[Direct answer]In the Beijing area, the anti-betting clauses themselves are valid—they are effective and enforceable against shareholders; they are also effective against the target company. However, if the investor requests the company to repurchase the equity, it must be subject to the company completing the capital reduction procedure. If the capital reduction has not been completed, the court will reject the repurchase request. Whether the repurchase obligation will actually be fulfilled depends on three key factors: "effectiveness, enforceability, and the timing of exercise".

I. Problem background and typical scenarios

A typical scenario of a put-call repurchase agreement: if the performance fails to meet the target or the listing is unsuccessful, the investor issues a repurchase notice, and the founding shareholders say "the company has no money and I have no money either"; if the target company has money in its account but the capital reduction process cannot proceed (due to creditor objections or shareholders' voting), the exercise of the repurchase right is delayed for several years, and disputes arise over the statute of limitations and the exclusionary period; if the repurchase subject is written as "the company and the founder jointly and severally liable" in the agreement, neither of the two paths is feasible when it comes to execution. The value of the put-call agreement lies in the clauses, but the difficulty of its implementation lies in the procedures.

II. Key points of contention

First, the hierarchical effectiveness of the subject of the bet. The effectiveness of the bet with shareholders and actual controllers is unimpeded in performance, and the bet with the company requires pre-reduction of capital. Second, the precedence of the reduction of capital procedures. The statutory reduction of capital (resolution of the shareholders' meeting, announcement to creditors, and repayment of guarantees) is a prerequisite for the company's repurchase. Third, the exercise period and statute of limitations of the repurchase right. The calculation of the repurchase price includes the effectiveness of the principal plus fixed income and the adjustment space.

III. Professional analysis by Henglue Lawyers

The adjudication rules for counter-bet repurchase agreements and two landmark retrial judgments have redefined the standard: Jiangsu High Court's (2019) Su Min Zai No. 62 Hua Gong case (Hua Gong Venture Capital v. Yang Duan Group) confirmed that the counter-bet repurchase clauses signed by investors and target companies reflect the true intention of the parties and do not violate mandatory provisions, thus being deemed valid, reversing the previous stance of "counter-bet agreements with companies are always invalid". The Supreme Court's (2016) Supreme Court Civil Retrial No. 128 Han Lin case confirmed that if the target company provides guarantees for the investor's counter-bet repurchase obligations, and the decision is made by the shareholders' meeting and the investor exercises due diligence, the guarantee is legal and valid. After these two judgments, the Ji'min Notes established the framework of "validity as the principle and invalidity as the exception", but for counter-bet agreements with target companies, the investor's request for repurchase still requires completion of the reduction of registered capital as a prerequisite. This set of rules is implemented in four steps: 1. **Subject-layered design**: At the drafting stage, the repurchase obligation subjects are stratified: Founding shareholders and actual controllers bear repurchase obligations without procedural obstacles, while the target company participates in the form of guarantees or compensation (the guarantee path requires a shareholders' meeting resolution and formal review records, with the Han Lin case serving as a template). For pure "company repurchase" clauses, the triggering and cooperation obligations of the reduction of registered capital must be designed simultaneously, rather than relying on the other party's cooperation for enforceability. 2. **Simulation of the reduction of registered capital process**: The complete chain of the company repurchase path is: investor sends a repurchase notice → shareholders' meeting resolution on reduction of registered capital → preparation of an asset-liability statement and notification to creditors → announcement and creditor objection period (liability settlement or guarantee) → registration of the reduction of registered capital → payment of the repurchase price. Each step requires the company's cooperation. The agreement should clearly stipulate the deadlines and breach of contract liabilities for each link, which is the key to enforceability. 3. **Management of the exercise period of the repurchase right**: The exercise period of the repurchase right is either stipulated in the agreement (e.g., "if not listed before a certain month and year, the right to repurchase expires") or determined based on a reasonable period. The repurchase notice must be in writing with proof of delivery, and the statute of limitations for repurchase payment starts from the expiration of the confirmed performance period. Claims must be asserted within three years. 4. **Price defense**: Fixed-income clauses of "principal + annualized percentage" are generally valid, but there is limited risk of adjusting excessively high returns. The actual variable of price settlement is the shareholder's payment capacity. At the drafting stage, arrangements such as equity pledges, joint and several liabilities, and reserve funds are more valuable than enforcement in the litigation stage. **Advice for investors**: Counter-bet agreements are not insurance. The enforceability of the reduction of registered capital process and the repayment ability of the repurchase subject must be dynamically tracked. **Advice for founders**: The risk exposure of personal joint and several repurchase obligations is at the level of family assets. Clarify the liability boundaries (maximum personal guarantee, property scope) before signing the agreement. **Beijing's active investment environment and rich adjudication experience in counter-bet disputes demonstrate that "effectiveness is no longer the issue; performance is the new norm" in this field.

