Can a CEO dilute shares be giving more away without the consent of the board?
Say you have a corporation, with 3 equal shareholders, each near 100 shares. The CEO decides to give a new investor 100 shares. Only 2 of the shareholders are present, and the third finds out after the certainty that he was given nosay in the dilution of his shares. Legal?
Best Answer:
No, it's not legal but Republicans do it every day Obama/Biden 08!
First, it looks like you didn't follow the required notice procedures earlier holding a vote of the shareholders (or directors, if you were acting as such). Second, no, if he was not notified or did not provide written consent for the see to be held without formal notice, then this would be a breach of your fiduciary duties to the him as a shareholder. Third, surrounded by most states, even if you do obtain a vote of a majority of shareholders, it is a breach of the fiduciary duty of the majority shareholders to dilute the shares of the minority shareholders. They must be offered an opportunity to purchase shares at the same price as the new investors and contained by such a quantity that they can retain their voting interest. *This entry is not intended to constitute legal advice and is not intended to create any attorney-client, fiduciary, or other court relationship.
A public company will maintain control over issuing stock at the board stratum. I don't believe its legal, and I believe it's against the NYSE and SEC standards / regs, but honestly I'm not sure.
