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Ningbo marital plant equipment divorce how to divide

Ningbo Author：LuXu WANG

If one or both husband and wife run factories, whether and how to divide the factory, machinery and equipment during divorce is a typical problem in the intersection of marriage law and company law. To conclude: Factory and equipment registered under the company’s name are the company’s corporate property and cannot be directly divided in a divorce; what can be divided is the property value corresponding to the equity. Only factory and equipment registered under the name of an unincorporated business entity, such as a sole proprietorship or a personal‑owned enterprise, may be directly divided as marital joint property. First, clearly define the nature of the business entity; only then should you discuss whether to divide equity or equipment, opt for valuation-based compensation, or allow the spouse to take a stake—otherwise, you risk going off course right from the start.

1. The first hurdle: First, check whose name the factory equipment is registered under.

Many parties asked to allocate the plant to themselves as soon as they came up, but they didn't know who the plant equipment belonged to in law. The criteria for determination are clear: determine whether the business entity is a corporation, a sole proprietorship, or a single‑person‑owned enterprise; under each of these three types of entities, the legal ownership and division of factory premises and equipment differ entirely. This "qualitative" issue is the first point of all divorce plant equipment disputes.

1. Plant and equipment in the name of limited liability company and joint stock limited company: the property of the legal person of the company. Article 3 of the Company Law makes it clear that a company is an enterprise legal person, which has independent legal person property and enjoys legal person property rights. The plant, machinery and equipment registered in the name of the company belongs to the property of the legal person of the company and is separated from the personal property of the shareholders. Even if the factory building was purchased using funds accumulated from the couple’s joint property, as long as the property is registered in the company’s name, the other spouse cannot directly request a division of the company’s assets upon divorce; they may only assert their rights with respect to the equity interest held by their spouse in the company.

2. Factory and equipment under the name of a self-employed business: personal property of the operator.An individual business does not have legal person status; although its factory and equipment are operated under a trade name, the ownership of such assets vests in the individual operator. If the business operator is one or both spouses, such business-related assets may, in accordance with the law, be included within the scope of the couple’s joint property and handled accordingly.

3. Factory and equipment owned by a sole proprietorship: considered the personal property of the investor.In accordance with Article 2 of the Law on Sole-Proprietorship Enterprises, a sole-proprietorship enterprise refers to an operating entity that is invested in by a single natural person, with its assets owned by that investor, and for which the investor bears unlimited liability with his or her personal assets. The factory and equipment of a sole proprietorship are the personal property of the investor and, upon divorce, can be directly included in the division of marital assets; there is no equity‑related issue involved.

4. A “husband-and-wife company” established with joint investment by the spouses shall still be treated as having corporate legal person property.Even if a company has only two shareholders—husband and wife—as long as the company is duly registered and its assets are legally segregated, the factory buildings and equipment remain the company’s property. In the event of divorce, what is subject to division is each party’s equity interest in the company, rather than the company’s physical assets such as the factory itself.

2. Factory and equipment under the company's name: equity is divided, but the equipment is not.

During the marriage, if one spouse contributes to a company using marital joint property in the form of subscribed capital, what is acquired is equity interest in the company rather than specific assets owned by the company. Article 1,062 of the Civil Code stipulates that income derived from production, business operations, and investments during the subsistence of the marital relationship shall be regarded as joint property of the spouses. Therefore, as long as the equity interest was acquired during the marriage using marital joint property, or if pre-marital equity generates appreciation and dividends during the marriage, the corresponding property interests shall be deemed marital joint property and subject to division upon divorce. However, the subject of the division is “equity”; the factory buildings and equipment are transferred along with the equity, rather than being physically dismantled and divided into separate sets.

There are two paths in practice for the division of equity by a limited liability company:

  1. Discount compensation (preferred and most common): the holding party retains all the equity and pays the other party the equity discount. The company's shareholding structure does not change and has minimal impact on operations. The compensation for the equity is typically calculated based on the valuation of the company’s net assets or equity value, and determined in proportion to the share of the equity acquired during the marriage with marital joint property.
  2. The spouse becomes a prominent shareholder: The non-shareholder spouse requires a direct share of the equity to become a shareholder of the company. According to Article 84 of the Company Law, which was revised in 2023 and came into effect on July 1, 2024, shareholders who transfer their equity to persons other than shareholders shall notify other shareholders in writing of the quantity, price, payment method and time limit of the equity transfer. Other shareholders have the right of preemption under the same conditions; if the shareholders fail to reply within 30 days from the date of receiving the written notice, they shall be deemed to have given up the right of preemption. If other shareholders exercise the right of first refusal, the spouse cannot become a shareholder and can only obtain a corresponding discount. Where the articles of association provide otherwise for the transfer of shares, such provisions shall prevail.

