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I was wondering if it is legal for company directors that also work and operate the business to gift themselves shares during a capital raise in order to retain their controlling interest in the company? The rationalisation being that they aren't earning enough.

As a founding member and now minor share holder (as a result of this already occurring once before) should I be questioning the legality of this? The first time this happened was to intentionally dilute me as the feeling was I had too many shares for someone no longer active in the business.

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    A jurisdiction would be helpful.
    – Pete B.
    May 28, 2020 at 12:21
  • to answer the question: "should I be questioning the legality of this?" requires you to specify the country.
    – mhoran_psprep
    May 28, 2020 at 14:25
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    Sorry, Australia. Appreciate any advice and I understand this may not be universally the same system but I imagine certain ethical principles will be similar across the board.
    – Matthew
    May 28, 2020 at 17:46

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Not sure of specific company laws in Australia.

In general board of directors can decide the compensation of CEO/founding member and others roles in cash and stocks. This is generally how the smaller share holders get squeezed out. Unless you can establish gross injustice and take it up with company law board there isn't much that can be done to stop the board resolution.

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