Theories of Corporate Personality

                Persons are of two kinds namely, Natural Persons and Legal Persons. There are three kinds of Legal persons i.e. Corporations institutions and fund or estate. Corporate personality is a fiction of law. It is an artificial personality given to corporation whereby certain rights and duties are attributed to it.

Corporation  :

                A corporation or Company is an artificial or fictitious Person created by the personification of a group or a series of individuals. The individuals forming the corpus of the corporation is called its members. there are two kinds of Corporation or a Company. 1) Corporate sole and 2) Corporate Aggregate. 


Theories of Corporation

     There are many theories of Corporate Personality. Different Jurists propounded different theories to explain the nature of Corporate personality, but the best-known theories of a Corporate Personality are as follows


1) Fiction Theory:

             The Fiction theory was propounded by Savigny. According to Savigny "a personality is attached to corporations, institutions and funds by a pure legal fiction. The Personality of  Corporation is different from the personality of its members, that means there is a double fiction in the case of Corporation.  Salmond and Holland are the supporters of this theory. According to Salmond, corporation is nothing more than the outcome of metaphor and fiction. The main defect of this theory is that it exists in the eyes of law only.


2) Realist theory:


                   Realist Theory was propounded by the great German Jurist Gierke. It was followed by Sir Fredrick Pollock, Geldart, Maitland etc.   According to  Gierke, Corporation is a real but mysterious entity, every group has a real mind, a real will and real power of action. According to this theory, every group comes to have personality of its own whether that group is social or political one.   


3) Concession Theory:

                  Salmond, Savigny and Dicey are the main supporters of this theory. According to this theory, the only realities are sovereign and individual. the other groups cannot claim recognition as persons. they are treated as persons merely by a concession and the part of the sovereign. Legal personality is conferred only by law.

                 Corporate personality is nothing but a concession given to group or body of individuals by law to act as one body. 


4) Purpose Theory:

                 According to this theory, Personality is only enjoyed by human being. German jurist Brinz and Bekker are the main supporter of this theory.

          Salmond criticised this theory, According to him, it is not applicable to a corporation sole.


5) Bracket Theory:


               Ihering is the chief exponent of Bracket theory. Bracket theory is also known as symbolise theory. According to this theory, the members of a corporation are the bearers of the rights and duties which are given to the corporation for the sake of convenience It is not always practicable or convenient to refer to all the innumerable members of a corporation. A bracket is placed around them to which a name is given. That bracket is the corporation.

              The weakness of this theory lies in the fact that it is not able to indicate when the bracket may be removed and the mask lifted for the purpose of taking note of the members constituting the corporation.

See also...

1)   Definition and Kinds of Persons (Legal Personality)

2)   Difference Between Partnership and company

3)   Legal Status of Dead Person

4)   Advantages of Law

5)   Kinds of Possession