A PROJECT

ON

BRACKET THEORY OF CORPORATE PERSONALITY

[Submitted as a partial fulfillment of the requirements for B.A.L.L.B. (Hons.) 5 Year Integrated
Course]

Session: - 2019-20

Submitted On:-

03/03/2020

Submitted By: - Submitted To: -

Anuj Bugalia Dr. Abhishek kumar Tiwari
Roll No.: -
35

University Five Year Law College,

University of Rajasthan, Jaipur

 DECLARATION

I, Anuj Bugalia, hereby declare that this project titled “BRACKET THEORY OF
CORPORATE PERSONALITY” is based on the original research work carried out by me
under the guidance and supervision of “Dr. Abhishek Kumar Tiwari”.

The interpretations put forth are based on my reading and understanding of the original texts.
The books, articles, websites etc. which have been relied upon by me have been duly
acknowledged at the respective places in text.

For the present project which I am submitting to the university, no degree or diploma has been
conferred on me before, either in this or any other university.

Date:- 03/03/2020

Signature
Anuj Bugalia

Roll No.:-35
Semester:- VI A
 CERTIFICATE

Date : 03/03/2020

Dr. Abhishek Kumar Tiwari

Faculty

University Five Year Law College

University Of Rajasthan, Jaipur

This is to certify that ANUJ BUGALIA student of VI semester, Section A has carried out
project titled “BRACKET THEORY OF CORPORATE PERSONALITY” under my
supervision. It is an investigation of a minor research project. The student has completed
research work in stipulated time and according to norms prescribed for the purpose.

SUPERVISOR
 ACKNOWLEDGEMENT

I have written this project “BRACKET THEORY OF CORPORATE PERSONALITY”

under the supervision of Dr. Abhishek Kumar Tiwari, His valuable suggestions herein have
not only helped me immensely in making this project but also in developing an analytical
approach to this work. I would like to express my sense of gratitude to those who took
initiatives to and helped me in making this project.

I am extremely grateful to the library staff and the librarian of the college for the support and
cooperation extended by them from time to time.

I am humbled by the support and cooperation I have got from my friends from time to time and
have enlightened me with their knowledge.

ANUJ BUGALIA
 TABLE OF CONTENTS

S. NO. TITLE PAGE NO.

1 DECLARATION

2 CERTIFICATE

2 ACKNOWLEGEMENT

3 CHAPTER 1 : CORPORATE PERSONALITY

4 CHAPTER 2 : LEGAL THEORIES

5 CHAPTER 3 : BRACKET THEORIES

6 CHAPTER 4 : CONCLUSION

7 BIBLIOGRAPHY
 CHAPTER 1

CORPORATE PERSONALITY

1. Introduction of Corporate Personality:

Corporate Personality is the creation of law. Legal personality of corporation is recognized

both in English and Indian law. A corporation is an artificial person enjoying in law capacity
to have rights and duties and holding property.

A corporation is distinguished by reference to different kinds of things which the law selects
for personification. The individuals forming the corpus of corporation are called its members.
The juristic personality of corporations pre-supposes the existence of three conditions:
(1) There must be a group or body of human beings associated for a certain purpose.
(2) There must be organs through which the corporation functions, and
(3) The Corporation is attributed will by legal fiction. A corporation is distinct from its
individual members.

It has the legal personality of its own and it can sue and can be sued in its own name. It does
not come to end with the death of its individual members and therefore, has a perpetual
existence. However, unlike natural persons, a corporation can act only through its agents.
Law provides procedure for winding up of a corporate body. Besides, corporations the banks,
railways, universities, colleges, church, temple, hospitals etc. are also conferred legal
personality. Union of India and States are also recognized as legal or juristic persons.

Corporations are of two kinds:

1. Corporation Aggregate: Is an association of human beings united for the purpose of
forwarding their certain interest. A limited Company is one of the best example. Such a
company is formed by a number of persons who as shareholders of the company contribute or
promise to contribute to the capital of the company for the furtherance of a common object.
Their liability is limited to the extent of their share-holding in the company. A limited
liability company is thus formed by the personification of the shareholders. The property is
not that of the shareholders but its own property and its assets and liabilities are different
from that of its members. The shareholders have a right to receive dividends from the profits
of the company but not the property of the company. The principle of corporate personality of
a company was recognized in the case of Saloman v. Saloman & Co.1

2. Corporation Sole: Is an incorporated series of successive persons. It consists of a single

person who is personified and regarded by law as a legal person. In other words, a single
person, who is in exercise of some office or function, deals in legal capacity and has legal
rights and duties. A corporation sole is perpetual. Post – Master- General, Public Trustee,
Comptroller and auditor general of India, the Crown in England etc are some examples of a
corporation sole. Generally, corporation sole are the holders of a public office which are
recognized by law as a corporation... The chief characteristic of a corporation sole is its
“continuous entity endowed with a capacity for endless duration”. A corporation sole is an
illustration of double capacity. The object of a corporation sole is similar to that of a
corporation aggregate. In it a single person holding a public office holds the office in a series
of succession, meaning thereby that with his death, his property, right and liabilities etc., do
not extinguish but they are vested in the person who succeeds him. Thus on the death of a
corporation sole, his natural personality is destroyed, but legal personality continues to be
represented by the successive person. In consequence, the death of a corporation sole does
not adversely affect the interests of the public in general.

