What do the First Valuation Adjustment Mechanism (VAM) Lawsuits in China Tell Us?

Analysis on the HF Fund’s lawsuits against Gansu Shiheng and Hong Kong Dia

(By Bai Lituan & Zhang Qianlin) In December 2012, HF Fund Management Co., Ltd. (the “HFF”) filed a lawsuit against Gansu Shiheng Nonferrous Metals Co., Ltd (the “GSNM”), and after being heard by the Supreme People’s Court, the Court stated that the valuation adjustment Mechanism (VAM) would be considered partially valid. This particular case has been seen ups and downs, and now that it has finally been heard, we would like to share our opinions on it within a framework of legal analysis, and hope that it will help clarify any issues presented in the case and thus help to reduce the risks investors typically face.

READ MORE

Guiding Case by China Supreme Court: JV’s Minority Shareholders May Undertake All Company’s Debt

By You Yunting

By judicial practices in China, in case the Sino-foreign invested company, which however is operated under the management of Chinese shareholder, is trapped in the insolvency, the foreign investors could be judged to take all the debt of the company, not subject to the total amount of its investment, when Chinese partner chooses to disappear or refuse to clear the debt. And in recent, as per the latest 3rd guiding cases by China Supreme People’s Court, by a decision indicated in it, the non controlling shareholder shall be liable to the joint liability to the non-settled debt of the company, that obviously aggravates the burden of the company shareholder. Then, what is the fair way to avoid such risks? We put forward our answer to it in today’s post.

READ MORE