I'm very new to being a shareholder in a business and know nothing of the financial side because I am just a shareholder and not allowed to view the accounts etc. Long story short my % in the company (that we started together) have dropped without me being notified due to the director just buying more shares to pay bills etc. Is this legally ok? Should I have been notified? Shouldn't this have been done via a loan to the business? If it was done because director knew the business would not be able to pay him back is this legally ok?

  • What fraction of the shares do you own? I assume that if you don't have access to the accounts that you are a minority shareholder. Does the director own more than 50% of the shares? Mar 6 '19 at 0:28
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    "not allowed to view the accounts" This is very dodgy. What's to stop the other director pocketing all the money and leaving you with X% of nothing? Mar 6 '19 at 0:29
  • Well, legally he does not have to show me the books as I am a shareholder ? Correct me if I'm wrong. Also he states the account is linked to his personal bank account therefore I could not have any access to it either. Mar 6 '19 at 3:46

I believe the term you need to raise with the other director is "minority oppression".

While actions taken in bad faith are more likely to be found to be oppressive, conduct may be oppressive even if undertaken lawfully and in good faith if the result is a disadvantage or burden on the minority that is beyond what could be considered as commercially reasonable and fair.


  • Thanks for this I will be bringing these points up with him. Mar 6 '19 at 3:47

Is this legally ok?

If the new shares have been authorized - which could have happened before you joined - and the purchase happens roughly at book value, then yes, that is fair. You not dong your homework regarding board authorizations is your problem, not his.

For many (startup level) companies that is how you pay the bills. You collect investor money based on a specific valuation. Now, any new issuance of shares may be correlated with an offer to investors to preferably buy their shares, or with a new series issue. As long as the valuations are fair (i.e. the shares are not sold ridiculously low compared to what the company is worth) - nothing to object.

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