Equity, as the most important form of wealth aggregation for the vast majority of entrepreneurs, has both personal and property attributes. Therefore, unlike other forms of wealth inheritance for entrepreneurs, such as real estate, cash, and financial products, the legal issues involved in equity inheritance are also more complex and diverse. This article intends to analyze the current situation of entrepreneur equity inheritance based on relevant authoritative data reports, and then take Lin Qi, the former controlling shareholder and actual controller of the well-known online and mobile gaming platform "Youzu Network" in China, as an example to sum up and summarize how equity is allocated in the case of legal inheritance. Finally, starting from practical cases, analyze the key planning points of entrepreneur equity inheritance in parties’ intentional situations. (The cases mentioned in this article are all sourced from publicly available online information such as CNINFO and Sina Weibo, or adapted based on our handling of practical cases, without involving the privacy of the parties involved)

Equity, as the most important form of wealth aggregation for the vast majority of entrepreneurs, has both personal and property attributes. Therefore, unlike other forms of wealth inheritance for entrepreneurs, such as real estate, cash, and financial products, the legal issues involved in equity inheritance are also more complex and diverse. This article intends to analyze the current situation of entrepreneur equity inheritance based on relevant authoritative data reports, and then take Lin Qi, the former controlling shareholder and actual controller of the well-known online and mobile gaming platform "Youzu Network" in China, as an example to  sum up and summarize how equity is allocated in the case of legal inheritance. Finally, starting from practical cases, analyze the key planning points of entrepreneur equity inheritance in  parties’ intentional situations. (The cases mentioned in this article are all sourced from publicly available online information such as CNINFO and Sina Weibo, or adapted based on our handling of practical cases, without involving the privacy of the parties involved)

What is the current status of equity inheritance under statistical datas?

Gradually entering the period of equity inheritance

According to the "2021 Hengchang Shaofang · Hurun Rich 100 List" jointly released by Hurun Research Institute and others, the threshold for entrepreneurs to be listed in 2021  was still 2 billion yuan, with 2918 entrepreneurs on the list. The average age of entrepreneurs on the list  was 56 years old, and 96% of the entrepreneurs on the list  were first-generation entrepreneurs, with only over 100 being successors. Taiwan and Hong Kong  accounted for the majority.

In addition, according to the 2021 China Private Wealth Report released by China Merchants Bank and Bain Company, the number of Chinese high net worth individuals with investable assets of over 10 million RMB in 2020 reached 2.62 million, and the proportion of high net worth individuals under 40 years old increased from 29% in 2019 to 42% in 2021.

From this, it can be seen that as the first generation of wealth creation entrepreneurs gradually enter retirement age, the second generation successors have gradually been mature, and some of the first generation entrepreneurs begin to hand over to the second generation successors. Chinese enterprises gradually enter the period of equity inheritance.

Most have not made equity inheritance arrangements

According to the  Research  Report on the  Inheritance of Chinese family businesses (2021) jointly released by the Fudan Youth Entrepreneurs Education and Research Development Center and others, 60.5% of family businesses currently do not have any arrangements or progress in enterprise inheritance, and maintain a natural attitude. There are three types of enterprises in the remaining part: firstly, they hope to be inherited  by the next generation, and will systematically cultivate their children's corresponding abilities while respecting their wishes;  secondly,they plan to hire professional managers or teams, and expect capable individuals to take up their positions; Thirdly, the inheritance of the enterprise has been completed, and the enterprise has achieved excellent performance under the leadership of its successors.

From the above research, it can be seen that only a few first-generation entrepreneurs have completed equity inheritance, and most have not yet embarked on actual equity inheritance planning arrangements.

