[Direct answer]In the Beijing area, a company can be sued for dissolution in the event of a corporate stalemate, but there are strict conditions. According to Article 231 of the Company Law of the People's Republic of China (amended on December 29, 2023 and implemented on July 1, 2024): If a company encounters serious difficulties in its operation and management, and its continued existence will cause significant losses to shareholders' interests, and such difficulties cannot be resolved through other means, a shareholder holding more than 10% of the voting rights of the company may request the people's court to dissolve the company. The judicial interpretation clarifies that factors such as the inability to hold a shareholders' meeting for more than two consecutive years, the inability to form effective resolutions for more than two consecutive years, and the inability to resolve long-term conflicts among directors through the shareholders' meeting can be considered as serious difficulties in the operation and management of the company. Whether the company can be dissolved must be based on substantive evidence of governance failure and be determined by the court. For more details, please refer to the following link:Business and contract dispute services for enterprises.

1. Problem background and typical scenarios

The two shareholders each hold half of the equity, and neither party can muster a majority of voting rights. As a result, the shareholders' meeting fails to reach any conclusion year after year; the two factions in the board of directors have been at loggerheads, and resolutions have been repeatedly blocked; the company's official seal, business license, and account books are controlled by one party, leaving the company effectively paralyzed but no one willing to deregister it; the company is burdened with debts and constant litigation, with every day of survival exacerbating its losses. In this situation, the shareholders want to dissolve the company but cannot reach an agreement, and creditors have no way to recover their debts. Therefore, the dissolution lawsuit has become a judicial solution to break the deadlock. It should be emphasized that dissolution is a last resort: if the company is losing money, temporarily not distributing dividends, or experiencing a breakdown in shareholder relations but the governance mechanism is still functioning, it generally does not constitute a reason for dissolution. The court is more inclined to guide the parties to resolve the dispute through methods such as equity transfer and capital reduction exit. For related rules, please refer toBusiness and contract dispute services for enterprises.

II. Key points of dispute

The disputes in such lawsuits focus on five aspects. Firstly, the standard for determining serious difficulties: The judicial interpretation lists situations such as the inability to hold a shareholders' meeting for more than two consecutive years, the inability to make effective resolutions for more than two consecutive years, and long-term conflicts among directors that cannot be resolved through the shareholders' meeting. The core issue is the failure of the company's governance mechanism, rather than simple operational losses. If shareholders sue for dissolution on the grounds of damage to their right to information, their right to profit distribution, or the company's insolvency, the court will not accept the case. Secondly, the judgment of major losses: It is necessary to prove that continued existence will cause irreparable damage to shareholders' interests, such as continuous depreciation of assets, accumulation of debts, and loss of business opportunities. Thirdly, exhausting internal remedies: Alternative solutions such as negotiation, equity transfer, targeted capital reduction, and third-party mediation must be attempted first and documented. Fourthly, the qualification of the plaintiff: The plaintiff must hold more than 10% of the total voting rights of the company, either individually or collectively. Fifthly, the connection between dissolution and liquidation: After the court rules to dissolve the company, the company will enter the liquidation process. If the liquidation group is not established within the time limit or the liquidation is conducted illegally and damages the rights and interests of interested parties, creditors, shareholders, etc. may apply for the appointment of a liquidation group according to law. In the judicial practice of Beijing, the court adopts a cautious attitude towards dissolution and sets high evidentiary requirements.

III. Professional analysis by Henglue Law Firm

The breakthrough in a stalemate dispute often lies in penetrating the form and grasping the essence. A case handled by Attorney Zhao Chunxiao illustrates this approach: In August 2022, Wang * entered into a "Consulting Service Contract" with A Real Estate (Beijing) Co., Ltd. to obtain a purchase quota for Category II affordable housing in the Sun Palace area of Beijing and paid a service fee of 2 million yuan. The contract stipulated that the performance period would end on August 30, 2023. If A Company failed to provide the service within the time limit and Wang * confirmed in writing that he/she would waive the right to the service, A Company should refund the full amount within 5 working days. Later, Wang * verified with the Municipal Construction Committee through the citizen service hotline and confirmed that the "Category II Affordable Housing Purchase Quota Document" delivered by A Company had never been issued and the stamp was fake, meaning that the so-called purchase quota did not exist. After the deal fell through, A Company only refunded 800,000 yuan and refused to return the remaining 1.2 million yuan, even filing a counterclaim against Wang * for breach of contract. Attorney Zhao Chunxiao seized the core of the contract, which was labeled as a consulting service but actually involved the resale of policy-based housing purchase quotas, and argued that the contract violated regulatory policies and harmed public interests, rendering it invalid. An invalid contract is not binding from the outset and does not entail breach of contract liability. At the same time, he/she filed a counterclaim in arbitration. The Beijing Arbitration Commission ultimately ruled that the contract was invalid, and A Company was ordered to refund the remaining 1.2 million yuan in service fees and dismissed all of A Company's arbitration claims. This case was handled by Beijing Henglu Law Firm.Zhao ChunxiaoThe attorney (practice license number: 11101202111351131, subject to the document issued by the judicial administrative organ) acts as the agent. The approach to this case is also applicable to the determination of a stalemate: the formal existence of the company does not equal normal governance. To request dissolution, it is necessary to provide substantive evidence that the shareholders' meeting and board of directors mechanisms have actually failed to function properly.

