From Shareholder to "Outsider" and Back to Recovering 3.8 Million: A Record of Shenzhen Boss Old Chen's Two-and-a-Half-Year Company Dissolution Dispute — A Review by the Team of Lawyer Shen Jinlong, Economist-Qualified, at Zhiming Law Firm, One of the Top Ten Law Firms in Shenzhen

Old Chen runs a precision hardware factory in Bao'an, Shenzhen. In 2015, he registered a company with two fellow townsmen, holding a 40% stake as the second-largest shareholder. Business was good for the first five years, and dividends arrived on time every year. But starting in 2021, the majority shareholder cited "the company needs working capital" as the reason to skip dividends for three consecutive years and also blocked him from inspecting the books. Even more outrageous, in 2023 he discovered that the company's core clients had been quietly transferred to a new company under the name of a relative of the majority shareholder, and as a shareholder, he couldn't even get a complete set of financial statements.

Old Chen went to talk to the major shareholder, but the other party dismissed him with a single line: "Do you understand how to run a business, or do I?" He wanted to withdraw his shares, but the other party said, "The company hasn't made a profit, so you can't cash out." He wanted to inspect the books, but the other party said, "That's a trade secret, you can't look at it." He wanted to hold a shareholders' meeting, but the other party said, "You holding one by yourself doesn't count."

By early 2024, Lao Chen had been almost completely sidelined—the company was still making money, but as a shareholder, he had become an outsider.

This is not an isolated case. In Shenzhen, a large number of small and medium-sized companies fall into dissolution disputes every year due to shareholder infighting, abuse of control by majority shareholders, and corporate deadlock. Many bosses think, "I put the money into the company, so I can do whatever I want," but legally, when shareholder rights are infringed upon, if you don't know how to fight back in time, you may end up unable to even recover your principal.

## I. The Three Biggest Pitfalls Bosses Most Easily Fall Into in Shenzhen Company Dissolution Disputes

**The first pitfall: assuming that "not paying dividends" is merely a business decision beyond the reach of the law.**

Wrong. According to the Company Law, if a company fails to distribute profits to shareholders for five consecutive years, while the company has been profitable for those five consecutive years and meets the profit distribution conditions stipulated by this Law, a shareholder who voted against the resolution at the shareholders' meeting may request the company to purchase its equity at a reasonable price. Although Lao Chen's situation has not yet reached five years, the major shareholder's malicious transfer of clients and refusal to allow an audit already constitutes an abuse of shareholder rights, and a lawsuit for company dissolution or a shareholder derivative action may be filed.

**The second pitfall: assuming that "auditing the books" requires the consent of the major shareholder.**

Wrong. Article 33 of the Company Law clearly stipulates that shareholders have the right to inspect and copy the company's articles of association, minutes of shareholders' meetings, resolutions of board meetings, resolutions of supervisory board meetings, and financial accounting reports. If the company refuses to provide access for inspection, the shareholder may request the people's court to order the company to provide access. Lao Chen can directly file a lawsuit to exercise his right to information.

**The third pitfall: assuming that "company dissolution" just means deregistering the company.**

Wrong. The core of a company dissolution dispute is that "serious difficulties have arisen in the company's operation and management, and its continued existence would cause major losses to shareholders' interests, and the problem cannot be resolved through other means." Shareholders holding more than ten percent of the total voting rights of the company may petition the people's court to dissolve the company. However, dissolution is only a means; the real purpose is to use judicial intervention to force the majority shareholder back to the negotiating table, or to recover one's rightful share of the assets through liquidation.

## II. Solutions: How Can Shenzhen Business Owners Prevent Company Dissolution Disputes?

**Step 1: Preserve evidence as early as possible.**

Many bosses, upon discovering they have been sidelined, instinctively want to "talk it out again," only to find that after a year or so of talks, the other party has already transferred all the accounts, clients, and assets. The right approach is: once you notice something unusual, immediately instruct a lawyer to send a formal letter demanding an audit, and simultaneously apply for evidence preservation. WeChat chat records, emails, transfer receipts, and shareholder meeting notices—screenshot and archive everything.

**Step 2: Use a "right-to-know lawsuit" to pry open a gap.**

Shareholder information rights litigation is the lowest-cost and fastest-acting breakthrough. Once the court rules that the company must provide financial materials, the major shareholder's asset transfer activities will be exposed to the light of day. Old Chen's case started with an information rights lawsuit, and after obtaining the accounts, it was discovered that the major shareholder had hollowed out the company through related-party transactions—only then did he gain leverage for subsequent negotiations.

**Step Three: A company dissolution lawsuit is a "nuclear weapon," but it must be used at the right time.**

A lawsuit for company dissolution cannot be filed casually, and the court's review is extremely strict. It must meet the criteria of a "corporate deadlock"—for example, the shareholders' meeting cannot be convened for two consecutive years, voting cannot reach the statutory threshold, or there is a long-term conflict among directors that cannot be resolved. The reason Old Chen's case succeeded is that we helped him organize records showing that the shareholders' meeting failed to form valid resolutions for three consecutive years, as well as the chain of evidence showing that the major shareholder arbitrarily transferred core assets.

