Corporate Personality | Company Law - CLAT PG PDF Download

Corporate Personality

• Creation of Law: Corporate personality is established by law, and both English and Indian legal systems recognize the legal personality of corporations. A corporation is considered an artificial person with the capacity to hold rights, duties, and property.
• Differentiation: Corporations are identified based on various entities that the law designates for personification. The individuals who make up the corporation are known as its members.

Juristic Personality of Corporations

• Conditions for Juristic Personality: The juristic personality of a corporation relies on three key conditions:
• Group of Individuals: There must be a group of human beings associated for a specific purpose.
• Organ Functionality: The corporation must have organs or mechanisms through which it operates.
• Legal Fiction of Will: The corporation is ascribed a will through legal fiction.
• Distinction from Members: A corporation is separate from its individual members. It possesses its own legal personality, allowing it to sue and be sued in its own name. Unlike natural persons, a corporation does not cease to exist with the death of its members and enjoys perpetual existence. However, it can only act through its agents.
• Winding Up Procedure: The law provides a procedure for winding up a corporate body.
• Examples of Legal Personality: In addition to corporations, entities such as banks, railways, universities, colleges, churches, temples, and hospitals are also granted legal personality. The Union of India and the States are recognized as legal or juristic persons.
• Funds and Estates: In certain cases, the corpus of a legal person may consist of a fund or estate reserved for specific purposes, such as a trust estate, the estate of an insolvent, or a charitable fund. These fall under the concept of legal personality.

Types of Corporations

1. Corporation Aggregate

• A Corporation Aggregate is a group of individuals joined together to pursue common interests, such as a limited company.
• In a limited company, shareholders contribute capital for a shared purpose, with their liability limited to their investment.
• The company is a separate legal entity, distinct from its shareholders, owning its assets and liabilities.
• Shareholders are entitled to dividends but do not own the company’s property.
• The principle of corporate personality was established in the case of Saloman v. Saloman & Co.

2. Corporation Sole

• A Corporation Sole consists of a single legal person, often holding a public office, with legal rights and duties.
• Examples include the Post-Master-General and the Crown in England.
• A Corporation Sole is perpetual, with the capacity for endless duration.
• When the person in office dies, their rights and liabilities pass to their successor, ensuring continuity.
• The legal personality continues, even though the natural person ceases to exist.
• This mechanism protects public interests despite the death of the individual officeholder.