China-Singapore cross-border enforcement breaks down | How can equity holdings be penetrated by the judiciary? ——Starting from the 125 million settlement case of Beijing No. 4 Intermediate People’s Court

Author: Lawyer Zhang Jingxinyue, PRC-qualified Lawyer | Singapore Registered Foreign Lawyer

But in practice, we frequently see situations like this:

The Singapore arbitration award has come into effect, but the name of the person subject to execution is "clean" - the core domestic equity has already been formally "isolated" through entrusted shareholding, relative holding, affiliated company shareholding, and equity transfer.

• If the equity is registered in someone else’s name, can it still be executed?
• If there is no written holding agreement, will the court recognize it?
• When the equity is transferred from the parent company to the subsidiary, does it mean that the rights are "cut off"?

In May 2025, the Beijing No. 4 Intermediate Court (Beijing International Commercial Court) 125 million yuan equity holding dispute case was released on the official website of the Supreme People's Court, giving an answer with great reference value. This case not only clarified core rules such as "equity registration only has presumptive effect" and "agency holding shall not be used against bona fide creditors", but also directly responded to one of the most difficult problems in cross-border enforcement:

How to bring the equity hidden behind the agency holding back into the scope of execution through "penetrating review"?

Based on the cross-border enforcement scenario between China and Singapore, this article will take the recognition and enforcement of Singapore arbitration awards in Chinese courts as the core perspective, combine the latest typical cases and current legal norms, systematically sort out key issues such as penetration standards, evidence rules, procedural paths, cross-border notarization and certification of equity holdings, and provide a set of practical operational frameworks that can be directly referenced for cross-border investors, corporate legal affairs and lawyers.

01 The institutional logic, dual attributes and refereeing position of equity holdings in cross-border execution

(1) Realistic motivations and risk alienation of equity holdings

Equity holding is also known as entrusted shareholding, anonymous investment or shareholding in a false name. Its typical legal structure is: The actual investor and the nominal investor enter into an entrustment contract, and the actual investor performs the investment obligations and enjoys investment rights. The nominal investor is registered as a shareholder at the industrial and commercial registration, shareholder list and public disclosure level, but does not actually enjoy shareholder rights and does not bear investment risks.

In cross-border transactions, equity holdings are widespread. The main reasons include: foreign investment access restrictions, privacy protection, family inheritance, tax arrangements, and cross-border structure construction.

However, when a dispute occurs, agency holding can easily be transformed into a tool for evading debts. Typical manifestations include: sudden transfer of equity after the debt is formed, use of multiple layers of nesting to conceal the investment relationship, and use of registration appearance to exclude execution, etc., which directly leads to the loss of the creditor's interests in winning the lawsuit.

To this end, Chinese courts have formed highly stable, clearly hierarchical, and universally applicable adjudication rules when dealing with cross-border equity enforcement disputes, namely the principle of distinction between internal and external effects:

1. Relatively effective internally

If the agency holding contract between the actual investor and the nominal investor is a true expression of intention, does not violate the mandatory provisions of laws and administrative regulations, and does not violate public order and good customs, it will be binding internally on both parties, and the ownership of the investment rights can be confirmed accordingly.

2. No external confrontation

The internal agreement on the agency relationship is not effective against the world and cannot be used against the person who applies for execution in good faith. When the person subject to execution causes an improper reduction of the liability property through agency holding, resulting in the inability to perform effective legal documents (including overseas arbitration awards), the court has the right to break through the registration appearance and take enforcement measures such as sealing, freezing, evaluating, and auctioning the equity held on agency.

In short: The agency holding agreement binds both internal parties and does not bind external creditors; autonomy of will cannot override judicial enforcement rights.

(2) Law application rules: Domestic equity interests shall be governed by Chinese law

In cases where Singapore arbitral awards apply for recognition and enforcement by Chinese courts, even if the following cross-border factors exist:

• The party concerned has Singaporean nationality or is a Singaporean enterprise;
• Habitual residence is in Singapore;
• The place of arbitration is Singapore;
• The holding agreement is signed in Singapore;
• Funds come from Singapore accounts.

The equity involved in the case is the equity of a company within China. According to the law of the location of the property and the basic principles of jurisdiction and judicial review of the Civil Procedure Law, the execution review, ownership identification, penetration standards, and disposal procedures of the equity are all uniformly applicable to Chinese law. Foreign-related factors, overseas arbitration, and cross-border capital transfers do not constitute valid reasons for excluding the application of Chinese law or excluding enforcement.