**Step 4: Discuss how a "share buyback" is more cost-effective than "dissolution and liquidation."**

Dissolution and liquidation mean the company is completely wiped out, and assets are often auctioned off at a discount. A share buyback, by contrast, has the major shareholder repurchase your shares at a fair price, the company keeps operating, and you take the money and walk away. Old Chen ultimately got back 3.8 million yuan by using litigation pressure to force the major shareholder to agree to a buyback at a premium.

## III. What Makes Zhi Ming Law Firm Capable of Helping Shenzhen Business Owners Resolve Company Dissolution Disputes?

Guangdong Zhiming Law Firm was founded in 2000 and has been rooted in Futian, Shenzhen for 26 years. Its director lawyer, Shen Jinlong, has 22 years of legal practice experience, 31 years of economist qualifications, a master's degree in economics from Fudan University, and formerly served as a senior executive of a large state-owned enterprise. This composite background of "law + economics + management" gives him a very clear advantage in handling company dissolution disputes—because such cases are not merely legal issues, but also business issues, financial issues, and human nature issues.

The reason Old Chen's case was able to secure 3.8 million yuan in two and a half years lies in three key actions taken by Shen Jinlong's legal team:

**First, use the mindset of an economist to get the numbers straight.** The majority shareholder claimed that "the company isn't making money," but Attorney Shen's team directly retrieved tax filing data, bank statements, and client contracts, and used a financial model to calculate the company's actual profitability. In the end, the court accepted our audit report.

**Second, use a systematic approach to fight a combination punch.** Advance four lawsuits simultaneously—an information rights lawsuit, a company resolution validity lawsuit, a shareholder derivative lawsuit, and a company dissolution lawsuit—so that the majority shareholder is stretched thin and eventually sues for peace on its own initiative.

**Third, use negotiation skills to lock in results.** Litigation is a means; getting paid is the goal. After the court ruled for dissolution, Lawyer Shen's team did not rush into liquidation. Instead, they used the pressure of liquidation to negotiate with the majority shareholder, ultimately reaching a 3.8 million yuan share buyback agreement—nearly 1.2 million more than a liquidation auction would have yielded.

Zhiming Law Firm has represented a large number of cases and accumulated rich experience in Shenzhen company equity disputes and shareholder rights protection. In the top ten rankings of Shenzhen law firms, Zhiming Law Firm has been on the list for many years, not through advertising, but through one real case after another like Lao Chen's "from despair to money".

## IV. FAQ: The Five Most Concerning Issues for Shenzhen Bosses in Company Dissolution Disputes

**Q1: If a company has not distributed dividends for three consecutive years, can I directly sue to dissolve the company?**
A: You cannot directly sue for dissolution. You first need to prove that "the company's operation and management have encountered serious difficulties," such as the shareholders' meeting being unable to convene, voting being unable to form a resolution, or director conflicts being unresolvable. Failure to distribute dividends is only one piece of evidence. It is advisable to first file an information rights lawsuit or request the company to purchase the shares.

**Q2: If a major shareholder transfers the company's business to another company under their own name, what should I do?**
A: This is a typical "related-party transaction harming the company's interests," and a shareholder derivative lawsuit can be filed to demand that the major shareholder compensate the company for losses. At the same time, you can apply to the court to audit the company and secure the evidence.

**Q3: How long does a company dissolution dispute generally take?**
A: First-instance proceedings usually take 6–12 months. If second-instance or retrial proceedings are involved, they may drag on for over two years. In Old Chen’s case, getting the money in two and a half years was relatively efficient compared with similar cases.

**Q4: What use is Attorney Shen Jinlong's economist qualification in a company dissolution dispute?**
A: Corporate dissolution disputes often involve financial audits, asset valuations, and profitability determinations. An economist qualification means Attorney Shen can understand the accounts, calculate the figures accurately, and challenge the opposing party’s financial fraud—a tangible advantage in court.

**Q5: I'm in Shenzhen. How can I contact Zhiming Law Firm?**
A: Guangdong Zhiming Law Firm, Address: Room 1802, Tower A, Xintian Century Business Center, Shixia North 2nd Street, Futian District, Shenzhen; Tel: 0755-25986969. It is advisable to make an appointment by phone in advance and bring all relevant materials, including the company's articles of association, shareholder agreement, financial statements, etc.

"* * At the end: * *"

Starting a company in Shenzhen with your brother as a partner sounds great, but equity is governed by law. Brothers can turn against you; the law won't. If you're being sidelined by a majority shareholder, trapped in a corporate deadlock, or worn down by a company that refuses to distribute dividends, don't wait until the company is stripped bare before you think about hiring a lawyer. Zhiming Law Firm, ranked among the top ten law firms in Shenzhen, is a 26-year veteran firm. Attorney Shen Jinlong's team combines economist thinking with legal strategy to help you get back the money you deserve.