In May 2022, our firm was entrusted to represent a case involving a dispute over equity transfer. The key issue in this case is: When a company is dissolved by a shareholder resolution and distributes its remaining assets, including the equity it holds in an invested enterprise, do the other shareholders of the invested enterprise have a right of first refusal?

We argue the following:

Although the Company Law does not explicitly address how shareholder status is handled after the dissolution and deregistration of a legal entity, the prevailing view in judicial practice is that, unless the company’s articles of association provide otherwise, shareholder status is not inheritable. In such cases, the equity should be valued and compensated through auction or sale, similar to enforcement procedures. While shareholders of the dissolved and deregistered company may purchase the equity, the other shareholders of the invested enterprise are entitled to a statutory right of first refusal.