In accordance with the judgment, the VAM agreement is valid if it is concluded between the investor and the majority shareholder of the target company, the investor and the target company on the ground that the compensation commitment made by the shareholder of the invested company in favour of the investor does not affect the interest of the invested company or its creditors. , nor is it contrary to binding laws or regulations. However, if the VAM agreement is concluded between the investor and the invested company, it is not valid because it allows the investor to make profits not related to the performance of the invested company, which harms the interests of the invested company and its creditors. Management`s terms of sale include: (1) a substantial infringement, including breach of a guarantee in the VAM contract; (2) the sale of shares by shareholders resulting in a change in the control of the holding company; (3) intellectual property disputes detrimental to the prospects of the holding company; (4) changes to the portfolio company`s key operation; (5) the insolvency of the holding company; (6) significant deviations from the plans adopted by shareholders at general meetings or by the board of directors; (7) the portfolio company`s inability to obtain appropriate licences; (8) the portfolio company will no longer be financially profitable within 5 years of the investment. However, the Tribunal`s deliberate attempt to confirm the DEM agreement between investor Haifu and shareholder Diya was hardly convincing. In this case, there was only one DEM agreement (i.e. clause 7.2). The agreement provides that the company is required to pay the compensation in cash. After (and only after) the company`s inability to meet the obligation to compensate, the controlling shareholder Diya is required to assume responsibility.
The agreement between Haifu and Diya was therefore similar to a guarantee agreement on the company`s debts. The consequence of this analysis is that if the main DEM agreement between Haifu and Shiheng has been cancelled because it is an illegal guarantee, the guarantee agreement between Haifu and Diya should also be cancelled. Therefore, in the strict legal sense, the legal consequences (i.e. disability) of the main VAM agreement would infect the validity of the guarantee, in which case Diya should not be held liable for full compensation.