DeHeng Successfully Represented a Typical VAM Agreement Dispute Case at BAC

2024-12-13

Recently, DeHeng represented the financing party in a valuation adjustment mechanism (VAM) agreement dispute case accepted by the Beijing Arbitration Commission (BAC), successfully preventing the investor’s simultaneous claims for performance compensation and equity repurchase from being supported. DeHeng lawyers achieved complete success in their arbitration representation.

In this case, the investor, based on two grounds—“failure to meet performance targets during the VAM period” and “failure to complete an IPO within the agreed timeframe”—simultaneously filed claims for performance compensation and equity repurchase against the financing party, seeking an arbitration amount equivalent to four times the total investment.  

Despite certain ambiguities in the VAM agreement regarding whether the investor could simultaneously assert both claims and despite case search results being significantly favorable to the investor and unfavorable to the financing party, DeHeng’s lawyers persuaded the investor to abandon the claim for performance compensation.

Ultimately, the arbitration award reasonably determined the rights, obligations, responsibilities, and risk-sharing ratio between the investor and the financing party in the VAM transaction. It safeguarded the investor’s fundamental rights, reasonably reduced the financing party’s debt burden and legal risks, and ensured the normal business development of the invested enterprise.  

The DeHeng team for this case was led by Sun Yanli and Ren Zhangwei, partners at DeHeng’s Beijing Office, with support from Zhou Jie, another partner at the Beijing Office, as well as lawyers Lyu Jiaxue and Zhang Zhuang.