In recent years, there have been frequent disputes over equity inheritance

On June 7, 2022, using the keywords "equity" and "inheritance" as the key words, and using "inheritance disputes" and "company related disputes", "testamentary inheritance disputes" and "legacy disputes" as the causes of action, we searched on " PKULAW.com" and found that the number of cases from 2010 to 2021 is shown  as the following figure:

It can be seen from the statistical data of the above cases that the number of equity inheritance disputes between 2010 and 2020 basically shows a rising trend year by year, keeping pace with the development of private enterprises since China's  Reform and Opening-up, while the number has declined in 2021, which may be due to the impact of the COVID-19, leading to many disputes being shelved and  suspended. It is worth noting that if there  have been arrangements such as wills, the number of cases of equity inheritance disputes shows a sharp decrease. This indicates that the important reason for disputes arising from equity inheritance is that the vast majority of entrepreneurs did not use  inheritance tools such as wills to plan and arrange equity inheritance in advance.

How to allocate equity inheritance under legal circumstances?

So let's take a look first. If entrepreneurs have not planned and arranged for equity inheritance in advance, how should equity inheritance be distributed under legal circumstances? Let's start with a case:

On December 25, 2020, Lin QiLin, the controlling shareholder and actual controller of the  Listed company Youzu Network, passed away at the age of 39 due to ineffective drug treatment after being poisoned. In the same year, Lin  ranked 31st on the 2020 Hurun 80s'  Self-made Rich List with a wealth of 6.8 billion yuan.

On January 11, 2021, Youzu Network released a notice stating that Lin Qi directly held 219702005 shares of Youzu Network stock, accounting for 23.99% of the total share capital at that time. Among them, 171769168 shares were in a pledged state, and he did not leave a will or legacy support  agreement to dispose of the above-mentioned stock assets during his lifetime. Therefore, his equity was lawfully inherited by three underage children (Lin's parents waived their inheritance rights), The shareholder rights of the three are exercised by their legal guardian (their mother) Xu Fenfen (who has previously divorced Lin Qi, who becomes the actual controller of Youzu Network.

On January 12, 2021, a netizen named " Tang cu ge li ji la" on Weibo claimed to be the sister-in-law of Lin's illegitimate son, accusing Youzu Network of intentionally concealing the "youngest son" and demanding that the "youngest son" be inherited in the first order.

On March 24, 2021, Youzu Network released a notice stating that the shares under Lin's name have not yet completed the registration procedures for inheritance and non-transaction transfer. Due to the need to first release all equity pledges on the shares to be transferred, and as Xu Fenfen has not yet fully raised funds to release the equity pledge, the pledgee has not agreed to release the pledge, and therefore cannot initiate the transfer registration procedures.

On July 13, 2021, "Tang cu ge li ji la" issued a document stating that they had filed a lawsuit with the court on January 13, 2021, requesting the "youngest son" to participate in the inheritance of Lin's estate in accordance with the law. They also issued the "Four Questions" to the notary office that notarized the inheritance rights in this case, stating that Lin's parents specifically mentioned in the notarized records that Lin's parents  had waived their inheritance rights, but if various reasons had arised in the future, which prevented all three legitimate children from inheriting the above-mentioned estate, In the statutory inheritance procedure of redoing,they would reserved the right to inherit or waive the aforementioned inheritance.

On November 3, 2021, Hongta Securities released an announcement stating that on October 14, 2020, Lin, as the acquiring party, pledged its 35.41 million shares of Youzu Network to Hongta Securities to carry out stock pledge-style repo transactions and obtained financing loans of RMB 230 million from Hongta Securities. Due to Lin's death, the relevant agreement is terminated, and the three heirs, as heirs of the pledged underlying securities, shall not only enjoy property rights but also fulfill corresponding repurchase obligations as stipulated in the contract. As of the date of prosecution in this case, the three heirs have not fulfilled their repurchase obligations. Therefore, Hongta Securities filed a lawsuit with the court in October 2021, requesting the court to order the three defendants to repay the outstanding principal of the financing loan and pay the financing contract interest and liquidated damages to the company, totaling 267.0552 million yuan. They also requested the court to confirm that they have the priority right to compensation for the discount, auction or sale proceeds of 35.41 million pledged shares of Youzu Network. Hongta Securities  simultaneously  applied for property preservation measures against the property under the names of the three defendants.

