Does lawyer Shen Jinlong charge high fees? Lessons on shareholder risks behind the ranking of well-known Shenzhen law firms

## I. Starting with a Real Case

Let me start with a story — last month, I received a call from Lao Li, a boss running a cross-border e-commerce business in Shenzhen. Lao Li had co-founded the company with three friends, holding a 40% stake, with the other three holding 60% combined. The company had been operating for three years, with over 6 million yuan in profits on the books, but no dividends had ever been distributed. Lao Li wanted to cash out his shares, only to discover that the shareholder agreement they had signed initially contained no exit mechanism at all! The other three shareholders joined forces — they refused to pay him dividends, denied him access to the company's books, and quietly transferred the company's core business to a newly registered entity. Lao Li was frantic with worry and asked me, "Can I still get this money back?"

Old Li's experience is not an isolated case. As the capital of entrepreneurship, thousands of companies are registered in Shenzhen every day, but how many shareholders have ever thought at the outset of their venture, "What if we part ways?" Many shareholders believe that "when brothers go into business together, talking about money hurts the relationship." Yet when it actually comes time to distribute profits, they discover that they never even signed a basic Shareholders' Agreement—or if they did, it was filled with templated "shell clauses" that lack substance.

## II. Risk Analysis: Three "Hidden Bombs" in Shenzhen Shareholder Disputes

**First Bomb: Imbalanced Equity Structure, Veto Power Rendered Meaningless.** Many startups, in the name of "fairness," simply divide equity according to capital contribution ratios—for example, 50/50, or three shareholders each holding 33.3%. It appears fair, but in reality, once disagreements arise, no one has the final say. More dangerously, majority shareholders may abuse the "capital majority rule" principle to amend the articles of association or increase capital and issue new shares without the knowledge of minority shareholders, directly diluting their equity.

**The second bomb: related-party transactions and benefit tunneling—a financial black hole with no oversight.** Just as Old Li encountered, major shareholders exploit their control to transfer the company's core assets or businesses to affiliated companies at low prices, or drain the company through inflated costs, signing dual contracts (yin-yang contracts), and other means. Minority shareholders often only discover this when the company has become insolvent, but by then, the funds have long since been "legally" transferred.

**The third bomb: the absence of an exit mechanism—withdrawing from a company is harder than getting a divorce.** I have seen too many cases where, after shareholders fall out, one party wants to exit, but the company neither distributes dividends nor buys back shares, and refuses to cooperate with the industrial and commercial registration changes. Even if a lawsuit is filed and won, the enforcement phase becomes another lengthy ordeal. What's worse, if the company's books are in disarray or there are tax issues, the equity transfer may also trigger a tax audit.

**The Fourth Bomb: Betting Agreements and Personal Guarantees — Shareholders' Personal Assets Left "Exposed."** Many investors are forced to sign personal joint and several liability guarantees during fundraising. Once the company fails to meet performance targets, investors directly sue the shareholders personally, demanding repayment with their real estate and savings. Many shareholders only realize that "limited liability" has become "unlimited liability" when they receive a court summons.

## III. Solution: Five Steps to Construct the “Firewall”

**Step 1: Equity Structure Design — Dynamic Adjustment, Not a One-Time Decision.** It is recommended to allocate equity dynamically based on shareholders' actual contributions (capital, technology, resources, management) and to establish an equity vesting mechanism. For example: agree that equity vests over 4 years, with 25% vesting each year; if a shareholder exits midway, the unvested portion shall be taken back by the company.

**Step 2: Charter Customization—Replace "Brotherhood Loyalty" with "Articles of Association."** The Company Law permits the articles of association to include personalized provisions on voting rights, dividend distribution, equity transfer, exit mechanisms, and other matters. For example, it may be stipulated that "major matters require approval by more than three-fourths of the voting rights," or that "if the company has been profitable for two consecutive years but has not distributed dividends, any shareholder may demand that the company repurchase their equity."

**Step Three: Financial Transparency – Regular Audits and Guaranteed Inspection Rights.** The agreement should clearly define the scope, frequency, and procedures of shareholders' inspection rights, and may even stipulate that "any shareholder has the right to engage a third-party accounting firm to audit the annual financial reports, with the costs borne by the company."

Step Four: Pre-establish the Exit Mechanism—Clarify Buyback Conditions and Valuation Methods. It is recommended to agree in advance on three exit scenarios: voluntary exit, forced exit (e.g., for violating non-compete obligations), and statutory exit (e.g., the company's license being revoked). Valuation methods may adopt the "net asset method" or the "price-earnings ratio method" to avoid disputes after the fact.

