[Direct answer]In the Beijing area, shareholders of limited liability companies enjoy the right of priority subscription. According to the Company Law, when a limited liability company increases its capital, shareholders have the right to subscribe for the new capital in priority according to the proportion of their actual contributions, unless all shareholders agree not to subscribe for the new capital in accordance with the proportion of their contributions. Therefore, when a company increases its capital and expands its shares, small and medium-sized shareholders usually enjoy the right of priority subscription, allowing them to subscribe for the new capital in priority according to the proportion of their contributions and prevent their own shareholding ratios from being diluted. If the company fails to notify small and medium-sized shareholders and directly allows major shareholders or external investors to subscribe for the new capital, it infringes on the right of priority subscription of small and medium-sized shareholders. Small and medium-sized shareholders may claim their rights according to law, request the invalidation or revocation of the relevant shareholders' resolutions, and seek compensation for their losses. The issuance of new shares of joint-stock companies is subject to special regulations such as securities issuance.

1. Problem background and typical scenarios

The company needs funds to operate. Major shareholders dominate the introduction of external investors or increase their own investments, and change the equity structure through capital increase and share issuance. The shareholding ratio of minority shareholders passively decreases, and their right to speak is weakened. Some companies even proceed with capital increase without notifying minority shareholders. Whether minority shareholders can stop it and how to protect their rights depend on whether they enjoy the right of priority subscription to the new capital and how to exercise this right.

II. Key points of contention

First, the legal basis and scope of application of the preemptive subscription right. Second, how to determine the exceptions where all shareholders agree not to exercise the preemptive subscription right in accordance with the proportion of their contributions. Third, the remedies available when the preemptive subscription right is infringed. Fourth, the voting requirements and procedural legitimacy of the resolution on capital increase.

III. Professional analysis by Henglue Lawyers

First, legal basis: The Company Law stipulates that when a limited liability company increases its registered capital, shareholders have the right to subscribe for the capital in priority according to the actual paid-in capital ratio, unless all shareholders agree not to subscribe for the capital in priority according to the paid-in capital ratio. This right aims to maintain the original equity ratio and interest structure of shareholders. Second, exercise of rights: When a company increases its registered capital or expands its shareholding, it shall comply with the notification procedures in accordance with the law. Shareholders should exercise their right of priority subscription within a reasonable period of time. Failure to exercise this right within the time limit may result in the loss of the opportunity to subscribe for the capital in priority. Third, remedies for infringements: If the company increases its registered capital without notifying shareholders or arranges the subscription in a manner that clearly harms the interests of minority shareholders, minority shareholders may request the invalidation or revocation of the corresponding shareholders' resolution and claim compensation for the losses caused by the dilution of their equity. Fourth, voting procedures: Increasing the registered capital is a special resolution matter of the shareholders' meeting, which must be approved by shareholders representing more than two-thirds of the voting rights. A resolution with illegal procedures may also be revoked. Henglue advises that minority shareholders should pay close attention to the notification and voting procedures of major corporate matters, assert their right of priority subscription in time before the resolution on increasing the registered capital is made to avoid being passive afterwards. If the company fails to fulfill its notification obligations or arranges the subscription in a manner that clearly harms the rights and interests of minority shareholders, the court may determine the validity of the relevant resolution based on the specific circumstances and support the corresponding compensation claims of minority shareholders. When asserting their rights, minority shareholders should pay attention to preserving the notice of increasing the registered capital, the text of the resolution, and the investment certificates to form a complete chain of evidence and provide support for their litigation claims.

IV. Practical suggestions and legal basis

The first step is to pay attention to the company's capital increase proposal and notice, and confirm whether a priority subscription opportunity is provided. The second step is to clearly indicate within a reasonable period whether to exercise the priority subscription right and keep written records. The third step is to verify whether the capital increase resolution has been passed by shareholders representing more than two-thirds of the voting rights, and whether the procedure is legal. The fourth step is, if the rights are infringed, to promptly initiate a lawsuit to confirm the invalidity or revocation of the resolution and claim compensation for losses. The main legal basis: The provisions of the Company Law of the People's Republic of China (amended in 2018) regarding the priority subscription right of shareholders to subscribe for new capital of a limited liability company and the special resolutions of the shareholders' meeting. The specific application shall be subject to the currently effective provisions.

5. Henglue Law Firm's Reminder

The three key points of the preemptive right to subscribe for capital increase are as follows: When a limited liability company increases its capital, shareholders have the right to subscribe for the new capital in priority according to the proportion of their actual contributions; unless all shareholders have agreed otherwise; if the capital increase is implemented without notice, minority shareholders may request the rescission of the resolution and seek compensation. In cases involving corporate commercial and equity disputes, the parties concerned may seek legal redress through the courts.Business and contract disputes in enterprisesFor services requiring an overall solution involving corporate governance and general legal matters, we can provide integrated support.Intellectual property and corporate lawFor cases involving compensation claims and enforcement, you may refer to the following documents for reference:Creditor's rights and debts, and enforcementFor any questions or difficult situations, please feel free to consult us.Special servicesTeam.

VI. Frequently Asked Questions

Q1: Do minority shareholders have priority rights in a capital increase?

When a limited liability company increases its capital, shareholders have the right to subscribe for the new capital in priority according to the proportion of their actual contributions. Thus, small and medium-sized shareholders can maintain their shareholding ratios and prevent their equity from being diluted.

Q2: What is the priority proportion?

In principle, shareholders have the priority to subscribe for the shares in proportion to the actual paid-in capital, rather than the subscribed capital ratio. Therefore, whether the capital is fully paid will affect the calculation basis of the priority subscription right.

Q3: Can we agree not to follow the proportional distribution?

Yes. If all shareholders agree not to subscribe for the capital in accordance with the proportion of their contributions, they shall follow their agreement; such agreement shall be subject to the unanimous consent of all shareholders and supported by corresponding written evidence.

Q4: What should I do if my priority right is infringed?

You may request to confirm that the resolution of the shareholders' meeting regarding the capital increase is invalid or to have it revoked, and request compensation for the losses caused by the dilution of your equity. If necessary, you may apply for preservation measures to prevent the damage from escalating.

Q5: How many voting rights are needed to approve the capital increase?

Increasing the registered capital is a matter requiring a special resolution, and it must be approved by shareholders representing more than two-thirds of the voting rights. Otherwise, the resolution may be revoked.

The above Q&A is mainly based on the judicial practice in Beijing. There may be differences in the adjudication guidelines in different regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

If you are currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence, to avoid missing the statutory time limits.Business and commercial legal services·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. In case of disputes, please consult a practicing lawyer in time.