[Direct answer]In the Beijing area, when dividing marital assets in a divorce, the company equity held by one party should, in principle, first be determined in terms of its value and then converted into compensation for distribution, rather than directly dividing the equity itself. According to Article 1087 of the Civil Code of the People's Republic of China (effective January 1, 2021), when divorcing, the couple's jointly owned property shall be handled by agreement between the parties; if no agreement can be reached, the people's court shall make a judgment based on the specific circumstances of the property, taking into account the interests of the children, the wife, and the wife's rights. Regarding the division of equity, there are four common approaches in practice: First, the parties may agree on the equity value and one party may acquire the equity and compensate the other party; Second, the parties may jointly commission a qualified appraisal institution to evaluate the equity value; Third, for some unlisted limited companies, the equity value may be estimated based on methods such as net assets, profitability, and comparable transaction prices; Fourth, if the company has no actual operations or significant undisclosed liabilities, it is necessary to complete an audit and liquidation before appraisal. There are two key points to note: First, the equity value should exclude undisclosed liabilities and potential risks, otherwise the party receiving less may bear additional burdens; Second, tax costs. The transfer of equity typically involves the tax basis for personal income tax and corporate income tax, which requires advance calculation. It should be noted that if the equity is registered under one party's name but is actually jointly invested by both parties or there is a situation of nominal ownership, the ownership should be clarified before division to avoid valuing on an incorrect basis.Business and contract disputes in enterprisesThe column provides specific explanations on issues related to equity ownership.

1. Problem background and typical scenarios

Many parties who consult on such issues are often stuck in a stalemate during the divorce settlement stage, with common concerns including: how much are the equity shares worth, who should conduct the valuation, and what to do if the other party refuses to cooperate. In practice, a key preliminary issue is the confirmation of equity ownership: whether the equity is registered and corresponds to the actual investment, whether there is a situation of holding on behalf of others or gift, and whether the historical capital increase and transfer are genuine, which determines whether it can be divided as joint property. If the ownership is unclear, proceeding directly to valuation often leads to erroneous conclusions. Another common misunderstanding is ignoring liabilities and taxation: calculating solely based on the net book value without deducting contingent liabilities, guarantees, and unresolved transactions may result in the party receiving a smaller share actually bearing more responsibilities. At the same time, the taxation method of personal income tax on equity transfer will significantly affect the actual amount received, so it should be calculated at the stage of scheme design. In addition, attention should also be paid to procedural issues: equity division involves changes in industrial and commercial registration, which may affect corporate governance and operations, so the scheme should also take into account its enforceability. For practical issues related to equity transactions and due diligence, you can refer to the relevant materials.Intellectual property protection and corporate lawColumn; for an explanation of corporate governance and registration matters, you may refer to the following for referenceReal estate transactions and construction projectsColumn.

II. Key points of contention

Focus One: Confirmation of equity ownership and handling of situations involving nominal holders. Focus Two: Selection of valuation methods and evaluation institutions. Focus Three: Deduction of undisclosed liabilities and contingent debts. Focus Four: Estimation of tax costs and tax bases. Focus Five: Operational feasibility of the division plan. Focus Six: Coordination between industrial and commercial registration changes and the effectiveness of agreements. Focus Seven: Compensation standards for one party acquiring equity. Focus Eight: Determination of the valuation reference date and value fluctuations. In addition, attention should also be paid to the selection of common methods for valuing unlisted equity, the evidentiary requirements for situations involving nominal holders and donations, and the coordination arrangements between industrial and commercial registration changes and preemptive purchase rights. The above-mentioned specific rules shall be subject to the currently effective laws, regulations, and judicial rulings.

III. Professional analysis by Henglue Lawyers

From the perspective of equity division in practice, the feasibility of the plan often depends on the coordination of four key steps. First, ownership clarification: This includes reviewing investment certificates, industrial and commercial archives, articles of association, previous shareholders' resolutions, and evidence of possible proxy holding or gift transactions. Unclear ownership is the root cause of all subsequent disputes. Second, financial review: Conducting audits or special verifications to clarify undisclosed liabilities, external guarantees, shareholder loans, and related-party transactions. In practice, many disputes arise from hidden liabilities only being discovered after the division, so this step directly impacts the fairness of the valuation. Third, valuation and taxation: The valuation method should be clearly explained to avoid simply providing numbers. At the same time, it is necessary to estimate the tax burden of equity transfer, as different tax calculation methods can significantly alter the actual distribution results. Fourth, enforceable solutions: Combine discount compensation, equity division, and subsequent governance arrangements, taking into account the company's operational needs, other shareholders' preemptive purchase rights, and the feasibility of industrial and commercial changes. When handling such matters, our firm typically formulates a plan based on the above four steps, weighing ownership, financial matters, valuation, and execution within the same framework to avoid providing legally valid but unfeasible solutions in practice. At the same time, we remind clients to pay attention to time limits and evidence preservation. Once equity changes occur, the cost of rectifying them afterwards will significantly increase.

