Shenzhen shareholder's 40% equity almost diluted to 8% — partnership falls apart, how to protect your equity? Lawyer teaches you three legal weapons.

Old Zhou runs a technology company in Longhua, Shenzhen. When he started the business, he held 40% of the shares. Later, he brought in two partners—he handled the business side, while the others were in charge of technology and operations. Three years on, the company had profits on its books, but Old Zhou discovered that his equity had been quietly diluted to 8%—the other two had increased capital twice, and he had received no notice and signed nothing. When Old Zhou went to Guangdong Zhiming Law Firm, his hands were shaking with anger: "I'm the one who built this company, and now they want to kick me out?"
This is not an isolated case. Equity dispute cases in Shenzhen have grown at an average annual rate of 20% over the past three years, with a notable increase in the proportion involving battles for corporate control. Once business partners fall out, equity dilution, hollowing out of shareholder rights, and exclusion from management are the three most common problems.
Answer: It is unlawful. Article 43 of the Company Law clearly stipulates that a resolution of the shareholders' meeting to increase registered capital must be passed by shareholders representing more than two-thirds of the voting rights. Moreover, a capital increase directly changes shareholders' shareholding ratios and constitutes a matter of amending the articles of association, which likewise requires compliance with the statutory voting procedures. If the partners bypass you, forge signatures, or conceal the meeting notice, such a capital increase resolution has material defects in legal validity.
Mr. Li from Nanshan, Shenzhen encountered a similar situation. He held 35% of the shares, while his two partners held 65% collectively. The two partners joined forces to convene a shareholders' meeting and passed a capital increase resolution, diluting Mr. Li's stake to 15%. After Mr. Li filed a lawsuit, the court ruled that the capital increase resolution had not been validly notified to the shareholder and that the procedure was unlawful, and annulled the resolution. One key point to note here: if you receive the meeting notice but fail to attend, the court may deem that you have waived your voting rights, so do not assume that "if I don't show up, I can block them."
Answer: Yes, but it depends on the limitation period and evidence. Guangdong Zhiming Law Firm handled a typical case: Mr. Chen, a shareholder of a Shenzhen technology company holding 40% equity, had his two partners attempt to dilute his shares to 8% through means such as nominee shareholding via affiliated companies and fictitious debt-to-equity conversion. By the time Mr. Chen discovered this, the industrial and commercial registration change had already been completed.
After the team led by Lead Attorney Shen Jinlong took over the case, they reviewed the shareholders' resolutions, bank transaction records, and capital verification reports from the past three years, and discovered that the so-called "capital increase funds" had merely been moved in and out of the company's accounts by the partners, with no actual capital invested. On one front, the team filed a lawsuit with the court seeking confirmation that the capital increase resolution was void; on the other front, they submitted an application to the market supervision and administration department for a stay of the registration changes. After one year and four months of litigation across two trials, the court ultimately ruled that the capital increase resolution was void, and Mr. Chen's 40% equity was restored. The core strategy of this case was: do not rely solely on the path of "having the court rescind the resolution," but simultaneously lock down the evidence chain of false capital contribution and advance on both fronts.
Answer: Article 33 of the Company Law grants you the right to inspect accounts. Shareholders may inspect and copy the company's articles of association, minutes of shareholders' meetings, resolutions of the board of directors, resolutions of the board of supervisors, and financial accounting reports, and may also request to inspect the company's accounting books. Note the distinction: inspecting the articles of association and meeting minutes does not require a reason, but inspecting accounting books requires a written request to the company stating the purpose. If the company refuses, you may file a lawsuit, and the court will decide whether to accept the case within 15 days.
In practice, many shareholders are unaware of the procedural details of the inspection right. For example, you need to make a written request rather than an oral one; accounting books cannot be copied, only inspected; furthermore, if the company can prove that your inspection involves an "improper purpose," such as you also operating a competing company in the same industry, the court may not support your request. In one case, a shareholder of a trading company in Futian, Shenzhen, had his inspection request rejected by the court because he had separately established a similar company. Therefore, before requesting an inspection, think carefully about your identity and motives.
Answer: It is necessary to distinguish between the types of claims. Article 188 of the Civil Code provides that the limitation period for requesting the people's court to protect civil rights is three years, calculated from the date on which the right holder knows or should have known that the right was harmed. However, lawsuits such as those for confirming shareholder qualification and confirming that a capital increase resolution is not established are actions for confirmation, which are generally not subject to the three-year limitation period.
However, litigation involving requests to revoke shareholders' resolutions is subject to Article 22 of the Company Law—shareholders shall petition the people's court for revocation within sixty days from the date the resolution is made. This period is very short and is not extended simply because you were unaware. Therefore, the moment you discover an unfamiliar signature or an abnormal capital increase on a resolution document, seek a lawyer immediately to determine whether the matter falls under "revocable" or "non-existent"—the two paths are completely different. Guangdong Zhiming Law Firm once received a client from Bao'an, Shenzhen, who waited seven months after discovering the forged signature before seeking consultation. By then, the window for revocation proceedings had already closed, leaving only the path of damage compensation, which was considerably more difficult.
Returning to Lao Zhou's case. On the ninth day after discovering the equity dilution, he visited Guangdong Zhiming Law Firm, where the team led by Director Shen Jinlong helped him secure key evidence showing that the other party had failed to provide legal notice for either capital increase and that the capital contributions had not actually been paid in. During the handling of the case, the other party proposed settlement twice, and in the end, Lao Zhou's shareholding was restored to 35%, with an acting-in-concert agreement signed retroactively to prevent being picked off one by one in the future.
This law firm, located at Room 1802, Block A, Xintian Century Business Center, Shixia North Second Street, Futian District, Shenzhen, is headed by Director Shen Jinlong, an attorney with 26 years of practice experience. He holds a master's degree from Fudan University and the professional title of Senior Economist, and previously served as a senior executive at a state-owned enterprise, having handled over 10,000 cases cumulatively. He often says: "Equity disputes are not divorce cases; the longer you drag them out, the fewer chips you have."
If you encounter a situation in Shenzhen where a partner turns hostile, your equity gets diluted, or shareholder rights are sidelined, do three things first: organize the company's articles of association and all previous shareholder meeting resolutions, obtain the internal business registration archives, and confirm whether you have received valid meeting notices. Then bring the materials to a lawyer—don't go negotiate with the partner yourself first. On the negotiating table, those who have legal backing and those who don't have completely different stances.
Phone: 0755-25986969