On May 24, 2022, Youzu Network released a notice stating that Lin had engaged in stock pledge based repurchase transactions with Hongta Securities during his lifetime. Due to the failure to fully repay the aforementioned debts upon expiration of the pledge, which constituted a business breach of contract,  Lin's  shares of some of companies were expected to passively reduce their holdings by no more than 35.41 million shares. So far, Lin has passively reduced 14735488 shares pledged in Hongta Securities through centralized bidding and Block trade, accounting for 1.61% of the current total equity.

In this case, Lin did not leave any will or legacy support agreement to dispose of his approximately 3 billion yuan worth of equity in a listed company before his death. According to Article 1123 of the Civil Code, the corresponding equity should be divided according to legal inheritance, mainly based on the following factors:

Are there any restrictions in the company's articles of association

According to Article 75 of the Company Law, "After the death of a natural person shareholder, its legal heir may inherit the shareholder's qualification, unless otherwise specified in the company's articles of association.

In this case, after searching for the valid company articles of association on Youzu Network on  CNINFO, there is no restriction provisions on the succession of shareholders' qualifications to Lin Qi's legal heirs after the death of a shareholder. This means that Lin Qi's legal heirs can inherit Lin Qi's shareholder qualifications on Youzu Network in accordance with legal provisions.

Did the equity belong to the community property

If Lin's equity is the  community property, according to Article 1153 of the Civil Code, half of the shares belonging to his spouse should be divided first, and the remaining half of the shares is Lin's inheritable  property. At the same time, his spouse, as the first in order inheritor, also participates in the distribution of the remaining half of Lin's shares together with other  inheritors of the first order.

However, in this case, Lin had already divorced his ex-wife Xu Fenfen during his lifetime and was not in a marital relationship at the time of his death. Based on information obtained through  publication channels, Lin's ownership of Youzu Network at the time of his death was his personal property.

Werr there  the first order heirs

According to Article 1127 of the Civil Code, the spouse, children, and parents are all first-order heirs, including children born  outside of  marriage. At the same time, according to Article 1130 of the Civil Code, all heirs in the same order inherit  shares of equity equally.

Therefore, in this case, if the claim that Lin gave birth to his "youngest son" out of wedlock is true, then Lin's parents, Lin's three legitimate children, and Lin's "youngest son" out of wedlock  would be all the first in line heirs, equally inheriting Lin's shares of the Youzu Network shares.

Was there an heir who relinquishes inheritance

If some inheritors give up inheritance, other inheritors will equally inherit the shares which are given up  . According to Article 1124 of the Civil Code, the waiver of inheritance by the inheritor shall be expressly waived in writing before the disposal of the  property. At the same time, according to Article 36 of the Interpretation of the Supreme People's Court on the Application of the Inheritance Part of the Civil Code of the People's Republic of China (Ⅰ.), if the inheritor reneges on the abandonment of inheritance before the disposal of the  property or during the litigation, it does not  certainly have the effect of reneging on inheritanceand the People's Court shall decide based on the specific reasons proposed by the inheritor. After the disposal of the estate, if the inheritor reneges on giving up inheritance, the court will  certainly not recognize it.

In this case, it is speculated that Lin's parents gave up their inheritance rights  for the purpose of Lin's three legitimate children. Therefore, Lin's three legitimate children equally inherited the equity shares that Lin's parents gave up. However, Lin's parents' waiver is conditional, that is, if various reasons in the future prevent Lin's estate from being fully inherited by his three legitimate children, in the redo legal inheritance procedure, Lin's parents reserve the right to inherit or relinquish the aforementioned estate. Therefore, the situation where Lin gave birth to his "youngest son" out of wedlock, as claimed by " tang cu ge li ji la", is true. When the legal inheritance procedure is  redone in the future, it does not  certainly have the effect of Lin's parents giving up their legal inheritance share.

Were the heirminors

According to Article 27 and Article 34 of the Civil Code, the parents are the guardians of underage children, and the duties of the guardians are to act on behalf of the ward to carry out civil legal acts, protect the personal rights, property rights, and other legitimate rights and interests of the ward.

