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Equity Dispute FAQ

Below are frequently asked questions on equity and shareholder disputes, compiled by Lawyer Kevin Jun Lin from litigation practice. Every case differs — please consult a lawyer for advice on your specific situation. Answers are currently published in Chinese; use the language switch for the Chinese version, or contact us in English through the form.

What if there is a dispute over whether contributions in equipment or technology were actually made?

Non-monetary contributions must be appraised and verified and must not be overstated or understated. A common dispute is that the actual value of the equipment or technology is materially lower than the subscribed contribution. The contribution may then be treated as not fully made and required to be made up (Article 47 requires subscribed capital to be paid within five…

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What can be inspected in a shareholder right-of-information action, and what if the company refuses?

Under Article 57 of the new Company Law, shareholders may inspect and copy the articles of association, the shareholders’ book, minutes of shareholders’ meetings, board and supervisory resolutions and financial reports; inspection of accounting books and vouchers requires a statement of purpose. A company may refuse on reasonable grounds of improper purpose, but must reply in writing with reasons. The…

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After the parents divorce, does the child's equity "ust belong to the custodial parent to manage"?

Not “owned” by either side. Both parents are guardians and both have substitution rights; only routine affairs are usually handled by the custodial parent. Major dispositions require consensus. The child’s equity always remains the child’s personal property (from inheritance) and belongs to no guardian.

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The appraisal report is clearly too low—how do I rebut it?

Three breakthroughs: whether the assumptions are abnormal (e.g., assuming liquidation or order loss); whether the method is mismatched; whether the financial data is complete. File a written objection within the legal period, request the institution’s explanation and the appraiser’s appearance, and apply for re-appraisal where necessary.

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If the company has been profitable for five years without paying dividends, can a shareholder require a buy-out?

Under Article 89 of the new Company Law, where a company has failed to distribute profits for five consecutive years while remaining profitable for those five years and meeting the statutory conditions for distribution, a shareholder who voted against the resolution may require the company to buy its shares at a reasonable price. If no agreement is reached within 60…

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The company has been profitable but paid no dividends for years—can the successor shareholder win by suing?

Suing directly for dividends without a resolution specifying a concrete distribution plan, the court will dismiss. The viable path: first push a dividend motion at the shareholders’ meeting; if the controlling shareholder abused rights (related-party transfers, disguised distribution, malicious hoarding) causing loss, claim forced distribution under the abuse exception—but the proof threshold is high, so concurrently filing an inspection suit…

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The company suspects the successor shareholder wants to steal technology and poach clients—how to lawfully refuse inspection?

It must reply in writing within 15 days of the written request, giving specific, provable reasonable grounds—such as the shareholder currently working in the same industry, having leaked secrets, or having consulted for competitors. A refusal based on mere suspicion without grounds will most likely lose in an inspection-right suit and may also bear the other side’s enforcement costs.

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What can be done if the company fails to honour a repurchase obligation under a valuation adjustment agreement?

First distinguish whether the repurchasing party is the company or the founders — their ability to perform and the legal route differ. Where the company is the repurchaser, check whether the capital reduction procedures under the Company Law (Art. 224) have been completed, since a failure to reduce capital lawfully may affect performance. Identify the agreement terms, assess available assets…

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The successor shareholder does nothing but demand money—can the other shareholders force him out?

No. There is no duty-of-diligence trigger for exit; exit requires negotiated transfer, company buyback (only under statutory circumstances), or targeted capital reduction—all needing the shareholder’s own consent or strict conditions. If the stalemate is intolerable, the initiative lies with whoever is willing to pay—a buyout is always cheaper than confrontation.

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After winning revocation and getting the equity back, can I still make him take less?

Yes, in parallel. Revocation solves “clawing the equity back”; Art. 1092 solves “what penalty the transferor deserves.” The equity remains community property after restoration, but given the transferor’s malicious act, the court may award him less in division. The two paths are not mutually exclusive.

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