How to divide the equity acquired after marriage in Ningbo.

After their marriage, Ms. Chen’s husband subscribed for a 30% equity interest in a limited liability company under his own name, with the capital contribution drawn from the couple’s joint savings. At the time of divorce, Ms. Chen argued that the equity belonged to the joint property of the husband and wife and should be divided-can it be divided? Conclusion first: after marriage, the equity acquired by the joint property of the husband and wife, the property rights and interests corresponding to the capital contribution belong to the joint property of the husband and wife, which should be divided in the event of divorce. However, the equity has both property and personal attributes. In principle, the registrar has the right to dispose of the equity transferred separately. If the non-shareholder wants to "become a shareholder", it must pass the preemptive right of other shareholders. It is three different things to divide, how to divide and to whom.

1. legal basis: property rights and interests and the stratification of shareholder qualifications

Article 1062 of the Civil Code of the People's Republic of China stipulates that the "income from production, operation and investment" obtained by husband and wife during the existence of marriage relationship is the common property of husband and wife. The equity acquired by common property after marriage, the source of capital contribution and the investment income fall into this range, and the divorce belongs to the common property that can be divided. Article 72 of the Interpretation (I) of the Supreme People's Court on the Application of the Marriage and Family Code of the the People's Republic of China Civil Code stipulates: "when the husband and wife divide the stocks, bonds, investment fund shares and other securities in the common property, as well as the shares of unlisted joint stock limited company, if negotiation fails or it is difficult to distribute them according to the market price, the people's court can distribute them in proportion according to the quantity. "Article 73 specifically deals with the division of the capital contribution of a limited liability company:" The people's court hears divorce cases involving the division of the capital contribution of one party in the name of the limited liability company in the joint property of the husband and wife, and the other party is not a shareholder of the company. The situation is handled separately: (1) Both spouses agree to transfer part or all of the capital contribution to the shareholder's spouse, and more than half of the other shareholders agree, and other shareholders have explicitly given up the preemptive right, the spouse of the shareholder can become a shareholder of the company; (II) the husband and wife agree on the transfer share and transfer price of the capital contribution, if more than half of the other shareholders do not agree to the transfer, but are willing to purchase the capital contribution on the same terms, the people's court can divide the property obtained from the transfer of capital contribution ...... "-- The core of the transmission of the article is: the property value of the capital contribution is certain, but the spouse's ability to" become a shareholder "depends on the consent of a majority of the other shareholders and the arrangement of the right of first refusal.

thus formed two lines to understand the division of equity: property line-the amount of capital contribution and the corresponding income belong to common property, which must be divided; qualification line-the qualification of shareholders has the personal attribute and the personality, non-shareholder spouse is not of course obtained, which must be agreed by other shareholders or the articles of association. This is also the interface between the interpretation of Article 73 of the (I) and the Company Law on the protection of the personality of limited liability companies.

2. Core Points: Treatment in Five Situations

1. The source of capital contribution determines the ownership of the property. If the capital contribution is made by common property after marriage, the equity property rights and interests are common property; if the capital contribution is made by personal property before marriage and is registered in the name of one party, the part of the capital contribution is personal property, but the part of the value added after marriage based on the joint operation and management of husband and wife may be recognized as common property (Article 26 of the (I) of interpretation: the income generated by one party's personal property after marriage, except for fruits and natural value added, shall be recognized as common property).

2. In principle, the transfer by the registering party is valid. The equity registration of a limited liability company has the effect of publicity. If the registrant transfers the equity separately, and the transferee is in good faith and pays reasonable consideration, the transfer is generally effective (except for malicious collusion to damage the interests of the spouse); when the spouse's relief turns to divorce and division, it is claimed that the transferor has less or no division, or recourse for the transfer price. This rule suggests that if it is found that the other party has made a surprise transfer of shares at a low price, it is necessary to seize the time to claim the rights (see the relevant analysis of "surprise transfer of shares before divorce" for details).