In this case, all three of Lin's legitimate children are minors, so Xu Fenfen, the mother of the three minors  as well as the Lin's ex-wife, serves as the legal guardian to act on behalf of the three children in civil legal acts. That is, the shareholder rights corresponding to the inherited equity are totally carried out by Xu Fenfen, who becomes the actual controller of Youzu Network.

Are there any unpaid taxes and debts of the deceased

According to Article 1161 of the Civil Code, the inheritor shall  clear up the taxes and debts that the deceased should pay in accordance with the law to the extent of the actual value of the acquired estate.

In this case, Lin engaged in a pledge-style repo transactions with Hongta Securities during his lifetime. However, due to the failure to fully repay the aforementioned related debts upon expiration of the pledge, which constituted a  business default, Lin's  Youzu Network stocks in pledge on Hongta Securities during his lifetime, although legally inherited by three legitimate children, could only accept passive reduction for the purpose of repaying the related debts.

In  intentional situations

How to plan for equity inheritance?

It can be seen that although Lin's three legitimate children have legally inherited the equity of Youzu Network, the inheritance of equity without careful planning in advance has not only caused a series of troubles, but also been unstable. It is unknown whether the gaming empire created by LinLin Qi  could continue and thrive in the future.

Preparedness ensures success, unpreparedness spells failure.According to Article 1123 of the Civil Code, intentional inheritance of equity  haves priority than precedence over statutory  succession. Therefore, in certain situations, how should equity inheritance be planned? Let's start with  another typical case:

Mr. Wang and Mr. Li jointly invested and contributed to the operation of a well-known local catering company. Mr. Wang  was in charge of market development and finance, while Mr. Li  was in charge of procurement and company management. Both of them agreed not to receive  salaries from the company, but will receive dividends at the end of the year based on their shareholding ratio. Mr. Wang held 60% of the shares and Mr. Li  held 40% of the shares. The catering company also  had branches in neighboring cities, with an annual net profit of nearly 6 million yuan.

Mr. Wanghad had two marriages and two sons. Among them, the eldest son, Wang Da, was born to his ex-wife and has already had a son; The youngest son, Wang Xiao, was born to his current wife, Mrs. Wang, and  was  underage. After receiving the company's dividends every year, Mr. Wang would separately allocate a portion to transfer to Wang Da and Wang Xiao as living  funds. Mr. Li had divorced in his early years, but had a daughter named Li Yi.

Something unexpected happened. Mr. Li suddenly died in a car accident, and Li Yi inherited all of Mr. Li's equity in the company according to the law. At that time, Li Yi had just entered a university and was unable and unwilling to participate in the company's operations. However,  she shared 40% of the profits without working  every year, which gradually  led to Mr. Wang's dissatisfaction Mr. Wang felt that he was working for Li Yi.

As Mr. Wang gradually enters retirement age and begins to plan for the future inheritance of the company's equity, after careful consideration, Mr. Wang has decided to distribute  his equity to each of his two sons,30% for each. The position of executive director and legal representative of the company  would be temporarily  taken by Wang Da. As Wang Xiao  was still  underage, the corresponding shareholder's equity of 30% equity would be temporarily exercised by Mrs. Wang.

After a few years of smooth operation according to Mr. Wang's inheritance plan, one day Mr. Wang died of a sudden heart attack, and conflicts  among the parties gradually emerged: the eldest daughter-in-law planned to divorce Wang Da and demanded that half of Wang Da's equity be divided; Mrs. Wang planned to remarry with taking Wang Xiao to the new family; Li Yi has become the company's largest shareholder and wanted to gain more  powers.

