Definitely illegal in both Australia and the UK, and as far as my legal knowledge extends to the US (directors' fiduciary duties are pretty similar across these

Definitely illegal in both Australia and the UK, and as far as my legal knowledge extends to the US (directors' fiduciary duties are pretty similar across these countries), illegal there as well. In the situation described, founders are essentially sacrificing the valuation of the company (an 'asset' of the company and its shareholders) for their own personal gain - a clear violation of their duty to the company. pyoung - whether the acquiring company is doing anything illegal is probably more open to question (though whether it's unethical is pretty clear in my opinion). It probably comes down to whether their behaviour gets to the point where it could be held liable for inducement to breach a contract, or inducement to breach fiduciary duty. However, the focus of Dan's comment focuses the question (rightly, I believe) on the obligations and behaviour of the founders, which is where most of the responsibility lies.