Legal Question in Business Law in California

Unless you are capable of voting to restrict the issuance of shares, yes they can do that. If they used sound business judgment they can do that. Theya lso have a legal obligation to protect your financial interest as a partial owner of the company.

You can limit the company's ability to do this by adding an anti-dilution clause to your stock purchase agreement.

You can't unilaterally add an anti-dilution clause, of course; the majority owners would have to consent, which seems unlikely.

The Corporations Code requires general fairness in the issuance of additional shares, including that the corporation receive adequate consideration. See, e.g., sections 409 and 410. Subsection 409(e) says, for example, "The board shall state by resolution its determination of the fair value to the corporation in monetary terms of any consideration other than money for which shares are issued."

For an exposition of the �inherent fairness� fiduciary duty of majority shareholders to the minority, see Jones v. H. F. Ahmanson & Co. (1969) 1 Cal.3d 93 at pp. 108-112.