[Direct answer]In the Beijing area, the determination of "formal equity but actual debt" is based on substance: if the investor does not participate in the operation and management, receives fixed or guaranteed returns, and agrees to repurchase at maturity or exit in a fixed manner, even if the investor is registered as a shareholder in the industrial and commercial register, the actual relationship is a loan, and the interest rate cap applies; however, there are differences in external and internal legal effects - when the company goes bankrupt or external creditors claim, based on the principle of registration appearance and commercial publicity, it may still be treated as equity. Separating the determination from the legal effect is the general framework of such cases.

1. Problem background and typical scenarios

High-incidence areas of "nominal equity, actual debt": Private equity funds invest in real estate projects through the "equity + repurchase" model; trust plans provide loans under the guise of capital increase; industrial investments involve fixed dividends and exit arrangements; and founders sign repurchase agreements as a hedge against financing risks. Fund providers demand "fixed returns + safety cushions", while financing parties insist on "not diluting control rights". Both sides tacitly agree to this arrangement—but in the event of disputes, this tacit understanding will face legal scrutiny.

II. Key points of dispute

First, qualitative standards. What constitutes a loan when the four elements of fixed income, guaranteed terms, no assumption of operational risks, and exit arrangements are superimposed? The evidence varies greatly from case to case. Second, the distinction between internal and external legal effects. Investors and financing parties handle matters according to their true intentions (i.e., a loan); however, when involving the company's external creditors or bankruptcy proceedings, the principle of appearance over substance and the principle of capital maintenance may override the true intentions, making it difficult to withdraw the capital injection as company capital. Third, the effectiveness and performance of repurchase clauses. The effectiveness and enforceability of clauses against the company and shareholders differ from the rules governing these clauses. Fourth, the relationship between assignment guarantees and equity transfers used as guarantees. The boundaries between liquidation obligations and chattel pledge clauses need to be clarified.

III. Professional analysis by Henglue Law Firm

The operational framework of "nominal equity, actual debt" is advanced in three stages: "qualification - stratification - plan". **Qualification stage**: The priority of evidence is contract terms (fixed income, repurchase, and minimum guarantee clauses) > actual performance (whether dividends are paid on schedule, whether investors participate in operations, and traces of voting rights exercise) > registration appearance (industrial and commercial registration is just the starting point, not the end). Clauses such as "investment returns are calculated at an annualized X% rate, regardless of profit or loss" and "the original shareholders will repurchase after N years" are the core qualifying evidence. Investors can use this evidence to prove borrowing, while financiers can counterattack with traces of performance if they deny it. **Stratification stage**: Internal relationships (between investors and the company, shareholders) are handled according to their true intent. If it is determined to be a loan, the principal and interest are settled according to loan rules, with interest rates subject to a four-fold cap on the LPR. Repurchase obligors must fulfill their repurchase obligations as agreed. External relationships (with company creditors and bankruptcy proceedings) require caution. Invested funds registered as shareholders are considered part of the company's capital. Creditors' claims of false contributions or withdrawal of reinvested funds during bankruptcy proceedings are often rejected. The "nominal equity, actual debt" defense cannot counter external capital adequacy responsibilities, which is the risk most financiers underestimate. **Plan stage**: - **Financiers' risk control design**: Prioritize shareholder repurchase over company repurchase (avoiding capital reduction procedures and capital maintenance obstacles), set up equity pledges and actual controller's joint guarantees, and control single exposure. - **Financiers' compliance design**: Avoid "fixed income regardless of profit or loss" clauses, replacing rigid fixed-rate repayment with "performance compensation + repurchase" enforceable structures to prevent company-level litigation over hidden withdrawals. - Special reminder for bankruptcy scenarios: Managers typically review the nature of reinvested funds. Nominal equity, actual debt claims are often blocked due to industrial and commercial registration. Financiers should prepare comprehensive guarantees in advance. Beijing is a hub for private equity and industrial funds, with high-volume disputes over such structures. Structural analysis before signing contracts is far more cost-effective than litigation-stage qualification disputes.

IV. Practical suggestions and legal basis

The first step is structural argumentation: evaluate the name-reality risk based on four factors before signing the contract, and select the repurchase subject and guarantee structure. The second step is clause traceability: ensure that the expressions of fixed income, repurchase, and exit are consistent with the actual intentions, to avoid name-reality mismatch. The third step is registration cooperation: determine whether to conduct industrial and commercial changes based on the structure, and the funding party weighs the external risks. The fourth step is performance management: keep track of dividend payments, repurchase triggers, and correspondence throughout the process. Main legal basis: Article 146 (False Intention and Concealed Acts) and Article 667 (Loan Contracts) of the Civil Code of the People's Republic of China (effective in 2021); Articles 522 and 557 (Contract Performance and Termination of Rights and Obligations) of the Civil Code; the provisions on betting agreements and assignment guarantees in the "Minutes of the National Court Civil and Commercial Trial Work Conference"; and specific applications shall be subject to the currently effective regulations.

5. Henglue Law Firm's Reminder

The two-sided nature of "nominal equity, actual debt" must be kept in mind: internally, it can be "restored" to a loan, but externally, it may be "locked" as equity. The safety margin required by the financier is in the guarantee structure, not in the registration appearance; the flexibility required by the borrower is in the terms and conditions, not in the post-dispute defense. For cases involving the identification of "nominal equity, actual debt" and investment disputes, they can be resolved through legal means.Business and contract disputes in enterprisesYou can refer to the overall solution for services involving the compliance of private equity funds and financing structures\nFinancial capital and cross-border transactions involving foreign entitiesFor reference, please refer to the section on the recovery of repurchase funds and the enforcement of guaranteesCreditor's rights and debts, and enforcement casesFor reference, you can refer to the sections related to the drafting and negotiation of investment agreementsSpecial legal servicesFor reference, you can refer to the disputes over investment and financing of real estate projects involving plate movementsReal estate transactions and construction projectsThe topics related to corporate governance and investment compliance can be combined togetherIntellectual property protection and corporate law板块。

VI. Frequently Asked Questions

Q1: If I register as a shareholder, could I also be considered as a borrower?

Possibly. If the internal relationship is determined according to its true meaning, the fixed income, the non-participation in the operation, and the repurchase arrangement are sufficient to restore the lending relationship.

Q2: Are all agreements on the company's repurchase of equity valid?

In order for a contractual obligation to be enforceable, it is necessary to go through statutory procedures such as capital reduction. In practice, it is preferable to let the original shareholders or actual controllers repurchase the shares.

Q3: Can I file a claim for creditor's rights after the company goes bankrupt?

The additional capital registered as shareholders' equity is often recognized as equity capital in bankruptcy proceedings, which hinders the declaration of creditor's claims. Guarantee measures serve as the main safety cushion in such situations.

Q4: Does the fixed income clause violate capital maintenance requirements?

There is a risk that the company's rigid fixed payment arrangement may be deemed as a withdrawal of investment, so the structural design should avoid this red line.

Q5: Is the interest rate cap applicable?

For transactions identified as loans, the interest shall be handled in accordance with the loan rules and shall be subject to the upper limit of four times the one-year LPR rate.

This article is written based on the common judicial interpretations in the Beijing area. If the case occurs in other regions, it is recommended to consult local lawyers to verify the regional differences.

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 limit.Corporate commercial legal services·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective 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.