[Direct answer]The divorce settlement of the equity of overseas-listed companies involves three steps: First, determine the applicable law in accordance with Article 24 of the Law on the Application of Laws to Foreign-Related Civil Relations (effective from April 1, 2011), which allows the parties to agree to apply the law of the habitual residence, nationality, or main property location of one party. If no agreement is reached, the law of the common habitual residence shall apply; Second, determine the ownership in accordance with Article 1062 of the Civil Code. Equity and income obtained during the marriage or invested with common property belong to common property, while the original shares held before marriage belong to personal property; Third, if no agreement can be reached, the court shall make a judgment in accordance with Article 1087. The court may assess compensation or distribute the equity in proportion to its quantity. In cases involving cross-border evidence collection and foreign exchange compliance, it is recommended to consult with a professional first.Financial capital and cross-border legal services involving foreign affairsAndBeijing Henglu Law Firm.

I. Problem background and typical scenarios

With the increasing popularity of Chinese companies listing in the United States and Hong Kong and employee stock ownership plans, divorce disputes involving the equity of overseas-listed companies are becoming more common. Typical scenarios include: one party being a company founder or senior executive who holds shares in the listed entity through offshore structures such as Cayman Islands and the British Virgin Islands; one party holding listed stocks or restricted stocks in US or Hong Kong stock brokerage accounts; employee stock options that have been granted but not exercised, with disputes arising over the exercise conditions and vesting timeline; and equity registered in a relative's name suspected of being held on behalf of others, or held through offshore trusts, making ownership difficult to directly determine. Overseas equity is subject to the laws of the company's registration location, the regulatory rules of the listing location, and China's foreign exchange management regulations. Most evidence is located overseas, making the collection of evidence, valuation, and enforcement significantly more difficult than for domestic assets. Moreover, any slight misstep in the division plan could make it difficult to implement.

II. Key points of contention

  • Applicable law and jurisdiction: The applicable law for marital property relations is determined in accordance with Article 24, and the determination of the habitual residence directly affects the characterization of the property; overseas shareholders may also trigger parallel proceedings abroad, and the jurisdictional arrangements and service paths determine the pace of the case.
  • Ownership and valuation: The division of ownership of shares held before marriage and exercised during marriage, and the ownership of the increased shares; the determination of the ownership time point of restricted stocks and options; the selection of the evaluation benchmark date under the fluctuation of stock prices, and the valuation differences between the two parties are often very significant.
  • Division method and execution: The transfer of overseas accounts and stocks is subject to the procedures of overseas securities firms and foreign exchange management. If the judgment needs to be enforced overseas, it is also necessary to evaluate the recognition rules of the relevant jurisdictions for judgments on marital property. This can be combined with the following factors for consideration:Business and contract dispute services for enterprisesDesign and implement a comprehensive solution to address the problem simultaneously.

III. Professional analysis by Henglue Lawyers

The common experience of Henglue Law Firm in handling foreign-related equity cases is: first, clarify the equity chain, and then discuss the division plan. The first step is to fix the evidence, including the account opening materials and account statements of overseas securities firms, option grant agreements, company registration office documents and shareholder registers, nominee agreements, and purchase fund transaction records; evidence formed overseas needs to be notarized and authenticated. For documents from countries that have signed the Convention on the Abolition of the Requirement of Legalization for Foreign Public Documents, since the convention came into effect in China on November 7, 2023, only an additional certificate is required, significantly shortening the evidence-gathering period. The second step is to categorize and define the ownership of the equity: distinguish between pre-marital original holdings, holdings increased with marital joint property, and dividends and dividends during marriage, and determine ownership according to Articles 1063 and 1062 of the Civil Code; for options, determine whether they belong to marital joint property based on the grant time, exercise conditions, and attribution time. The third step is to design a plan: for tradable stocks, one party can compensate the other party at a discounted price; for restricted stocks and options, arrangements such as holding in proportion and phased compensation are often used; for cases involving compliance with overseas structures and fund repatriation, it is recommended to cooperate with financial institutions.Financial capital and cross-border legal services involving foreign affairsThe team conducts a joint evaluation to prevent the implementation of the separation plan from being hindered by compliance obstacles.

IV. Practical suggestions and legal basis

At the legal basis level: Article 1062 of the Civil Code (effective January 1, 2021) lists the income from production and business investment as marital joint property; Article 1063 defines personal property such as premarital assets; and Article 1087 stipulates that if no agreement can be reached, the court shall adjudicate according to the principles of protecting the rights and interests of children, the wife, and the innocent party. Article 24 of the Law on the Application of Laws to Foreign-related Civil Relations (effective April 1, 2011) prescribes the selection range of the applicable law for marital property relations and the applicable order when no selection is made. Article 72 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 (effective January 1, 2021) stipulates that if the parties cannot reach an agreement on the division of securities such as stocks, bonds, and investment fund shares in the joint property, or if it is difficult to distribute them at market prices, the people's court may distribute them proportionally according to their quantity. At the practical advice level: It is recommended to list the shareholding structure and account lists as early as possible and notarize key evidence; if you have clues about the other party's concealment and transfer of overseas assets, you can apply for investigation and evidence collection and claim that the other party should receive a smaller share or no share according to Article 1092 of the Civil Code; before suing, evaluate the cross-border recognition and enforcement of judgments, foreign exchange registration, and tax costs simultaneously, and prioritize obtaining compensation in the form of discounted prices on enforceable assets within the country.