IV. Practical suggestions and legal basis

Action recommendations: First, sort out the ownership of equity and investment certificates; Second, complete the audit or special financial verification; Third, confirm whether there are any issues such as nominal ownership, gift-giving, or defects in investment; Fourth, select an appropriate valuation method and explain the basis for it; Fifth, estimate the tax costs of equity changes; Sixth, design a division plan that takes into account the feasibility of operations; and Seventh, assess in advance the impact of industrial and commercial changes and other shareholders' preemptive purchase rights. Legal basis: Articles 1062, 1066, and 1087 of the Civil Code of the People's Republic of China (all effective from January 1, 2021); relevant provisions of the Interpretation of the Marriage and Family Chapter of the Civil Code of the People's Republic of China by the Supreme People's Court (No. 29 of 2020, effective from January 1, 2021); and the requirements for industrial and commercial registration of equity changes shall be subject to the currently effective regulations.

5. Henglu Law Firm's Reminder

The clearing of implied liabilities should be completed before valuation. The confirmation of ownership rights should precede the valuation. Sixth, firstly, the ownership of equity should be clarified before valuation. Secondly, implied liabilities will significantly affect the rationality of valuation. Thirdly, tax costs should be estimated at the planning stage. Fourthly, the choice of the assessment benchmark date will affect the value conclusion. Fifthly, the division plan needs to consider the feasibility of industrial and commercial changes and corporate governance. Sixthly, pay attention to the impact of other shareholders' preemptive rights. Seventhly, pay attention to preserving the evidence related to capital contribution and nominee holding. Eighthly, the cost of rectifying equity changes is high, so it is advisable to deal with it as soon as possible. For the coordination arrangements between dispute resolution and enforcement procedures, you can refer to the relevant provisions.Special services and other casesColumn.

VI. Frequently Asked Questions

Q1: Should equity be divided during a divorce?

In principle, it is necessary to divide the equity into two parts. However, it is not usually done by directly splitting the equity in half, but by first determining the value of the equity and then having one party acquire the equity and pay the other party the corresponding compensation. According to Article 1087 of the Civil Code, in the event of divorce, the couple's jointly owned property shall be handled by mutual agreement between the parties. If no agreement can be reached, the court shall make a judgment according to law. To determine whether the equity belongs to jointly owned property, it is necessary to first examine the source of the investment and the time of its acquisition.

Q2: How is the stock price determined?

There are three common methods: determining the value by mutual agreement between the two parties; entrusting an evaluation agency to conduct an assessment; and estimating the value of unlisted limited company shares by referring to net assets, profitability, and prices of similar transactions. In practice, it is recommended to adopt verifiable evaluation methods and explain the basis for the evaluation, while paying attention to deducting undisclosed liabilities and potential risks to avoid valuation distortion.

Q3: What should I do if the other party disagrees with the evaluation?

You can apply to the court for a commissioned appraisal. When dividing the couple's joint property, the court may determine the division method based on the specific circumstances of the property and the operational needs; if one party holds equity but does not have the actual operating conditions, they will usually acquire the equity and pay a compensation in the form of a discounted price. The appraisal fees are generally paid in advance by the applicant, and the cost will be shared according to the final judgment result.

Q4: How should it be calculated if one party's operation of the company leads to an increase in the stock price?

It is necessary to distinguish between two factors: individual efforts and joint management. If one party works in the company and invests in its operation, their reasonable input and contribution may be taken into account during the divorce settlement, but this does not necessarily increase their share of the assets; if the other party actually participates in the operation and makes corresponding investments, they can claim corresponding rights. In practice, the determination is usually based on a comprehensive assessment of the investor's capital contribution, operational contributions, and family division of labor.

Q5: Do I need to pay taxes when dividing equity?

This usually involves tax costs. The party acquiring the equity needs to handle the registration of equity changes, which may involve corporate income tax and personal income tax. The tax calculation method is related to the transfer price of the equity and the cost of acquiring the equity, so there may be a difference between the actual amount received and the book value. It is recommended to complete the tax estimation during the design phase of the plan and consult professional opinions to determine a reasonable arrangement.

The above content is based on the judicial practice 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 about specific situations.

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

Disclaimer: This article is compiled based on current laws and regulations and publicly available 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 you encounter disputes, please consult a practicing lawyer in time.