corporate-law australia shareholders incorporation
Can a private company board of directors issue new shares?
<p>If so, wouldn't this be unfair against shareholders as this would devalue their shares and voting rights?</p>

<h2>Not in <a href="/questions/tagged/australia" class="post-tag" title="show questions tagged &#39;australia&#39;" rel="tag">australia</a></h2>

<p>Changes in shareholding of private companies require the approval of all existing shareholders.</p>

<p>However, in general (for private and public companies), shares are issued for something of value to the company - cash or something else - and therefore of value to the existing shareholders. The directors (and shareholders in private companies) need to decide if this is in the company’s best interest.</p>

<p>Yes in the US. Boards are constrained by the certificate of incorporation and by state law restrictions on necessary approvals.</p>
<p>But in the situation you're describing, board members are most constrained by their fiduciary duties (and accompanying personal liability). Directors have a duty of care: they can't be ignorant and neglect to sort out the company's value and then issue shares well below fair market value. Directors also have a duty of loyalty: they can't issue shares to themselves at below fair market value to the detriment of the other shareholders.</p>
<p>Fiduciary duties are what keep this from being a problem among normal companies. Grifty management/boards occasionally do it because, well, grift.</p>
