{"id":2383,"date":"2025-11-21T16:59:01","date_gmt":"2025-11-21T08:59:01","guid":{"rendered":"https:\/\/www.zhenghan.com\/case\/2383.html"},"modified":"2025-11-25T16:59:01","modified_gmt":"2025-11-25T08:59:01","slug":"second-instance-victory-against-all-odds-hongqiao-zhenghan-assists-in-overturning-the-finding-of-equity-nominee-holding-in-a-family-enterprise","status":"publish","type":"case","link":"https:\/\/www.zhenghan.com\/en\/case\/2383.html","title":{"rendered":"Second-instance victory against all odds: HongQiao ZhengHan assists in overturning the finding of equity “nominee holding” in a family enterprise."},"content":{"rendered":"

Recently, in a shareholder qualification confirmation lawsuit heard on second instance by the Shenzhen Intermediate People’s Court, represented by the Guangzhou Office of HongQiao ZhengHan, the first-instance judgment was reversed, resulting in a victory against all odds. Against the backdrop of a family enterprise’s entrepreneurial history spanning nearly three decades, the majority shareholder (elder brother) sued the minority shareholder (younger brother) on the grounds of “nominee holding”, demanding confirmation that the minority shareholder’s equity was held in trust for the majority shareholder. The first-instance court ruled to confirm the “nominee holding” and upheld the majority shareholder’s claims. Faced with an extremely unfavorable situation, the Guangzhou Office of HongQiao ZhengHan was invited to intervene in the second instance and represent the minority shareholder. After intense litigation between the two parties, HongQiao ZhengHan dedicated itself to reconstructing and restoring the facts of shareholding, refuting the majority shareholder’s “nominee holding” narrative. Ultimately, the Shenzhen Intermediate People’s Court, on second instance, overturned the finding of a “nominee holding” agreement in the first-instance judgment, ruled that the minority shareholder did not constitute nominee holding, and preserved the family enterprise equity worth hundreds of millions of yuan for the minority shareholder.<\/p>\n

I. Basic Facts of the Case<\/h2>\n

The family enterprise was co-founded by two brothers in Shenzhen in the 1990s. After years of development, it grew into a well-known enterprise with assets exceeding one billion yuan. At the company’s inception, the elder brother, as the majority shareholder, held 70% of the equity, and the two brothers arranged four companies to act as registered nominal shareholders to hold the remaining 30% equity actually belonging to the younger brother, who, as the minority shareholder, had not been publicly named as a shareholder before. Later, the younger brother acquired back the 30% equity from the aforementioned four corporate shareholders at zero consideration. The company then underwent two rounds of capital increases, and the 70-30 shareholding ratio between the two parties has remained unchanged to this day.<\/p>\n

Since 2019, conflicts have arisen between the two brothers. The elder brother filed a lawsuit for shareholder qualification confirmation, claiming that the 30% equity held by the younger brother was held in trust for him. The first-instance court held that although the two parties had not signed a nominee holding agreement, after comprehensively examining various factors such as the “intent for nominee holding”, “source of capital contributions”, and “exercise of shareholder rights”, and conducting layered argumentation, it determined that the equity constituted “nominee holding”. It found that the 30% equity at the time of the company’s establishment was held by four companies as nominees arranged by the elder brother, and the younger brother’s acquisition of the equity at zero consideration should be regarded as part of the elder brother’s nominee holding arrangement. Even the capital increase funds paid by the younger brother’s account to the company were deemed to be “bridge funds” provided by the elder brother rather than the younger brother’s own funds. Finally, the court ruled that the 30% equity registered in the younger brother’s name belonged to the elder brother, meaning the younger brother faced the desperate situation of losing his lifelong efforts and having his massive equity assets reduced to zero.<\/p>\n

After the younger brother filed an appeal, out of deep concern over the potentially unfavorable outcome of the final instance, he sought out the Guangzhou Office of HongQiao ZhengHan upon reputation and entrusted the firm to represent him in the second instance.<\/p>\n

