SUBJECT – “JURISPUDENCE”

TOPIC – “SIGNIFICANCE OF THE CONCEPT OF ‘PERSONALITY’

IN THE STUDY OF LAW”

SUPERVISED BY:
MR. SOURADEEP RAKSHIT

SUBMITTED BY:
NAME: VITO K SHOHE
Roll. No. - 08
COURSE: B.A LLB

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 ACKNOWLEDGEMENT

With profound gratitude and sense of indebtedness I place on record my sincerest thanks to

MR. SOURADEEP RAKHSIT, Assistant Professor in Law, Indian Institute of Legal

Studies, for his invaluable guidance, sound advice and affectionate attitude during the course

of my studies.

I have no hesitation in saying that he/she molded raw clay into whatever I am through his

incessant efforts and keen interest shown throughout my academic pursuit. It is due to his

patient guidance that I have been able to complete the task.

I would also thank the Indian institute of Legal Studies Library for the wealth of information

therein. I also express my regards to the Library staff for cooperating and making available

the books for this project research paper.

Finally, I thank my beloved parents for supporting me morally and guiding me throughout the

project work.

Date:20THNOVEMBER 2017

__________________

NAME

VITO K SHOHE

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 CONTENTS
SL NO. TOPIC PG NO.

1. CHAPTER 1

2. SYNOPSIS...........................................................

3. CHAPTER 2

4. INTRODUCTION.................................................

5. CHAPTER 3

6. HISTORY OF LEGAL PERSONALITY

7. CHAPTER 4

8. INTERNATIONAL & SPECIAL LEGAL ENTITY

9. CHAPTER 5

10. CONCLUSION.................................................................

11. BIBLIOGRAPHY.................................................................

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 CHAPTER 1

SYNOPSIS
1.1 STATEMENT OF PROBLEMS:

THE PROBLEM FACED IS TO FIND OUT THE CHARECTERISTICS AND

BEHAVIOUR OF A LEGAL PERSON AND ALSO THE RIGHTS OF A LEGAL
PERSON.

1.2 RESEARCH OBJECTIVES

The main aim and objective is to understand

 The nature of legal Personality

 The background of Personality in study of Law
 What are the rights of a legal person

1.3 RESEARCH METHOD

DOCTORINAL FORM IS USED

SOURCES OF DATA
The Primary sources:
Authorities
The Secondary sources:

 Articles

 Books

 Website
1.4 HYPOTHESIS

Characteristics and qualities (such as age and domicile) from which human beings derive
their legal capacity and status, within their society's legal order. It is the sum total of an
individual's legal advantages and disadvantages.

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 CHAPTER 2

INTRODUCTION

Characteristics and qualities (such as age and domicile) from which human beings derive
their legal capacity and status, within their society's legal order. It is the sum total of an
individual's legal advantages and disadvantages. To have legal personality means to be
capable of having legal rights and duties within a certain legal system, such as to enter into
contracts, sue, and be sued. Legal personality is a prerequisite to legal capacity, the ability of
any legal person to amend rights and obligations.
Legal persons are of two kinds: natural persons – people – and judicial persons – groups of
people, such as corporations, which are treated by law as if they were persons. While people
acquire legal personhood when they are born, judicial persons do so when they are
incorporated in accordance with law.  legal person (in legal contexts often simply person,
less ambiguously legal entity) is any human or non-human entity, in other words, any human
being, firm, or government agency that is recognized as having privileges and obligations,
such as having the ability to enter into contracts, to sue, and to be sued.
The term "legal person" is however ambiguous because it is also used in contradistinction to
"natural person", i.e. as a synonym of terms used to refer only to non-human legal entities.
So there are of two kinds of legal entities, human and non-human: natural persons (also
called physical persons) and juridical persons(also called juridic, juristic, artificial, legal,
or fictitious persons, Latin: persona ficta), which are other entities (such as corporations) that
are treated in law as if they were persons.
While human beings acquire legal personhood when they are born (or even before
in some jurisdictions), juridical persons do so when they are incorporated in accordance with
law.

A legal person (in legal contexts often simply person, less ambiguously legal entity)[1][2] is

any human or non-human entity, in other words, any human being, firm, or government
agency that is recognized as having privileges and obligations, such as having the ability to
enter into contracts, to sue, and to be sued.[3][4][5]
The term "legal person" is however ambiguous because it is also used in contradistinction to
"natural person", i.e. as a synonym of terms used to refer only to non-human legal entities.[6][7]
So there are of two kinds of legal entities, human and non-human: natural persons (also
called physical persons) and juridical persons(also called juridic, juristic, artificial, legal,
or fictitious persons, Latin: persona ficta), which are other entities (such as corporations) that
are treated in law as if they were persons.[4][8][9]
While human beings acquire legal personhood when they are born (or even before
in some jurisdictions), juridical persons do so when they are incorporated in accordance with
law.
Legal personhood is a prerequisite to legal capacity, the ability of any legal person to amend
(enter into, transfer, etc.) rights and obligations.

