Corporate personhood or juridical personality is the legal notion that a juridical person such as a corporation, separately from its associated human beings (like owners, managers, shareholders, or employees), has at least some of the legal rights and responsibilities enjoyed by natural persons. In most countries, a corporation has the same rights as a natural person to hold property, enter into contracts, and to sue or be sued. Limited liability is said to be a privilege conferred by the state as a result of act of incorporating or forming a business.
Early history
Ancient Indian society used legal personhood for political, social, and economic purposes. As early as 800 BC, legal personhood was granted to guild-like śreṇī that operated in the public interest. The late Roman Republic granted legal personhood to municipalities, public works companies that managed public services, and voluntary associations (collegia) such as the early Catholic Church. The diverse collegia had different rights and responsibilities that were independent of the individual members. Some collegia resembled later medieval guilds and were allowed to advance the needs of a trade as a whole, but collegia were otherwise barred from enriching their members.
In the Middle Ages, juridical persons were chartered either as corporations or as foundations in order to facilitate collective perpetual ownership of assets beyond the founders' lifespans, and to avoid their fragmentation and disintegration resulting from personal property inheritance laws. Later on, incorporation was advocated as an efficient and secure mode of economic development: advantages over existing partnership structures included the corporation's continuing existence if a member died; the ability to act without unanimity; and limited liability. The word corporation derives from the Latin corpus (“body”), and juridical personhood was often assumed in medieval writings. By the Renaissance period, European jurists routinely held that churches and universities chartered by the government could acquire property, enter into contracts, sue, and be sued independently of their members. The government or the Pope granted religious organizations the 'power of perpetual succession,' meaning that church property would neither revert to the local lord nor be taxed upon the death of church members. Some town charters explicitly granted medieval towns the right of self-governance. Commercial endeavors were not among the entities incorporated in the medieval era, and even risky trading companies were originally run as common-law partnerships rather than corporations; the incorporation of the East India Company monopoly in 1600 broke new ground, and by the end of the century, commercial ventures frequently sought incorporation in Europe and the Americas. By the 19th century, the direction of British and American corporate law had diverged; British law of this period (such as the Joint Stock Companies Act 1856) appeared to focus more on corporations that more closely resembled traditional joint ventures, while American law was driven by the need to manage a more diverse corporate landscape.
Contemporary global approaches
Common law systems
United Kingdom The UK, as the birthplace of modern corporate law, has a well-developed system of corporate personhood. Under British law, companies incorporated under the Companies Act have separate legal personality, allowing them to own property, enter contracts, and sue and be sued. The UK approach emphasizes regulatory oversight through Companies House.
Canada Canadian corporate law recognizes corporate personhood through both federal and provincial incorporation systems. The Canada Business Corporations Act grants corporations most rights of natural persons, though limitations on political activities and constitutional rights differ from the US.
Australia Australian corporations law, governed primarily by the Corporations Act 2001, provides for corporate personhood with conduct of business oversight through the Australian Securities and Investments Commission (ASIC).
Civil law systems
Germany Under German law, corporations have legal personality separate from their shareholders. The German approach emphasizes stakeholder governance, with employee representation on corporate boards and strong regulatory frameworks that balance shareholder interests with broader societal concerns.
France French corporate law recognizes legal personality through various corporate forms, including the société anonyme (SA) and société à responsabilité limitée (SARL). The French system emphasizes regulatory oversight and has specific provisions regarding corporate social responsibility that differ from Anglo-American approaches.
Japan Japanese corporate law, influenced by both German civil law and Anglo-American traditions, recognizes corporate personhood through various corporate forms. The Japanese approach emphasizes stakeholder capitalism and long-term corporate governance, with less emphasis on shareholder primacy compared to some other systems.
Country specific laws
India
Under Indian law the corporate, managing bodies, etc. and several other non-human entitles have been given the status of the "legal person". In court cases regarding corporate, the shareholders are not responsible for the company's debts but the company itself being a "legal person" is liable to repay those debts or be sued for the non-repayment of debts. The non-human entities given the "legal person" status by the law "have rights and co-relative duties; they can sue and be sued, can possess and transfer property". Since these non-human entities are "voiceless" they are legally represented "through guardians and representatives" to claim their legal rights and to fulfill their legal duties and responsibilities. Specific non-human entities given the status of "legal person" include "corporate personality, body politic, charitable unions etc.", as well as trust estates, deity, temples, churches, mosques, hospitals, universities, colleges, banks, railways, municipalities, and gram panchayats (village councils), rivers, all animals and birds."Birds to holy rivers: A list of everything India considers 'legal persons, Quartz, September 2019.
