Insights

How to divide the equity and management rights of the company jointly run by Ningbo husband and wife during divorce?

Ningbo Author：LuXu WANG

In Ningbo, it is quite common for small and micro enterprises and foreign-trade factories to be jointly owned by couples: the husband manages production, while the wife handles finances. At registration, one may hold 60% of the shares and the other 40%, or they may each hold 50%. In many cases, only the husband is listed as a shareholder, with the wife managing the money and accounting but not appearing on the business registry. When the company is profitable, no one pays much attention to the ownership structure or equity percentages. But once a divorce occurs, questions like “Whose equity is it? How should it be divided? And who will have control of the company going forward?” become far more complicated than disputes over property and savings—after all, the company still has employees to pay, loans to repay, and customer orders that must be fulfilled.

Conclusion first: for a husband-and-wife company established with the joint property of husband and wife, the equity as a whole belongs to the joint property of husband and wife, and the shareholding ratio in the industrial and commercial registration and articles of association is not equal to the divorce division ratio (Article 10 of the (II) for Interpretation of Marriage and Family Compendium of the Civil Code); If negotiation fails, the court dealt with it in accordance with the principle of article 1087 of the Civil Code, "taking care of the rights and interests of the child, the woman and the no-fault party. In addition, the husband and wife company also stepped on a special thunder: if it is recognized as a "substantial one-person company" when the debt is not repaid, the shareholders must certify the independence of the company's property, otherwise the company's debts will be paid off jointly and severally, and divorce cannot be exempted from liability. Below, we will break it down into five steps.

Is the equity of 1. husband and wife company a common property?

To judge whether an equity is the joint property of husband and wife, the order is: first look at the source of capital contribution, then look at whether there is a written agreement, and finally it is the turn to register in whose name and how much.

1. The source of funding is fundamental.

Article 1062 of the Civil Code stipulates that the "income from production, operation and investment" obtained during the existence of the marriage relationship shall be the joint property of husband and wife. There are three scenarios: (1) If a company is established after marriage with marital joint property as the investment, both the equity and any dividend income constitute marital joint property, regardless of whose name the equity is registered under; (2) If one party held equity prior to marriage, the equity itself remains that party’s personal property, but any investment proceeds arising after marriage—such as dividends, shares acquired through capital increases, or proceeds from transfers or liquidation—constitute marital joint property and are subject to division; (3) If investment is made during marriage using personal property and this can be proven, it is treated as personal property; if such proof cannot be provided, it is presumed to be marital joint property.

2. The registration ratio is only "public announcement", not a husband and wife property agreement.

The shareholding ratio of husband and wife in industrial and commercial registration is often allocated at will or due to formal needs. Can it be used as the basis for divorce division? Article 10 of the (II) of Interpretation of Marriage and Family Compendium of the Civil Code (Law Interpretation No. 1 [2025], implemented on February 1, 2025) answers: If the husband and wife invest in a joint property limited liability company and are registered as shareholders, there is no agreement on the ownership of the shares or the agreement is unclear, and if one party requests to determine the division ratio according to the amount of capital contribution recorded in the register of shareholders or the articles of association at the time of association, the time of divorce, the court shall not, the court shall not support, and the division. Article 1065 of the Civil Code requires that the husband and wife's property agreement must be in writing, and neither the industrial and commercial registration nor the articles of association can replace it-if you want to divide it according to the proportion of registration, you must first get a written agreement. In a case involving a husband-and-wife-owned company in Yiwu, Zhejiang (Case No. (2019) Zhe 0182 Min Chu 4606), the company’s articles of association stipulated that one spouse held a 10% stake and the other held a 90% stake; however, the court ultimately divided the shares as joint marital property.

Several paths of equity division in 2. divorce

How to divide depends on the company's shareholder structure (pure husband and wife company or third-party shareholders) and whether the two parties can negotiate. Issues that can be negotiated shall be resolved through negotiation; if no agreement is reached, the court shall handle them in accordance with Article 1087 of the Civil Code. There are generally four common approaches.