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In international law, consequently, legal personality is a prerequisite for an international
organization to be able to sign international treaties in its own name.

The term person and personality has been the object of legal and philosophical and moral
sense which means rational substratum or quality of a human being. It has also been used in
theanthropological or biological sense by which person means as one of the species. In the
legalsense the person has special meaning and importance. In law the word person is not
confined to any human being but is given an extended meaning which includes entities or
associations other than human beings. An attempt therefore is made to define the concept of
person which possesses judicial meaning. Legal personality is an artificial creation of law.
Entities recognised by law are capable of being parties to a legal relationship. A natural
person is a human being whereas legal persons are artificial persons! such as a corporation!
created by law and given certain legal rights and duties of a human being" a being! real or
imaginary! who for the purpose of legal reasoning is treated more or less as a human being

All legal persons can sue or be sued. A legal personality is what grants a person or
organization rights and responsibilities under thelaw. $ince legal systems are built for use by
human beings! humans are usually automaticallyassumed to have a legal personality. In the
modern world! the concept of legal personality isfrequently a part of discussions about the
rights or legal responsibility of entities such ascorporations that cannot be defined by a single
person. The concept has also been and continuesto be an important part of the discussion on
human rights. The other instance in which a legal personality becomes an important issue is
when the entity inquestion is not a human! but a business! partnership! or corporations. $ince
laws generally only

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 CHAPTER 3

HISTORY

The concept of legal personhood for organizations of people is at least as old as Ancient
Rome: a variety of collegial institutions enjoyed the benefit under Roman law.
The doctrine has been attributed to Pope Innocent IV, who seems at least to have helped
spread the idea of persona ficta as it is called in Latin. In canon law, the doctrine of persona
ficta allowed monasteries to have a legal existence that was apart from the monks,
simplifying the difficulty in balancing the need for such groups to have infrastructure though
the monks took vows of personal poverty. Another effect of this was that as a fictional
person, a monastery could not be held guilty of delict due to not having a soul, helping to
protect the organization from non-contractual obligations to surrounding communities. This
effectively moved such liability to individuals acting within the organization while protecting
the structure itself, since individuals were considered to have a soul and therefore capable of
being guilty of negligence and excommunicated.
In the common law tradition, only a person could sue or be sued. This was not a problem in
the era before the Industrial Revolution, when the typical business venture was either a sole
proprietorship or partnership—the owners were simply liable for the debts of the business. A
feature of the corporation, however, is that the owners/shareholders enjoyed limited liability
—the owners were not liable for the debts of the company. Thus, when a corporation
breached a contract or broke a law, there was no remedy, because limited liability protected
the owners and the corporation wasn't a legal person subject to the law. There was no
accountability for corporate wrongdoing.
To resolve the issue, the legal personality of a corporation was established to include five
legal rights—the right to a common treasury or chest (including the right to own property),
the right to a corporate seal (i.e., the right to make and sign contracts), the right to sue and be
sued (to enforce contracts), the right to hire agents (employees) and the right to make by-laws
(self-governance).

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 CHAPTER 4

SEPERATE & INTERNATIONAL LEGAL PERSONALITY

“International legal personality” refers to entities endowed with rights and obligations under
public international law. The term includes both human and non-human entities. Generally,
international legal entities are states, international organizations, nongovernmental
organizations, and to a limited extent private individuals and corporations within a state.

. “The company is at law a different person altogether from the subscribers to the
memorandum; and though it may be that after incorporation the business is precisely the
same as it was before, and the same persons are managers and the same hands receive the
profits, the company is not in law the agent for the subscribers or trustees for them. Nor are
the subscribers as members in any shape or form, except to the extent and in the manner
provided by the Act."

Salomon v. Salomon & Company Ltd [1897] AC 22.

With reference to case law discuss the meaning and effect of Separate Legal Personality.

When a company is formed by registering under the Companies Act 1985, it becomes a
corporation with different characteristics from that of a partnership or other unincorporated
body. Corporations can be compared to a human in that it is an ‘artificial person’ as it has a
separate legal personality, in comparison of that to a natural person (Davies, 1997: 77). The
benefit of having a company is that the people running it are completely separate to its
owners so if either changes throughout the life of the company, the business does not need to
wind up and begin all over again. Companies can also enjoy the benefits of limited liability in
that stakeholders will only lose what they have invested if the company does go into
administration.

The case that helps us understand separate legal personality is that of Salomon v. Salomon &
Co. Ltd (1897) AC 22. Here Mr. Salomon incorporated his sole trader business into a private
limited company in order to provide his family with some personal stake in the business. Mr.
Salomon became the clear majority shareholder, enjoying 99% of the shares along with a
£10000 debenture while his wife and 5 children held one share each. This complied with the
legislation at the time being a company had to have 7 members. Unfortunately the company
faced trading difficulties and went into liquidation. Although there were attempts from
creditors and liquidators to hold Mr. Salomon liable for the debts of the business, the House
of Lords held that Mr. Salomon and the business were separate entities due to the ‘veil of
incorporation’. Farrer & Hannigan (1998: 68) describe the somewhat humorous, yet
compliant comment from the Law Quarterly Review in reference to the case:

‘The House of Lords had recognised that one trader and six dummies would suffice and that
the statutory conditions were mere machinery.’

