June 13, 2012

PRC Court Challenges Net Profit Guarantee Arrangement

Summary: A recent high-profile PRC case calls into question the enforceability of an arrangement where cash “compensation” to a financial investor from a portfolio company would be triggered if the company fails to achieve a certain net profit target. Investors should be aware of this development and structure their incentive and downside protection arrangements with extra caution.


Yingxi Fu-Tomlinson
Yingxi Fu-Tomlinson
Senior International Policy Advisor
Silicon Valley
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