Having a C-Corp, Delaware or no, does not remove personal responsibility. Let's say I form a C-corp and accept client's money. The company then just happens to spend all that money on me and not deliver any product or service. I believe that is still called fraud and the individual is still liable.
That may be a harsh example.
Business is still about people. Regardless of whether an individual's credit it tied to the company - and in this case I believe it is - these decisions affect his future ability to conduct business. These decisions affect his relationships with other people.
Telling everyone to take a hike may be a short-term solution. However, I believe finding a win-win solution among all parties is a long-term win.
So many things in this thread that make no sense to me. The guy is a minority share holder and acting in good faith, this is a completely different situation than a sole proprietorship with outright fraud.
These things are not related.
Thomas' advice may sound harsh but it is absolutely the most realistic approach here, he has to think about #1 for a bit and divorce himself from identifying corporate debt with private debt. He technically doesn't owe anybody anything as far as I can see and by assuming responsibility might actually make matters worse (because he is now at least acting as a signing officer of the company).
No, it isn't harsh at all, but I think that to people that have never been on or over the edge that it may sound harsh.
I had a stake in a Canadian gas station, the lady that ran it had signed up for some stupid carpet cleaning machine that they were paying through the nose for. She was complaining about how much it had cost and how many years they would still be under contract, it would have cost about 50 times what the p.o.s. was worth.
So I asked for permission to negotiate a solution, received it and called the company. I presented them with two options, $100 to buy out the contract (and keep the machine) or a very protracted collection procedure with 0 chance of success and a very large amount of bad publicity. The one phone call was all it took.
Business is not always being nice, and in this case the OP is being way too nice and is not looking out for his own interests as much as he should. The fact that his co-founder left him to rot is particularly galling.
Oh, and I think you meant 'wouldn't', not 'would'.
Corporate liability does not shield you from fraud, negligence, or other torts.
It most certainly does shield you from personal liability for debts the company incurred in good faith (meaning: virtually all the company's debts).
People on this thread are giving what seems to me to be some spectacularly bad advice. Do not throw your own personal finances down the toilet after your company's.
When a C Corp starts out it has no credit rating. You have to back it with your credit until the corporation can stand on it's own. Some of these debts will fall back to those who guaranteed them.
The corporation could file for bankruptcy and possibly the bankruptcy court could sort it all out, which sounds like the best thing for those involved.
That depends, if the board approves the compensation package and it does not run afoul of the letter of contract law, you are free to compensate yourself how you feel assuming that you are a for profit corporation. Generally contract law rules out over that situation though as generally contracts spell out you give me x and I provide you with y. Not delivering on the contract in a grossly negligent way could be fraud, but you would be surprised at the liberties one can take under the protection of limited liability, I have seen the worst of the worst operate within the confines of limited liability while just shying south of the fraud threshold. It is an art many sociopaths master.
That may be a harsh example.
Business is still about people. Regardless of whether an individual's credit it tied to the company - and in this case I believe it is - these decisions affect his future ability to conduct business. These decisions affect his relationships with other people.
Telling everyone to take a hike may be a short-term solution. However, I believe finding a win-win solution among all parties is a long-term win.