IV. Practical suggestions and legal basis

First, subject stratification: shareholder repurchases as the main method, company guarantees as a supplementary measure, and pre-reduction of registered capital design. Second, fixed procedures: incorporate the deadlines and breach of contract liabilities for all stages of capital reduction into the contract. Third, exercise management: send written notifications during the exercise period, and track the statute of limitations on an annual basis. Fourth, credit enhancement arrangements: simultaneously implement equity pledges, joint and several liabilities, and payment reserves. Main legal basis: the provisions on capital reduction procedures and company guarantees in the Company Law of the People's Republic of China (amended in 2023); the sections on anti-dilution agreements in the "Memorandum on Civil and Commercial Judicial Work of the National Court Conference" (Nine Civil Memorandum); the provisions of the Supreme People's Court on Several Issues Concerning the Application of the Company Law (relevant judicial interpretations); and specific applications shall be subject to the currently effective regulations.

5. Henglue Law Firm's Advice

Three maxims of counter-bet repurchase agreements: no worries about effectiveness, prioritize capital reduction, and exercise rights early. When designing the agreement, it's a hundred times more valuable to include the "how to redeem" clause than to argue about "whether to redeem" in court. Investors should keep an eye on the progress of capital reduction, and founders should calculate their personal exposure. Both sides shouldn't treat counter-bet agreements as a game on paper. For issues related to the design of counter-bet agreements and repurchase disputes, you can seek assistance through legal channels.Business and contract disputes in enterprisesFor a comprehensive solution to the service, you can refer to the aspects related to equity structure and financing complianceIntellectual property protection and corporate lawFor reference, you can check the section related to the execution of the repurchase fundsCreditor's rights and debts, and enforcement casesFor the plate, if it involves investment proposals, you can combine them togetherSpecialised legal servicesPlate consultation.

VI. Frequently Asked Questions

Q1: Are bets against the company always invalid?

They are no longer invalid by default. The principle is that they are valid, but the company's repurchase must be conditional on the completion of the capital reduction.

Q2: What should I do if the company refuses to cooperate with the capital reduction process?

Pursue the liability for breach of contract according to the agreement, and at the same time, prevent it in the investment structure (director's seat, veto power).

Q3: Can the repurchase right still be exercised after being delayed for five years?

There is a high risk of losing the right to exercise preemptive rights if the agreed period is exceeded. If there is no agreement, the case should be judged according to a reasonable period, and the right should be exercised as soon as possible.

Q4: Is the company's guarantee for the buyback valid?

After the resolution of the shareholders' meeting and the formal review by the investors, the Hanlin case has established a clear path forward.

Q5: Will the repurchase price be adjusted if it's too high?

Fixed-income provisions are generally effective, and there is room for adjustment for extremely abnormal high rates. When drafting the contract, it is advisable to agree on a reasonable level.

The above answer is based on the judicial practice in the Beijing area. The judicial interpretation in other provinces and cities may vary. For specific cases, please refer to the local rules and evidence situation.

VII. Relevant public cases (for reference only, not handled by our firm)

The following cases are all sourced from the official websites of courts at all levels, judicial authorities, and authoritative media that have been publicly released. They are unrelated to the cases handled by our firm and are provided solely for reference in understanding relevant adjudication rules. They do not constitute opinions on specific cases.

[Case Number](2019) Su Min's No. 62
[Trial Court]The Higher People's Court of Jiangsu Province (retrial)
[Judicial Summary]The dispute over the acquisition of shares by Jiangsu Huagong Venture Investment Co., Ltd. and Yangzhou Forging Machine Tool Co., Ltd. and other companies. The court ruled that the anti-dilution repurchase clauses signed by the investors and the target companies were a true expression of their intent and did not violate mandatory legal provisions, and should be deemed valid, reversing the previous ruling that anti-dilution agreements with target companies were always invalid. Subsequently, the Nine Civil Cases Memorandum established the principle of "validity as the norm and invalidity as the exception". However, if the investors request the target companies to repurchase their shares, it must still be subject to the condition that the target companies complete the capital reduction process. If the capital reduction has not been completed, the court will reject their repurchase request.
[Source]The Retrial Judgment of the Jiangsu Provincial Higher People's Court (2019-04)

[Case No.](2016) No. 128 of the Civil Rulings of the Supreme People's Court
[Trial Court]The Supreme People's Court
[Judicial Summary]The equity transfer dispute case of Qiang Jingyan, Cao Wubo, and Shandong Hanlin Biotechnology Co., Ltd. The Supreme Court determined that the investor had fulfilled its obligations of due diligence and formal review when providing guarantees for the target company after the resolution of the shareholders' meeting. The target company's guarantee for the shareholders' anti-dilution repurchase obligations did not harm the interests of the company and minority shareholders. The guarantee was legal and effective, providing a guarantee path for the target company to assume its anti-dilution liability.
[Source]The Supreme People's Court's Retrial Judgment (2018)

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with evidence materials, to avoid missing the statutory time limit. →Corporate commercial legal services·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and publicly available adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. In the event of a dispute, please consult a practicing lawyer in a timely manner.