Performability of Valuation Adjustment Mechanism: Value Judgements at the Normative Level

Abstract

On the occasion of a valuation adjustment mechanism, the main conflict of profit occurs between the shareholders of the repurchasable shares and the creditors of the target company. Since the introduction of the Minutes of the national courts' civil and commercial trial work conference (Minutes), the academic debate on the valuation adjustment mechanism has centred on the enforceability of the share repurchase clause therein. If the dispute is dealt with according to the literal meaning of Article 5(2) of the Minutes, it is not only detrimental to the maintenance of transaction security, but also systematically in conflict with Article 579 of the Civil Code of the Peoples Republic of China (hereinafter referred to as Civil Code) systematically. Therefore, by means of systemic interpretation, Article 5(2) of the Minutes can be limited to the case of insufficient distributable profits in order to achieve the harmonisation of the normative system.