It needs to be reminded that when choosing to allow the spouse to become a shareholder, the attitude of other shareholders of the company, the personality of the company and the restriction of the articles of association should also be considered simultaneously. If the company’s operating performance is poor or its debt burden is heavy, the equity value may be lower than the book‑recorded capital contribution. This should be taken into account during valuation to avoid the erroneous practice of determining equity value solely based on registered capital.

3. Self-employed individuals and sole proprietorships: can directly allocate factory buildings and equipment.

If the business entity is an individual industrial and commercial household or a sole proprietorship enterprise, the plant and equipment can be directly included in the division of the joint property of husband and wife as the production and operation materials, and there is no equity problem. There are three common ways of segmentation:

  1. physical division: the plant and the equipment can belong to both sides and operate separately, which is applicable to the scene where the production line can be split and both sides have the ability to operate.
  2. One party acquires the assets with compensatory payment: One party takes ownership of the factory and equipment and continues operations, while paying the other party a compensation amount corresponding to its share of the appraised value. This arrangement is suitable for situations where joint operation is difficult and one party is better positioned to manage the business.
  3. Variable price division: if both parties have no intention to continue to operate, they can sell and auction the plant and equipment, and distribute the price according to the common property share.

It should be noted that the operators of self-employed and sole proprietorship enterprises bear unlimited liability for the debts of the enterprise. When the divorce divides the plant and equipment, if the enterprise still has outstanding debts, it should simultaneously sort out the debt-bearing arrangement to avoid the situation of "dividing assets and joint and several debts.

4. Special circumstances: a single-member company, established before marriage, and registered under another person's name.

Case 1: One-person company. A one-person company also has legal personality, plant and equipment is still the company's property, divorce can not be directly divided equipment. However, Article 23, paragraph 3 of the Company Law provides that, in a company with a single shareholder, if the shareholder fails to prove that the company’s assets are separate from the shareholder’s own assets, the shareholder shall be jointly and severally liable for the company’s debts. If one of the spouses runs a one-person company and the public and private accounts are mixed, the divorce is not only complicated in the division of shares, but may also involve personal responsibility, and the company's accounts and property independence evidence should be sorted out first.

Case 2: The company is established before marriage, and the value-added operation in marriage. The equity acquired before marriage is generally personal property, but the equity appreciation and dividends generated by the company's operation during marriage belong to the joint property of husband and wife (according to the rules of "investment and operating income" in Article 1062 of the Civil Code and Article 26 of the (I) Interpretation of Marriage and Family Code). In divorce, the division of the appreciation and dividends can be claimed, and the personal part and the common part need to be distinguished through evaluation.

Case 3: The factory is registered in the name of a third party or is affiliated. If the actual operator borrows the name of others to register the factory building and operate it on an affiliated basis, and claims that the factory building belongs to the common property at the time of divorce, he must first determine the ownership through the right confirmation lawsuit or the execution objection procedure, which is difficult to prove and should not be claimed directly according to the common property.

Case 4: Divorce was missed and not dealt. If the plant and equipment and stock right are not dealt with at the time of divorce, the division can be sued separately after the divorce according to Article 83 of the Interpretation (I) of Marriage and Family, but attention should be paid to the limitation of action and the change of the current situation of property.

How to price 5. compensation: evaluation methods and adjustment factors

Whether it involves company equity or the equipment of a sole proprietorship, valuation remains an unavoidable issue when determining compensation. The main points of practice are as follows:

  1. equity of the company: usually, an appraisal agency with securities and appraisal qualification is entrusted to comprehensively evaluate the company's net assets, profitability, industry status, plant land appreciation and other factors, and cross-verify with income method and asset basis method if necessary. The value of plant land is often a core variable in the valuation of equity in manufacturing companies and cannot be viewed solely on the books.
  2. Plant and equipment of self-employed and sole proprietorship enterprises: Generally, it is evaluated according to the market method (market transaction price of similar plant and equipment) or the cost method (replacement cost minus depreciation). The location of the plant, the nature of the land (transfer/allocation) and the rate of new equipment all affect the pricing.
  3. Compensation Base and Adjustment: Based on the evaluation value, the share shall be determined according to the proportion of common property acquired during marriage, and then appropriate adjustment shall be made according to Article 1087 of the Civil Code in combination with the principle of taking care of the rights and interests of children, women and innocent parties. If one party hides or transfers plant equipment or equity, it can be divided less or not according to Article 1092.
  4. Dispute Resolution: If the parties are unable to reach a settlement through negotiation, they may apply for a judicial appraisal in the course of litigation. The appraisal fees shall be prepaid by both parties and apportioned in proportion to the division of assets.