Coincidentally with changes in market conditions, several branches  had suffered losses one after another, leading to a tight financial chain. Wang Da, Mrs. Wang, and Li Yi held a shareholders' meeting to discuss countermeasures:

Wang Da thought that investment should be increased to improve the quality of   restaurants. Mrs. Wang believes that branches  should be closed and only the main store should be  maintained. As neither of the two had reached a 50% equity ratio, neither can persuade the other, and the company could not make an effective decision. At this time, it is crucial that either of them can obtain the support of Li Yi. At this time, Li Yi graduated from college and was about to test  her own abilities. She believed that the 40% equity left by his father was a great opportunity, and she was the largest shareholder and should be the executive director and legal representative. Li Yi proposed that she would agree to one’s strategy whoever agreed her to become the legal representative

After several arguments, both Wang Da and Mrs. Wang refused to accept Li Yi's "proposal", believing that Li Yi did not have the ability to manage the company, and the exploration of approaches of the company's  development was set aside. All parties were caught in a power struggle, causing serious internal friction in the company, and the company's governance was deadlocked.

As the saying goes, ‘wealth cannot be surpassed by three generations', how to achieve the inheritance of equity from generation to generation is probably one of the most concerning topics for entrepreneurs. In this case, Mr. Wang and Mr. Li, as first-generation business partners, worked tirelessly and sincerely to establish a  giant business. However, they both encountered many obstacles in the inheritance of the equity to the second-generation successors. It can be seen from this case that in terms of equity inheritance, the following points should be emphasized:

Partners participating in profit sharing should create value for the company

In this case, Mr. Li died in a sudden car accident, and his daughter Li Yi inherited 40% of his equity in the company in accordance with the law. As a college student, Li Yi, who was unable and unwilling to participate in the company's operation, took nearly half of the company's profits  free of burden every year. Although Li Yi obtained corresponding dividends,which is in accordance with the law, , Mr. Wang's dissatisfaction also has some of rationality in the long run from a rational perspective.

Especially for companies in their start-up and upward stages, it is necessary for capable individuals to work together and provide their wise, and work together to promote the development of their careers. Companies should encourage the concept of "more work, more pay", otherwise it may lead to other partners' mentality of "not suffering from scarcity but suffering from inequality", thereby dampening their enthusiasm for doing business. Of course, as  in this case, if Li Yi agrees, Mr. Wang can also acquire the equity inherited by Li Yi, thereby achieving Li Yi's  withdraw and avoiding some of partners 'gain for nothing'; But if Li Yi disagrees, things will be more difficult to handle.

It is worth noting that according to Article 75 of the Company Law, the company's articles of association can provide personalized settings for shareholder qualifications in the case of inheritance. In this case,  Mr. Wang and Mr. Li could set personalized provisions in the company's articles of association at the beginning stage of establishment of the company, such as: (1) "If a natural person shareholder dies, their legal heirshave the right to choose to inherit their equity or transfer their equity. If they choose to inherit, they are only entitled to become shareholders of the company with the consent of more than half of the other shareholders; if they choose to transfer, other shareholders have the right of first offer under the same conditions"; Or (2) "If a natural person shareholder passes away and their legitimate heirs hold office in the company, they can become  shareholders of the company. Otherwise, the company or other shareholders should purchase for their equity, and the price should be calculated based on the company's net assets at that time, with the purchase money belonging to their legitimate heirs." This can to some extent avoid the occurrence of "freeloader" shareholder heirs in the future, and can also realize the company value created by the deceased shareholder in the past in the form of "equity transfer price".

Of course, if the partners did not make the aforementioned personalized arrangements in the company's articles of association at the beginning of its establishment, subsequent adjustments can also be made by modifying the company's articles of association. However, according to Article 43 of the Company Law, modifying the company's articles of association requires the consent of shareholders representing two-thirds or more of the voting rights.

Avoiding the dispersion of company voting rights

In this case, Mr. Wang, with a  fair distributing attitude, shared his own equity  of the company equally between his two children. However, this precisely led to  contests of equities and company deadlock. Mr. Wang originally held 60% of the company's equity and had relative control over the company's decisions. If all of  shares were passed on to one son, the corresponding control would still continue.

But now Mr. Wang's equity  was divided into two, with Wang Da and Wang Xiao each holding 30% of the shares, while Li Yi holding 40% has instead become the largest shareholder, with veto power over major matters such as modifying the company's articles of association, increasing or reducing registered capital, company merger, division, dissolution, or changing   form of the company. Moreover, when there was a disagreement between Wang Da and Mrs. Wang, who represented Wang Xiao  in exercising shareholder rights, Mr. Wang's original control position corresponding to his equity was completely lost, and Li Yi instead became the person who could give conditions.

