Our client is a state-owned shareholder of the target company. The company has four other individual shareholders, one of whom, Mr. Li, plans to transfer his equity to Company A. To circumvent our client’s right of first refusal, the four individual shareholders devised a scheme: Mr. Li would first transfer part of his equity internally to another individual shareholder, Mr. Zhang. Subsequently, Company A would file a shareholder qualification confirmation lawsuit against Mr. Zhang and the target company, claiming that the equity under Mr. Zhang’s name was held on behalf of Company A and requesting that Company A be registered as the actual shareholder.

We argue that, according to the Judicial Interpretation III of the Company Law, the disclosure of an actual investor as a shareholder only requires the consent of a majority of the other shareholders. In this case, if all four individual shareholders (excluding the state-owned shareholder) agree to Company A’s disclosure, it would formally meet the conditions for shareholder qualification confirmation. However, since the source of Company A’s equity is a transfer, and Mr. Li did not notify the state-owned shareholder of the true transferee (Company A) or the actual terms of the equity transfer when transferring the equity to Mr. Zhang, the state-owned shareholder may still assert its right of first refusal upon learning the facts. Therefore, this "scheme" cannot circumvent the right of first refusal.