1. Negotiated transfer: "Who operates, who takes shares"

Pure husband and wife company internal adjustment is the simplest. Article 84, paragraph 1 of the Company Law provides that shareholders may transfer all or part of their equity interests to one another—transfers between spouses do not require the consent of any third party. If the parties agree that one spouse transfers all of their equity to the other, a simple change of registration is sufficient. Once the equity is held by a single shareholder, the company becomes a single‑shareholder company, and the surviving operating shareholder must thereafter bear the stringent burden of proving the separation of personal and corporate assets. If the company has other third-party shareholders and wishes to bring in a spouse as a shareholder, Article 73 of the Interpretation (I) of the Marriage and Family Chapter of the Civil Code applies: this article requires “approval by more than half of the other shareholders.” However, Paragraph 2 of Article 84 of the new Company Law has removed this requirement, retaining only written notice plus a thirty-day right of first refusal; if the other shareholders do not respond, they are deemed to have waived their rights, and the spouse may then acquire the shares and become a shareholder. If the articles of association provide otherwise, those provisions shall prevail.

2. Discount compensation: the optimal solution to preserve the company.

One party wants the company and the right to operate, and the other party takes the money and walks away. After both parties have agreed on the valuation of the equity, the continuing party shall pay the other party the consideration, which may be paid in a lump sum or in installments with appropriate security (such as a pledge of equity interests or a mortgage on real estate). For a company owned solely by a married couple, this is merely an internal adjustment between the two shareholders, involving no third-party right of first refusal. It is the quickest to implement, causes the least harm to the company, and is also the most common arrangement in court rulings. (Example, fictional) In Haishu District, Ningbo, a married couple who each hold a 50% stake in a foreign trade company are divorcing. Based on the audited valuation, the husband will pay the wife a lump-sum compensation in installments, with the equity interest serving as collateral. In real-life cases, the valuation basis, payment milestones, and default clauses should all be clearly set forth in the agreement.

3. Continue to co-governance: first think clearly whether it is possible to "do business"

After the divorce, both parties still hold 50% each to continue to be shareholders, which is not prohibited by the company law. However, the limited company relies on "human nature", and the co-governance of two people who have lost their marital ties can easily evolve into failure of shareholders' meetings, mutual veto of resolutions, and mutual distrust of accounts. If you really want to choose this path, you must sign the shareholder agreement at the same time: voting rights distribution, profit distribution and timetable, audit rights, loss sharing, mandatory purchase price and competition restrictions when one party withdraws.

4. What to do if there is no agreement: valuation, bidding or dissolution

Both parties want equity: the court can organize bidding, the higher the price and compensate the other party, or divide the equity in proportion to exercise their rights. How much the equity value is the core: the negotiated price takes precedence, followed by the audit assessment (net assets method, income method) commissioned by the court, and again with reference to tax returns and bank flow calculations. If the party in control of the accounting records refuses to cooperate, the other party may apply to the court for an investigative order to obtain the relevant materials or request a judicial audit. Incomplete accounting records often result in the valuation being determined in a manner unfavorable to that party, which underscores the importance of maintaining accurate and well-organized books on a regular basis.

Special Risks of 3. Husband and Wife Companies: Property Mix-up and Burden of Proof

1. The rule itself: the shareholders of a one-person company must "prove their innocence"

Article 23, paragraph 1, of the Company Law provides for a general denial of personality: if a shareholder abuses the independent status of a company as a legal person and the limited liability of a shareholder, evades debts and seriously harms the interests of creditors, he shall be jointly and severally liable for the debts of the company, and the creditor shall prove the abuse. The third provision represents a rare instance of reversed burden of proof: “In a company with only one 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.” The old Company Law placed this provision in Article 63; the new Company Law (revised in 2023 and effective July 1, 2024) has incorporated it into paragraph 3 of Article 23, with the content remaining unchanged. A single-member company lacks internal oversight, and the personal and corporate assets areextremely easy easily commingled; therefore, the shareholder must bear the burden of proving their innocence.