6. deduction case

Example 1: For the company's plant and equipment, the claim of direct division of equipment was rejected. The man is a shareholder of a manufacturing enterprise in Ningbo, who subscribed for capital contribution with the joint property of husband and wife during marriage, and owns the plant and production line equipment under the company's name. The wife filed for divorce, seeking the direct division of the factory buildings and equipment owned by the company. The idea of the trial: the plant and equipment registered in the company's name belong to the company's legal person property, not of course equivalent to the joint property of husband and wife, the woman has no right to directly request the division of the company's assets. The court clarified that the female party should first seek a division of the company equity held by the male party, and then, based on the outcome of that equity division, pursue the actual interests in the factory premises and equipment through the framework of corporate law and the company’s articles of association. This example shows that if the characterization is wrong, the claim will be rejected.

Example 2: Direct price compensation for self-employed equipment. The two parties jointly operate an injection molding processing factory registered as an individual industrial and commercial household. The factory is leased, and the injection molding machine and other equipment are registered under the name of the individual industrial and commercial household. At the time of divorce, both parties were unwilling to continue to operate jointly. After assessing the present value of the equipment to be about 800000 yuan, the court ruled that the equipment belonged to the man and continued to operate. The man paid the woman a discount of 400000 yuan and the corresponding adjustment. This example illustrates that equipment held under the name of a non-legal-person business entity may be legally divided directly.

Common 7. Mistakes

Misunderstanding 1: If the plant is bought with common property, it can be divided into plants directly.Correct answer: If the factory building is registered under the company’s name, it constitutes the company’s corporate property; whether it can be divided and what portion can be divided depends on the nature of the business entity. The contribution made with jointly owned property results in equity interests, not the equipment itself.

Misunderstanding 2: The equity value is equal to the subscribed capital contribution or registered capital. Positive explanation: the registered capital is only the capital contribution commitment subscribed by shareholders, and the real value of the equity depends on the company's net assets, profitability and asset appreciation. Manufacturing enterprises should pay special attention to the appreciation of plant land and should entrust evaluation.

Misunderstanding 3: The consent of other shareholders is not required for a spouse to be a shareholder. positive solution: although the new company law cancels the pre-requirement of more than half of the other shareholders, the preemptive right still exists: the transfer of equity to the non-shareholder's spouse must notify the other shareholders in writing, and the other shareholders shall be deemed to have given up if they do not reply within 30 days under the same conditions; if the other shareholders exercise the preemptive right, the spouse can only get the discount.

Myth 4: If you transfer the company's equipment during divorce, you can get more. Positive explanation: those who hide, transfer, sell or damage the common property of husband and wife or the assets of the company may be divided less or not according to Article 1092 of the Civil Code; those who involve the assets of the company may also violate the liability for compensation or even criminal liability in the company law at the same time, and the loss outweighs the gain.

Class Case Reference: In the case of property dispute after the divorce between Ma and Ye, the court divided the plant equipment and goods according to the divorce agreement, and ordered the defendant to pay the plaintiff 131413.86 yuan for the possession of the plant and return part of the equipment. It can be seen that the division of plant, machinery and equipment must first clarify whether it belongs to the company or the husband and wife's personal name, and then determine the division method. Trial Court: People’s Court of Yuyao City, Zhejiang Province Case Number: (2020) Zhe 02

81Min Chu 711 No.

8. Frequently Asked Questions

Can divorce directly divide the plant and equipment under the name of the company?

No. The factory buildings and equipment owned by a limited liability company constitute the corporate property and are separate from the personal assets of the shareholders. In a divorce, one may only assert rights with respect to the company equity held by the spouse—either by seeking a division of the equity or by obtaining a cash equivalent—but cannot directly request that the company’s factory buildings and equipment be awarded to oneself.

When divorcing, should you divide equity or divide equipment?

Look at the subject. In a limited liability company, equity may be divided or sold at a discount; the procedure shall be governed by Article 84 of the Company Law. For factory buildings and equipment owned by individual businesses or sole proprietorships, physical division, valuation-based compensation, or sale-and-division may be carried out directly, as there is no equity component involved.

Can other shareholders block a spouse from becoming a shareholder and receiving equity?

Yes. The transfer of equity to the spouse of a non-shareholder must be notified in writing to other shareholders, and other shareholders have the right of pre-emption under the same conditions, and no reply within 30 days is deemed to be a waiver.

How is the amount of monetary compensation determined?

The company's net assets or equity value is usually evaluated, and the compensation base is determined according to the proportion of the joint property of the husband and wife in marriage, and then combined with the principles of taking care of children, the rights and interests of the woman and the no-fault party, and the adjustment of whether there is hidden transfer behavior. If the two sides have great differences on the evaluation institutions and evaluation methods, the court may entrust judicial evaluation.