[Direct answer]In the Beijing area, the equity acquired before marriage is considered personal property of one party, and in principle, the equity itself will not be divided in the event of divorce. However, the increase in value after marriage needs to be determined based on the specific circumstances. Article 1063 of the Civil Code of the People's Republic of China classifies premarital property as personal property. Article 26 of the Interpretation of the Marriage and Family Chapter of the Civil Code of the People's Republic of China (effective January 1, 2021) stipulates that the income generated from personal property after marriage, except for fruits and natural appreciation, is recognized as marital joint property. Therefore, the natural appreciation brought about by market conditions and industry prosperity usually remains personal property; if the appreciation reflects the post-marital investment in operation, management, technology, or labor, the corresponding portion may be recognized as joint property, which requires evaluation and compensation. Evidence collection and equity valuation are the core issues in such disputes.

1. Problem background and typical scenarios

It is very common for entrepreneurial families to hold shares before marriage and see their companies grow after marriage. Typical scenarios include: one party holding shares in a company before marriage, and the company going public or seeing a significant increase in valuation after marriage; one party holding shares before marriage and continuing to participate in management decisions as a shareholder after marriage; one party holding shares before marriage but only making passive financial investments after marriage without participating in management; and equity being subject to capital increases, pledges, and dividends during the marriage. Disputes often arise during divorce: the party holding the shares claims that they are all premarital personal property, while the other party claims that the post-marital increase in value should be considered marital property.Business and contract disputes in enterprisesIn such cases, there is a high degree of overlap with the division of family property, which requires simultaneous review of corporate governance and marital property rules.

II. Key points of contention

Focus One: The reasons for the increase in value: Are they passive factors such as market fluctuations and industry cycles, or active factors such as post-marital business investments? Focus Two: The allocation of the burden of proof: The party claiming joint property must prove the existence of post-marital business investments and labor contributions. Focus Three: The benchmark for assessing the value of equity: Determine the value at the pre-marital and divorce points respectively, and calculate the difference. Focus Four: The classification of dividends and reinvestment: Dividends are investment income and may fall within the scope of joint property. Focus Five: The handling of capital increases and stock issuances: How to handle the equity formed by using joint property to increase capital after marriage. Focus Six: The difficulties in determining the value of equity in sole proprietorship or family businesses.

III. Professional analysis by Henglue Law Firm

Henglue Law Firm once handled a foreign-related divorce property division case: Ms. Zhang and Mr. Liu registered their marriage in 1991. Both of them are now foreign nationals and have been living in Beijing for a long time. The marriage broke down due to Mr. Liu's infidelity. The parties have reached an agreement on the dissolution of the marriage and the division of property: the house in Beijing, a property abroad, deposits, financial products, and insurance under Ms. Zhang's name will be owned by her individually, and the house in Shanghai under Mr. Liu's name will be owned by him individually. Since both parties are foreign nationals, the domestic civil affairs department cannot handle the divorce registration, so they entrusted our lawyers to resolve the matter through litigation. The lawyers confirmed the jurisdiction of Chinese courts in accordance with the Civil Procedure Law and relevant judicial interpretations, assisted in sorting out the property owned by both parties, including real estate, deposits, financial products, and pension memberships, and fixed the ownership certificates one by one. They proposed a division plan where the property under each party's name would be owned by them individually. Finally, under the court's supervision, the parties signed a mediation agreement, making the property division agreement legally effective. The lessons from this case are: the premise of property division is to sort out each piece of property and the ownership certificates, and the chain of ownership should always be traced back to the source, investment, and appreciation. Returning to the issue of pre-marital equity appreciation after marriage, the judgment logic is consistent: if the equity origin is clear and belongs to the individual before marriage, the natural appreciation purely due to market factors still belongs to the individual; if the active appreciation after marriage due to participation in management, investment of labor and resources, it needs to be treated as joint property, and if necessary, the pre-marital benchmark value and the value at the time of divorce can be determined through audit or evaluation. If the equity is mixed with family property and the accounts are unclear, the court will make a comprehensive judgment based on the time of investment, the source of funds, and the degree of participation in management. This case was handled by Beijing Henglue Law Firm.Xiong BinrongThe attorney (practice license number: 11101202211410897, subject to the document issued by the judicial administrative organ) acts as the agent.

