Q: Corporation S in California. 50/50 ownership. Can my partner hire his family member without specific approval?
His hiring created a huge conflict of interest and was done without authorization and due hiring process. Would it be possible to fire that employee?
It really depends what the bylaws say and I bet they don't address it. Thus, any decisions must be jointly made by the directors or could be made by the officers. My guess you are both directors and officers. If you don't want his family members working there you need to tell him.
The above is not legal advice. It is an illustration of options that can be used in certain situations. I have not examined all of your facts, if I did I might provide a different response.
Based on the size of the corporation; 50-50 owned, under the California corporate law, there must be at least two directors. Almost certainly you shareholders both are those required directors as well. Directors of the Board are bound by the “duty of care” which in turn entails “business judgment rule”. Under this rule, a member must act in good faith, gather information and make an informed decision, don’t waste resources of the corporation and act in the best interest of his or her corporation.
Under the duty of loyalty, a board member’s conduct must not be self-serving.
The bylaws may also have a provision with respect to this matter; requiring more than 50% vote for hiring an officer/employee. In hiring officers/employees of the corporation, the board members must adhere to the above standards. This should be the test whether your co-shareholder’s act has conformed to these standards. I handle so many such businesses and can only imagine what could go wrong under the circumstances. Consult a business attorney. Good luck.
Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.
The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.
Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.