Theory of corporate personality in company law
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The legal use of the word ‘person’ has attracted an assortment of theories which is probably second to none in volume. ‘Person’ in law, is both the recognition of an entity as well as the acknowledgement of such an entity’s rights and interests. Granting of ‘personhood’ states then enables an entity to undertake acts and relations that are recognized in the law. In the realm of law, the term ‘person’ is nothing more than an abstraction – a representation through the form of an entity either real or artificial, of certain attributes. These attributes come to form what is known as ‘personality’ in the law.
The effort in this paper has been to provide a description of this conception of corporate personality. In doing so, at first the researcher has attempted to introduce the subject by speaking of personality in the widest possible terms and locating its existence even outside the boundaries of law. The researcher has then outlined the concept of legal personality, its nature, types and implications and while doing so, summarily dealt with the notion of the corporation sole and the corporation aggregate. Next, the researcher has dealt with part of the subject-matter itself by elaborating on the meaning and theoretical underpinnings of the concept of dual personality and the attributes of corporate personality along with a jurisprudential understanding of the same.
Persons in law are seen to be of only two kinds: real/natural and artificial. Human beings are considered ‘real’ or ‘natural’ persons because they are ipso facto persons. The other kind of person is the artificial person, which is a fiction of law invested with limited legal capacity. At this juncture, it is necessary to clarify the meaning of the term ‘capacity’ in law. Capacity is the primary attribute of personality and denotes the ability to commit acts and undertake relations that are recognised in the law. Capacity is what enables a person to have a ‘standing’ in law, be it in the person’s ability to claim-possess-exercise rights, property, enter into contracts, sue and be sued, commit legal injury or be the victim thereof. In other words, capacity in law is the medium through which personality expresses itself.
As mentioned earlier, the law in recognising artificial persons infuses such entities with limited legal capacity. The limitation exists in the sense that artificial persons do not possess personalities in the fullest sense of the term. Their ability to commit legally recognizable acts is limited to the extent that law allows for, nothing more. To provide an example, a body corporate such as a joint stock company is undoubtedly a ‘person’ but cannot be likened to a human person anymore than an apple can be compared to an orange. While human beings as natural persons are capable of every act and relation possible in fact, an artificial person is only capable of those acts and relations allowed in law; the doctrine of ultra vires with respect to joint stock companies prevents such artificial persons from committing acts/undertaking relations that are outside their scope of activities as specified in the Memorandum and Articles of Association.
The familiar theoretical classification of artificial persons follows likewise –
Corporation Sole.
Corporation Aggregate.
Both of the above are however narrow in the sense that they contemplate only one segment of artificial personality i.e. the body corporate. It may be pertinent to note that the law also recognises other forms of artificial personality such as the idol. Indeed Salmond in his work on jurisprudence has chanced to observe on this aspect, “legal persons, being the arbitrary creations of the law, may be of as many kinds as the law pleases.” However, for our present purposes, a discussion on the concept of a ‘body corporate’ will suffice in helping understanding the nature of artificial personality.
The effort in this paper has been to provide a description of this conception of corporate personality. In doing so, at first the researcher has attempted to introduce the subject by speaking of personality in the widest possible terms and locating its existence even outside the boundaries of law. The researcher has then outlined the concept of legal personality, its nature, types and implications and while doing so, summarily dealt with the notion of the corporation sole and the corporation aggregate. Next, the researcher has dealt with part of the subject-matter itself by elaborating on the meaning and theoretical underpinnings of the concept of dual personality and the attributes of corporate personality along with a jurisprudential understanding of the same.
Persons in law are seen to be of only two kinds: real/natural and artificial. Human beings are considered ‘real’ or ‘natural’ persons because they are ipso facto persons. The other kind of person is the artificial person, which is a fiction of law invested with limited legal capacity. At this juncture, it is necessary to clarify the meaning of the term ‘capacity’ in law. Capacity is the primary attribute of personality and denotes the ability to commit acts and undertake relations that are recognised in the law. Capacity is what enables a person to have a ‘standing’ in law, be it in the person’s ability to claim-possess-exercise rights, property, enter into contracts, sue and be sued, commit legal injury or be the victim thereof. In other words, capacity in law is the medium through which personality expresses itself.
As mentioned earlier, the law in recognising artificial persons infuses such entities with limited legal capacity. The limitation exists in the sense that artificial persons do not possess personalities in the fullest sense of the term. Their ability to commit legally recognizable acts is limited to the extent that law allows for, nothing more. To provide an example, a body corporate such as a joint stock company is undoubtedly a ‘person’ but cannot be likened to a human person anymore than an apple can be compared to an orange. While human beings as natural persons are capable of every act and relation possible in fact, an artificial person is only capable of those acts and relations allowed in law; the doctrine of ultra vires with respect to joint stock companies prevents such artificial persons from committing acts/undertaking relations that are outside their scope of activities as specified in the Memorandum and Articles of Association.
The familiar theoretical classification of artificial persons follows likewise –
Corporation Sole.
Corporation Aggregate.
Both of the above are however narrow in the sense that they contemplate only one segment of artificial personality i.e. the body corporate. It may be pertinent to note that the law also recognises other forms of artificial personality such as the idol. Indeed Salmond in his work on jurisprudence has chanced to observe on this aspect, “legal persons, being the arbitrary creations of the law, may be of as many kinds as the law pleases.” However, for our present purposes, a discussion on the concept of a ‘body corporate’ will suffice in helping understanding the nature of artificial personality.
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