2. The biggest dispute: husband and wife company is not a "real one-person company"

The husband and wife company has two shareholders registered. On the surface, it is not a one-person company, but there are great judicial differences, and the risk comes from here. The Supreme People's Court (2019) Supreme Famin No. 372 is a landmark judgment of the "substantial one-person company": Xiong Mouping and Shen Mouxia got married in August 2011, and Qingmanrui Company was established in November of the same year with the joint property of husband and wife, with a registered capital of 2 million yuan and 50% each. After the company was in debt, the creditor Wuhan Maoren Company applied for the addition of the husband and wife as executors. On June 28, 2020, the Supreme People’s Court, in a retrial, determined that all equity interests substantially originated from the same property right and were jointly owned and controlled by a single entity, such that the interests of the equity holders are consistent and essentially unified. This situation bears a high degree of similarity to a one-person company in terms of its organizational structure and the applicable legal standards; therefore, in accordance with Article 63 of the former Company Law (now Article 23, paragraph 3), the burden of proof regarding the separation of assets should be allocated to both spouses. If they fail to discharge this burden, they shall bear joint and several liability for the company’s debts. Another view maintains that the determination should be based on the number of registered shareholders: a single-member company refers only to a company with a single natural-person shareholder or a single corporate shareholder; a company owned by a married couple has two shareholders and is not subject to the reversal of the burden of proof, with creditors required to independently prove the existence of commingling. Article 7 of the Supreme People’s Court’s “Interpretation of the Company Law (Draft for Comments)” dated September 30, 2025, proposes to clarify that this provision shall not apply to companies owned by a married couple; however, the draft has not yet come into effect.

3. Fall into the divorce scene: three kinds of joint pressure to recognize

  1. If the company's debts cannot be paid off, the creditor may apply for the addition of the husband and wife shareholder as the executed person (case No. 372 is the execution of the additional scenario);
  2. Debts incurred during the marriage for the operation of the company, which are used for joint operation or living together, may constitute joint debts of husband and wife (Article 1064 of the Civil Code), which are liable for personal property;
  3. Divorce and equity division do not exempt the joint and several liability that has been formed-the husband and wife agreed that "the debt belongs to the holding party" can not fight the creditor.

4. List of property segregation

  1. The company account is strictly separated from the personal account, and there is no need for a personal card to receive money, pay wages and pay for purchases;
  2. The capital transactions between shareholders and the company sign a written loan agreement, repay the principal and interest on schedule, and do not hang "other receivables" for a long time ";
  3. Regulate the annual accounting, the preparation of financial and accounting reports, conditional audit-continuous annual report is the core evidence to prove the independence of property;
  4. Dividends go through legal procedures and leave the resolution of the shareholders' meeting, not to treat the company as a "personal wallet to withdraw money at any time".

The 4. division plan has been decided. How will the company complete the last kilometer?

1. Registration of changes in equity and amendment of articles of association

Five-step settlement: determine the ownership of equity according to divorce agreement, court mediation document or judgment; Convene a shareholders' meeting to make resolutions on equity transfer, amendment of articles of association and change of shareholder register; First file tax declaration (Zhejiang "after tax certificate"); Apply to the market supervision department for change registration. The materials generally include company registration (filing) application, shareholders' meeting resolution, equity transfer agreement or effective legal documents, amendment to articles of association, identification certificate of new shareholders, etc; synchronously update bank account, tax, social security information. In Zhejiang, you can submit your application online through the “One-Stop Enterprise Registration” platform or at the local market regulation service window.

