Performance Obstacles of Share-Repurchase VAM Agreement and Its Solution
VAM(Valuation Adjustment Mechanism)agreement is a typical application form of share repurchase,and the focus of the judicial practice and theoretical research related to VAM agreement covers aspects from contract validity to contract performance.In November 2019,the Supreme People's Court promulgated the Minutes of the National Court Civil and Commercial Trial Work Conference(hereinafter referred to as the Nineth Minutes),distinguishing the validity and performance of VAM agreement.However,the provision that the implementation of capital reduction procedures is a prerequisite for the performance of share repurchase obligations is still to be discussed.Capital reduction should be the possible result of share repurchase,not a necessary prerequisite.Taking the capital reduction procedure as the precondition for the performance of VAM agreement may lead to unreasonable performance obstacles.In the case of performance obstacle due to capital reduction failure,whether the target company constitutes a breach of contract and the specific liabil-ity for breach(continued performance or compensate for damages)shall be subject to the doctrine of capital maintenance.On this ba-sis,appropriate positioning of capital reduction procedures,introduction of financial constrain rules,establishment of liquidity testing standards and the definition of the upper limit of VAM liability are the effective solutions to the performance obstacles of VAM agreement
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