In a "fair market", transactions are generally only consummated when the "arms length" Buyer's and Seller's opposing vested interests over-lap. In corporate governance, decisions are generally made through a series of procedures that are deemed to represent ultimately, not more than 100% of the "voting equity" shares. Various jurisdictions recognize that corporations may be effectively controlled by relatively small portions of these equity shares. For example, in Ontario, Canada the wording is something to the effect of ..."in the absence of any larger shareholder, an effective controlling block can be as small as 20%". (This is, of course, quite logical, since the "absence of any large...

In a "fair market", transactions are generally only consummated when the "arms length" Buyer's and Seller's opposing vested interests over-lap. In corporate governance, decisions are generally made through a series of procedures that are deemed to represent ultimately, not more than 100% of the "voting equity" shares. Various jurisdictions recognize that corporations may be effectively controlled by relatively small portions of these equity shares. For example, in Ontario, Canada the wording is something to the effect of ..."in the absence of any larger shareholder, an effective controlling block can be as small as 20%". (This is, of course, quite logical, since the "absence of any larger" suggests that there can only be at most 4 other "concentrated" ownership position none of which is larger and in practice is unlikely to be anywhere close to 4x 19.9%)

Bottom line, most of the "investment" contracts I've seen force the "borrower" to pledge their shares as collateral for the loan. They also contain provisions that say effectively say that if "management" is not meeting its objectives, the pledged shares can be voted by the investor. The net result is that the emergence of a class of "vulture" capitalists that have a vested interest in lending money, knowing that this is may be a cheap way to gain control and replace current management.

The bottom line is that it's necessary "prudence" to establish an acceptable level of trust with a lender, that is commensurate with the risks!