2. The aftermath of one party's withdrawal

The withdrawal is not only from equity, but also from a series of positions and authorities: whether the legal representative, director or executive director, supervisor and financial officer have changed; How to hand over the official seal, financial seal and online banking U-shield; Whether external loans, guarantees and long-term contracts are re-signed. If the withdrawing party continues to hold office, clarify the labor relations, salary and competition restrictions; If you withdraw completely, confirm that you will no longer act in the name of the company and no longer handle the company's accounts.

3. Anti-deadlock design for continued co-governance

The third paragraph of Article 84 of the Company Law allows the articles of association to make other provisions on the transfer of shares. If the shares are still held jointly after divorce, it is recommended to include in the articles of association or shareholders' agreement: the right to audit accounts and financial disclosure, the timetable for profit distribution, major matters (guarantees, loans, disposition of major assets) must be voted on in a specific proportion, two consecutive failure to form a valid resolution will trigger the compulsory acquisition, and if there is still no solution, the dissolution will be initiated.

4. The deadlock cannot be broken: judicial dissolution is the final stop-loss valve.

Article 231 of the Company Law stipulates that if serious difficulties occur in the operation and management of the company, and the continued existence of the company will cause significant losses to the interests of shareholders, which cannot be resolved through other means, shareholders holding more than 10% of the company's voting rights may request the court to dissolve the company. A lawsuit for dissolution is under the jurisdiction of the court at the company’s domicile (Article 24 of the Interpretation II of the Company Law); accordingly, the Ningbo company filed the suit in the district (or county) court where it is registered. The former spouse holds 50% of the shares and thus controls voting rights that significantly exceed the 10% threshold, rendering them eligible to bring the suit. After dissolution, the directors shall serve as the liquidators (Article 232 of the Company Law) and must form a liquidation committee within fifteen days; the parties shall be paid from the remaining assets in accordance with their respective rights.

Arrangements to be made before 5. divorce

The outcome of equity disputes between husband and wife companies is often foreshadowed on the day of company registration:

1. Incorporation of shareholding arrangements into articles of association and written property agreements

The agreement on the property of the husband and wife must be in writing (Article 1065 of the Civil Code). If the respective ownership percentages truly reflect the parties’ intentions, they should execute a written agreement specifying that “the registered ownership percentages constitute the spouses’ agreement regarding the attribution of equity interests,” and notarize it if necessary. If they wish to restrict the spouse from becoming a shareholder directly upon divorce or to impose conditions on the transfer of shares, such provisions may be included in the company’s articles of association (Article 84, paragraph 3). Only when the written agreement is in place can the "follow the agreement" channel of Article

10of Interpretation (II) be activated.

2. Build a "separation zone" between the company and marriage"

There is a clear distinction between public and private, transparent accounts (see the list in section III), clear ownership of significant corporate property, and no corporate assets are used to subsidize household expenses. Financial chaos comes at two costs: externally, it exposes the company to the risk of creditors “piercing the corporate veil”; internally, it turns the question of “how much is the company worth?” into an opaque and unclear matter.

3. Crisis: first fix the evidence, then talk about the plan.

Make copies of industrial and commercial internal files, capital verification reports, audit reports, articles of association, bank flow and tax returns on file; Do not rob official seals, do not unilaterally change accounts, do not suddenly transfer shares-the party who hides, transfers or sells common property may divide it less or not (Article 1092 of the Civil Code). Litigation: divorce disputes and equity division can be handled together; If the company has another third-party shareholder, it can also claim another case.

6. Frequently Asked Questions

The company was opened by us after marriage, with 50% registration each. Is the divorce half for one person?

The registration ratio is not the basis for division (Article 10 of the Interpretation (II)). In the absence of a written agreement, equity interests are generally treated as joint marital property. Courts will adjudicate the matter in accordance with principles that take into account the best interests of the children, the rights of the wife, and the interests of the faultless party, typically resulting in an equitable division. However, adjustments may be made based on each spouse’s contributions during the marriage, any divorce-related fault, and which party continuing to manage the business would be more beneficial to the company.