1
Salomon v A Salomon & Co Ltd [1897] AC 22
 CHAPTER 2

LEGAL THEORIES

Introduction to Legal Theories

Generally, there are two types of person which the law recognized, namely the natural and
artificial person. The former is confined merely for human beings while the latter is generally
referred to any being other than human being which the law recognized as having duties and
rights. One of the most recognized artificial persons is the corporation.

Legal scholars, particularly the jurists, have always explored the issue on the recognition of
corporation as a legal person. In the study of jurisprudence, the separate legal personality of
corporation is based upon theories, which are concentrated upon the philosophical
explanation of the existence of personality in beings other than human individuals.

W. Friedman stated that: “All law exists for the sake of liberty inherent in each individual;
therefore the original concept of personality must coincide with the idea of man.”

Even though there are many theories which attempted to explain the nature of corporate
personality, none of them is said to be dominant. It is claimed that while each theory contains
elements of truth, none can by itself sufficiently interpret the phenomenon of juristic person.
Nonetheless, there are five principal theories, which are used to explain corporate personality,
namely, the fiction theory, realist theory, the purpose theory, the bracket theory and the
concession theory.

Theories Other Than Bracket Theory

1] Fiction Theory

As per the fiction theory, a corporation exists only as an outcome of fiction and metaphor. So
the personality that is attached to these corporations is done purely by legal fiction.
The legal person is created only in the eyes of the law for a specific purpose. The theory was
propounded by Savigny and backed by Salmond and Holland.

2] Concession Theory

This is similar to the fiction theory. However, it states that the legal entity has been given a
corporate personality or a legal existence by the functions of the State. So as per this theory,
only the State can endow legal personalities, not the law.

3] Realist Theory

As per the realist theory, there is really no distinction between a natural person and an
artificial person. So a corporate entity is as much a person as a natural person. So the
corporation does not owe its existence to the state or the law. It just exists in reality. This is
not a very practical theory as it does not apply in the real world.

4] The Purpose Theory

This theory is also known as the theory of Zweckvermogen. Similar to the fiction and
concession theories, it declares that only human beings can be a person and have
rights. Entities other human is regarded as an artificial person and merely function as a legal
device for protecting or giving effect to some real purpose. As corporations are not human,
they can merely be regarded as juristic or artificial person. Under this theory, juristic person
is no person at all but merely as a “subject less” property destined for a particular purpose
and that there is ownership but no owner. The juristic person is not constructed round a group
of person but based on the object and purpose. The property of the juristic person does not
belong to anybody but it may be dedicated and legally bound by certain objects. This theory
rationalized the existence of many charitable corporations or organizations, such as trade
unions, which have been recognized as legal persons for certain purposes and have
continuing fund. It is also closely linked with the legal system which regard the institution of
public law (Anstalt) and the endowment of private law (Stiftung) as legal personalities.
 CHAPTER 3

THE BRACKET THEORY

This theory is also known as the “Symbolic” theory. It was set up by Ihering and later
developed particularly by Marquis de Vareilles-Sommiéres. Basically, this theory is similar
to the fiction theory in that it recognizes that only human beings have interests and rights of a
legal person. According to Ihering, the conception of corporate personality is essential and
merely an economic device by which simplify the task of coordinating legal relations. Hence,
when it is necessary, it is emphasized that the law should look behind the entity to discover
the real state of affairs. This is clearly in line with the principle of lifting of the corporate veil.
Under this theory, rights are not inherent attributes of the human will and that an individual is
not a subject of right by reason that he possesses a will. On the contrary, the will is at the
service of law and it is the interest of man which the law protects.

The symbolist theory is often acknowledged for its availability to justify corporate
personality from non-legal facts but it has been repeatedly rejected by the courts in common
law jurisdictions because it denies the law by deducing that the only legal relation which is
fixed and certain can be discovered by removing the ‘brackets’ of the corporation and
analyzing the relations of the human beings involved.
 CHAPTER 4

CONCLUSION

From the discussion on jurisprudence theories of corporate personality, it is observed that

main arguments lie between the fiction and realist theories. The fiction theory claimed that
the entity of corporation as a legal person is merely fictitious and only exist with the
intendment of the law. On the other hand, from the realist point of view, the entity of the
corporation as a legal person is not artificial or fictitious but real and natural. The realist also
contended that the law merely has the power to recognize a legal entity or refuse to recognize
it but the law has no power to create an entity.

Referring to the English company law case law, it can be seen that in most cases, the court
adopted the fiction theory. Salomon v A Salomon Co Ltd is the most obvious example. It is
also observed that fiction theory provide the most acceptable reasoning in justifying the
circumstances whereby court lifted the corporate veil of corporation. If the entity of the
corporation is real, then the court would not have the right to decide the Circumstances where
there is separate legal entity of the corporation should be set aside. No human being has the
right to decide circumstances whereby the entity of another human being should be set aside.
Only law has such privilege.

Nonetheless, the realist contention that the corporation obtain its entity as a legal person not
because the law granted it to them but because it is generated through its day to day
transaction which are later accepted and recognized by law also seem acceptable.
 BIBLIOGRAPHY

WEBSITES

A] Legal Services

http://www.legalserviceindia.com/legal/article-20-theories-of-corporate-
personalities.html

BOOKS

A] Studies in Jurisprudence & Legal Theory

Dr. N.V. Paranjape, Central Law Agency, Reprint 2010