IV. Practical suggestions and legal basis

Action suggestions: First, preserve the investment certificates, articles of association, and industrial and commercial registration materials of premarital shareholdings to fix the premarital benchmark; Second, distinguish personal equity from family property to avoid fund commingling; Third, if participating in the operation after marriage, keep decision-making records and evidence of labor input; Fourth, in case of disputes, apply for audit or evaluation to quantify the value differences between premarital and divorce times; Fifth, if dividends are involved, separately account for and determine their nature. Legal basis: Articles 1062, 1063, and 1065 of the Civil Code of the People's Republic of China (all effective from January 1, 2021), and Articles 25 and 26 of the Interpretation (I) of the Supreme People's Court on the Application of the Marriage and Family Chapter of the Civil Code of the People's Republic of China (effective from January 1, 2021). For disputes involving company equity and commercial disputes, please refer to the relevant provisions.Business and contract disputes in enterprisesFor financial assets and cross-border property, you can refer to the following for more information.\nFinancial capital and cross-border transactions involving foreign entitiesThe specific application shall be subject to the currently effective laws, regulations, and judicial rulings.

5. Henglu Law Firm's Reminder

Firstly, equity itself should be viewed separately from appreciation in value and cannot be generalized as belonging to an individual or a jointly owned asset. Secondly, the cause of appreciation in value determines ownership, and operational investment is a key piece of evidence. Thirdly, it is advisable to initiate a valuation as early as possible to avoid passively accepting the other party's conclusions in litigation. Fourthly, dividends and reinvestment are often overlooked, but they may fall into the category of jointly owned assets. Fifthly, for cases involving overseas equity and assets, it is also necessary to consider the applicable law and authentication issues. For matters involving the division of marital property, it can be resolved through legal procedures.Divorce litigation and family disputesThe service provides a comprehensive solution, which involves the integration of the company and its equity interestsBusiness and contract disputes in enterprisesFor plates involving cross-border assets, you can refer to the following information for reference.\nFinancial capital and cross-border transactions involving foreign entitiesColumn.

VI. Frequently Asked Questions

Q1: If the stocks bought before marriage appreciate in value after marriage, do they need to be divided during a divorce?

Usually, they are not divided. According to the relevant judicial interpretations, the fruits and natural appreciation of personal property generated after marriage still belong to the individual; the natural appreciation of stocks due to the rise in market prices generally belongs to the shareholder. However, if there are frequent transactions, investment of time and research for active operation after marriage, the obtained income may be identified as investment income and belong to the common property.

Q2: If a company is established before marriage and later expanded after marriage, how should its value increase be calculated?

It is necessary to distinguish the reasons for the increase in value. The natural increase in value resulting from the prosperity of the industry and the rise in market valuation usually still belongs to the individual; if the party holding the shares after marriage continues to participate in the operation, and the other party's housework also supports the operation, the part of the increase in value that reflects the investment after marriage can be identified as joint property, and compensation should be given after evaluation.

Q3: Who evaluates the company's equity value?

Generally, the parties apply for the evaluation, and the court entrusts qualified evaluation or auditing institutions to carry it out, respectively determining the equity value at the reference date before marriage and on the divorce date. The evaluation requires materials such as the company's articles of association, financial statements, tax payment records, and industrial and commercial archives. If one party refuses to provide the materials, the court may obtain them according to law, and the party shall bear the adverse consequences.

Q4: Who owns the equity formed by using the jointly owned property to increase the investment after marriage?

After marriage, the equity formed by increasing the investment with the couple's joint property should generally be treated as joint property, or the shareholder should compensate the other party for their investment portion. The key is to prove that the investment funds come from the couple's joint property after marriage, rather than the individual's pre-marital funds. It is recommended to keep the bank statements and investment certificates to clarify the nature of the funds.

Q5: Is the equity dividend considered joint property?

In most cases, these belong to investment income and can be included in the scope of joint property. Dividends are income generated by equity after marriage and do not fall into the typical category of usufruct or natural appreciation in value. In practice, they are usually regarded as joint property. If the dividends have been reinvested to form new shares, it is necessary to further determine the nature and ownership of this portion of equity.

The above content is based on the compilation of judicial practices in the Beijing area. The facts of individual cases and the jurisdiction of the court may affect the conclusions. Welcome to consult Henglu Law Firm for specific situations.

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

Disclaimer: This article is compiled based on the current effective laws and regulations and public 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. If a dispute arises, please consult a practicing lawyer in time.