Partners turned hostile and tried to dilute his 40% equity — a Shenzhen shareholder turned the tables with a single move, and the court ruled in his favor.

In Shenzhen Nanshan Science and Technology Park, a smart hardware company once saw its valuation soar to 120 million RMB. Old Li, a co-founder, held 40% of the shares, having single-handedly built up the technology, clients, and supply chain. However, after financing came in in 2023, Old Chen, the major shareholder, began to scheme—first proposing a capital increase and share expansion at the shareholders' meeting. Old Li voted against it, but Old Chen, in collusion with other minority shareholders, forced the capital increase resolution through. Old Li's 40% stake was now set to be diluted to 22%.

When Old Li came to us, he was sitting on the sofa in our Futian office, lighting one cigarette after another. He said, "Attorney Shen, I've worked at this company for seven years. The product was developed by my team and me through countless all-nighters. Now they want to push me out with a piece of paper—a resolution?" On the table lay two documents: one was a capital increase agreement, and the other was a shareholders' resolution. On the signature page, Old Li's name was clearly listed—but he said he had never signed this resolution.
Upon investigation, problems indeed emerged. The signatures on that shareholders' meeting resolution clearly showed discrepancies in handwriting. More suspiciously, the meeting notice was never delivered to Old Li at all—the so-called "shareholders' meeting" was convened privately by Old Chen during Old Li's business trip, attended only by a few shareholders from affiliated parties. Under Article 22 of the Company Law, a shareholders' meeting resolution is void if its content violates laws or administrative regulations; 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 sixty days from the date the resolution is made.
Old Li's problem was stuck right here—three months had already passed since the resolution was made, and the period for exercising the right of revocation had long since expired. The lawyer hired by Old Chen's side seized on this point, putting on a "nothing you can do about it" air. But after Director Shen Jinlong took over the case, he did not rush down the old path of a revocation lawsuit. Instead, he took a different angle: since Old Li claimed the signature was forged, the first step would be to conduct a handwriting examination, turning the question of "whether the resolution actually exists" into a criminal issue of forging evidence. At the same time, he reported to the market regulatory department that the capital increase filing materials were suspected of fraud, and requested that the change registration be suspended.
Here I must mention a key move. After Shenzhen's commercial registration reform, although the filing process for equity changes is fast, the regulatory authorities retain retrospective power to review the authenticity of materials. In Old Li's case, we submitted our objection application before the industrial and commercial change was completed, effectively stalling the entire change process. That stall bought us time for the subsequent negotiations. Old Chen's side didn't expect us to bypass the conventional shareholder information rights lawsuit and instead go straight to challenging the forged signatures—they panicked.
The back-and-forth lasted four months. Three pre-trial conferences were held in between. When the handwriting appraisal report was issued, it revealed that two of the three key signatures were not written by Mr. Li himself. This was no longer an internal corporate dispute; if the matter proceeded further, Mr. Chen would face criminal exposure for false litigation or forging the company seal. Ultimately, under court mediation, the parties reached an agreement: the capital increase resolution was invalidated, Mr. Li's equity interest was restored to 35%, and Mr. Chen repurchased 5% of the shares from Mr. Li at a 15% premium per share. Mr. Li partially cashed out and exited, but retained a veto right at the control level — major matters such as transfer of core technology and merger or division of the company required Mr. Li's written consent.
This result was satisfactory to Old Li. He didn't fully retain the 40%, but he kept 35% plus veto power, which was far better than the 22% originally expected. The key was that the company didn't fall apart because of the internal strife; although the valuation dropped somewhat, the core team remained intact.
Actually, there's a fair amount of luck involved in turning this case around. If Old Chen had moved faster and gotten the business registration change completed first, the approach would have been completely different. Equity dispute cases in Shenzhen have been growing at an average of 20% annually over the past two years, and nearly half of them involve battles for control. Many of these disputes arise between co-founders who go from "brotherly bond" to "courtroom showdown" in just a year or two. Among the clients we've handled, there are minority shareholders who, after being sidelined, couldn't even get access to the financial ledgers; co-founders who were kicked out of management by a single shareholder resolution; and veterans like Old Li who nearly got diluted down to minority shareholder status.
Q: If a shareholder discovers that their equity has been diluted, what is the most effective first step to take?
Answer: The first step is to pull the internal business registration files immediately. Check whether the signature on the capital increase agreement and the shareholders' resolution is actually yours. If not, get a handwriting authentication done right away and apply to suspend the change registration. In Shenzhen, the market supervision authority can suspend review of a change application suspected of involving forged materials, but the premise is that you must raise an objection before the change is completed. If you wait until the change has been registered, overturning it from within the company afterward will be much more difficult.
Q: If a minority shareholder is squeezed out by a majority shareholder, can they win by suing in court?
Answer: Whether you can win does not depend on your status as a "minority shareholder," but on whether the major shareholder's actions comply with regulations. If there are defects in the convening procedure, irregularities in the voting method, or if the content of the resolution infringes upon your statutory rights—such as dividend rights, the right to information, or preemptive rights—the court may rule in your favor. However, evidence is key, especially whether the meeting notice was properly served to you and whether you signed the resolution. These two points are where issues are most likely to arise.
In cases like Old Li's, many people ask why not directly sue to revoke the resolution. The reason is that the right of revocation is subject to a sixty-day exclusion period, after which it is lost. We took a different approach, starting with the authenticity of the signatures, and turned "whether the resolution was established" into a preliminary issue—if the resolution was never established in the first place, there is naturally nothing to revoke. This angle has support in precedents from Shenzhen courts over the past two years, but it requires a very solid chain of evidence. Merely claiming orally "I never signed" is not enough; it must be supported by a forensic appraisal report.
After years in this line of work, the biggest takeaway is: equity disputes are never legal problems—they're human nature problems. When Lao Li and Lao Chen started their business together, neither ever imagined they'd one day fall out over a few percentage points of shares. But when interests are at stake, brotherhood means nothing. If you're facing a similar equity dilemma in Shenzhen, don't put it off—the longer you wait, the more disadvantageous it gets. You can come find us at Room 1802, Building A, Xintian Century Business Center, Shixia North Second Street, Futian District, or call 0755-25986969. In Zhi Ming Law Firm's twenty-six years, we've handled no fewer than a thousand equity disputes—if not eight hundred. The cases led by Director Shen Jinlong have involved claim amounts ranging from hundreds of thousands to hundreds of millions. Chances are, your problem isn't the first of its kind, and it won't be the last.