Presented by

kabita sharma adhikari

LlM second semester

roll no :2

THEORIES OF CORPORATE PERSONALITY

In Jurisprudence, discussion on the nature of corporate personality has always become one
of the major focuses. Even though there are many theories which attempt to explain the
nature of corporate personality, none of them is said to be dominant. It is contented that
while each theory contains elements of truth, none can by itself sufficiently interpret the
phenomenon of a juristic person. Majority of the principal jurisprudence theories on
corporate personality contented that the legal entity of the corporation is artificial. 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.
There are various theories of corporate personality which have attempted to theorize the nature
and authority of it. Even though there are many theories 4 which attempted to explain the nature
of corporate personality none of them is said to be dominant. It is claimed that each theory
contains elements of truth; none can by itself sufficiently interpret the phenomenon of juristic
person. The following are the principal theories of corporate personality:. 1The following are the
principal theories of corporate personality:

1. Fiction Theory

2. Realist Theory

3. Concession Theory

4. Bracket Theory or Symbolist Theory

5. Purpose Theory

1
file:///C:/Users/cc/Downloads/320856784-Theories-of-Corporate-Personality.pdf
6. Kelson theory

7.Theory of corporate social reponsibility

 Fiction Theory: This theory is firstly promulgated by sin bald fieschi Pope Innocent IV
(1243-1254). According to this theory the legal personality of entities other than human
beings is the result of a fiction. Hence not being a human being corporation cannot be a
real person and cannot have any personality of its own. Under this theory rights and
duties attached to corporation as artificial person totally depend on how much the law
imputes to it by fiction. Savigny salmond and Holland are considered as the most ardent
supporter of the fiction theory. This the view that a corporation is so far distinct from its
members that it is capable of surviving even the last of them. Salmond the principal
English fiction theory advocate made it clear that a human being is the only natural
person whilst legal person govern any subject matter other than a human being to which
the law attributes personality. States, corporations and institutions cannot have rights of a
person but they are treated as if they are persons. Under the fiction theory, to exist as a
legal person it depends upon impediment of law. The fiction theory has a reasonable
reasoning to justify the position of unincorporated associations and partnerships.
Gray supported this theory by saying that only human beings are capable of thinking,
whereas a corporation is a non-human entity to which we attribute will through humans
who are capable of thinking and assign them legal personality.2

 Concession Theory
Concession theory is concerned with the sovereignty of the state. It is of the view that as
the corporation is a legal person recognized by state or law, so it is of great importance.
According to this theory, a juristic person is the creation of the state. This theory is allied
to fiction theory. The supporters of this theory are almost same. The theory simply says
that the corporate bodies are having legal personality only to the extent granted by the
state. This theory is different from fiction theory on the point that it identifies law with

2
International Journal of Science and Research (IJSR). Naveen Singh Thakur1 , Divya Singh2 1, 2Post Graduate,
LLM(Corporate Laws), Chandigarh University, Punjab, Indi Volume 7 Issue 4, April 2018 www.ijsr.net pdf page
 the state while fiction theory does not.3 Therefore concession theory is basically linked
with the philosophy of the sovereign national State. Under this theory the State is
considered to be in the same level as the human being and as such it can bestow on or
withdraw legal personality from other groups and associations within its jurisdiction as an
attribute of its sovereignty. Hence a juristic person is merely a concession or creation of
the State.4

 The Real Entity Theory

At the twilight of the nineteenth century, a corporate law theory known as the real entity
theory or organic theory began to emerge and was championed by the German scholar,
Otto Von Gierke. His fundamental claim is that the legal personality of the company is
superimposed upon an organic unit which exists in human society. According to him, the
state and other associations are considered as social organisms and the collective
organisms exist beyond and above individual organisms. Aside the individual will, there
also exists, he opined, a collective will which is incorporated in several social units and
considered juristic persons once recognized as separate legal entities. he explains the
collective personality as the capacity of an association to possess rights and
responsibilities and thus differing from a mere aggregate of several individuals. In his
organic theory, he made it explicit that the collective person is a real person rather than
an imaginary one and its legal status like that of an individual is assigned by law. The
development of the real entity theory towards the end of the nineteenth century was also
aided by the British legal historian, Fredrich William Maitland who holds that a
collective person can will and act by itself and by the men who are its organs in a similar
way a man wills and acts by brain, mouth and hand. He considered it not a fictitious
person but a group-person and its will, a group-will. In all, the premise of the real entity
theorists is that legal entities are not fictitious but real with the capacity of having their
own mind as well as possessing rights and duties they could exercise. Although the real
entity theorist accept that legal entities are persons by virtue of the law and act of the