II. Key Points and Difficulties<\/h2>\n

1. Nearly three decades of time span, making fact restoration difficult<\/strong><\/p>\n

The equity dispute involved in the case spans nearly three decades. Many key facts occurred in the distant past, and the collection of relevant evidence was arduous, posing a great challenge to the complete restoration of the case facts.<\/p>\n

2. The opposing party was the controlling shareholder, making it difficult to overturn the appearance of nominee holding<\/strong><\/p>\n

The elder brother served as the company’s chairman, held operational decision-making power, and focused on finance in the internal division of labor. The indications of capital contributions at the time of the company’s establishment in the 1990s and subsequent capital increases were unfavorable to the younger brother, and the elder brother had an advantageous appearance of “nominee holding”. It was extremely difficult to\u7834\u89e3 and prove that the younger brother actually performed shareholder obligations including capital contributions and exercised shareholder rights.<\/p>\n

3. Non-standard operation of the family enterprise, leading to ambiguous legal relationships<\/strong><\/p>\n

The enterprise involved was a typical family enterprise without a sound financial system and governance mechanism in its operation and management, resulting in relatively vague core facts such as the source of capital contributions and profit distribution in the first-instance evidence presentation.<\/p>\n

4. Defeat in the first instance and other related cases, making second-instance reversal extremely difficult<\/strong><\/p>\n

Other shareholding companies of the younger brother were also sued by the elder brother for nominee holding, and effective judgments from courts in other regions had already found that the younger brother held equity as a nominee for the elder brother. The younger brother had suffered successive defeats, making the reversal of the case in the second instance extremely challenging.<\/p>\n

III. Highlights of Representation<\/h2>\n

1. Reconstructing and restoring facts to refute the “nominee holding” claim<\/strong><\/p>\n

By thoroughly sorting out the nearly three decades of entrepreneurial history of the two brothers and collecting a series of evidence in the process, HongQiao ZhengHan vividly restored the enterprise’s years of development from the entrepreneurial stage, equity transfer stage, capital increase stage, growth to the outbreak of conflicts, sorted out multiple doubtful points in the first instance, and successfully persuaded the collegial panel to understand and accept that the true intention of both parties had always been joint entrepreneurship and shareholding.<\/p>\n

2. Focusing on capital contribution liability and highlighting the opposing party’s flaws in evidence presentation<\/strong><\/p>\n

In the second-instance stage, HongQiao ZhengHan closely adhered to the provisions of the Company Law and relevant judicial interpretations, pointing out that the majority shareholder failed to provide sufficient evidence to prove that he had actually performed the original capital contribution and subsequent capital increase obligations corresponding to the 30% equity, that there were major flaws in the evidence chain and no logical closed loop was formed. In particular, it was pointed out that the majority shareholder claimed that the capital contributions came from companies actually controlled or held by him, but as a legal person, a company has independent property. The funds transferred from the majority shareholder’s controlled companies to the minority shareholder’s account do not naturally belong to the majority shareholder’s own funds, nor can it be naturally inferred that the majority shareholder fulfilled his capital contribution obligations, and the majority shareholder should bear the consequences of insufficient evidence.<\/p>\n

3. Synthesizing rights and obligations to demonstrate the authenticity of shareholder status<\/strong><\/p>\n

HongQiao ZhengHan excavated and submitted a series of supplementary evidence proving that the minority shareholder had participated in the company’s operation and management as a shareholder for many years, shared the company’s income through current accounts, provided guarantees for the company’s debts with personal assets, signed major decision-making documents, and approved the company’s financial system, etc., actually exercising shareholder rights and performing shareholder obligations, which did not conform to the legal characteristics of “nominee holding”.<\/p>\n