Therefore, if an entrepreneur has different companies of multiple business lines , different children can be responsible for different business lines, which are independent and parallel to each other. However, if the company's business lines are relatively single, in order to avoid power contest and company deadlock caused by equity dispersion, it is advisable to pass on the company's equity to only one child, who controls important decisions of the entire company, while for other children, life insurance, family trusts  cash，real estate, and other forms of property can be used for compensation.

However, if  it is not appropriate to completely pass on equity to only one child in reality, the following methods can also be considered to concentrate the voting rights of equity as much as possible to avoid potential equity  contest and company deadlock in the future:

(1) Separation of voting ratio, dividend ratio, and shareholding ratio

According to Articles 34 and 42 of the Company Law, shareholders exercise their voting rights in proportion to their capital contributions and receive dividends in proportion to their actual contributions. However, they can also make a complete separation agreement between the voting ratio, dividend ratio and shareholding ratio in the company's articles of association, shareholder agreement, and other documents, that is, the voting ratio and dividend ratio do not completely correspond to the shareholding ratio. For example, in this case, the equity of Wang Da, Wang Xiao, and Li Yi can be set as follows:

The sideward: Shareholding ratio,Voting ratio, Dividend ratio. The downward: Wang Da, Wang Xiao, Li Yi, Total.

It is worth noting that the modification of the company's articles of association to add such personalized design still requires the consent of shareholders representing more than two-thirds of the voting rights.

(2) Sign a  agreement of persons acting in concert or voting rights delegation agreement

The agreement of  persons acting in concert means that when exercising the voting rights of the company, the relevant shareholders adopt the same declaration of will, and in case of any inconsistency among the shareholders, the intention of a certain shareholder shall be taken as the common intention.

The voting rights delegation agreement refers to entrusting voting rights to the entrusted shareholders to exercise.

Despite the difference of the legal basis between  the two agreements , essentially both are calculated by combining voting rights. However, it should be noted that according to Article 173 (2) of the Civil Code, the principal may unilaterally revoke the voting authorization at any time.

Specifically, in this case, when Mr. Wang  plan for the inheritance of equity, he could still  allocate 30% equity to Wang Da and Wang Xiao, but at the same time requested that Wang Da and Mrs. Wang, who acted on behalf of Wang Xiao in civil legal acts, jointly sign an agreement persons acting in concert or voting power delegation agreement as a prerequisite for inheriting equity, so that the voting rights owned by Wang Da and Wang Xiao can be combined and calculated. The relative control of Mr. Wang's family over the company can be continued.

(3) Establishing equity family trusts

If Mr. Wang would set 60% of the company's equity in a family trust, the control rights of this part of the equity will be  under the name of the trustee, which is the trust company. At the same time, through the flexible arrangement of the family trust, the separation of the company's management rights, dividend rights, and trust beneficiary rights can be achieved. Taking the current typical model of equity family trust "family trust+SPV" as an example, as shown in the following figure:

Mr. Wang delivered funds to set up a family trust to the trust company. At the same time, the family trust and Wang Da jointly set up a limited partnership as the SPV. The SPV  accepted Mr. Wang's 60% equity of the company, and then directly held 60% equity of the company. Each year, the company's corresponding equity dividends were distributed through the SPV layer by layer  to the family trust level.Then the dividends  were distributed to the designated beneficiaries according to Mr. Wang's arrangement in the designated proportion.

In terms of control of the company, according to the provisions of Articles 67 and 68 of the Partnership Law, the limited partnership fairs is decided and executed by the General partner (hereinafter referred to as "GP"), and the limited partner (hereinafter referred to as "LP") does not participate in the execution of the partnership affairs, so the GP has legal control over SPV. In this case, if Mr. Wang intends to transfer control position of the company to Wang Da, he can arrange for Wang Da as the GP. However, as the GP bears unlimited joint and several liability for the debts of SPV, it is recommended to minimize the proportion of GP holding partnership shares as much as possible to avoid possible debt risks.