3. Diverse ways of segmentation. The most common way is to negotiate that one party holds shares and compensate the other party at a discount; it can also be agreed that the non-shareholder's spouse can transfer the capital contribution and change it after negotiation; if the equity is difficult to be priced or both parties are unwilling to hold it, it can be transferred to other shareholders or a third party and then split the price; the shares of an unlisted joint-stock company can also be distributed according to the quantity proportion in accordance with Article 72.

4. Value evaluation is the core link. There is no public market price for the equity of a limited liability company, so it is usually necessary to entrust an appraisal agency to determine the value according to the net assets method, income method or market method, and the base date of appraisal is generally based on the time point of prosecution or negotiation between the two parties; the unpaid part should be treated in combination with the obligation of capital contribution, and cannot be simply converted according to the subscribed registered capital.

5. Unpaid contributions obligations are clearly vested. The new Company Law (revised in 2023) establishes a five-year paid-in period, and the overdue capital contribution of the stock company shall be adjusted within the transition period (for the stock company established before June 30, 2024, if the capital contribution period exceeds five years, it shall be gradually adjusted to within five years, and the adjustment shall be completed and recorded in the articles of association by June 30, 2027 at the latest). When dividing equity interests that have been subscribed but not fully paid up in a divorce, the division plan should clearly specify who is responsible for the obligation to pay the unpaid portion and whether the unpaid amount will be deducted when determining the cash compensation. This will help avoid the situation where one party receives the equity but ends up bearing the liability for the unpaid capital contribution.

How to determine the 3. value: valuation method and reference date

The difficulty of pricing unlisted shares is the main source of disputes in such cases. Commonly used in practice: the net asset approach (multiplying audited net assets by shareholding, suitable for asset-intensive companies); the income approach (predicting discounted future earnings, suitable for growth companies); and the market approach (with reference to the trading prices of similar companies, with a narrow application). Factors to be considered in the assessment include: differences between paid-in and subscribed contributions, undistributed profits, external liabilities and guarantees, shareholder borrowings, and industry prospects. The selection of the valuation benchmark date has a significant impact on the outcome-the company's status at the point of prosecution, separation, and divorce may differ in value, and the parties should agree on the benchmark date before the valuation or be determined by the court. If you are not satisfied with the conclusion of the assessment, you can apply for additional assessment or commission, but the cost of the procedure is not low-in the negotiation of discount compensation, "based on assessment + up and down floating range" is often a more efficient approach.

4. the preemptive right of other shareholders: want to "enter the company"

There are two ways for the non-shareholder spouse to directly obtain the shareholder qualification: one is to transfer the amount of capital through negotiation, and more than half of the other shareholders agree and give up the preemptive right (explain the first item of Article 73 of the (I)); the other is to divide the transfer price if the other shareholders of the company do not agree to the transfer but are willing to purchase on the same conditions. If the articles of association provide otherwise for the transfer of equity, it shall be handled in accordance with the articles of association (Article 84, paragraph 4, of the new Company Law). Practical tips: the new company law has deleted the procedural requirement that the external transfer must be approved by more than half of the other shareholders and changed it to written notice plus the preemptive right. however, article 73 of the explanatory (I) still retains the expression "more than half of the other shareholders agree + give up the preemptive right" for the divorce division scenario-there is a discussion on the convergence of the relationship between the two in practice, it is prudent to actively seek the views of other shareholders in the division plan and obtain written consent or waiver statements to avoid blocking the registration of changes. If only the value of the property is divided and the shareholder's qualification is not disputed, there is no need to go through this and direct discount compensation is sufficient.

