The Resolution of Obstacles in Implementation for Fulfillment of Share Repurchase in the Valuation Adjustment Agreement

: The Summaries of the National Conference for Work of Courts on the Trial of Civil and Commercial Cases stipulates that the fulfillment of the obligation to repurchase shares under Valuation Adjustment Agreement must be based on the completion of the capital reduction process, resulting in a deadlock in the repurchase process. The existing solutions to the obstacles to compliance all have certain flaws. A possible resolution path is to provide two parallel options for the investors and financiers to choose from: One solution is to form a capital reduction resolution with attached effective conditions before signing the Valuation Adjustment Agreement, and the other approach is to repurchase shares according to the shareholding ratios after signing the Valuation Adjustment Agreement. The former resolution automatically takes effect when the repurchase conditions are met, eliminating the need for another shareholders meeting. Specifically, shareholders who initially voted in favor of the capital increase resolution at the shareholders’ meeting must make a separate statement indicating their willingness to repurchase shares in proportion to their original shareholding if the company fails to fulfill its repurchase obligations. Office1 If neither of the above two options is agreeable to both sides, whether to sign the Valuation Adjustment Agreement depends on whether the investors are willing to assume the risk of shares repurchase failure. In this case, the financiers face the risk of funding failure.