Reference Case: Jiangsu Huagong Venture Capital Co., Ltd. v. Yangzhou Forging Machine Tool Co., Ltd., Pan Yunhu et al.
The Jiangsu Higher People's Court held that a direct VAM repurchase clause between the investor and the target company is not automatically invalid. Where the obligation can be performed through the Company Law's capital-reduction and creditor-protection procedures without substantively harming the company or outside creditors, the clause may be treated as valid and enforced. The decision is widely seen as a major transitional authority between the Haifu line and the later rule stated in the Ninth Civil Minutes.
Holding
The Jiangsu Higher People's Court held that a direct VAM repurchase clause between the investor and the target company is not automatically invalid. Where the obligation can be performed through the Company Law's capital-reduction and creditor-protection procedures without substantively harming the company or outside creditors, the clause may be treated as valid and enforced. The decision is widely seen as a major transitional authority between the Haifu line and the later rule stated in the Ninth Civil Minutes.