One family member who helps run a Phoenix construction company told me the following unfolding story. The other founding member, without prior notification or required shareholder approval, pledged $275,000 of the construction company’s equity as collateral for a non-business-related loan.
Only in 2011, when the bank called the loan, did the other shareholders become aware of the loan’s existence. The entire $275,000 loan proceeds are gone. The other shareholders voted the empty-handed co-founder out of the company, but there are many unresolved issues, including the long-term viability of the construction firm.