Sign a Nominee Agreement First; File the Company Registry Change When It Vests
You’ve settled the split—next is how to grant it. The early-stage trap is overbuilding the structure: holding platforms, option pools, a pile of entities—before the company is even running. This lesson covers three disciplines, and the costliest lesson of all: if the person who left won’t sign, the company can lock up.
The cost of complex structure too early
Every extra limited partnership means another annual company filing, tax return, and change-of-registration process. Every tweak means running the whole process again. While the company is still validating, your energy goes into maintaining the scaffold.
Get the company running first
A simple structure changes fast. When you’re the only shareholder, any adjustment is one signature. Put the time you save into product and customers.
Equity you grant: lock it in by agreement first—don’t rush a company registration change. Why becomes clear in the walkthrough below. First, whether nominee shareholding holds up in law.
Where the actual capital contributor of a limited liability company and the nominal capital contributor enter into a contract providing that the actual contributor shall contribute capital and enjoy investment rights and interests while the nominal contributor acts as the nominal shareholder, and a dispute arises between them as to the validity of that contract, the people’s court shall uphold the contract as valid if there is no circumstance of invalidity prescribed by law.
Valid agreement—good news. Paragraph 3 of the same article also draws a boundary: if the actual contributor, without the consent of more than half of the other shareholders, demands that the company change shareholders, enter them on the register, and complete registration, the court will not support it. So nominee shareholding is an internal rights arrangement; externally, the registry still controls. Spell it out: capital contribution, dividends, how voting rights are exercised, when they become a registered shareholder, and what happens on breach.
Equity is pay for long-term contribution ahead. Granting it all at once is settling several years of future compensation early.
A common rhythm: four-year vesting with a one-year cliff
Year one is the cliff—nothing vests until that anniversary, then it vests evenly by quarter or by year. Someone who leaves early takes only what’s already vested; the rest returns to the pool. The point isn’t to trap people—it’s to align long-term contribution with reward.
Same person, same day they leave—different arrangements, very different outcomes.
A shareholders’ agreement must have exit terms. What triggers a buyback, at what price, within how many days—all as concrete numbers and dates.
Where a shareholder transfers equity to a person other than a shareholder, the quantity, price, payment method, and time limit of the transfer shall be notified in writing to the other shareholders, who shall have a right of first refusal under the same conditions. Failure to reply within thirty days of receiving the written notice is deemed a waiver of that right. Where the articles of association provide otherwise for equity transfers, those provisions prevail.
That last sentence is your room to design: the articles of association may set different rules for equity transfers. Want departure to require a transfer, or a buyback price formula? Writing it into the articles and the shareholders’ agreement beats negotiating after the fact. Article 89 separately gives shareholders a right to request company repurchase in certain cases—that’s a shareholder-protection clause, not the same as the buyback mechanism you design yourself.
- If the nominal shareholder privately transfers or pledges equity registered in their name, the actual contributor may only be able to pursue remedies after the fact. Who you pick matters more than the clause you write.
- Company creditors can pursue contribution liability against the nominal shareholder as registered; that shareholder then seeks recovery from the actual contributor. Both sides of the nominee arrangement need to know this risk.
- Foreign investment, IPO, and certain licensed businesses bring extra compliance issues with nominee arrangements—ask a specialist early in those scenarios.
Before you have partners, get these ready so you can put them on the table when you negotiate.
- Put equity-transfer restrictions and deadlock clauses in the articles now—no one to push back while you’re still solo.
- Prepare a shareholders’ agreement template with vesting rhythm, departure buyback, non-compete, and confidentiality. Negotiating from a draft is faster than negotiating from thin air.
- Get IP under the company name first. Lesson 6 covered software copyright and copyright ownership—clear that before people join.
Early on, founders only. Build holding platforms and option pools when you have real demand—don’t maintain empty scaffolding early.
Nominee agreements are valid; externally the registry controls. Spell out contribution, dividends, voting rights, and conditions for becoming a registered shareholder.
Vest over time—don’t grant it all at once. Four-year vesting with a one-year cliff is common; leavers take only what’s vested.
Write exit and repurchase terms before granting equity. The articles may set different transfer rules—use that room.
Sources: Provisions of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (III) (2020 Amendment), Articles 24, 25, and 26; Company Law of the People's Republic of China (revised December 29, 2023, effective July 1, 2024), Articles 84, 86, and 89. Vesting rhythm is common market practice, not a statutory requirement. This lesson is not legal advice; consult a practicing lawyer for important arrangements. Verified 2026-08-10.