Case | to sign a gap compensation agreement for investment in non-publicly issued shares, and will the guarantor compensate the principal and interest within the range of 100 million, will it be supported? (2021) SPC Minshen No. 2922
Yuan invested in the non-public shares of Orient Seiko through the trust plan, and Li and Dong promised to guarantee li's investment income within the range of 100 million yuan, and signed a gap compensation agreement, mainly stipulating that "Yuan or a third party designated by him subscribes to the non-public shares of Orient Seiko, and the principal after the inferior contribution is 80 million yuan, the corresponding priority amount is 160 million yuan, and the subscription amount is 232 million yuan." Mr. Li and Mr. Dong agreed to assume the guarantee liability for the principal and proceeds recovered by Mr. Yuan or his designated entity when they subscribed for all the shares of Orient Precision Industries at the rate of less than 10% annualized according to the amount of Yuan's subscription, and to bear the guarantee liability up to 100 million yuan." Yuan purchased the shares of Orient Seiko through the establishment of a trust fund plan as agreed, and after the lock-up period arrived, the proceeds after the sale did not meet the agreement, so he sued Li and Dong to bear the guarantee liability.
The original trial supported Yuan's request, Li was not satisfied, and applied to the Supreme Court for retrial, saying: Yuan obtained 2 times the leveraged bank funds through the collective fund trust plan, and then nested layer by layer through the single fund trust plan, changxin fund - PUDB - Jufu No. 21 asset management plan, and finally invested in Guangdong Dongfang Seiko's non-public issuance of shares, which is a multi-layer nested illegal over-the-counter capital allocation contract disguised in the form of trust, which should be invalid. And the essence of the "Difference Compensation Agreement" is the guarantee commitment of Yuan's illegal investment behavior, which violates the principle of investment risk and self-responsibility, and should also be invalid. In addition, the "Difference Compensation Agreement" in this case contains gambling of a gambling nature, which is not in line with public order and good customs and should be invalid.
The collegial panel of the Supreme People's Court held that the focus was on the validity of the Gap Compensation Agreement in this case, and whether it was valid depended on whether the content of the Gap Compensation Agreement violated the Securities Law and constituted manipulation, influence or disruption of the securities market. In this regard, the final judgment of the collegial panel held that:
First, there is no agreement in the agreement to combine capital advantages, shareholding advantages or use information advantages to jointly or continuously buy and sell, or to conduct securities transactions with each other at a pre-agreed time, price and manner, or to manipulate the securities trading market by other means. The "Gap Compensation Agreement" ultimately invests in the shares issued by Orient Seiko in a private placement, rather than shares that have been freely circulated in the secondary market, with a long trading lock-up period, and the regulations of the exchange are subject to when reducing holdings and selling, and generally do not cause large fluctuations in the stock price. Therefore, Yuan's investment in stocks did not violate the first paragraph of Article 77 of the 2014 Securities Law.
Second, the "Gap Compensation Agreement" is the pre-allocation of risks and benefits after the parties to the contract make commercial judgments on the future value of Orient Seiko shares, and the "Difference Compensation Agreement" conforms to normal commercial investment logic, which is very different from gambling behavior of a gambling nature, and does not violate the principle of risk of securities transactions. The "Gap Compensation Agreement" is the true intention of both parties, the "Gap Compensation Agreement" should be considered legal and valid, and the parties to the contract should abide by the contractual obligations.
The Supreme People's Court judgment finally rejected Li's application for retrial, which means that Li and Dong are liable for Yuan's investment within 100 million yuan. In this case, it is also stated that the "Gap Filling Agreement" signed by the guarantor for investment in non-public shares is valid unless it is for the purpose of manipulating the securities market. In fact, from the general trend of this case, if the difference compensation agreement is found to be invalid, the consequence is that Yuan will bear the loss himself, how can similar investment be maintained? This is not in line with the principle of encouraging trading.
The above examples are for reference only.
Link to the law: The first paragraph of Article 77 of the 2014 Securities Law prohibits any person from manipulating the securities market by the following means: (1) alone or through collusion, concentrating capital advantages, shareholding advantages or using information advantages to jointly or continuously buy and sell, manipulating the price of securities transactions or securities trading volume; (2) colluding with others to conduct securities transactions with each other at a pre-agreed time, price and method, affecting the price or volume of securities transactions; (3) conducting securities transactions between accounts under their own actual control , affecting the price of securities transactions or the volume of securities transactions; (4) manipulating the securities trading market by other means.
