Carpe Diem! Redemption Right to Expire in 6 Months?

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Authors: Tim Liu | James Zhang Editor: Jerry Liu PE/VC investors and start-up company founders received an important message on how the redemption rights in their investment agreements should be exercised, or be defended against, by a set of formal replies published in the Supreme People’s Court’s newspaper on August 29, 2024.  [1] In one of the replies (the “SPC Reply”), namely “ how to measure the time limit for an equity investor to exercise its redemption right ”, a query from a judge in the Shanghai Higher People’s Court was addressed by a judge of China’s Supreme People’s Court. This query involves a long time controversial and confusing judicial question regarding (i) the legal nature of an equity redemption right in a Chinese law-governed PE/VC deal, and (ii) the legitimate procedure for exercising such right, in accordance with the very often used (and arguably “abused”) clauses in China-related PE/VC transactions, i.e., so called “valuation adjustment ………………………………