Jurisprudence - Nature and Concept of Legal Person

Jurisprudence: 

Nature and Concept  of Legal Person

By: 

Vijay Sardana
Advocate, Delhi High Court

Artificial personality, legal person, juridical personality, or juristic personality is the characteristic of a non-living entity regarded by law to have the status of personhood.

Creation and History of the Doctrine:

The concept of legal personhood for organizations of people is at least as old as Ancient Rome: a variety of collegial institutions enjoyed the benefit under Roman law.

The doctrine has been attributed to Pope Innocent IV, who seems at least to have helped spread the idea of persona ficta as it is called in Latin. In canon law, the doctrine of persona ficta allowed monasteries to have a legal existence that was apart from the monks, simplifying the difficulty in balancing the need for such groups to have infrastructure though the monks took vows of personal poverty. Another effect of this was that as a fictional person, a monastery could not be held guilty of delict due to not having a soul, helping to protect the organization from non-contractual obligations to surrounding communities. This effectively moved such liability to individuals acting within the organization while protecting the structure itself, since individuals were considered to have a soul and therefore capable of being guilty of negligence and excommunicated.

In the common-law tradition, only a person could sue or be sued. This was not a problem in the era before the Industrial Revolution when the typical business venture was either a sole proprietorship or partnership—the owners were simply liable for the debts of the business. A feature of the corporation, however, is that the owners/shareholders enjoyed limited liability—the owners were not liable for the debts of the company. Thus, when a corporation breached a contract or broke a law, there was no remedy, because limited liability protected the owners and the corporation wasn't a legal person subject to the law. There was no accountability for corporate wrongdoing.

To resolve the issue, the legal personality of a corporation was established to include five legal rights—the right to a common treasury or chest (including the right to own property), the right to a corporate seal (i.e., the right to make and sign contracts), the right to sue and be sued (to enforce contracts), the right to hire agents (employees) and the right to make by-laws (self-governance).

Since the 19th century, legal personhood has been further construed to make it a citizen, resident, or domiciliary of a state (usually for purposes of personal jurisdiction). 

Concept:

A legal or juridical or artificial person (Latin: persona ficta; also juristic person) has a legal name and has certain rights, protections, privileges, responsibilities, and liabilities in law, similar to those of a natural person. The concept of a juridical person is a fundamental legal fiction. It is pertinent to the philosophy of law, as it is essential to laws affecting a corporation (corporations law).

Legal / Juridical personality allows one or more natural persons (universitas personarum) to act as a single entity (body corporate) for legal purposes.

In many jurisdictions, artificial personality allows that entity to be considered under law separately from its individual members (for example in a company limited by shares, its shareholders). They may sue and be sued, enter contracts, incur debt, and own property. Entities with legal personality may also be subjected to certain legal obligations, such as the payment of taxes.

An entity with legal personality may shield its members from personal liability.

In some common-law jurisdictions, a distinction is drawn between corporation aggregate (such as a company, which has a number of members) and a corporation sole (which is where a person's public office is deemed to have a separate personality from them as an individual). Both have separate legal personality.

Historically most corporations sole were ecclesiastical in nature (for example, the Archbishop of Canterbury is a corporation sole), but a number of other public offices are now formed as corporations’ sole.

The concept of juridical personality is not absolute. "Piercing the corporate veil" refers to looking at the individual natural persons acting as agents involved in a company action or decision; this may result in a legal the decision in which the rights or duties of a corporation or public limited the company are treated as the rights or liabilities of that corporation's members or directors.

The concept of a juridical person is now central to Western law in both common-law and civil-law countries, but it is also found in virtually every legal system.

Examples:

Some examples of juridical persons include:

•  Cooperatives (co-ops), business organization owned and democratically operated by a group of individuals for their mutual benefit

•  Corporations are bodies corporate created by statute or charter. A corporation sole is a corporation constituted by a single member, in a particular capacity, and that person's successors in the same capacity, in order to give them some legal benefit or advantage, particularly that of perpetuity, which a natural person could not have had. Examples are a religious officiant in that capacity, or The Crown in the Commonwealth realms. A corporation aggregate is a corporation constituted by more than one member.

• Municipal corporations (municipalities) are "creatures of statute". Other organizations may be created by statute as legal persons, including European economic interest groupings (EEIGs).

•  Unincorporated associations, that is aggregates of two or more persons, are treated as juridical persons in some jurisdictions but not others.

• Partnerships, an aggregate of two or more persons to carry on a business in common for profit and created by the agreement. Traditionally, partnerships did not have continuing legal personality, but many jurisdictions now treat them as having an independent legal personality.

•  Companies, a form of business association that carries on an industrial enterprise, are often corporations, although companies may take other forms, such as trade unions, unlimited companies, trusts, and funds. Limited liability companies—be they a private company limited by guarantee, private company limited by shares, or public limited company—are entities having certain characteristics of both a corporation and a partnership. Different types have a complex variety of advantages and disadvantages.

•  Sovereign states are legal persons.

• In the international legal system, various organizations possess legal personality. These include intergovernmental organizations (the United Nations, the Council of Europe) and some other international organizations (including the Sovereign Military Order of Malta, a religious order).

•  The European Union (EU) has legal personality since the Lisbon Treaty entered into force on 1 December 2009. That the EU has legal personality is a prerequisite for the EU to join the European Convention on Human Rights (ECHR). However, in 2014, the EU decided not to be bound by the rulings of the European Court of Human Rights.

• Temples, in some legal systems, have separate legal personality.

• The Whanganui River was granted legal personality in March 2017 under New Zealand law because the Whanganui Māori tribe regard the river as their ancestor.

Not all organizations have a legal personality. For example, the board of directors of a corporation, legislature, or governmental agency typically are not legal persons in that they have no ability to exercise legal rights independent of the corporation or political body which they are a part of.

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