Corporate sole and corporate aggregate are treated as persons by law. There are
various theories which are developed to show the nature of personality. These
theories could be either political which talks about the relationship between
the state and group residing within the state or it could be a philosophical
explanation which is pertaining to existence of those persons which are created
by law. But the courts have not uniformly followed any of these particular
theories to deal with any problem or issue which is pertaining to corporation
but on the other hand they are also guided by the practical considerations.
So, here are some of the theories as follows -:
1.The Fiction Theory
2.The Realistic Theory
3.The Concession Theory
4.The Organism Theory
5.The Ownership Theory
6.The Symbolist Theory aka The Bracket Theory
The Fiction Theory:-
Ø There were many jurists those who gave their opinion on Fiction theory. They
said that any corporation either sole or aggregate has a fictitious personality.
This personality is necessary to form an individual corporation existing by
their own and even sustaining for its members. Here is difference between
judicial and natural person. Person those who exists for judicial purposes are
judicial person but person who is born with its own personality. But judicial or
artificial person are created by law.
Ø But one of the jurist Michound had raised various objections pertaining to
fictitious theory that if corporate sole or aggregate is fictitious or imaginary
person and only exists in the eyes of law, then how it is possible for them to
hold a tangible property? Then next issue was regarding the rights of a person.
He said that if corporate sole or aggregate is a imaginary then how they can
have rights because rights can be only with real persons. So ultimately he said
that corporate must be a real person not fictitious.
Ø Another issue was raised that legislator has done a mistake on their part by
forming such entities or personalities, but legislator never make things by
itself. It basically considers each and every aspect of society before forming
any personality or legislation like social need, social good or bad etc. and
legislation is the one which creates such personalities and in present
generation even public also demands such recognition. Therefore a law or judge
can give birth to something new which is worthy and beneficial for the commerce
The Realistic Theory:-
Ø This theory talks in contrast with the fictitious theory. This theory says
that corporation has a real personality not a fictitious. Gierke was the
exponent of this theory and tried to criticise the fiction theory. His opinion
was that, corporate has a real & recognized personality and it is not created by
law. This theory also know as sociological theory because in corporate aggregate
there is a collective will of different members and individual will is different
from collective will. So corporation has its own real psychic will, therefore it
is not fictitious or imaginary instead it is a real personality recognized by
law. But this theory does not apply to corporate sole because collective will is
necessary for form a real & psychic personality. Hence this theory states that
aggregate personality has similar features as a human personality.
The Concession Theory:-
Ø This theory is much similar with the fiction theory but not asserts exactly
what fiction theory says. It says that any legal personality can take birth from
law itself. It is concession or grant from the side of law that legal
personality is created and recognized. At certain point this theory is correct
because any right or any recognition to any personality would flow from the law.
So to validate or recognize any personality, recognition of law is must.
The Organism Theory:-
Ø This theory asserts that corporation is like an organism and it has (limbs in
the form of members), head (top authorities) and other organs. Moreover an
individual also has one head, body with legs which helps in achieving the
desires and performing the functions. According to theory corporate has its own
will and body which is subject to some legal rights and obligations as well. It
is not necessary to be a human being to have legal rights. A body with its own
will and life can have legal rights and can also be subjected to some legal
obligations or duties.
Ø So according to this theory, corporate personality is a social organism who
has its members, own will and body. Therefore the essence of this theory is that
to be a corporate personality, it should have body (head, limbs & organs),
collective will and recognition from law.
The Ownership Theory:-
Ø This is another theory of corporate personality. Bzinz, Bekker and Demelius
were those who have developed this theory and Planiol had elaborated it. This
theory states that human beings are subjected to legal rights not corporations.
Furthermore it says that juristic person or corporation is not a person anyway.
These are subject less property which is a creation of law and this fictitious
personality are there only for possessing property in common. Such personalities
are only form of ownership. Being in such ownership these personalities makes
contract, sustain legal proceeding like actual person.
Ø This ownership theory has some importance when it is used which pertains to
estates and funds which are corporations sole. Moreover human being can only be
subjected to rights and certain obligations. Hence if such personality cannot be
subjected to such rights and duties then they should be termed as subject less
property. So the essence of this theory is that certain objectives and interests
of human being are protected by the law and property belongs to juristic person
does not belong to anyone but it does owned for a specific objective and
purpose. Furthermore these juristic persons are there to give effect to some
The Symbolist Theory
Ø This theory is also called as the “bracket” theory and developed up by
Ihering and later propounded by Marquis de Vareilles-Sommiéres. This theory is
somewhat similar to the fiction theory in which human involvement is needed and
it also asserts that only human beings are subjected to legal rights and certain
obligations According to Ihering, the concept of corporate personality is
essential because it is that instrument which makes any objective clear and less
complicated. So to know the actual position of any business it is important to
look behind the corporate veil. So it is with consonance of principle called
lifting of corporate veil.
Ø The bracket theory is often acknowledge for its approachability to justify
corporate personality though it was not recognized under common law jurisdiction
because it resist law by concluding that the legal relation could only be
detected by removing the brackets of corporation and analysis the relation of
Ø This theory also asserts that the member of the corporation have their own
legal rights and legal obligation which has been referred to corporation itself.
To know the actual nature and state of the corporation, the brackets have to be
removed and names of members are kept in brackets. When brackets are removed, a
person could able to see what corporation is, what its actual nature and how
members are revealed by the way of removing the brackets. The essence of this
theory is that rights, obligation and liabilities are vested only to natural
person but not to corporation those are legal entities. In the cases ofSoloman
V Soloman Co. Ltd., (1897) AC 22it was said by the court that to understand the
real nature of the corporation, we must remove the bracket to find out the
actual position of the company.