The validity and performance of the gambling agreement in the Nine Minmin Minutes.
Published:
2020-04-15
In practice, commonly known as the "gambling agreement", also known as the valuation adjustment agreement, refers to the agreement between the investor and the financier to adjust the valuation of the future target company, such as equity repurchase and monetary compensation, in order to solve the uncertainty, information asymmetry and agency cost of the future development of the target company. From the perspective of the subject of the "gambling agreement", there are forms such as "gambling" between the investor and the shareholders or actual controllers of the target company, "gambling" between the investor and the target company, "gambling" between the investor and the shareholders of the target company, and "gambling" between the target company.
When hearing disputes over "gambling agreements", the people's courts should not only apply the relevant provisions of the contract law, but also the relevant provisions of the company law; they should not only adhere to the principle of encouraging investors to invest in entity enterprises, especially scientific and technological innovation enterprises, so as to alleviate the financing difficulties of enterprises to a certain extent, but also implement the principle of capital maintenance and the principle of protecting the legitimate rights and interests of creditors, and balance the interests of investors, creditors and companies in accordance with the law. There is no dispute in practice about the "gambling agreement" concluded between the investor and the shareholders or actual controller of the target company, if there is no other invalid cause, it is deemed to be valid and supports the actual performance. However, it is controversial whether the "gambling agreement" between the investor and the target company is valid and whether it can be actually implemented.
Dispute Handling Rules
If the "gambling agreement" concluded between the investor and the target company does not have any legal reasons for invalidity, if the target company claims that the "gambling agreement" is invalid only on the grounds of equity repurchase or monetary compensation agreement, the people's court will not support it. However, if the investor advocates actual performance, the people's court shall review whether it complies with the mandatory provisions of the Company Law on "shareholders shall not withdraw capital contribution" and share repurchase, and decide whether to support its litigation request.
If the investor requests the target company to buy back its shares, the people's court shall examine it in accordance with the mandatory provisions of Article 35 of the Company Law on "shareholders may not withdraw their capital contributions" or Article 142 on share repurchase. After examination, if the target company has not completed the capital reduction procedure, the people's court shall reject its claim.
If the investor requests the target company to assume the obligation of monetary compensation, the people's court shall conduct a review in accordance with the mandatory provisions of Article 35 of the Company Law on "shareholders may not withdraw their capital contributions" and Article 166 on profit distribution. If, after examination, the target company has no profit or is not profitable enough to compensate the investor, the people's court shall reject or partially support its claim. In the future, when the target company has profits, the investor may also file a separate lawsuit based on that fact.
Supporting legal provisions
Article 35 After the establishment of a company, shareholders may not withdraw their capital contributions.
Article 142 A company may not purchase its own shares. However, any of the following circumstances shall be excluded:
(I) reduce the company's registered capital; (II) to merge with other companies that hold the company's shares; (III) to use the shares for employee stock ownership plans or equity incentives; (IV) shareholders disagree with the company's merger and division resolutions made by the general meeting of shareholders and require the company to acquire Its shares; (V) use the shares to convert corporate bonds issued by listed companies that can be converted into stocks; (VI) listed companies are necessary to maintain company value and shareholder rights.
Where a company purchases shares of the company under the circumstances specified in Item (I) and (II) of the preceding paragraph, it shall be subject to a resolution of the general meeting of shareholders;
Where a company acquires its own shares under the circumstances specified in items (III), (V) and (VI) of the preceding paragraph, it may, in accordance with the provisions of the articles of association or the authorization of the shareholders' general meeting, be resolved by a meeting of the board of directors attended by more than 2/3 directors.
After the company acquires the company's shares in accordance with the first paragraph of this article, if it falls under the circumstances of item (I), it shall be canceled within ten days from the date of acquisition; if it falls under the circumstances of items (II) and (IV), it shall be transferred or canceled within six months;
Under the circumstances of items (III), (V) and (VI), the total number of shares of the company held by the company shall not exceed 10% of the total issued shares of the company, and shall be transferred or canceled within three years.
Where a listed company purchases its own shares, it shall perform its information disclosure obligations in accordance with the provisions of the the People's Republic of China Securities Law.
Where a listed company acquires its own shares due to the circumstances specified in Items (III), (V) and (VI) of the first paragraph of this Article, it shall proceed through public centralized trading.
The company shall not accept the shares of the company as the subject of the pledge.
Article 177 When a company needs to reduce its registered capital, it must prepare a balance sheet and an inventory of its property. The company shall notify the creditors within 10 days from the date of making the resolution to reduce the registered capital, and make a public announcement in the newspaper within 30 days. The creditor shall have the right to require the company to pay off its debts or provide corresponding guarantee within 30 days from the date of receipt of the notice, or within 45 days from the date of announcement if the notice is not received.
generalization and summary
Subject of 1. Gambling Agreement
1, investors and target companies bet.
2. Betting between investors and actual controllers
3, investors and company shareholders bet.
The validity and enforceability of 2. gambling agreements.
In summary, in the case of gambling with the target company, the court will not support the decision on the validity and actual performance of the gambling terms through the capital reduction procedure, so as to balance the rights and interests of creditors and investors, and the company will not complete the capital reduction procedure or agree on the corresponding subsequent repurchase or other forms of compensation without a resolution of the shareholders' meeting on the capital reduction procedure.
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