Business partner turned hostile and wants to force me out? Shenzhen equity lawyer's 40% equity defense battle teaches you 4 tactics to counter malicious dilution.

Lao Zhou partnered with someone in Shenzhen Longhua to develop intelligent hardware, holding a 40% stake. At the end of last year, he discovered that an extra 30 million yuan in "investment funds" had appeared on the company's books, yet he had received no notification — his partner had brought in a new shareholder through a targeted private placement at an extremely low price, diluting Lao Zhou's stake to 9%. By the time he brought his share certificate to Zhiming Law Firm, the capital increase resolution had already been registered with the industrial and commercial authorities. This is not an isolated case. Equity disputes in Shenzhen are growing at an annual rate of 20%, and corporate control battles have become the most concentrated flashpoint.

Answer: The capital increase itself is legal, but if the resolution for the capital increase bypasses you, the procedure is likely flawed. Under Article 34 of the Company Law, when a company increases its registered capital, shareholders have the right to subscribe to the new capital in priority according to their paid-in capital contribution ratio. Unless the articles of association provide otherwise, partners cannot deprive you of your preemptive right. In the case of Lao Zhou, the new shareholder subscribed at a valuation below market price, and the board directly excluded Lao Zhou from the subscription list—this is a typical infringement of rights. Submitting a written request to exercise your preemptive right is the first step in protecting your rights. It must be issued within a reasonable period after receiving the capital increase notice (usually within 30 days); exceeding that period may be deemed as waiver.
Answer: A case handled by Zhiming Law Firm in 2024 involving a dispute at Nanshan Technology Company can serve as a reference. The client held 35% of the shares, which was diluted to 5.8%. After we took over, we applied for a behavioral preservation within 48 hours, froze the company's business registration change files, and simultaneously obtained records of all prior shareholders' meeting notices, resolutions, and transfer records—revealing that the so-called "investment funds" had never actually been paid in full. The key was applying Article 22 of the Company Law, which provides that resolutions of the shareholders' meeting or general meeting, or of the board of directors, that violate laws or administrative regulations are void; where the convening procedures or voting methods violate laws, administrative regulations, or the company's articles of association, shareholders may petition the people's court to revoke the resolution within 60 days from the date the resolution is made. We argued that the resolution was non-existent on the grounds that the "capital increase was not actually paid," and the court accepted this, ultimately restoring the client's full 40% equity, with the opposing party bearing 120,000 yuan in litigation costs. The hardest part was the mid-case negotiation—the other side's precondition for settlement was prioritizing distribution of the book profits, but the client
Answer: Shareholders' right to information is explicitly granted by law. Article 10 of the Judicial Interpretation (IV) of the Company Law states that shareholders may inspect and copy the company's articles of association, minutes of shareholder meetings, resolutions of the board of directors, resolutions of the board of supervisors, and financial accounting reports, and may also request to inspect accounting books. A lawsuit concerning the right to information does not affect your subsequent filing of a claim for liability for damages to the company's interests. In practice, you can first send a lawyer's letter requesting access to the accounts (requiring the company to reply within 15 days); if refused, immediately file a lawsuit with the Shenzhen Futian District People's Court to apply for a court investigation order. What is uncovered may be more serious than you expect: Zhiming Law Firm once applied for a court investigation order on behalf of a shareholder of a manufacturing enterprise in Longhua, uncovering that a partner had used affiliated companies to divert payments totaling over 26 million yuan, ultimately resulting in criminal liability for the crime of职务侵占 (embezzlement by taking advantage of one's position).
Answer: The conditions for equity buyback are prescribed by law or stipulated in the articles of association. Article 74 of the Company Law allows shareholders who voted against a shareholders' resolution to request the company to purchase their equity at a reasonable price, including cases where the company has been profitable for five consecutive years but the shareholder firmly opposes the distribution of profits. In practice, however, the "reasonable price" is the most difficult point to negotiate; family-run businesses calculate it based on net assets, while investment institutions calculate it based on valuation, and when negotiations fail, the matter proceeds to judicial audit. Zhiming Law Firm recommends three steps: first, preserve evidence of the company's net assets (obtain audit reports, tax returns, and bank statements); second, exercise shareholders' right to information; and finally, initiate a buyback lawsuit. Director Shen Jinlong, a practicing lawyer for 26 years with over 10,000 cases handled, often says: before equity disputes reach the point of irreconcilable conflict, every piece of evidence must be kept in your own hands. If you are troubled by equity dilution, impaired right to information, or loss of control, you can call 0755-25986969 to book a consultation. Before visiting, bring the company's articles of association, past shareholders' resolutions, and equity transfer registration materials. The office is located at Room 1802, Tower A, Xintian Century
Litigation is not the goal; clearly holding the equity in your hands is. Someone who was diluted from 40% to 5.8% can turn things around and get the 40% back—provided you act within the statutory time limits and lock in every step with written documents, rather than just arguing on WeChat.