Contractual Innovation in China's Venture Capital Market

Venture Capital market is one of the fastest developing and largest engineered markets in the world. However, there is little empirical work examining contractual innovation in the context of China. Drawing upon extensive interviews, a hand-collected dataset of investment agreements and judgements made by Chinese courts on venture capital disputes, this lecture examines a unique contractual design that is common in the Chinese venture capital sector—the valuation adjustment mechanism (“VAM”). A VAM provides investors with a right to adjust a portfolio company’s original valuation and to get compensation by cash or equity upon the occurrence of certain future events (such as failing to meet financial or non-financial performance indicators). Although VAMs are prevalent in the Chinese market, they are not commonly found in its American, British and Singaporean counterparts. This lecture will firstly discuss the major features of China’s venture capital market. It will then discuss the economic function of VAM, the reasons behind its prevalence in China, the problems in using VAMs, and the ways forward. The discussant will be Professor Luca Enriques.

Dr. Lin Lin is an Assistant Professor at NUS Law. She specializes in corporate law, corporate finance, venture capital, FinTech and Chinese law.

Her articles have been published in leading journals in her field, such as Journal of Corporate Law Studies, European Business Organization Law Review, Journal of Business Law, Stanford Journal of Law, Business & Finance, Berkeley Business Law Journal and Columbia Journal of Asian Law. Her writings have been selected for presentation by the Stanford International Junior Faculty Forum and the Chicago-Tsinghua Junior Faculty Forum. Her monograph titled "Venture Capital Law in China " will be published by the Cambridge University Press.  

She has held visiting appointments in various institutions including Stanford and Oxford. She has taught as a Visiting Professor in mainland China and Taiwan. She has provided training on corporate law and FinTech for officials and practitioners from China, India and Singapore. Lin has delivered public lectures by invitation at numerous law schools including Stanford, Tsinghua, and Peking University.

Prior to joining academia, Dr. Lin was a Legal Policy Officer at the Accounting and Corporate Regulatory Authority of Singapore (ACRA). She has worked in the Corporate Finance Department of a leading law firm in Singapore. She has served as Assistant Counsel at the Singapore International Arbitration Centre (SIAC) and Consultant to the Steering Committee of the Taiwanese Company Law Reform. She is a fellow to the Commercial Law Institute of China Law Society and China Banking Law Society. 

She currently sits on the editorial board of the Asian Journal of Comparative Law and Journal of Malaysian and Comparative Law.