Avoiding the loss of equity due to the risk of children's marriage

In this case, Wang Da and his wife did not sign a marital property agreement. During  the marriage, Mr. Wang would transfer a portion of his income from the company's dividends to Wang Da as living  funds. After Mr. Wang passed away, Wang Da obtained 30% of the company's equity. Generally speaking, both the living  funds transferred and the 30% equity inherited  subject to the  community property of Wang Da and his wife. If Wang Da and his wife divorce, the wife has the right to share half of the living  funds and half of the equity, which is not Mr. Wang's intention.

According to Article 1063 (3) of the Civil Code,the property determined to belong only to one party in a will or gift contract belongs to the personal property of one spouse. Therefore, in order to avoid the loss of family property due to the risk of children's marriages, Mr. Wang can specify through a will or gift contract that the transfer of living funds and 30% of the equity will only be  transferred to Wang Da,  expressly not as the  community property of Wang Da and his wife.

Protecting the equity interests of underage children

In this case, Wang Xiao inherited 30% of the equity from Mr. Wang. However,  since Wang Xiao is a minor, no matter how much property  Mr. Wang leaves behind for him, once Mr. Wang passes away, all of Wang Xiao's property will inevitably be managed by Mrs. Wang. If Mrs. Wang remarries, it is possible that the equity dividends obtained by Wang Xiao will be used in the remarried family, which is not Mr. Wang's original intention.

According to Article 19 of the Civil Code, Wang Xiao is a minor aged 8 or above who is a person with limited capacity for civil conduct and can independently carry out civil legal acts that are purely beneficial. Therefore, it can be stipulated in the company's articles of association that before Wang Xiao reaches adulthood, non property rights related to equity, such as voting, will be exercised by Mrs. Wang on her behalf. However,  the purely profitable property rights, such as dividends,  should belong to Wang Xiao himself.

If there are procedural obstacles in modifying the company's articles of association, the equity passed down to Wang Xiao can also be temporarily entrusted by Mr. Wang to his trusted relatives and friends such as  Wang Xiao’s grandfather or grandmother to hold on behalf of him. The relatives and friends will exercise shareholder rights on behalf of Wang Xiao for his interests, and after Wang Xiao reaches adulthood, the equity can be restored  for him.

In summary, due to the different family members of each entrepreneur, different stages of enterprise development, and different personal abilities and willingness of second-generation successors, the equity inheritance  plan of each entrepreneur cannot completely copy successful examples such as Li Ka shing. Instead, it should be coordinated with the assistance of professionals to make use of wills, gifts, holdings, company articles of association, shareholder agreements, family trusts, life insurance, Family charters and other inheritance tools to develop personalized plans suitable for each entrepreneur, and the entrepreneurs should make the implementation  completed with the assistance of professionals.

Reference material

[1]Article 1123 of the Civil Code: After the commencement of inheritance , it shall be handled in accordance with statutory inheritance; If there is a will, it shall be handled according to will or legacy; If there is a legacy  support agreement, it shall be handled in accordance with the agreement.

[2] Article 1153 of the Civil Code: unless otherwise agreed, half of the jointly owned property shall first be divided into the spouse's property and the rest shall be the  estate of the deceased. If the inheritance is within the community property of the family, the property of others should be divided first when dividing the inheritance.

[3] Article 1127 of the Civil Code : inheritance shall be carried out in the following order:

（1） First order: spouse, children, parents;

（2） The second order: brothers and sisters, grandparents, maternal grandparents.

After the inheritance begins, the first order  heirs inherit, and the second order inheritors do not inherit. If there  are no first order heirs to inherit, the second order heir shall inherit.

The term "children" as used in this  Chapter includes legitimate children, illegitimate children, adopted children and stepchild who are dependent.

The term 'parents' as used in this part includes biological parents, adoptive parents, and stepparents who have a supportive relationship.

