Juristic Personality or Corporate Personality
Ethical Natural law philosophers of the 17th and 18th centuries as well as
the metaphysical theorists of 19th century postulated the concept of will as an
essential requirement for exercising legal right. They also believed that personality
is the subjective possibility of a rightful will.
Legal personality is an artificial creation of law. Entities recognized 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[1].
All legal persons can sue or be sued.
Theories of Juristic Personality
1. Fiction Theory – This theory was put forward by Von Savigny,
Salmond, Coke, Blackstone, and Holland etc. According to this theory, the
personality of a corporation is different from that of 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 are
attributed to the corporate entity. As a result of this, any change in the
membership does not affect the existence of the corporation.
It is essential to recognize clearly the element of legal fiction involved
in this process. A company is in law something different from its shareholders
or members[2].
The property of the company is not in law the property of the shareholders. The
company may become insolvent, while its members remain rich[3].
Gray supported this theory by saying that it is only human beings that are
capable of thinking, therefore it is by way of fiction that we attribute ‘will’
to non-human beings through human beings who are capable of thinking and assign
them legal personality.
Wolf said that there are three advantages of this theory. It is analytical,
more elastic and it makes easier to disregard juristic personality where it is
desirable.
2. Concession Theory – This theory is concerned with the Sovereignty
of a State. It pre-supposes that corporation as a legal person has great
importance because it is recognized by the State or the law. According to this
theory, a juristic person is merely a concession or creation of the state.
Concession Theory is often regarded an offspring of the Fiction Theory as
both the theories assert that the corporation within the state have no legal
personality except as is conceded by the State. Exponents of the fiction
theory, for example, Savigny, Dicey and Salmond are found to support this
theory.
Nonetheless, it is obvious that while the fiction theory is ultimately a
philosophical theory that a corporation is merely a name and a thing of the
intellect, the concession theory is indifferent to the question of the reality
of a corporation in as much as it focuses only on the source (State) from
which the legal power of the corporation is derived.
3. Group Personality Theory or Realist Sociological Theory – This
theory was propounded by Johannes Althusius and carried forward by Otto Van
Gierke. This group of theorists believed that every collective group has a real
mind, a real will and a real power of action. A corporation therefore, has a
real existence, irrespective of the fact whether it is recognized by the State
or not.
Gierke believed that the existence of a corporation is real and not based
on any fiction. It is a psychological
reality and not a physical reality. He further said that law has no power to create
an entity but merely has the right to recognize or not to recognize an entity.
A corporation from the realist perspective is a social organism while a
human is regarded as a physical organism. This theory was favoured more by the
sociologists rather than by the lawyers. While discussing the realism of the
corporate personality, most of the realist jurists claimed that the fiction
theory failed to identify the relationship of law with the society in general.
The main defect of the fiction theory according to the realist jurists was the
ignorance of sociological facts that evolved around the law making process.
Horace Gray, however, denied the existence of collective will. He called it a figment. He said that to get rid of the fiction of an
attributed by saying that corporation has a real general will, is to derive out
one fiction by another.
4. The Bracket Theory or the Symbolist Theory – This theory was
propounded by Rudolph Ritter von Jhering (also Ihering). According to Ihering,
the conception of corporate personality is essential and is merely an economic
device by which we can simplify the task of coordinating legal relations.
Hence, when necessary, it is emphasized that the law should look behind the
entity to discover the real state of affairs. This is also similar to the
concept of lifting of the corporate veil.
This group believed that the juristic personality is only a symbol to
facilitate the working of the corporate bodies.
Only the members of the corporation are ‘persons’ in real sense of the
term and a bracket is put around them to indicate that they are to be treated
as one single unit when they form themselves into a corporation.
5. Purpose Theory or the theory of Zweck Vermogen - The
advocates of this theory are Ernst Immanuel Bekker and Alois von Brinz. This
theory is also quite similar to the fiction theory. It declared that only human
beings can be a person and have rights. This theory also said that a juristic
person is no person at all but merely a “subjectless” property destined
for a particular purpose. There is ownership but no owner. Thus a juristic
person is not constructed round a group of persons but based on an object and
purpose.
The assumption that only living persons can be the subject-matter of rights
and duties would have deprived imposition of rights and duties on corporations
which are non-living entities. It
therefore, became necessary to attribute ‘personality’ to corporations for the
purpose of being capable of having rights and duties.
6. Hohfeld’s Theory- He said that juristic persons are creations of
arbitrary rules of procedure. According to him, human beings alone are capable
of having rights and duties and any group to which the law ascribes juristic
personality is merely a procedure for working out the legal rights and jural
relations and making them as human beings.
7. Kelsen’s Theory of Legal Personality – He said that there is no
difference between legal personality of a company and that of an individual.
Personality in the legal sense is only a technical personification of a complex
of norms and assigning complexes of rights and duties.
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Complete List of Jurisprudence Notes
5. Jurisprudence- Legal Concepts
6. Jurisprudence- Theories of Juristic Personality
7. Jurisprudence- School of Thoughts
6. Jurisprudence- Theories of Juristic Personality
7. Jurisprudence- School of Thoughts
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