The core terms of the 5. discount compensation agreement

If one party holds shares and pays compensation at a discount through negotiation, the agreement shall specify at least six items: ① the scope of shares and the proportion of shares held; ② the value benchmark (the evaluation report number and benchmark date, or the price confirmed in writing by both parties);③ the compensation amount and payment period (one-time or installment and overdue interest);④ the commitment of the obligation of not paying the actual contribution; ⑤ the obligation and period of cooperating with the change registration; ⑥ Taxes and liabilities for breach of contract. Taking the dispute over the transfer of shares between Du and Zhang disclosed by Ningbo Yinzhou Court as a lesson: the 2021 Stock Withdrawal Agreement stipulates the transfer amount of 698720 yuan, and the defendant is sentenced to pay the transfer amount and liquidated damages for overdue payment-oral agreement and vague documents will become wrangling points in the execution process, and the written fixed amount, time limit and consequences of breach of contract are the hard guarantees.

6. Common misconceptions and correct answers

Misunderstanding 1: Whose name is the name in which the equity is registered. positive solution: registration is the publicity of shareholder qualification, which is not equal to the ownership of property -- the equity property rights and interests formed by the contribution of common property after marriage belong to common property, which must be divided in the event of divorce.

Misunderstanding 2: When divorcing, just change the name of the shareholder to the spouse. Positive solution: Non-shareholders "become shareholders" must be approved by more than half of other shareholders and give up the preemptive right (Article 73 of the (I) of Interpretation) or the articles of association support; the registration of changes with incomplete procedures will be rejected, and may also lead to internal disputes of the company.

Misconception 3: It is fair to provide compensation equal to half of the subscribed registered capital. positive solution: the value of the equity is subject to the audit assessment, and the unpaid part should be deducted for the unpaid-the conversion according to the registered capital is often far from the real value, either suffer a loss or collapse.

Myth 4: The value of equity is up to you. Positive solution: when the negotiation fails, the evaluation shall prevail, and the determination of the base date and method of evaluation will directly affect the amount; it is difficult to accept the unilateral quotation and the evaluation entrusted by the unilateral party, and both parties jointly confirm that the base date and the institution are the right way.

Misunderstanding 5: One assessment is enough, and the conclusion should not be challenged. Correct solution: If you have any objection to the evaluation conclusion, you can apply for the explanation of the evaluation institution, supplement the evaluation or entrust it separately. In the procedure, there are appraisers appearing in court for cross-examination -- but the cost of repeated evaluation is high, so measure "whether the disputed amount is worth it" before starting ".

Misunderstanding 6: If the discount compensation is negotiated, everything will be fine, and it doesn't matter if you don't make changes. Correct solution: if the change registration is not done, the subsequent disposition, dividends and voting of the shareholder may be blocked, and the compensation of the other party will lose the basis of consideration; the change registration is the "last mile" of the discount scheme, which must be completed simultaneously. Reference of

cases: 4.6 of the equity of the company established by the joint property of husband and wife in marriage is recognized by the court as the joint property of husband and wife. If it is not dealt with in divorce, it shall be divided and each party shall get 50%; since the equity has been frozen, the request for assistance in changing registration will not be supported. That is, the property interest corresponding to the capital contribution is common property, and there is a separate threshold for the acquisition of shareholder status. Trial Court: Zhejiang Ninghai County People's Court Case No.:(2018) Zhejiang 02

26Minchu No. 8199

7. Frequently Asked Questions

Is the equity registered in the name of a party's personal property?

Not necessarily. Registration has the effect of public notice, but it does not constitute the sole criterion for determining property ownership—equity acquired after marriage with marital joint property as the investment constitutes a property interest that is part of the joint property and shall be subject to division upon divorce. The key to judging is the source of contribution: the contribution of common property is treated as common property, and the part of the contribution of personal property before marriage is personal property.

Is it certain to be a shareholder of the company if you divide your shares?

cannot automatically become a shareholder. The non-shareholder spouse's qualification as a shareholder must meet the conditions of Article 73 of the Interpretation (I) (consensus + consent of more than half of other shareholders + waiver of preemptive right) or the articles of association; If other shareholders do not agree and are willing to purchase at the same price, they can only divide the transfer price. Only want the value of the property, discount compensation can be, do not have to "into the company".

Is equity value calculated based on the registered capital?

