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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.
Is the spouse always entitled to a share of pre-marital equity's post-marital appreciation?
Not necessarily. The key lies in the nature of the appreciation. If it is natural appreciation (passive market factors), it belongs to the individual and the spouse has no right to a division; if it is active appreciation (generated by one party’s post-marital management and input), it constitutes investment income and is marital property, to which the spouse is entitled.…
Read the answer ›If a company does not hold a shareholders' meeting for two years, does that necessarily constitute corporate deadlock?
Not necessarily. The court must also comprehensively determine whether “serious difficulties have arisen in operation and management and continuance of the company would cause material loss to shareholders’ interests,” and whether the matter remains unresolved after other avenues have been exhausted. The inability to hold a meeting for two years is merely one of the most common circumstances and does…
Read the answer ›Can a creditor directly sue a shareholder who has withdrawn capital to recover payment?
Yes. A creditor may raise the claim together with a lawsuit against the company on the debt dispute, or apply at the enforcement stage to add the shareholder who has withdrawn capital as a person subject to enforcement, requiring the shareholder to bear supplementary compensation liability for the unsatisfied portion of the company’s debts within the scope of the principal…
Read the answer ›After a dissolution is ordered, may the company continue to operate?
No. After dissolution is ordered, the company enters liquidation proceedings, ceases business activities unrelated to liquidation, and its assets, claims, and debts are dealt with by the liquidation group in accordance with the law, culminating in deregistration.
Read the answer ›May you entrust lawyers and accountants to conduct the inspection, and who bears the cost?
You may entrust intermediaries, and the newly revised Company Law expressly supports this. The inspection and copying costs of the intermediary institutions are borne by the shareholder, but professional involvement can substantially improve the quality of inspection and the efficiency of subsequent rights protection. Further Reading The Right of First Refusal in Shareholders’ Agreements: One Clause That Determines Whether You…
Read the answer ›If the nominee shareholder is in debt, can the equity registered in their name be subject to compulsory enforcement?
Yes. Industrial and commercial registration has public notice effect, and a creditor’s application for compulsory enforcement against the equity registered in the name of the recorded shareholder is lawful. A hidden shareholder’s objection to the enforcement is unlikely to succeed—this is the most dangerous risk of nominee shareholding and must be assessed before signing any such arrangement. Source article: Who…
Read the answer ›The company claims it 'notified you in writing,' but you never received it—what should you do?
This is a typical ‘voidable’ procedural defect. You may assert that you were not lawfully notified and that the meeting was convened in violation of procedure, and file a suit to revoke the resolution within 60 days. The key is to prove ‘non-receipt’—keep evidence such as your communication records and proof that your address has not changed. Source article: Can…
Read the answer ›Is a provision in the articles of association stating 'shareholders may not inspect the accounting books' valid?
No. A shareholder’s right to inspect is a statutory right that cannot be deprived in advance through the articles of association or a shareholders’ agreement. Even if you sign to ‘voluntarily waive’ it, such a clause is void because it violates mandatory legal provisions. Source article: The Company Never Distributes Dividends or Shows You the Books? The Action for Inspection…
Read the answer ›Must the nominee agreement be in writing? Is an oral agreement valid?
The law does not prohibit an oral nominee arrangement, but in divorce proceedings it is extremely difficult to establish a nominee relationship based solely on an oral understanding. The court places a heavier burden of proof on the party asserting nominee holding, and a written agreement is the most central evidence.
Read the answer ›In a divorce, can the spouse directly become a shareholder of the company?
Generally, no. What the spouse receives is the property value of the equity (a cash buyout), not the shareholder status. Only where the parties reach agreement and the other shareholders consent (waiving their right of first refusal) may a change of registration make the spouse a shareholder. Source article: ‘The Company Founded Before Marriage: Why Is Half of the Post-Marital…
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