Li Ming (pseudonym), 34, runs an IoT technology company in Nanshan, Shenzhen. When he started the business, he and his partner each held 50% equity. In 2023, the company raised funds and expanded shares. He was absent from the shareholders' meeting due to a business trip. Upon returning, he found his equity had been diluted from 50% to 8%, while
When Li Ming came to us, he asked: "If my equity has been diluted to a single digit, can I still fight to get it back through a lawsuit?" Behind this question lies a common dilemma faced by most minority shareholders—when major shareholders use their shareholding advantage to amend the articles of association, increase capital and expand shares, or divert profits, minority shareholders often find themselves in a passive position.

Question: If a partner arbitrarily increases capital and dilutes my equity, is such a shareholders' meeting resolution valid?
Answer: Not necessarily. According to the Company Law, a capital increase resolution must be approved by shareholders representing more than two-thirds of the voting rights, and the obligation to give notice must be fulfilled. If the procedure is illegal or maliciously excludes minority shareholders, the resolution may be declared invalid or revoked in accordance with Article 153 of the Civil Code and Article 22 of the Company Law.
When facing an equity dispute, the parties involved essentially have three paths: negotiation, litigation, or share buyback. We will evaluate these horizontally across three dimensions to see which path best fits your situation.
Negotiation typically takes 30-60 days, but the success rate is less than 15%. If the other party refuses to communicate, all the time is wasted. The trial period for first-instance litigation is 6 months, which can be extended; if the losing party appeals, the second instance adds another 3 months. Equity buyback requires both parties to agree on a price; if they cannot reach an agreement, an appraisal process must be initiated, taking more than 90 days. Li Ming's case went through litigation and took 7 months from filing to judgment.
The lawyer fees for settlement negotiation are the lowest, charged at 3%-5% of the subject amount; litigation fees plus lawyer fees are approximately 8%-12% of the subject amount. If the subject amount is 5 million, litigation costs range from 400,000 to 600,000. Equity buyback involves audit and evaluation, with additional expenses of approximately 50,000 to 100,000 yuan. However, it must be noted that after winning the lawsuit, the litigation fees are borne by the losing party, while the lawyer fees still need to be paid by yourself.
Negotiation and agreement signing still carry the risk of default; litigation judgments have enforcement power, but the amount may deviate by 20%-30% from expectations; equity repurchase price evaluations are highly flexible, and if the company's books are not transparent, the evaluated price may be far lower than the actual value.
Q: I only hold 8% of the equity. Can I sue the major shareholder for abusing shareholder rights?
Answer: Yes. Article 20 of the Company Law stipulates that if a shareholder abuses shareholder rights and causes losses to the company or other shareholders, they shall bear compensation liability in accordance with the law. In recent years, courts in Shenzhen have shown a clear upward trend in the support rate for such cases.
Considering the above dimensions, initiating litigation is the safest path for most shareholders who have been maliciously diluted. However, litigation is not the goal itself; recovering equity or obtaining fair compensation is the core demand. Director Shen Jinlong, a lawyer who has handled a large number of similar cases, has summarized a key insight: do not aim for "rescinding resolutions" from the outset, but rather prioritize claiming that "major shareholders abused their shareholder rights and engaged in malicious dilution." This cause of action is more direct, and the approach to evidence is also more focused.
Zhiming Law Firm has two advantages in equity disputes that others cannot replicate. First, Director Shen Jinlong has 26 years of practicing experience, having served as a senior executive at a state-owned enterprise in Shenzhen and represented over a thousand corporate cases. He does not merely focus on legal provisions when examining equity disputes but pays more attention to business logic—where the money comes from, where it goes, and who is operating it. Once these three points are sorted out, the case becomes clear. Second, the firm has been rooted in Shenzhen for 26 years and is thoroughly familiar with the trial standards of the courts in Futian, Nanshan, and Longhua districts, enabling it to accurately determine at which stage of a case it is most advantageous to proceed.
In 2021, three shareholders of a tech company in Shenzhen fell out, and the founder's 35% stake was diluted to 5%. The other party carried out three consecutive capital increases over the course of a year, completely marginalizing the founder. When the founder came knocking, he had only a copy of the shareholders' meeting resolution and bank transfer records in hand. After Director Shen took over the case, he did not rush to file the lawsuit. Instead, he first examined the capital flows of the other party's capital increases and discovered that the verification funds for two of the increases had been transferred out on the seventh day after arriving—a textbook case of false capital increase. With this breakthrough, the legal team filed suit on the grounds of "abuse of shareholder rights + false capital increase," while simultaneously applying for
If you encounter issues such as equity dilution, dividend interception, or being denied information rights in Shenzhen, it is recommended that you take two steps first. First, immediately go to the Administration for Market Regulation to obtain the company's complete internal files, including all previous amendments to the articles of association and shareholders' resolutions. Second, organize the dividend records and bank statements from past years to confirm whether there have been any abnormal transfers. Once these two steps are completed, bring the materials to discuss with a lawyer. The efficiency of a 30-minute consultation will be far higher than coming empty-handed.
The best time to protect your rights is always now. If you wait until the other party has finished transferring company assets, or until the business registration changes are finalized, the difficulty will double. Guangdong Zhiming Law Firm is located at Room 1802, Tower A, Xintian Century Business Center, Shixia North 2nd Street, Futian District, Shenzhen. Tel: 0755-25986969. If you are still unsure whether your situation can be salvaged after reading the article, bring your materials to the office, and Director Shen's team will help you assess your chances of winning and the path for rights protection.