3
ibid
4
ibid
 State, they nevertheless still maintain that the legal person was in fact not created by the
law, but instead a pre-existing reality only ‘founded’ and acknowledged by the law.5
 Bracket theory( Symbolist Theory)
This theory says that the members of the corporation are the only persons who have
rights and dutie.The granting of juristic personality means putting a bracket round the
members in order to treat them as a unit. This is done for purposes of convenience. In
other words, juristic personality is only a symbol which helps in effectuating the
Interest or the purpose of the group. The theory speaks great truth when it says that
The groups are only to effectuate the interest of its members, but it has certain
Weaknesses also. The contention of the theory that only human beings have personality
and not the group is far from the truth. In modern times, it is agreed on all heads and is
fully established that corporation has a legal Personality which is separate and distinct
From its members and it has entirely different rights and duties. It is the separate
Personality that enters into contract and other legal transactions with others. How
Can a person enter into contract with a bracket? This question hits at the very root
of the theory. An important implication of the theory is that law can remove the
bracket.6
 Purposed theory
According tho this theory personality is only enjoyed by human beings, they alone canbe
the subject of right and duties. The so called juristic personas not the persona at all. Since
they are distinct from their human substratum, if any and since right and duties can onlssy
vest in human beings, they are simply subject less properties designed for certain
purpose. 7Purpose theory says that only human beings have personality. Juristic persons
are no persons at all. They are simply subject less properties meant for certain Purposes.
This theory was formulated mainly to explain the stiffing (foundations)

of German law and here ditasjacens of Roman law. The theory has no application to English or
Indian law where judges have repeatedly held that corporation is persons.
5
NAUJILJ 10 (1) 2019 African journal Page | 183 CORPORATE PERSONALITY IN COMPANY
JURISPRUDENCE: DIVERGENCES IN THEORETICAL PERSPECTIVES …
6
file:///C:/Users/cc/Downloads/320856784-Theories-of-Corporate-Personality.pdf

7
Prof.aggarwal nomita ,jurisprudence legal theory, central law publications former head and dean, faculty of law,
university of delhi,10th edition2014 page no.197…
  The Aggregate Theory
In the nineteenth century, the aggregate theory was popular, particularly in England and vividly
became known in the United States during the latter half of the nineteenth century. This school of
thought regards the company and other legal entities as constituting aggregations of
natural persons whose relationships are structured by mutual agreements.50 The
aggregate theory does not recognize the existence of a distinct corporate entity. Robert
Hessen, for instance stated: ‘a group or association is only a concept, a mental construct,
used to classify different types of relationship between individuals.’ For the aggregate
theorists the corporate whole is simply the sum of its parts; the companies are formed
when groups having a common interest come together for common objective and these
private individuals are the basis for all the acts of the companies; it has no separate
existence from its owners.8

 The Corporate Social Responsibility

The title corporate social responsibility has two meanings. First, it’s a general name for
any theory of the corporation that emphasizes both the reponsibility to make money and
the responsibility to interact ethically with the surrounding community. Second, corporate
social responsibility is also a specific conception of that responsibility to profit while
playing a role in broader questions of community welfare.

As a specific theory of the way corporations interact with the surrounding community
and larger world, corporate social responsibility (CSR) is composed of four obligations.

 The economic responsibility to make money.

 The legal responsibility to adhere to rules and regulations. 

8
NAUJILJ 10 (1) 2019 African journal Page | 183 CORPORATE PERSONALITY IN COMPANY
JURISPRUDENCE: DIVERGENCES IN THEORETICAL PERSPECTIVES …page187
  The ethical responsibility to do what’s right even when not required by the
letter or spirit of the law
 The philanthropic responsibility to contribute to society’s projects even when
they’re independent of the particular business

who had opined that the company should recognize its public obligations, perform
its public duties and be a ‘good citizen.’ In the famous article, Dodd argued for a
view founded on an entity theory of the company. If the obligation of the management
is to only act as agent of the shareholders, where the interests of the shareholder is
relegated and other competing interests pursued, the fiduciary role of the management is
considered violated in this regard. However, were the management considered the
agent of a corporate entity distinct from the shareholder aggregation and that entity
under the responsibility to be a ‘good citizen’, the management, thus acting for the
company would have the power to fulfill the citizenship responsibility of the
company, even when the shareholders disapprove. In this respect, Dodd concluded
that the management was not trustee for the shareholders, but for the company.9
 HOHFELD THEORY: Hohfeld has also given a theory about corporate personality. His
theory is closely related to the Bracket theory. He says that only human beings have
rights and duties and corporate personality is merely a procedural form, which is used to
work out in a convenient way for immediate purpose, a complex class of jural relation.

 KELSENS THEORY:  Kelsen makes an analytical and formal approach to the concept
of personality. He says that for legal purposes there is no contrast between natural and
juristic persons. Personality is always a matter of law. In law personality means the
totality of rights and duties. Any entity which bears the totality is a person in the eye of
Law. To make a distinction between natural and legal persons is meaningless.
Law individualizes certain parts of the legal order and establishes a unity in the rights and
duties pertaining to it. This device is for procedural facility and it is the Rights of
(human) individuals that are real. Kelsen theory does not throw any light on the nature of
the group personality nor does it help in solving practical Problems. It is submitted that to

9
Ibid page 188
do this is not in the province of the ‘pure theory of Law&, therefore, Kelsen did not
bother himself with actual working or practical problems.
Conclusion: It can be therefore said that the modern definitions are all but the genesis of
these five theories. Without these theories, it would have been very difficult to attribute a
meaning and a definition to the word Corporation and it would have become very vague.
It is with the help of these theories that the modern definition of corporation implies that
it is a separate legal entity, having an identity of its own and perpetual succession. A
corporation is capable of surviving beyond the lives of those who actually are its
beneficiaries.