In the current economic life, a significant part of family wealth is represented by equity. When a marriage dissolves, the equity held by one party in a limited liability company often becomes one of the most complex and difficult-to-handle asset types in the division of marital property. It is not only about the value of the property but also involves issues such as the corporate personality, the preferential purchase rights of other shareholders, and the corporate governance structure.

It is first necessary to clarify that the scope of the division is limited to the property rights in the shares. If the shares are acquired with the joint property of the couple after marriage, or if the investment is made with the income generated after marriage, then regardless of whether the shares are registered in the name of either party, the amount of capital contributed to the shares and the income generated therefrom shall be considered as joint property of the couple. The registered party is the nominal shareholder, while the other party enjoys these property rights.

However, the method of division cannot simply split the equity in half, with each becoming a shareholder. Because a limited liability company emphasizes the trust and cooperation among shareholders, it has a strong personal nature. Article 73 of the "Interpretation (I) of the Supreme People's Court on the Application of the Marriage and Family Article of the Civil Code of the People's Republic of China" refers to the provisions of the "Company Law of the People's Republic of China" on the transfer of shares, providing clear guidance for judicial practice.

Specifically, during the trial, the court will make different decisions based on whether both spouses reach a consensus and on the wishes of the other shareholders of the company.

  In the first scenario, both spouses agree to transfer part or all of the capital contribution to the spouse of the shareholder. At this time, the consent of the majority of the other shareholders of the company is required, and the other shareholders must explicitly state that they renounce their right of first refusal. If these two conditions are met, the spouse of the shareholder can become a shareholder of the company. If more than half of the other shareholders do not agree to the transfer but are willing to purchase the capital contribution under the same conditions, the People's Court may divide the property obtained from the transfer of the capital contribution. If more than half of the other shareholders do not agree to the transfer and are also unwilling to purchase the capital contribution under the same conditions, it is deemed that they agree to the transfer, and the spouse of the shareholder can become a shareholder of the company.

In the second scenario, the husband and wife are unable to reach an agreement on the division of equity. In this case, the court usually will not directly order mandatory division of equity, but may adopt the following compromise solutions: (1) judgment that the equity belongs to the registered party, with the registered party paying a discounted compensation to the other party based on the property value of the equity; (2) through an auction method, the equity is acquired by the highest bidder, and compensation is made to the other party; (3) in extremely rare cases, if the company's operations are at a deadlock, the company can be audited and liquidated after which the remaining property can be distributed, but this is the least economic solution.

Determining the equity value is another difficulty. The ideal way is for both parties to negotiate and determine a fair price. If negotiation fails, it often requires applying for judicial appraisal and entrusting a professional appraisal institution to assess the company's net assets. However, in practice, minority shareholders or non-controlling parties often find it difficult to obtain the company's true financial information, and the appraisal is fraught with difficulties. In addition, the equity value is dynamic, and the choice of the appraisal benchmark date will directly affect the compensation amount.

Therefore, the division of equity is a systematic project, which involves both the Marriage and Family Article of the Civil Code and the procedural requirements of the Company Law, and also requires dealing with complex valuation issues. We usually suggest that at the time of the establishment of the company or the acquisition of equity, the couple can make a preliminary arrangement for the ownership and future division of equity through a property agreement between spouses, thereby avoiding disputes in the future.