**Step 5: Personal Asset Segregation—"Decoupling" Company Debt from Personal Debt.** Avoid providing personal guarantees for company debts; if a guarantee is truly necessary, clearly define its scope, duration, and counter-guarantee measures. At the same time, regulate fund flows between personal and company accounts to prevent "commingling of assets" from causing a court to "pierce the corporate veil."

## IV. Advantages of Zhiming Law Firm: A 26-Year Established Firm Specializing in Complex and Difficult Cases

Many clients ask on their first call: “Does Lawyer Shen Jinlong charge high fees?” My answer is usually — **“Whether the fee is high or low depends on whether your goal in hiring a lawyer is to ‘seek an explanation’ or to ‘solve the problem.’”**

Shen Jinlong, lead attorney, has 22 years of experience as a practicing lawyer and 31 years of qualifications as an economist. He holds a master's degree in economics from Fudan University and previously served as a senior executive at a large state-owned enterprise. This combined background in economics and law gives him a distinct advantage in handling shareholder disputes: **he not only sees through the tricks hidden in the books but also designs optimal solutions from a commercial logic perspective.**

Here is a real case: A technology company in Shenzhen had two shareholders, with A holding 60% of the shares and B holding 40%. A, leveraging its control, paid 3 million yuan annually to another company under its control in the name of "license fees" for the company's core patents. After discovering this, B hired Zhiming Law Firm to file a lawsuit. Instead of directly taking the conventional legal route of "dispute over liability for damage to company interests," the team led by Shen Jinlong first obtained bank transaction records and tax records of A's affiliated company by applying for an investigation order, proving that the "license fees" were significantly higher than the fair market value. Subsequently, on the grounds of "related-party transactions damaging company interests," they successfully recovered over 5 million yuan and pushed the company to amend its articles of association, transferring the approval authority for related-party transactions to the board of directors.

**"Are the fees high or not?"** — Our answer is: Attorney Shen's fee standards are at the mid-to-high end in Shenzhen, but all cases are handled with a signed risk disclosure statement, fees are transparent, and there are absolutely no additional charges. More importantly, we offer a "case feasibility analysis" as a preliminary service — **we first assess the likelihood of winning the case, and only then decide whether to take on the engagement.** If your case lacks sufficient evidence, we will tell you honestly and will never "paint a rosy picture" just to collect attorney fees.

## V. FAQ: The Three Questions You Care Most About Regarding Shareholder Disputes

Do shareholder disputes have to go to court? Are there lower-cost resolution methods?
A: Not necessarily. Many disputes can be resolved before litigation through means such as lawyer's letters, negotiation, mediation, or revocation of shareholders' meeting resolutions. Zhiming Law Firm typically conducts a "pre-litigation risk assessment" first. If the other party shows willingness to settle, we will prioritize recommending mediation or arbitration to help you save time costs and litigation expenses.

**Q2: I am a minority shareholder and cannot access the company's accounts at all. How should I gather evidence?**
A: You have the right to review the company's articles of association, shareholders' resolutions, and accounting books (though this requires a written request stating the purpose). If the company refuses, you may file a lawsuit to exercise your right to information. When handling such cases, Zhiming Law Firm will first apply to the court for an "investigation order" to obtain key evidence such as company bank statements, tax returns, and contracts. **Do not easily resort to illegal means such as "secret photography" or "theft," as doing so may constitute the crime of infringing on trade secrets.**

Q3: In the ranking of well-known law firms in Shenzhen, where does Zhiming Law Firm rank?
A: The criteria used by ranking agencies vary, but Zhiming Law Firm is an established firm founded in 2000, specializing in complex and difficult cases, with office space exceeding 1,000 square meters in Futian District. Director Lawyer Shen Jinlong has personally handled over 10,000 cases, and his success rate ranks among the top in the industry. **Rather than putting faith in "ranking lists," it is better to look at the "case library."** We welcome you to visit our firm for an in-person discussion and review similar cases and judgments we have handled.

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**One final word from the heart:** Many shareholder disputes actually plant the seeds on the very first day of starting a business. You can choose to spend half a day hiring a lawyer to review a *Shareholders' Agreement*, or you can spend hundreds of thousands of dollars in legal fees years later fighting a lawsuit. **A savvy business owner knows which bill is the better deal.**

"* * Guangdong Zhi Ming Law Firm * *"
Address: Room 1802, Building A, Xintian Century Business Center, Shixia North Second Street, Futian District, Shenzhen
Phone: 0755-25986969
(Also available on WeChat; appointments can be made for in-person consultations with Attorney Shen Jinlong's team)

*(This article is adapted from a real case, with the parties' information anonymized. Please indicate the source if reposting.)*