In September 2025, Zong Fuli resigned from all her positions at Wahaha Group, including legal representative, director, and chairwoman. This move quickly drew widespread public attention. It was not merely a change in roles but also reflected the complexity of control succession in private enterprises following the founder’s passing. For many Chinese private companies, achieving a smooth generational transition of power and operational control remains a prevalent challenge. This article uses the Wahaha case as an example, combined with industry phenomena, to explore the challenges and future trends in the succession of control rights within private enterprises.
Background
Wahaha is a company that started as a small workshop in a school during the 1980s. Under the leadership of its founder Zong Qinghou, it has become one of the leading players in China’s beverage industry. Its products, such as AD Calcium Milk, purified water, and Nutri-Fast, are household names.
Zong Fuli, Zong Qinghou’s only daughter, joined the group after returning from overseas studies and gradually took charge of some operations. In 2018, she was appointed as the group’s general manager and is widely regarded as Zong Qinghou’s successor.
In private enterprises, equity does not equate to control. Although the founder’s children or family members are natural successors under the law, the smooth transition of management authority at the corporate governance level still requires adherence to the articles of association and decision-making mechanisms.
During his lifetime, Zong Qinghou was the absolute core of Wahaha Group, firmly holding its control. However, after his passing, the anticipated smooth transition of control did not fully materialize. As the natural heir, Zong Fuli held both equity and management positions. Yet the absence of institutionalized management arrangements within the enterprise led to turbulence during the power transition.
In fact, this phenomenon is not uncommon among China’s private enterprises. Many companies relied on the personal authority of their founders to drive growth during their tenure. However, as founders step down, the lack of standardized governance systems often creates uncertainty in the transfer of control.
Private enterprises commonly operate under a founder-dominated “personal-centered system.” While this model proves highly efficient during the startup and rapid growth phases, it may create institutional gaps when the business transitions to second- or even third-generation succession.
Take Wahaha as an example. Its shareholder structure reflects a mixed ownership system: Hangzhou Shangcheng District Culture, Commerce, and Tourism Investment Holding Group Co., Ltd. holds 46%, Zong Qinghou holds 29.4%, and the Grassroots Trade Union Federation (Employee Shareholding Association) holds 24.6%. Based on equity ratios, state-owned capital far exceeds individual holdings, suggesting it possesses certain characteristics of a state-owned enterprise. However, considering its historical contributions and actual influence, Wahaha Group has always been overshadowed by the aura of the Zong family enterprise. Starting as a school-run enterprise in 1987, Wahaha would not exist today without Zong Qinghou’s leadership—an undeniable fact.
This mixed-ownership model introduces governance complexities in practice: the founder’s personal authority, family influence, and the rights of state-owned shareholders intertwine. When institutional arrangements are inadequate, power transitions naturally become prone to turbulence.
From Case Studies to Trends: The Phenomenon of Generational Succession in Private Enterprises
The Wahaha incident is not an isolated case. Most of the first generation of private entrepreneurs who founded businesses in the 1980s and 1990s have now entered retirement or passed away. Corporate succession has entered a critical phase.
China’s private enterprises are undergoing a transition from “founder-led” to “institutional governance” models. In the past, founders relied on personal authority to steer business operations, but modern management principles emphasize decentralized decision-making, standardized processes, and governance mechanisms. This transformation impacts not only operational stability but also brand credibility and long-term growth.
The Wahaha incident serves as a stark reminder that family succession is not merely a “transfer of shares,” but a complex undertaking involving power dynamics, trust, and institutional frameworks. Private enterprises must proactively design clear structures of authority and responsibility. Through articles of association, equity arrangements, and professional management systems, they can effectively mitigate succession risks.
In recent years, an increasing number of Chinese enterprises have been experimenting with these approaches. Some companies establish family trusts to secure the transfer of equity; others introduce independent boards to enhance management professionalism; while some adopt “tiered equity” governance structures, enabling both family members and professional managers to fulfill their respective roles.
These shifts indicate that China’s private enterprises are transitioning from “experience-based management” to “rule-based management.”
From a broader perspective, several prominent trends are currently emerging:
- Institutionalized Governance: Founders are gradually embedding personal authority within corporate systems, reducing reliance on individuals and enhancing operational stability.
- Professional Succession: Increasingly, companies entrust daily management to second-generation leaders or professional managers, while founders retain influence over major decisions through equity stakes or board participation.
- New Challenges from Mixed Ownership: In some enterprises, introducing state capital or external investors diversifies decision-making but also complicates governance structures.
Each transfer of control reflects the maturing governance systems within China’s private enterprises. Zong Fuli’s case serves as a wake-up call for many companies: Regardless of size, establishing clear and transparent governance structures is the foundation for sustainable development.
- Here are several best practices worth adopting:
- Plan equity and succession structures in advance
- Founders can utilize tools such as equity trusts and family funds to ensure a smooth transition during generational handover and prevent disputes.
- Establish an independent board and professional management team
- Family members can retain control over strategic direction while delegating day-to-day operations to professionals, maintaining operational expertise and continuity.
- Refine the articles of association
- Clearly define succession mechanisms, voting rights ratios, and decision-making procedures for major matters to mitigate risks of potential chaos.
Conclusion
The Wahaha incident is not merely a personal career change for Zong Fulili, but a true reflection of the generational transition of control in China’s private enterprises. It reminds us that sustainable corporate development relies on transparent, robust governance systems, not solely on family will.
From institutional arrangements to equity structures, from founder authority to professional management, China’s private enterprises are charting a path that preserves the founder’s vision while ensuring enduring corporate growth. Wahaha represents just one case study, yet the governance challenges and trends it reveals hold universal significance for the entire private sector.
Written by Xueying Yang; Content planning: Gang Sun; Xueying Yang; Proofreading: Gang Sun
This article is provided by Sunfield Chambers Solicitors & Associates. The content of this article is based on publicly available information and the author’s understanding, and does not constitute any form of professional legal advice or basis for business decisions. Readers should refer to this article in the context of their own actual situation and consult relevant professionals for specific guidance. The author and the publishing platform do not assume legal responsibility for any consequences arising from the use of the information in this article.
Consultation with Specialized Lawyers
Abraham Sun
Principal Solicitor
As the Principal Solicitor, Abraham has been working with numerous clients including listed companies, state-owned enterprises, ultra-high-net-worth clients, and investment banks. Customers in various industries including Australian and Chinese companies and individual investors, had achieved considerable economic benefits with his professional legal advice.
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Dickson mainly conducts dispute resolutions and commercial litigation in areas across insolvency, corporations, employment, real property and consumer law. He is proficient in English and Chinese Mandarin, and have extensive experience acting for clients who have limited or no English skills in complex disputes and litigation matters.
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Linda assisted our legal team with a range of litigation matters in Australian intermediate and superior courts. She has established solid foundations in litigation from assisting in matters from the initial investigation stage to briefing and liaising with barristers and also assisting our solicitors at court appearances.
Bhanu Seemar
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Bhanu is a commercial litigation lawyer who has extensive experience working closely with counsel on a range of commercial law matters including contract disputes, insolvency disputes, consumer and franchise disputes, shareholder claims, financial services and regulatory enforcement matters, corporations law, and class action litigation.
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