In the United States
In a U.S. historical context, the phrase "corporate personhood" refers to the ongoing legal debate over the extent to which rights traditionally associated with natural persons should also be afforded to juridical persons including corporations. A headnote issued by the court reporter in the 1886 Supreme Court case Santa Clara County v. Southern Pacific Railroad Co. claimed to state the sense of the Court regarding the Equal Protection Clause of the Fourteenth Amendment as it applies to corporations, without the Court having actually made a decision or issued a written opinion on that point.Adam Winkler 'Corporations Are People' Is Built on an Incredible 19th-Century Lie; How a farcical series of events in the 1880s produced an enduring and controversial legal precedent March 5, 2018 theatlantic.com This was the first time that the Supreme Court was reported to hold that the Fourteenth Amendment's equal protection clause granted constitutional protections to corporations as well as to natural persons, although numerous other cases, since Dartmouth College v. Woodward in 1819, had recognized that corporations were entitled to some of the protections of the Constitution. The corporate personhood holding in Southern Pacific Railroad Co. was dicta though, and the first ruling to establish corporate personhood as a matter of constitutional law was Pembina Consolidated Silver Mining Co. v. Pennsylvania, 125 U.S. 181 (1888), where Justice Stephen Johnson Field wrote for the Supreme Court that:
U.S. courts have extended certain constitutional protections to corporations under various rationales. An early perspective, variously known as 'contractual', 'associate', or 'aggregate' theory, holds that owners of property have certain constitutional protections, even when the property is held via a corporation rather than directly under the owner's own name. Corporate attorney John Norton Pomeroy argued in the 1880s that "Statutes violating their prohibitions in dealing with corporations must necessarily infringe upon the rights of natural persons. In applying and enforcing these constitutional guaranties, corporations cannot be separated from the natural persons who compose them."
Similarly, proponents might argue a juridical person can be a device for exercising shareholders' rights to free speech. Under this perspective, such constitutional rights might also extend to other associations of people, even where the association does not take on the formal legal form of a corporation. A second perspective, known as the 'real entity' or 'natural entity' view, shifts the presumption of corporate regulation against the states.
The dominant view from the 1920s to the 1980s, championed by philosopher John Dewey, asserted that such perspectives are often overgeneralizations, and that the decision to grant corporate rights in a given sphere should be governed by the consequences of doing so. The 1980s saw an explosion of economic analyses, with a corporation often viewed as a nexus of contracts and as an economic agent appointed to act on behalf of its shareholders.
Some rulings combine multiple perspectives; the majority opinion in Citizens United argued both from an 'association' perspective ("if the antidistortion rationale were to be accepted... it would permit Government to ban political speech simply because the speaker is an association that has taken on the corporate form") and from a 'natural entity' perspective ("the worth of speech 'does not depend upon the identity of its source, whether corporation, association, union, or individual).
Treating juridical persons as having legal rights allows corporations to sue and to be sued, provides a single entity for easier taxation and regulation, simplifies complex transactions that would otherwise involve, in the case of large corporations, thousands of people, and protects the individual rights of the shareholders as well as the right of association.
Generally, corporations are not able to claim constitutional protections that would not otherwise be available to persons acting as a group. For example, the Supreme Court has not recognized a Fifth Amendment right against self-incrimination for a corporation, since the right can be exercised only on an individual basis. In United States v. Sourapas and Crest Beverage Company, "[a]ppellants [suggested] the use of the word 'taxpayer' several times in the regulations requires the fifth-amendment self-incrimination warning be given to a corporation." The Court did not agree. Likewise, corporations and organizations do not have privacy rights under the Privacy Act of 1974, since the statute refers to any "individual," which it defines as "a citizen of the United States or an alien lawfully admitted for permanent residence."
Since the Supreme Court's ruling in Citizens United v. Federal Election Commission in 2010, upholding the rights of corporations to make unlimited political expenditures under the First Amendment, there have been several calls for a Constitutional amendment to abolish corporate personhood. The Citizens United majority opinion makes no reference to corporate personhood or the Fourteenth Amendment, but rather argues that political speech rights do not depend on the identity of the speaker, which could be a person or an association of people.Citizens United v. Federal Election Commission Opinion of the Court (2010)Citizens United v. Federal Election Commission Concurrence & Dissent In Part (John Paul Stevens) (2010)