Chongqing Yeru Private Equity Investment Fund Management Co., Ltd. (“Chongqing Yeru”) signed the Share Purchase Agreement with Gao Zhiping, Gao Zhiyin, Zhang Jianfen, Zhejiang Chuangyi Technology Co., Ltd., Zhejiang Chuangjia Electronic Co., Ltd. and Gaorui TV, whereby if Gaorui TV failed to be invested by Jingda before August 31, 2018, Chongqing Yeru shall be entitled to request Gao Zhiping, the actual controller of Gaorui TV, to repurchase shares, and Gao Zhiyin, Zhang Jianfen and Zhejiang Chuangyi Technology Co., Ltd. shall be jointly and severally liable for Gao Zhiping's repurchase obligation. As Gaorui TV failed to be invested by Jingda before the agreed deadline and Gao Zhiping and others refused to fulfill the repurchase obligation, Chongqing Yeru filed an application to Chongqing Arbitration Commission for arbitration, claiming that Gao Zhiping pay the share repurchase price of RMB 372 million and that Gao Zhiyin, Zhang Jianfen and Zhejiang Chuangyi Technology Co., Ltd. be held jointly and severally liable.
The Share Purchase Agreement involved in this case is a common business model and transaction arrangement in PE investment, or a VAM Agreement whereby Gao Zhiping would purchase some of Gaorui TV's shares held by Chongqing Yeru under certain circumstances. Such agreement is a risk prevention measure for protecting the rights and interests of investors in equity investment. It is also commonly known as the actual controller's repurchase clause. As one of the lawyers appointed by Chongqing Yeru, Qing Miao helped Chongqing Yeru win this case at Chongqing Arbitration Commission based on her rich litigation and non-litigation experience, rigorous thinking of representation and sharp debating points in PE. All of Chongqing Yeru's claims were supported by Chongqing Arbitration Commission.
Recently, VAM Agreements have become one of the most widely used instruments in commercial investment practices, but there are different views in judicial practices on the legal validity of VAM Agreements between investors and the target company's shareholders or between investors and the target company. Lawyer Qing Miao's core view, that VAM Agreements between investors and the target company's shareholders do not violate mandatory provisions in laws and administrative regulations, was supported by Chongqing Arbitration Commission, and which to some extent helps the client saving considerable losses. This case itself has guiding significance for judicial practices.
This project was led by Partner QING Miao.