January 23, 2022

Theories of Corporate Personalities

Company Law

Fiction Theory

As per the fiction theory, a corporation exists only as an outcome of fiction and metaphor. So the personality that is attached to these corporations is done purely by legal fiction.

Concession Theory

This is similar to the fiction theory. However, it states that the legal entity has been given a corporate personality or a legal existence by the functions of the State. So as per this theory, only the State can endow legal personalities, not the law. t 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.

Realist Theory

As per the realist theory, there is really no distinction between a natural person and an artificial person. So a corporate entity is as much a person as a natural person. So the corporation does not owe its existence to the state or the law. It just exists in reality. This is not a very practical theory as it does not apply in the real world. 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 known as sociological theory because in corporate aggregate there is a collective will of different members and individual will is different from collective will.

Bracket Theory

This is one of the more famous and feasible theories of corporate personality. The bracket theory is also known as the symbolist theory which states that a corporation is created only by its members and its agents.

The Ownership Theory:-

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.

Author Details: Shubhang Gomasta (LLM student, MATS University, Raipur, Chattisgarh).

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