CORPORATE PERSONALITY

INTRODUCTION

In the subject of the statute and lawful hypothesis, the law perceives two sorts
of people that are legal person and corporate personality.

LEGAL PERSON

A legal entity is not a person but is recognized as a person under the law. This
includes things, property, institutions, groups, etc. The law treats them as
legally binding persons just like natural persons.

First, Legal personality requires personalization, but personalization

generally does not mean that a person has been granted legal personality.

Legal personality arises when the law goes beyond a collection of people or
things and recognizes a single entity that represents a collection of people or
things but is different from them.

Corporate Personality

A corporation is an artificial being created by a group of individuals with the

aim to do business. Being an artificial person, it has been given life through the
legal clauses and thus it has been deemed to have a corporate personality
through law.

Corporate personality is a legal concept. The corporate personality and it

essentially asserts that a corporation has a separate legal identity from its
members. The idea of corporate personality is used in both English and Indian
law.

Juristic personality of corporations must contain three essential conditions.

First, a group or body of human persons must be linked for a specific purpose;
Second, the company must have organs through which it acts; and

Third, the company is given will/animus by legal fiction.

The company's creditors can only sue the corporation to recover their money;
they cannot sue individual members.
Similarly, the business is not liable for the individual debts of its
shareholders/members, and the company's property is solely used for the
company's profit.

It has certain rights and responsibilities, including the power to own property,
enter into contracts, and sue and be sued in the name of the company.

The member's rights and obligations are distinct from those of the company's.
The company's legal personality and independence are conferred to it when it
is granted legally

CORPORATION AGGREGATE

Corporation aggregate refers to Group of people who make up a corporation.

A distinct legal personality is given to group or collections of persons who
become united to accomplish a task or purpose

CORPORATION SOLE

Corporation sole is a legal entity consisting of single (sole) incorporated office,

occupied by single (sole) natural person. Ex: PM, CAG, DM basically holds any
public office
Fiction Theory:

The fiction theory was pronounced by Savigny[i] and further expounded by

Salmond, Coke, Blackstone and Holland.

The word fiction implies something which is not real, which is exactly what
the theory implies an imaginary creation of law. It presupposes that
incorporation is a made-up extension of personality resorted to for ensuring
smooth functioning of government and facilitating dealings with property.

According to the fiction theory, a personality is attached to corporations,

institutions, and funds by a pure legal fiction. The personality attributed to the
corporation is different from that of its members.

In fact there exists a double fiction in the case of a corporation:

By the first fiction, the corporation is given a legal entity and through the
second fiction, the corporation is confered with the will of an individual
person. Through this double fiction, the personality of the corporation arises
which is different from its members.

Savigny regarded corporation as an exclusive creation of law having no

existence apart from its individual members who form the corporate group
and whose acts by fiction, are attributed to the corporate entity.

Thus, according to Savigny, the right of all corporations does not exist in the
individual members or group and a change in an individual member or, even
of all the members, does not affect the essence and unity of a corporation.

Salmond also supports the view that a corporation has a fictitious existence.
That a corporation is distinct from its members that it is capable of surviving
even the last member of them as company. bcz It being incorporated by an Act
of Parliament can only be dissolved only by another Act of Parliament

Criticism:
This theory has been criticised because it does not adequately address
corporate civil and criminal culpability. If the company's are assigned to it by
the fiction of law, it implies that it should always be legal, because the will
confered by law could never be used for illegal purposes. The firm would only
engage in intra vires activities and would never engage in ultra vires activities.

Realist Theory:

This theory was propounded by Gierke, the great German jurist.

According to Gierke, every group has real mind, a real will and a real power of
action. The existence of a group goes beyond the aggregate of the
individualities of persons forming the group.

According to this theory, every group has a personality of its own despite
being a social one or a political one. This group has a will of its own which is
different and distinct from the individual wills of the members

A corporation, also has a real existence independent of the fact whether it is

recognised the State or not. The will of the corporation is expressed through
the acts of its servants and agents. Being a juristic person is also subject to
certain rights and liabilities.

