Shareholder Profit Distribution Dispute Involving a Manufacturing Company in Xiamen

Case Summary

Chen, a shareholder of Plaintiff Xiamen-based Manufacturing Co., Ltd., holds 25% of the company's shares. Since its establishment in 2020, the company has been profitable for five consecutive years and generated sufficient after-tax profits annually. As of the end of 2024, the company's accumulated undistributed profits reached 800 million yuan. In 10 of 2024, the company held a shareholders' meeting where Wang, the controlling shareholder holding 75% of shares, leveraged their voting power advantage to pass a resolution not to distribute profits from 2020 through 2024, instead allocating all profits to reinvestment in the company. Plaintiff Chen argued that the company's five-year track record of profitability satisfies the conditions for profit distribution. They alleged that the controlling shareholder abused their voting dominance by withholding profits over an extended period, thereby infringing upon the legitimate rights and interests of minority shareholders like themselves. Consequently, Chen filed a lawsuit requesting the company to distribute 200 million yuan in profits according to their shareholding ratio.

Key Dispute

1.Does the company meet the statutory conditions for profit distribution?

2.Does a shareholders' meeting resolution to not distribute profits violate the law?

3.Does the plaintiff's claim regarding company profit distribution comply with legal regulations?

Case Strategy

1.Fixed company business registration information, shareholder identity proof of the plaintiff, financial audit reports for the company from 2020 to 2024, after-tax profit data, accumulated undistributed profit data, shareholders' meeting minutes, resolutions on non-distribution of profits, and communication records between both parties as core evidence.

2.Provide evidence that the company has been profitable for five consecutive years, with cumulative undistributed profits reaching 800 ten thousand yuan. Statutory and discretionary reserves have been fully set aside, meeting all profit distribution requirements under the Company Law.

3.Demonstrate that controlling shareholder Wang, leveraging their 75% voting power advantage, has long refused to distribute profits and instead reinvested all earnings, constituting an abuse of shareholder rights that severely infringes upon the legitimate interests of minority shareholders, including the plaintiff.

4.The evidence demonstrates that the shareholders' meeting resolution to not distribute profits violates the provisions of the Company Law regarding shareholders' right to profit distribution. The plaintiff's claim to receive a profit distribution of 200 yuan in proportion to their shareholding is lawful and should be supported by the court.

Processing Result

The court ruled that Defendant Xiamen [Company Name] Manufacturing Co., Ltd. shall distribute a profit of 200 ten thousand yuan to Plaintiff Chen within 10 days from the effective date of this judgment. Defendant shall bear all litigation and audit costs.

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