02 Legal standards and refined review requirements for the penetration determination of equity holdings in cross-border execution

In the practice of cross-border enforcement between China and Singapore, the courts have formed an operable five-element review system:

1. Fund chain traceability

The capital contribution ultimately comes from the person subject to execution. Even if it is transferred through a Singapore account or transferred at multiple levels, as long as a closed and corresponding capital chain can be formed, the actual capital contribution relationship can be determined;

2. Actual control is the core: The court focuses on examining the voting rights of shareholders’ meetings, the appointment and removal of directors, supervisors and senior management, the control of seals and licenses, the actual ownership of dividends, etc. If the nominal shareholder is only a “nominal” , does not affect the penetration determination;
3. Time point and subjective intention: If the agency is established after the debt is incurred, the arbitration is initiated or the award is made, and it lacks a reasonable commercial purpose, it can be directly inferred that it has the intention to avoid execution;
4. Abnormal related relationship: If the agent is a close relative, employee, related party or a third party without independent investment ability of the person subject to execution, his/her “The appearance of good faith” is often denied;

5. Consensus of holdings can be presumed

A written agreement is not a necessary requirement. In the absence of a written contract, the objective fact chain such as capital flow, equity transfer, income attribution, etc. is sufficient to infer that the factual holding is established.

03 Typical case: Beijing No. 4 Intermediate People’s Court’s 125 million yuan equity holding dispute case

(Official website of the Supreme People's Court released on May 12, 2025)

(1) Basic case facts

In 2010, Wu Yi accepted the entrustment of Li Jiang and other anonymous shareholders to hold the equity of a group company on his behalf. The two parties established an entrusted shareholding relationship through a simple agreement. Later, in order to expand its business, the group company established a new medical subsidiary under the "equity transfer" model. The ownership structure, shareholding ratio, and shareholder identity were completely consistent with the original group. However, the two parties did not sign a separate written holding agreement for the equity of the medical subsidiary.

The operating performance of the medical subsidiary has improved significantly, and the equity value has increased significantly. Because of his old age, Li Jiang proposed to cash out and asked Wu Yi to cooperate in realizing the value of the equity, but was rejected. Wu Yi argued that the original holding agreement was only for the group company, the medical subsidiary did not sign a written holding contract, and the equity should belong to the registered shareholders.

The dispute between the two parties intensified, and Li Jiang filed a lawsuit with the Beijing International Commercial Court of the Fourth Intermediate People's Court of Beijing, requesting to confirm the anonymous shareholding relationship and realize the value of the equity. The subject matter involved was nearly 400 million yuan. He also applied to the court to preserve and seal the equity of Wu Yi's medical subsidiary.

(2) Establishment of court trial logic and adjudication rules Although the case was settled with a package settlement of RMB 125 million, its trial logic has landmark guiding significance in the fields of large-amount commercial holdings, cross-border structures, and equity transfer of affiliated companies, and is directly applicable to China-Singapore cross-border execution scenarios:

1. Equity holding can be established based on objective facts and does not require a written agreement

The court made it clear that the agency relationship in commercial practice is diverse and flexible, and a written contract is not the only basis for the establishment of an agency. In the case of equity transfer, structural duplication, continuous historical evolution, clear sources of investment, and clear ownership of rights and interests, even if no separate written agency holding agreement is signed, the legal existence of the agency holding relationship can be inferred based on the complete chain of facts**.**

2. Look beyond the appearance of industrial and commercial registration and use the ownership of substantive rights as the core of the judgment

The court did not simply use industrial and commercial registration information to determine equity ownership, but conducted a comprehensive substantive review of 's capital sources, equity evolution history, actual control relationships, business management facts, and income distribution models. It clearly insisted that: commercial appearance doctrine must not be abused as a tool to evade debts, and registration disclosure cannot compete with the true ownership of rights.

3. "Equity transfer and structure duplication" can be deemed to naturally extend the agency holding relationship to the newly established company

The equity transfer from the group company to the medical subsidiary is not an independent and brand-new investment behavior, but a copy, continuation and inheritance of the original shareholding structure. In the absence of any expression of contrary intention, the original holding relationship will automatically extend to the equity of the newly established company.

4. Holding on behalf of others cannot be a legal defense for refusing to perform obligations or isolating property liability

The court clearly conveyed the judicial position through the trial: the institutional function of equity holding is to meet reasonable commercial needs, but not to provide protection for evading debts, evading execution, and refusing to perform obligations. Any attempt to use agency holding to falsify a successful claim will not be supported by the judiciary.

04 Extended penetration rules for affiliated companies, multi-layer structures and equity translation

In complex cases involving Singapore arbitration + Chinese execution, the person subject to execution rarely adopts a single direct holding agent, but generally uses methods such as multi-layer nesting, overseas entities, domestic SPV, equity transfer, and related company takeover to further conceal the equity. In this regard, Chinese courts adopt a review model of extended penetration, upward tracing, and overall identification.

(1) Equity transfer and structural reorganization: automatic extension of agency holding relationship

As shown in the case of the Beijing No. 4 Intermediate People's Court, if the original anonymous equity is transferred to an affiliated company through the establishment of a new subsidiary, equity transfer, free transfer, structural reorganization, etc., the court may determine that such arrangements are still subject to the original holding relationship, and may directly take enforcement measures against the extended equity.