According to this theory, a corporation is a social organism whereas man is a

physical organism. It contends that corporation uses men agents to carry on
their functions. The will of the corporation finds expression through the acts
of its directors, employees or agents. The existence of a corporation is actually
in fact and not based on any fiction unlike the previous theory. It is a
psychological reality rather than a physical reality.

Criticism:
Professor Gray denies that collective will exists. The corporate will, he claims,
is a fabrication of his imagination. A corporation is not a mythical or legal
entity; it is merely a collection of natural individuals, some of whom have
rights that differ from those of natural persons in common and differs in
various ways.
Concession Theory:

The theory is linked with the philosophy of sovereign state. According to this
theory, the only realities are the sovereign and the individual. They are
treated as persons merely by a concession on the part of the sovereign.

Legal personality is conferred only by law. It assumes that corporation as a

legal person has great importance because it is recognised by the State or the
law.

According to this theory, juristic personality is a concession granted to

corporations by the State. It is entirely at the discretion and disposal of the
State to recognise or not to recognise a corporation as a juristic person.

Criticism:

This theory is often termed as dangerous due to its over-emphasis on State

discretion in the matter of recognising corporation which are non-living
entities. This may lead to dictatorship and arbitrary restrictions on corporate
bodies, particularly the political entities.

Purpose Theory:

The main exponent of this theory is a German jurist called Brinz. In England,
this theory was, supported by E.I. Bekker, Aloys andDemilius.

The theory is based on the fundamental principle that corporations can be

treated as persons for certain specific purposes.

It runs on the assumption that only living persons can be the subject-matter of
rights and duties, and since corporations are non-living entities and they do
not have any rights and duties. To tackle this, the theory believes that it
became necessary to attribute personality to corporation for the purpose of
being capable of having rights and duties.
Bracket Theory

The Bracket theory, also called as Symbolist theory, is associated with the
well-known German jurist Ihring.

According to this theory legal personality is a symbol to facilitate the working

of the corporate bodies. The members of a corporation have certain rights and
duties which are given to the corporation for the sake of carrying business
transaction in a smooth manner.

It is not always convenient to refer to all the members of a corporation. So a

bracket is placed around them to which a name is given. That bracket is the
corporation. Only the members of the corporation i.e. human beings in real
sense are given a bracket to indicate that they are to be treated as one single
unit when they form themselves into a corporation.

Criticism:
There is an inherent weakness in this theory. It does not indicate when can
the bracket be removed and lifted for the purpose of taking note of the
members constituting the corporation.

The Organism Theory:

According to this theory, a company is similar to an organism, with (limbs in

the form of members), a head (top authorities), and other organs.
Furthermore, an individual has one head, a body, and legs, which aid in the
fulfilment of desires and the performance of functions. As per the theory, a
corporation has its own will and body, and also legal rights and
responsibilities.

To have legal rights, you don't have to be a human person. A body that has its
own will and life might have legal rights as well as legal obligations or duties.
A social entity with members, a will, and a body is referred to as a corporate
personality. As a result, the core of this theory would be that a corporate
personality must have a body (head, limbs, and organs), and legal recognition

Ownership Theory

This theory was developed by Bzinz, Bekker, and Demelius and extended by
Planiol.

According to this idea, people, not companies, should have legal rights. It also
states that a legal entity is never a person. It is a property without a subject
that is a legal invention, and this fictitious identity exists only for the purpose
of owning common property. Such a personality is just a kind of property.

Because of their possessions, these individuals can enter into contracts and
take legal action just like real humans.

This ownership theory makes sense when it comes to real estate and money
owned by corporations. In addition, people may only have certain rights and
obligations.

When it comes to estates and money that are solely owned by corporations,
this ownership theory holds some significance. Furthermore, only human
beings could be entitled to certain rights and duties.

As a result, if such a personality cannot be entitled to such rights and

obligations, it should be classified as subjectless property. The core of this
view is that the law protects particular human rights and interests, and
property acquired by a juristic person does not belong to anybody but is
controlled for a certain objective and purpose.

Conclusion:

In summation, there has been no theory which encompasses all the aspects of
the problem of juristic personality. The theories that have been propounded
are philosophical, political or analytical. But it must be borne in mind that
functional basis of the law cannot be ignored. Thus, common law has not
committed to any one single theory of corporate personality.