Q: Corporation S in California. 50/50 ownership. Can my partner hire his family member without specific approval?

A: 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.

A: 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.