The term "brothers and sisters" as used in this part includes brothers and sisters of the same parents, half brothers and half sisters, adoptive brothers and sisters, and step brothers and sisters who are dependent.

[4] Article 1130 of the Civil Code s: the heirs in the same order shall generally inherit equal shares of the estate.

Inheritors who have special difficulties in life and lack the ability to work should be taken care of when distributing their inheritance.

Inheritors who have fulfilled their main maintenance obligations to the deceased or have lived together with the deceased may receive an additional share in the distribution of the estate.

Inheritors who have the ability and conditions to support and do not fulfill their obligation to support shall not be divided or less divided when distributing the estate.

If the inheritors reach an agreement through consultation,  the distribution may also be unequal.

[5] Article 1124 of the Civil Code : if the heirs abandon inheritance after the commencement of inheritance, they shall make a written declaration of abandonment before the disposal of the estate. If there is no indication, it shall be deemed as acceptance of inheritance.

The legatee shall make an expression of acceptance or abandonment of the legacy within 60 days after becoming aware of it. If there is no indication of expiration, it shall be deemed as a waiver of the legacy.

[6] Article 36 of the Interpretation of the Supreme People's Court on the Application of the Inheritance Chapter of the Civil Code of the People's Republic of China (1): If the inheritor reneges on the abandonment of inheritance before the disposal of the estate or during the litigation, the people's court shall decide whether to recognize it based on the specific reasons proposed by the inheritor. After the disposal of the estate, if the inheritor reneges on giving up inheritance, it shall not be recognized.

[7] Article 27 of the Civil Code : parents are guardians of underage children. If the parents of a minor have died or have no guardianship ability, the following persons with guardianship ability shall serve as guardians in order: (1) grandparents, maternal grandparents; （2） brother and sister; （3） other individuals or organizations willing to serve as guardians ,who must obtain the consent of the residents' committee, villagers' committee, or civil affairs department in the place where the minor resides.

[8] Article 34 of the Civil Code : the duty of a guardian is to act on behalf of the ward in carrying out civil legal acts, protecting the personal rights, property rights, and other legitimate rights and interests of the ward. The rights arising from the lawful performance of guardianship duties by guardians shall be protected by law. If a guardian fails to fulfill their guardianship duties or infringes on the legitimate rights and interests of the ward, they shall bear legal responsibility. If a guardian is temporarily unable to fulfill their guardianship duties due to emergencies and the ward's life is left unattended, the residents' committee, village committee, or civil affairs department in the place where the ward resides shall arrange necessary temporary living care measures for the ward.

[9] Article 1161 of the Civil Code:the inheritors shall pay the taxes and debts that the deceased should pay in accordance with the law to the extent of the actual value of the acquired estate. The portion exceeding the actual value of the estate shall not be subject to voluntary repayment by the inheritor. If the inheritors abandon inheritance, they may not be liable for paying the taxes and debts that the deceased should have paid in accordance with the law.

[10] Article 1123 of the Civil Code: after the commencement of inheritance  , it shall be handled in accordance with statutory inheritance; If there is a will, it shall be handled according to will or legacy; If there is a legacy  support agreement, it shall be handled in accordance with the agreement.

[11] Article 34 of the Company Law : shareholders shall receive dividends in proportion to their actual capital contributions; When the company increases its capital, shareholders have the right to subscribe to the capital contribution in proportion to their actual contributions. However, unless all shareholders agree not to receive dividends in accordance with the proportion of their capital contributions or do not subscribe to their capital contributions in priority in accordance with the proportion of their capital contributions.

[12] Article 42 of the Company Law stipulates that shareholders shall exercise their voting rights at shareholders' meetings in proportion to their respective capital contributions, unless otherwise specified in the company's articles of association.

[13] Article 19 of the Civil Code: minors over the age of eight are persons with limited capacity for civil conduct, and when carrying out civil legal acts, their legal representatives shall act on their behalf or with the consent and recognition of their legal representatives. However, it is possible to independently carry out civil legal acts that are purely beneficial or that are appropriate for their age and intelligence.