5. Henglu Law Firm's Reminder

The key to overseas equity division is to design the application of law, ownership evidence, and execution path all at once. Stock price fluctuations make delay the most expensive cost. The earlier the valuation benchmark and evidence are fixed, the greater the room for negotiation. Cross-border cases should also comprehensively consider notarization and authentication, foreign law identification, and compliance arrangements for capital repatriation. Single-point solutions are prone to leaving potential problems. If you are facing similar disputes, you can seek assistance throughBeijing Henglue Law FirmThe appointment for the interview will be arranged by the cross-border family affairs team, who will provide a comprehensive solution based on the shareholding structure.

Q1: Can the equity of an overseas company definitely be divided during a divorce?

Not necessarily. The key lies in the determination of ownership. Foreign equity acquired before marriage and not increased with joint property after marriage belongs to personal property as stipulated in Article 1063 of the Civil Code, and is not subject to division. However, dividends, dividends, and other income generated during marriage belong to joint property. Equity acquired after marriage or invested with joint property, and options granted during marriage and subject to vesting conditions, are joint property according to Article 1062 and should be divided. In practice, the other party often hides stock holdings through methods such as nominee holding, trusts, and other people's accounts. Whether you can get a share depends on whether the evidence can be fixed. It is recommended to keep brokerage account statements, option agreements, and fund flows, and apply to the court for investigation if necessary.

Q2: What evidence is needed to claim the division of overseas equity interests?

It is recommended to prepare four categories of materials: 1. Identity and marriage-related documents, including marriage certificates, passports, and proof of habitual residence, which are used to determine the applicable law and jurisdiction. 2. Evidence of shareholdings, including overseas brokerage account opening materials and bank statements, position records, option grant and exercise agreements, company registry documents, and shareholder registers. 3. Evidence of funds, including the source of funds used to purchase shares, transfer records, and agency holding agreements. 4. Other clues, including communication records regarding the other party's concealment and transfer of assets. Evidence obtained overseas must undergo notarization and authentication. For evidence from contracting states of the Hague Convention, only additional certificates are required starting from November 7, 2023. It is recommended to complete these procedures before litigation to avoid repeated delays in the process.

Q3: Is it expensive to hire a lawyer for a cross-border divorce case?

The cost structure of cross-border cases is more complex than that of domestic cases. Lawyer's fees are generally charged according to whether the case involves property division and the amount of the disputed subject matter. For cross-border cases, due to the greater workload of cross-border evidence collection, foreign law research, and multi-party communication, the quotes are usually higher than those of similar domestic cases. Third-party fees, including notarization and authentication fees, translation fees, appraisal fees, and expert opinion fees, are calculated separately according to the actual expenses incurred. There are additional fees for procedures such as applying for property preservation. To determine whether the fees are reasonable, the key is to see whether the written entrustment contract clearly specifies the billing method, the stages of representation, and the scope of cross-border matters. It is recommended to ask the lawyer to list the budget and work content item by item before deciding to entrust them with the case.

Q4: How long does it take to handle a divorce case involving overseas equity interests?

Under Article 152 of the Civil Procedure Law of the People's Republic of China (amended on September 1, 2023 and implemented on January 1, 2024), first-instance ordinary proceedings within China should be concluded within six months from the date of acceptance of the case. However, the trial period for foreign-related civil cases is not subject to this time limit. In practice, due to the time-consuming processes of overseas service, notarization and authentication, foreign law identification, and equity valuation, divorce cases involving overseas equity often take more than a year to resolve. Methods to shorten the cycle include: completing the notarization and authentication of evidence before litigation, providing the other party's valid service address, and preliminarily negotiating to determine the benchmark date for stock valuation; if a mediation agreement can be reached on property division, the overall cycle can be significantly shortened.

Q5: After receiving the judgment, how should I deal with the overseas stocks?

There are two scenarios to deal with this: If the other party cooperates, the mediation agreement or judgment may stipulate a limited-term discounted compensation or cooperation in transferring assets, and set provisions for breach of contract liability; If the other party does not cooperate, domestic courts may enforce the judgment on controllable domestic assets. Overseas accounts and stocks usually need to be recognized and enforced in accordance with the procedures of the relevant jurisdiction. Some regions have judicial arrangements for mutual recognition and enforcement of judgments with China, but the feasibility varies greatly. Therefore, before suing, it is necessary to evaluate the enforcement path, prioritize claiming rights on assets that can actually be enforced domestically, and, if necessary, resolve the matter through negotiation to avoid winning the judgment but having difficulty realizing the benefits.

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.Financial capital legal services·Beijing Henglue Law Firm