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Recently, Wang Ziru, the founder of the digital review platform Zealer, was forced to execute again.

Tianyancha information shows that due to failure to perform the payment obligations determined by the effective legal documents within the period specified in the execution notice,8moon9day,Shenzhen Nanshan District People's CourtrightWang ZiruA "Consumption Restriction Order" was issued to restrict his high consumption. It is worth noting that the applicant for execution in this case is Shanghai Shuhui Venture Capital Center (Limited Partnership), which is Guangdong Jinru Yunhai (Group) Co., Ltd. (ZealerAlthough the court did not disclose the specific reasons for restricting its high consumption, industry insiders believe that it is likely that it has triggered the buyback bet clause like many current entrepreneurs based on information from multiple sources.

Public information shows that Wang Ziru is the founder and CEO of Zealer, and later withdrew from Zealer and joined Gree. Zealer's operating entity is Guangdong Jinru Yunhai (Group) Co., Ltd., which was established in 2012 and is a digital evaluation platform. Born in the mobile Internet era, Zealer has won the favor of many capitals under the huge dividends of the times. Between 2012 and 2016, Zealer completed 4 rounds of financing, and well-known industrial capitals such as Shunwei Capital under Lei Jun, OPPO, Gionee Mobile, BBK, and Tencent Investment have all participated in it.

Among them, Shunwei Capital withdrew from the project in 2017. Now the only VC institutional shareholders behind it are Shanghai Shuhui Venture Capital Center (Limited Partnership), Shenzhen Junsheng Panshi Investment Enterprise (Limited Partnership), Shenzhen Fuyongyun Venture Capital Partnership (Limited Partnership), and Shenzhen Litong Industrial Investment Fund Co., Ltd.

Shanghai Shuhui Venture Capital Center (Limited Partnership) is the applicant for execution in this case. According to Zerone, Shanghai Shuhui Venture Capital Center (Limited Partnership) only invested in the Zealer project, so the fund is a special fund.

This is not the first time that Wang Ziru has been subject to enforcement. Tianyancha shows that he was twice filed by the court in June last year and January this year and became the subject of enforcement. In January this year, Wang Ziru was forcibly enforced by the Shenzhen Nanshan District People's Court for more than 33.83 million yuan.according toThe consumption restriction order issued by the Nanshan People's Court of Shenzhen shows that it is a "dispute related to Shanghai Shuhui Venture Capital Center (Limited Partnership)". Therefore, the industry speculates that Wang Ziru's dispute with Shanghai Shuhui Venture Capital Center (Limited Partnership) triggered the buyback bet clause, but he failed to repurchase.

There is Wang Ziru now, and there was Luo Yonghao before. Even star entrepreneurs can hardly escape the "curse" of current entrepreneurs buying back equity.

Recently, Shenzhen Capital Group, a leading domestic VC institution, has intensively initiated repurchase lawsuits against its invested companies, which has attracted considerable attention in the primary market.

Signing a buyback clause/bet agreement is a "must-have" for startups in the primary market financing in recent years. If the company fails to meet the performance indicators within the agreed time with the investor, or fails to IPO (list) within the agreed time, it must repurchase the equity held by the investor. With the economy entering a downward cycle in the past two years, the capital market has suspended IPOs or raised IPO thresholds, many innovative companies have failed to achieve the performance indicators and listing process agreed with investors, and are facing the life-and-death test of repurchasing equity.

Sun Weiping, partner lawyer at Grandall Law Firm (Shanghai), said in an interview with a Securities Times reporter that when a company fails to complete a qualified IPO within the agreed period and triggers the repurchase right clause, even if the investor initiates a lawsuit, it often faces difficulties in enforcing the repurchase right.

He analyzed that, on the one hand, if any of the investors in each round requested a repurchase, it would cause other investors to follow suit, which might lead to a situation where many investors requested a repurchase at the same time. The cash flow of the invested enterprises and major shareholders might be stretched and unable to pay the repurchase price. On the other hand, most of the enterprises that have completed IPO applications will terminate the special shareholder rights clauses with all investors in an invalid and irrevocable manner before the application. This directly leads to the lack of support for the investors' claim to restore the repurchase right clause after the failure of the IPO, and the invested enterprises and investors are caught in the dilemma of potential disputes.

"The current primary market equity investment mechanism, with the repurchase right as its representative clause, is overly dependent on the IPO exit of the project within the foreseeable period, which reflects the speculative tendency of primary market equity investment." Sun Weiping believes that the investment logic of pursuing IPO exit in the short term not only increases the risk of investment projects, but also is not conducive to cultivating investors' attention to the long-term value of the company, which runs counter to the concept of "patient capital."

Sun Weiping suggested that the investor and the enterprise can negotiate to set an observation period, allowing the investor to conduct tracking observations during the observation period. For example, the parties can agree in the investment agreement that the 12 months after the completion of the investment delivery is the observation period. During the observation period, the investor has the right to require the invested enterprise to provide supporting materials for the observation matters, attend the board of directors/operation meetings of the invested enterprise, and arrange for a third-party agency to conduct tracking due diligence on the invested enterprise. Within a certain period after the observation period, the investor shall conduct acceptance inspections on the observation matters. If the acceptance fails, the investor shall have the right to repurchase. If the invested enterprise cannot cooperate with the normal tracking and observation, it shall be deemed that the acceptance of the observation matters has failed, and the investor has the right to request a repurchase. The observation period should be between 6 and 36 months. If the observation period is agreed to be too long, it will not only affect the IPO application of the invested enterprise, but also reduce the effectiveness of the observation period clause.

He believes that the observation period clause is expected to play a role in strengthening post-investment management, stimulating investment activity and improving investment quality.

Editor: Yue Yanan

Proofreading:Liao Shengchao