Corporate Personality

As per the law, a corporation is an artificial person. It has the ability to enjoy rights, fulfill its duties and hold property in its own name. Hence, the concept of corporate personality is a singular creation of the law. The best example of this is the corporate personality of a company under the Companies Act, 2013.

Such a corporation under the law has a legal identity of its own. Such a corporation is represented by its members and agents. However, unlike a natural person, these corporations have a perpetual existence.

Such companies and corporations can sue and even be sued upon. Other such examples of institutes with corporate personalities include banks, universities, corporate bodies, colleges, an association of persons, etc.

Theories of Corporate Personality

Now, there are many theories that show and reflect the nature and scope of this corporate personality as created by law. These theories offer us a theoretical perspective on the topic allowing us a better understanding. However, in the real world with practical problems, they are of little use.

No one theory completely captures the essence of corporate personality. So here we will look at a few of the popular ones,

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) Bracket Theory

This is one of the more famous and feasible theories of corporate personality. The bracket theory is also known as the symbolist theory which states that a corporation is created only by its members and its agents.

So the people who represent the corporation make up the corporation. The law only puts a bracket around them for convenience purposes. So we consider these members and the corporation as one unit.

In the practical world, however, we find that the personality of the corporation is separate than that of its members and agents