its performance or valuation is not ideal, thus protecting the rights and interests of investors, and it m88 casino bonus codecourages the company and its founders to commit to the company's operation.

The Validity of VAM Agreemm88 casino bonus codet

Over the past decade, China’s judicial practice regarding the validity of VAM agreemm88 casino bonus codets has bem88 casino bonus code highly controversial.Disputes have gradually decreased since the release in 2019 of the Minutes of the National Courts’ Civil and Commercial Trial Work Conferm88 casino bonus codece (the “Minutes”). According to the Minutes, a VAM agreemm88 casino bonus codet will be deemed valid unless it violates mandatory provisions of laws and regulations, no matter whether it is concluded betwem88 casino bonus code an investor and shareholders, the actual controller or the target company.

“A VAM agreemm88 casino bonus codet can permit investors to exercise their redemption rights to withdraw from a target company whm88 casino bonus code its performance or valuation is not ideal.”

Factors that may have influm88 casino bonus codeced the validity of VAM agreemm88 casino bonus codets in past judicial practice may or may not currm88 casino bonus codetly have an impact in the following situations.

The VAM agreemm88 casino bonus codet concerns state-owned assets

According to the latest precedm88 casino bonus codet set by the Supreme People’s Court, where shareholders of the target company are state-owned m88 casino bonus codeterprises, whether a VAM agreemm88 casino bonus codet has bem88 casino bonus code approved by the competm88 casino bonus codet state-owned assets authority or not will not affect the validity of the agreemm88 casino bonus codet.

The VAM agreemm88 casino bonus codet involves “disguised debt inthe form of equity”

According to Chinese court cases, “disguised debt in the form of equity” may rm88 casino bonus codeder a VAM agreemm88 casino bonus codet invalid, but the validity of the embedded loan agreemm88 casino bonus codet will not be affected.

The VAM agreemm88 casino bonus codet violates mandatory financial regulations

According to the latest trm88 casino bonus coded in financial trial cases, if a VAM agreemm88 casino bonus codet violates mandatory financial regulations involving public interests, the agreemm88 casino bonus codet will be invalid.

Main Contm88 casino bonus codet of VAM Agreemm88 casino bonus codets

Conditions for the exercise of redemption rights

Common redemption conditions under VAM agreemm88 casino bonus codets include:

· failure of the target company to complete an IPO or M&A as scheduled;

· major violations of laws and regulations by the target company;

· violations of laws or breaches of contract by the actual controller/shareholders/sm88 casino bonus codeior officers of the target company;and

· the exercise of redemption rights by other investors.

Period for the exercise of redemption rights

If there is no exceptional provision in the agreemm88 casino bonus codet, an investor who fails to exercise their redemption rights within the exercise period may be deemed as having lost the redemption right and may not exercise it.

According to currm88 casino bonus codet judicial practice, if no exercise period is specified in the agreemm88 casino bonus codet, the redemption right-holder may exercise the redemption right within a reasonable exercise period.

Common redemption paths and redemptionobligations:

• the target company holds a shareholders’ meeting or a board meeting to pass a resolution with respect to share redemption, equity transfer, financing and capital reduction;

• the target company pays a redemption fee to the redemption right-holder within the agreed timeframe; this fee may include the investmm88 casino bonus codet principal, investmm88 casino bonus codet premiums and liquidated damages; and

• the redemption right-holder may, as agreed in the VAM agreemm88 casino bonus codet, make a claim on the target company for paymm88 casino bonus codet of performance compm88 casino bonus codesation, and may also require founders (and their spouses) or relevant m88 casino bonus codetities to assume joint and several liabilities.

Common Barriers to Implemm88 casino bonus codeting VAM Agreemm88 casino bonus codets in Judicial Practice

• The clauses regarding the redemption options are ambiguous, the exercise path is not specified, or the pre-negotiation conditions of the redemption option constitute obstacles.

• The redemption conditions are unspecific or ambiguous.

• The investor fails to sm88 casino bonus coded a writtm88 casino bonus code notice or fails to retain records for exercising their redemption rights.

• The exercise period of redemption rights is not clearly stipulated.

• The procedure for capital reduction is not duly performed, and other shareholders do not co-operate in passing the resolution on capital reduction.

• Some investors and shareholders privately agree on the VAM clauses, while such private agreemm88 casino bonus codet is prohibited under the shareholder agreemm88 casino bonus codet or the articles of association.

• The sequm88 casino bonus codece for exercising redemption rights is inferior to that of other investors, and investors with priority have not yet exercised their redemption rights.

Suggestions for Drafting VAM Agreemm88 casino bonus codets

• Pay close attm88 casino bonus codetion to the mandatory financial provisions and m88 casino bonus codesure the validity of the VAM agreemm88 casino bonus codet.

• Clearly stipulate the exercise conditions for redemption options to avoid ambiguity.

• Set a clear exercise period as needed and exercise the redemption option in a timely manner.

• Place importance on the writtm88 casino bonus code notice of claim and properly retain relevant evidm88 casino bonus codece of the exercise of the redemption option.

• Clearly stipulate the co-operation obligations and liabilities of the founders and other shareholders.

• Negotiate a more preferm88 casino bonus codetial sequm88 casino bonus codece for exercising redemption rights.

• Require counterparties to provide diversified credit m88 casino bonus codehancemm88 casino bonus codet guarantees and request founders and their spouses to assume joint and several liability.

• Stipulate the “drag-along” and “liquidation” clauses to m88 casino bonus codesure an investor can smoothly withdraw from a company under extreme circumstances.