Before the divorce, he transferred the equity to his mother at a low price. Can I get it back?

After the implementation of the interpretation (II), the court will not support the request to confirm that the transfer is invalid on the grounds of "without the consent of the spouse", unless it can be proved that the transferor and the transferee maliciously colluded to damage the spouse's rights and interests (Article 9 of the interpretation (II)), and the transfer to the close relatives, the price is obviously unreasonable or free of charge is the key direction of evidence. Even if the contract is valid, the transfer price is still the joint property of the husband and wife and may be divided. Ningbo Fenghua Court had a case law in the old law period, which invalid the act of transferring free of charge to her daughter during divorce and ordered her to score less.

The company can't repay the debt. Can I still repay the divorce?

If the company is identified as a "substantial one-person company" and the husband and wife shareholders cannot prove the independence of the property, the debts of the company shall be paid off jointly and severally, and neither divorce nor equity division shall be exempted; the creditor can also apply for additional husband and wife as the person subject to execution (see Section 3 for the boundary of joint and several debts). “The moment you get divorced, you’re free” does not hold true in the context of aHusband and wife company.

7. Practical Insights from a Lawyer

When husband and wife start a joint-stock company, the most easy mistake to fall into when they get divorced is to directly regard the shareholding ratio in the industrial and commercial registration as the division ratio-the registration ratio is more publicized to the public. When there is no written agreement between husband and wife, it does not of course determine how much you share. Therefore, the first thing is not to argue about the proportion, but to go back to the source: whether the company was established with the joint property after marriage, and whether the two parties have a written agreement stating the ownership. To find out the source of capital contribution, the time of establishment and the source of each capital increase is often more decisive than to entangle with "I am 60% and you are 40%. This order of judgment (first contribution, then agreement, then registration) is best sorted out before the negotiation, so as not to hand over the initiative as soon as you open your mouth.

What we really need to race against is time. Company property is most afraid of procrastination. Once the other party transfers the orders, customers, equipment and account funds during the negotiation period, it is very difficult to restore them afterwards. Therefore, when detecting the signs of marriage, three things should be done simultaneously: fixing the financial statements for nearly one or two years, tax records, bank and public account flow, shareholder and employee structure; Sorting out the real estate, vehicles, trademarks, equipment and other assets under the company's name; For the equity or assets that may be disposed of, apply for property preservation in a timely manner. On the split path, the internal transfer of pure husband and wife company is the most convenient, usually "one party stays to continue to operate, the other party is compensated at a discount according to the assessed price.

also need to guard against a special thunder: if a husband and wife company is identified as a mixed personality or a substantial one-person company, shareholders often have to self-certify that the company's property and personal property are independent of each other, otherwise they may bear joint and several liability for the company's debts, and divorce cannot be thrown away. Therefore, during the negotiation period, do not use the company's account to pay personal expenses, withdraw funds at will or transfer assets without consideration, and do not cooperate with the other party to make false accounts for the sake of "multiple points. After the plan is negotiated, it is necessary to complete the last kilometer: equity change, amendment of articles of association, industrial and commercial registration, transfer of seals and accounts, attribution of external debts and in-operation contracts, all of which must be written in enforceable terms and agreed on the consequences of breach of contract. Only when it is written in black and white and the formalities are completed can the share on paper really become your rights and interests.

Compress the rules into three sentences: the real share of the equity of the husband and wife company is not written in the industrial and commercial registration, but determined by the source of capital contribution and written agreement, and if there is no agreement, it will be divided according to the common property and the principle of care; the best solution in divorce is almost "one party stays for business and the other party gets compensation". If the company is broken up, the equity is waste paper; the husband and wife company still has the sword of "real one-person company" hanging on its head. The clean accounts are not only to prevent creditors, but also to calculate the premise of equity value. For couples entrepreneurs in Ningbo: write the articles of association and property agreement on the day of registration, and make the account clear every year, which is more effective than hiring ten lawyers when divorcing.