(2) Multi-layer nested architecture: penetrating upward to the final actual controller

For a typical cross-border structure: Singapore parent company → offshore intermediate holding company → domestic SPV → domestic target company equity

The court can penetrate upward layer by layer to identify the ultimate actual controller. If the ultimate controller is the person subject to execution, the court can still directly execute the underlying domestic equity even after going through multiple layers of intermediate entities.

(3) Real debts of famous stocks, transfer guarantees, and channel shareholdings: penetrating the real transaction purpose

In practice, there are a large number of situations where equity registration appears as financing guarantees, lending channels, famous stocks and real debts, and repurchase arrangements. The court can see through the appearance and determine that the equity is not a true transfer, and determine the true ownership of rights accordingly, eliminating the improper defense of the nominal holder.

(4) “Shell-out” transfer and malicious reconstruction: right of revocation and penetration in parallel

If the person subject to execution transfers equity at an obviously unreasonable low price, for free, or in a fictitious transaction, resulting in a reduction in liability property, the creditor may also claim:

1. Execute the penetration identification in the program;
2. The creditor’s right of revocation in substantive law can cancel the malicious transfer and restore the property status.

05 Enforcement of Singapore Arbitration Award for Equity Holding: Procedural Path and Cross-Border Evidence Rules

(1) Standard procedures

1. Apply to a court with jurisdiction for recognition and enforcement of a Singapore arbitration award: For cross-border arbitration award enforcement, the Intermediate People’s Court shall be the place where the person subject to execution is domiciled or where the property is located. Jurisdiction, Beijing Fourth Intermediate People's Court, Shanghai Financial Court, Shenzhen Intermediate People's Court, etc. are the core courts with centralized jurisdiction over foreign-related enforcement.
2. The court reviews and rules to recognize the validity of the award: The court conducts review in accordance with the New York Convention and bilateral judicial assistance treaties, If there is no reason for non-execution, the ruling shall be made to admit and execute**.**
3. Enter the enforcement procedure and initiate property investigation and control: search through the court’s online investigation and control system, offline investigation, lawyer’s investigation order, etc. Domestic equity, real estate, deposits, vehicles and other properties.
4. If entrusted equity is discovered, submit evidence of penetration: Submit evidence such as capital chain, actual control, entrusted holding facts, related relationships, equity transfer, etc., and apply to court. Seizure and freezing of equity holdings on behalf of shareholders**.**
5. Reject the execution objection/objection lawsuit of the nominal shareholder: If the nominal shareholder only raises an objection based on the internal agreement of the registration or agency holding agreement, The court did not support it according to law.
6. Evaluate, auction, and sell equity to realize debt repayment (2) Cross-border evidence notarization and authentication rules

Evidence formed in Singapore must complete statutory certification procedures before it can be used in Chinese courts:

1. Notarized by Singapore Notary;
2. Apply for consular authentication through the Chinese Embassy or Consulate in Singapore;
3. Provide standardized Chinese translation. Scope of application: Agency holding agreements, emails, financial documents, control certificates, overseas testimony, etc.

06 Practical risk reminder: Typical situations where cross-border equity holdings are easily penetrated

Combined with the judicial practice of cross-border enforcement between China and Singapore, the probability of penetrating enforcement in the following situations is extremely high:

1. Unexpected transfer of equity to close relatives/related parties during Singapore arbitration proceedings after the debt is incurred;
2. The agent holder does not actually contribute capital, does not participate in operations, does not bear risks, and does not receive dividends;
3. Transfer dormant equity through equity transfer, structure duplication, and new establishment of affiliated companies;
4. There is no reasonable commercial purpose, and the equity transfer is only carried out to isolate property and avoid enforcement;
5. Funds flow across multiple levels across borders, but can be completely traced back to the person subject to execution, forming a closed capital chain;
6. The agent and the person subject to execution have special relationships such as close relatives, associated enterprises, and control relationships.

Conclusion

In the context of China-Singapore cross-border commercial dispute resolution and international arbitration award enforcement, a trend has become very clear:

Equity holdings are no longer a "safe haven" to avoid enforcement, but are the focus of penetrating judicial review.

It can be seen from the 125 million yuan settlement case of Beijing No. 4 Intermediate People’s Court that Chinese courts adhere to a judicial line of “substantial priority, prudent appearance, combating debt evasion, and protecting successful claims” in cross-border enforcement.

Neither the appearance of industrial and commercial registration nor the complex cross-border structure can be a legal reason to block enforcement. For parties holding a Singapore arbitration award and hoping to realize their claims in China, the truly effective strategy is not to hope that the other party will "keep the promise" but to:

-Use the capital chain as the core evidence to lock in the investment facts in advance;

-Take actual control as the starting point to solidify the traces of the exercise of shareholders’ rights;

• Based on the penetration rules, proactively advocate and accurately provide evidence during the procedure;

-Guaranteed by cross-border evidence standards to ensure that every overseas material meets the requirements for notarization and certification.

Only in this way can a "winning ruling" be turned into "real money" that can truly fall into the pocket, and the last line of defense in cross-border transactions can be maintained.

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This article is general information and not legal advice. Specific matters require assessment by appropriately qualified professionals.