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Therefore the formation of the company was perfectly legitimate and the veil of incorporation
was what made Mr. Salomon the individual, different from Salomon & Co. Ltd once all rules
and regulations had been complied with.

This said there can be occasions where the corporate veil is lifted in order to obtain access
financially to the members of the company. Whilst there can be many reasons for the
corporate veil to be lifted, the rule of thumb is when it’s in the interests of justice to do so.
The veil can be lifted in two different ways, by legislation or by the courts. Where the
company has less than 7 members for more than 6 months, everyone can be held responsible
for debts incurred by the company during that time under legislation. An individual within a
company may also be taken to court where they were aware tax evasion was occurring. In the
case of Gilford Motor Co. Ltd v Horne (1933) Ch 935 CA, a Managing Director of a
company agreed not to petition customers from his employees. When he was leaving
employment he set up his own company and began to implore customers but the courts ruled
that this was purely to hide his own mismanagement in the old company and held him liable
for fraud. Legislation may also highlight fraudulent trading, reckless trading, and the
existence of a group of companies. Barber (2001: 24) highlights the effects of fraudulent or
wrongful trading:

‘The directors will be personally liable to contribute towards paying the company’s debts.
The distinction between them and the company as a separate persona is disregarded.’

If the courts decide to lift the corporate veil, they will do so where they feel it is reasonable
and equitable. When an English subsidiary was formed by an American company so that they
could make and sell tyres in the European market in the case of Firestone Tyre & Rubber Co.
V Llewllin (1957) 1 All ER 561, the courts held the American company was liable to pay tax
on the profits of the subsidiary. Even though the subsidiary was independent in its day to day
business, it would transfer profits to the American company after deducting a specific sum.
The courts ruled that the subsidiary was an agent for the American company and it was
therefore liable to pay tax on the English profits.

Similarly, the courts may decide to lift the veil where a group of companies should be treated
as one unit. This happened in Holdsworth & Co. V Caddies (1955) W.L.R. 352, H.L. where
Caddies was the managing director of the Holdsworth parent company. It was argued that he
could not be disciplined to dedicate all his time to the subsidiaries given they all had their
individual board of directors. Lord Reid at 367 said “an agreement in re moratoria and must
be construed in light of the facts and realities of the situation" (Davies, 1997: 167). As their
argument was too technical it was discarded. In the courts eyes if the company has been
formed for fraudulent reasons or to perpetrate an injustice against minority shareholders, the
veil may also be pierced.

There are many obvious benefits to forming a company but there can also be consequences.
The veil of incorporation only allows for legal action to be taken against the company, not
individuals within it. Shareholders do not have holdings on any property the company
considers an asset. Limited liability means only the company is liable for its debts.
Shareholders give up all say in the business once they sell their shares to another party. A
company will still exist even where members pass away as it is an entity in its own right.
Corporation tax is also to the company’s disadvantage while it needs to ensure certain
information is made available while making returns to the Companies Registration Office.
All benefits and detriments should be considered before wishing to form a company.

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We have seen how a company is completely separate from shareholders and those individuals
running it. The veil of incorporation allows the company to be treated it if were indeed an
individual itself. Dine (2005: 25) defines the very obvious benefits of starting a company:

‘Is is free to develop as an instrument of business shaped by both the people involved in its
running and those regulating its existence.’

A company will survive regardless if management changes frequently or even if shareholders

sell up. Provided it can comply with all regulations of the Companies Acts it will remain until
such times where it is decided to wind up the business or if they face unfortunate
administration.

2. “A company being a legal entity can enter into contracts as an individual can. It is however
subject to one major limitation from which the individual is free: it cannot enter into a
contract which is ultra vires."

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 CHAPTER 5

CONCLUSION

All legal persons can sue or be sued. A legal personality is what grants a person or
organization rights and responsibilities under the law. Since legal systems are built for use by
human beings! humans are usually automatically assumed to have a legal personality. In the
modern world! the concept of legal personality is frequently a part of discussions about the
rights or legal responsibility of entities such as corporations that cannot be defined by a single
person. The concept has also been and continues to be an important part of the discussion on
human rights. The other instance in which a legal personality becomes an important issue is
when the entity in question is not a human! but a business! partnership! or corporations. Since
laws generally only.

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 BIBLIOGRAPHY

BOOKS:

 Dr. PARANJEE,N.V.,JURISPRUDENCE AND LEGAL THEORY,Eighth Edition,

2016
 DIAS,R.M.V.,,JURISPRUDENCE,BUTTERWORTHS,Sixth Edition,2012

WEBSITE:
 https://www.legalbites.in/rights-duties-jurisprudence/
 https://www.civilserviceindia.com/subject/Political-Science/notes/rights-meaning-
and-theories.html

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