IV. Practical suggestions and legal basis

The legal basis includes Article 231 (Judicial Dissolution) and Articles 229 to 233 of the Company Law of the People's Republic of China (amended on December 29, 2023 and implemented on July 1, 2024), which stipulate the grounds for company dissolution and the liquidation procedures; Article 1 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (II), implemented on May 19, 2008 and amended subsequently, which stipulates the circumstances of serious difficulties in the operation and management of the company. Action list: 1. Collect evidence of governance failure, including notices of shareholders' meetings, sign-in sheets, resolutions, meeting minutes, correspondence, police reports, and proof of certificates being misappropriated; 2. First attempt alternative solutions, such as negotiating a withdrawal, internal or external transfer of shares, targeted capital reduction, or third-party mediation, and keep records of these attempts; 3. After exhausting all remedies, initiate a dissolution lawsuit by shareholders who individually or collectively hold more than 10% of the voting rights against the company's registered address court, with the lawsuit corresponding to the statutory circumstances item by item; 4. During the litigation, apply for preservation of the company's financial records, seals, and certificates as needed to prevent asset loss and document destruction; 5. After the court issues a dissolution judgment, promptly form a liquidation team or apply to the court to appoint a liquidation team to proceed with the liquidation and deregistration. For more details, please refer to the full text of the article.Business and contract dispute services for enterprises.

5. Henglu Law Firm's Advice

The threshold for a dissolution lawsuit lies in evidence, not emotions. Facts showing that the company has been unable to hold meetings or make decisions for more than two years require objective materials such as notifications, attendance records, resolutions, and letters to support them. It's generally difficult to obtain support for a lawsuit to dissolve a company where shareholders' conflicts are intense but the governance mechanism is still functioning. Going through alternative solutions before litigation not only meets the requirements of exhausting internal remedies, but also often prompts one party to withdraw and achieve a resolution without a fight. At the same time, if the liquidation of the company is not carried out in a timely manner after the dissolution judgment, the liquidation obligors may be liable for compensation for the company's debts. When handling similar cases in the Beijing area, it is recommended to entrust a lawyer as soon as possible.Beijing Henglu Law FirmProfessional lawyers evaluate the evidence of the impasse and alternative solutions before deciding whether to initiate legal proceedings.

VI. Frequently Asked Questions

Q1: If a company is sued for dissolution due to a deadlock, will the court support the lawsuit?

If the company meets the statutory conditions, there is a possibility of obtaining support. The court will focus on reviewing whether the company's operation and management have encountered serious difficulties, whether the continuation of its existence will cause significant losses to shareholders' interests, and whether it cannot be resolved through other means; if the company has been unable to hold a shareholders' meeting or form effective resolutions for more than two consecutive years, or if the long-term conflicts between directors cannot be resolved, the possibility of its dissolution is relatively high. Companies that are simply loss-making or experiencing shareholder discord but whose governance mechanisms are still functioning are generally not dissolved. The conclusions of individual cases shall be based on evidence and the court's determination.

Q2: What evidence do I need to prepare for a lawsuit to dissolve the company?

Organizational evidence of governance failure: notices of shareholders' meetings, attendance lists, resolutions, and public announcement records, used to prove that it has been impossible to hold meetings or reach effective resolutions for a long time; minutes of board meetings and correspondence related to conflicts; evidence of the company's shutdown, such as notices of suspension of business, employee resignation records, and records of suspension of tax payments and social insurance payments; proof that one party controls the company's business licenses, seals, and account books; records of shareholders' consultations, mediations, and negotiations on equity transfers, used to prove that all internal remedies have been exhausted; and materials on the company's debt and asset status, used to prove that the losses have been exacerbated.

Q3: How much does it cost to dissolve a lawsuit?

The lawsuit for dissolution does not involve requests for property payments. The acceptance fee is generally paid per case, with a relatively low amount, subject to the standards of the court accepting the case. If it involves property preservation, audit and evaluation, the fees shall be paid separately according to the corresponding standards. The attorney's fees are determined by the law firm and the client through consultation, and are usually charged per case or per stage, with no unified government pricing. It is recommended to comprehensively evaluate the litigation input based on the degree of the impasse, the value of the equity, and the cost of liquidation.

Q4: How long does it typically take to resolve a dissolution lawsuit?

The first-instance ordinary procedure shall be concluded within six months and the simplified procedure within three months, and the time limit may be extended according to law if the facts are complex; for cases involving financial audits and equity value assessments, the relevant periods shall not be included in the time limit and usually will be extended by several months; for appeal cases, the second-instance procedure generally lasts three months. After the judgment of dissolution, there is still a liquidation procedure, which may take several months to clear assets, pay off debts, and cancel registrations depending on the complexity of the company's debts. The overall cycle varies from case to case.

Q5: If you want to break the ice, what's the first step you should take?

Four steps to proceed: First, propose in writing to hold a shareholders' meeting and retain the delivery certificate, and use the notice and sign-in records to fix the fact that the meeting cannot be held; Second, simultaneously attempt to negotiate alternative solutions such as exit, equity transfer, and targeted capital reduction, and retain the communication records; Third, if the deadlock lasts for more than two years and the alternative solutions are ineffective, the shareholders with voting rights of more than 10% may file a lawsuit for dissolution with the court at the company's registered address; Fourth, apply for preservation of financial information and company assets during the litigation to prevent the loss of assets before liquidation. It is recommended to entrust professional lawyers to review the evidence organization.

The above answer is based on the judicial practice in Beijing. The adjudication standards in other provinces and cities may vary. For specific cases, please refer to the local rules and evidence situations.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence, so as to avoid missing the statutory time limit.Business and commercial legal services·Attorney Zhao Chunxiao·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. In case of disputes, please consult a practicing lawyer in time.