In short, the saying revolves around the idea that a healthy, long-term “partnership” – especially one that requires trust, sacrifice and evolution, which most outsourcing does – cannot be managed strictly from static words on the one hand, but through a trusting and mutually beneficial relationship. So, if you take the contract out of the drawer instead of managing through relationship and trust, it either means that you are antagonistic, which will surely only get worse and lead to a deterioration of the relationship; or it`s proof in itself that you don`t have a good relationship. In this way, the contract is seen as “negative” – a kind of necessary evil upstream (perhaps to appease the law and finances) that can somehow be defeated once the contract is signed and the actual relationship begins. Companies sometimes choose to enter into agreements with partners that are not immediately disclosed or that are intentionally kept secret from third parties. These agreements are called in China “drawer agreements”. However, their legal validity is often questioned, especially if one of the signatories is a listed company. Since the main shareholders of the listed companies do not comply with their obligations under the agreement, Ping An Trust applies to the Court for the Protection of Legal Disputes. As a result, the participation of majority shareholders and related parties of listed companies was frozen, which also raised concerns in the market about the company`s “stock market crisis”. Since Everbright was not a bona fide counterparty and the buyout agreement had not been ratified by Baofeng Group, it was an invalid contract and Baofeng Group assumed no civil liability for the nullity of such an agreement. On December 31, 2020, the Beijing Supreme People`s Court issued its decision in first instance, rejecting all of Everbright`s claims and winning the Baofeng Group in its entirety in first instance. Everbright appealed to the Supreme People`s Court on January 14, 2021. The appeal hearing began on 27 May 2021 and the verdict is still pending. 9.
A Party is not exempt under this Section if (i) the Party requesting the discharge consents to the event or conduct that forms the basis of the release, or (ii) the instrument or agreement separate from the Party provides for a waiver of the release under this Section, or expressly, or by a general wording indicating: that the parties waive objections based on the guarantee or the amortization of the guarantees. According to the agreement of our journalist, a listed company signed a corresponding agreement with the capital before this increase. The agreement stipulates that if the share price is less than the amount XX, the main shareholder of the listed company must pay compensation. But then the company`s share price fluctuated, and the lowest price was even less than half the agreed price. To avoid possible clearing, the company found a two-tier market investment institution to drive up the share price. We lawyers say this, but it can be difficult to get the message across, as project managers and others focus on getting the job done and save time and money on legal involvement. The “bottom drawer” is the kind of thing that is lifted up over and over again. In-house lawyers and external lawyers are negatively tarred with the gold-plated brush at the end.
It`s an uncomfortable space for lawyers. In the case of market recognition, the drawer contract is interpreted as an agreement of which third parties have not become aware in time or intentionally. Drawer deals of listed companies often occur in the context of mergers and acquisitions, private placements, etc. Both parties often sign drawer agreements outside the contract to reconcile conflicting interests. “The drawer agreement violates the concept and direction of disclosure requirements for listed companies.” Fu Lichun, research director of Northeast Securities, said, “For other shareholders of publicly traded companies, especially public investors, it must be unfair, there is a hint of obfuscation.” According to research data from the Twenty-First Century Economic Report, secret disclosure has its unique macroeconomic background. Most of the exposed drawer agreements were dissolved after the dispute between the two parties, in particular the performance compensation drawer agreement, the reduction and compensation agreement, and then extended to the public. “. Although good economic sense is a very important factor to consider when interpreting a contract, a court should be very slow to dismiss the natural meaning of a provision as correct simply because it seems to be a very negligent term for one of the parties to accept, even ignoring the benefit of the wisdom of retrospection. The purpose of interpretation is to establish what the parties have agreed, not what the court considers to have agreed.
Experience shows that it is by no means unknown that people enter into reckless agreements, even if one ignores the benefit of the wisdom of retrospection, and that it is not for a court to release some of the consequences of its recklessness or bad advice when interpreting an agreement. Therefore, when interpreting a contract, a judge should avoid rewriting it to help a reckless party or punish a wise party. “At the beginning of my career, I thought the danger of this thought was that it would mainly result in the client not enforcing their negotiated rights – whether because of the externalizer`s self-interest, the externalizer`s lack of incentive to do the `right thing`, or simply because of the sheer lack of knowledge of both parties. And while this can often be the result, I realized that the principle of “keeping the contract in the drawer” is even more dangerous than that and will eventually come at the expense of both parties. Ironically, keeping the treaty in the drawer will mainly lead to all the things that proponents of the proverb believe are supposed to help prevent it. Specifically, “For example, whether the business partner of the reorganization plan will sign the performance commitment agreement is likely to affect the success or failure of the entire system, and in some cases, whether the withdrawal of the company`s original majority shareholder after receiving the shell without such an agreement is protected by the interests concerned, this will also affect: whether the loan can be granted. An associate of a private equity firm in Beijing told Twenty-first Century Business Reporter. Determination of the validity of the drawer agreement.
This case was quite complex and involved mountains of evidence, the main ones being cooperation frameworks and buy-back agreements. The Framework Cooperation Agreement granted baofeng Group a right of first refusal and was reviewed and approved by the Board of Directors and publicly announced. The buyout agreement states that Baofeng Group has an irrevocable buyback obligation, but has not been reviewed or disclosed by a Baofeng shareholder meeting. According to the disclosure, xinyang Feng Backdoor was listed on the stock exchange in 2014 and it was expected that the original shell owner would reduce its 12.17% stake in the listed company and withdraw from it once the reorganization is complete. According to the agreement with the foreign group, the foreign exchange group itself or third parties designated through the shenzhen Stock Exchange`s large trading platform determine the purchase price of all the shares it wants to reduce, and the lower limit is 12 yuan per share. However, it should be noted that the biggest problem with the drawer log is that it violates the relevant provisions on the disclosure of information. In addition, there are often grey areas or even violations of laws and regulations in the content of the agreement. As a result, the drawer protocol has been strictly regulated by regulators. The growing number of disputes caused by the drawer deal has thrown this hidden conflict of interest onto the table. It started with a merger and acquisition many years ago. In 2016, Ping An Trust participated in fei Li Xin`s related support financing, but also asked the majority shareholders of the listed companies to sign the subordination agreement.
However, the “drawer protocol” also carries many dangers. Especially for small and medium-sized investors, the existence of the drawer contract is obviously difficult to estimate the real value of the company, since much of the information is hidden underground, so it is inevitable to make a bad investment judgment. Other respondents believe so. The Beijing Supreme People`s Court ruled that the transaction, pursuant to Article 121 of the Companies Law, concerned the essential interests of a listed company and that the legal representative acted ultra vires or outside his legal powers by entering into an agreement without approving a resolution of the shareholders` meeting. .