4. Applying for witnesses to appear in court to vividly restore the entrepreneurial process<\/strong><\/p>\n

When HongQiao ZhengHan intervened in the second instance, the court had already held one hearing for the case. HongQiao ZhengHan applied for and obtained the opportunity for a second hearing, and specifically arranged for a number of key witnesses to appear in court to jointly restore and review the arduous story of the two brothers’ entrepreneurship, moving the collegial panel with a true and infectious narrative.<\/p>\n

\"\"<\/p>\n

One of the visual documents submitted by HongQiao ZhengHan to the court in the second instance, summarizing and presenting key facts and corresponding testimony<\/p>\n

IV. Adjudication Opinions<\/h2>\n

The second-instance court held after trial that:<\/strong><\/p>\n

1. Although the appellant (minority shareholder) acquired the 30% equity from four corporate shareholders at zero consideration, regarding the fact that he never paid the equity transfer consideration, the appellant claimed that it was because none of the four corporate shareholders had actually made capital contributions at the time of the company’s establishment. Based on the requirements for industrial and commercial change registration under the paid-in capital system at that time, although an equity transfer contract with consideration was signed, the appellant was actually not required and did not need to pay the equity transfer payment. Based on the existing evidence, it cannot be determined that the four corporate shareholders held 30% of the equity as nominees for the appellee (majority shareholder) personally at the time of the company’s establishment, and thus it cannot be proved that the appellant’s acquisition of equity from the four companies was based on the intention to hold equity as a nominee for the majority shareholder. Moreover, the appellant provided a reasonable explanation for never paying the equity transfer payment, so it is difficult to find that there was a nominee holding agreement between the two parties.<\/p>\n

2. The key to determining whether a nominee holding relationship can be established is whether the appellee (majority shareholder) actually performed his capital contribution obligations, that is, whether it can be determined that all the minority shareholder’s capital increase funds came from the majority shareholder. The first-instance court, based on the fact that the majority shareholder’s controlled companies transferred funds to the minority shareholder, found that the majority shareholder was the actual contributor, which this court does not affirm. As a legal person, a company has independent legal person property. The funds transferred by the company to the minority shareholder’s account do not naturally belong to the majority shareholder’s own funds, nor can it be naturally inferred that such companies transferred funds to the minority shareholder under the arrangement and instruction of the majority shareholder. Therefore, it cannot be determined that the majority shareholder actually performed his capital contribution obligations.<\/p>\n

Accordingly, the second-instance court revoked the first-instance judgment and ruled to dismiss all claims of the appellee.<\/p>\n","protected":false},"author":3,"featured_media":0,"template":"","meta":{"_acf_changed":false},"case-category":[311,295,308,309],"case_tag":[368,377,378,379],"class_list":["post-2383","case","type-case","status-publish","hentry","case-category-family-private-wealth","case-category-intermediate-peoples-court","case-category-company-investment","case-category-others-industries","case_tag-turning-defeat-into-victory","case_tag-shareholder-qualification-confirmation","case_tag-equity-nominee-holding","case_tag-family-enterprise"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.zhenghan.com\/en\/wp-json\/wp\/v2\/case\/2383","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.zhenghan.com\/en\/wp-json\/wp\/v2\/case"}],"about":[{"href":"https:\/\/www.zhenghan.com\/en\/wp-json\/wp\/v2\/types\/case"}],"author":[{"embeddable":true,"href":"https:\/\/www.zhenghan.com\/en\/wp-json\/wp\/v2\/users\/3"}],"wp:attachment":[{"href":"https:\/\/www.zhenghan.com\/en\/wp-json\/wp\/v2\/media?parent=2383"}],"wp:term":[{"taxonomy":"case-category","embeddable":true,"href":"https:\/\/www.zhenghan.com\/en\/wp-json\/wp\/v2\/case-category?post=2383"},{"taxonomy":"case_tag","embeddable":true,"href":"https:\/\/www.zhenghan.com\/en\/wp-json\/wp\/v2\/case_tag?post=2383"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}