No. Registered capital is the book amount of the subscription, which may differ significantly from the true value. The value determined through audit and valuation shall prevail, with comprehensive consideration given to the paid-in capital, net assets, profit prospects, and other relevant factors; equity interests that have been subscribed but not yet paid in must not be valued based on the subscribed amount.

The registering party transferred the equity at a low price to a relative before the divorce—what should be done?

Sub-situation: If the transferee is in good faith and pays reasonable consideration and has already registered, it is difficult to recover the equity, and it is turned to claim that the transferor has less or no property and compensation for losses; If the transfer is obviously low, the transferee is a close relative, and the time is approaching divorce, it may constitute malicious collusion (Article 154 of the Civil Code), and another case may claim that the transfer is invalid or request revocation, and apply for property preservation.

The company is a subscription system. How to divide the shares before they are paid in?

The obligation to contribute unpaid capital is transferred along with the equity interest: the transferee (including a spouse who acquires equity through division) shall bear the obligation to make such contributions, and the transferor shall be jointly and severally liable for any unpaid contributions made by the transferee that are not paid on time (Article 88, Paragraph 1 of the new Company Law). The division scheme should clarify the subject of the unpaid amount, and deduct the discount compensation accordingly, so as to avoid the disconnection between the obligation of capital contribution and the division of property.

8. Practical insights from a lawyer's experience

When faced with the equity acquired after marriage during divorce, the parties are easy to simplify the problem into whether they can be divided or not. In fact, there are three different levels of problems, such as dividing, how to divide and to whom. For the equity formed by the joint property of husband and wife, the property rights and interests corresponding to the capital contribution usually belong to the common property and should be included in the division. However, the equity has both property and personal attributes. The registered party generally has the right to dispose of the equity transferred to the outside world. If the non-shareholder wants to truly become a shareholder, he has to pass the preemptive right of other shareholders. First, clarify whether what you truly want is an equity discount or shareholder status; your subsequent strategy will differ accordingly.

Before taking action, you must thoroughly assess your financial situation: determine whether the funding comes from joint marital property or personal assets, specify the subscribed and paid-in capital amounts, identify who is listed as the registered owner in the business registration, and review the company’s recent financial and operational performance. The value of equity is not like real estate has a relatively clear market price, the evaluation base date and the choice of evaluation method directly affect the figures, liabilities, taxes, the difficulty of realization should be taken into account, the inflated valuation is meaningless to both sides.If you are claiming equity, assess whether you can pass the door of the right of first refusal; if you are accepting discount compensation, the focus shifts to the amount of compensation and payment security.

Most cases end up on discount compensation, so how to write the terms is particularly critical: the payment node, the liability for breach of contract, the obligation to cooperate with the registration, and the arrangement of the company's cooperation with the materials should be clearly written, otherwise the figures on the paper are difficult to cash. The other side often uses the company's losses and worthless shares to lower the price, when financial information, tax records and business flow to check, more convincing than empty arguments. It is also necessary to predict that the other party may dispose of the equity before the judgment or make a surprise increase in capital to dilute the share, and apply for preservation early if necessary. While staring at the division ratio, don't forget whether it can really be obtained in the end.

The complete chain of equity division after marriage is as follows: the source of capital contribution is determined by nature (common property contribution = common property) → the valuation and pricing are determined by amount (audit evaluation, base date is clear) → the division method is determined by path (shareholding compensation, transfer price, share by share) → the qualification change procedure (other shareholders' consent, articles of association, change registration) → the capital contribution obligation is determined by attribution (who will bear the unpaid part). For shareholders, keep the capital contribution certificate and company account books, and voluntarily disclose the equity status; For non-shareholders, timely fixed equity acquisition time and capital contribution source evidence, advocate evaluation and pricing, need to become shareholders in accordance with Article 73 procedures to promote, as long as the value of the property to strive for discount compensation-two sets of demands correspond to two sets of play, the wrong direction of the cost is very high.