||It has been suggested that this article be split into articles titled Legal person and Judicial person, accessible from a disambiguation page. (June 2013)|
To have legal personality means to be capable of having legal rights and duties within a certain legal system, such as to enter into contracts, sue, and be sued. Legal personality is a prerequisite to legal capacity, the ability of any legal person to amend (enter into, transfer, etc.) rights and obligations.
Legal persons (lat. persona iuris) are of two kinds: natural persons – people – and judicial persons (also called juristic or artificial or fictitious persons, lat. persona ficta) – groups of people, such as corporations, which are treated by law as if they were persons. While people acquire legal personhood when they are born, judicial persons do so when they are incorporated (registered) in accordance with law.
A fictitious person (Latin: persona ficta) (also artificial person, juridical person, juristic person, legal entity and body corporate, also commonly called a vehicle) has a legal name and has certain rights, protections, privileges, responsibilities, and liabilities under law, similar to those of a natural person. The concept of a legal person is a fundamental legal fiction. It is pertinent to the philosophy of law, as it is essential to laws affecting a corporation (corporations law) (the law of business associations).
Legal personality allows one or more natural persons to act as a single entity (a composite person) for legal purposes. In many jurisdictions, legal personality allows that composite to be considered under law separately from its individual members or shareholders. They may sue and be sued, enter contracts, incur debt, and own property. Entities with legal personality may also be subjected to certain legal obligations, such as the payment of taxes. An entity with legal personality may shield its shareholders from personal liability.
The concept of legal personality is not absolute. "Piercing the corporate veil" refers to looking at the individual natural persons acting as agents involved in a corporate action or decision; this may result in a legal decision in which the rights or duties of a corporation are treated as the rights or liabilities of that corporation's shareholders or directors. Generally, legal persons do not have all of the same rights—such as the right to freedom of speech—that natural persons have.
Some examples of legal persons include:
- Cooperatives (co-ops), business organization owned and democratically operated by a group of individuals for their mutual benefit
- Corporations are by definition legal persons. A corporation sole is a corporation constituted by a single member, such as The Crown in the Commonwealth realms. A corporation aggregate is a corporation constituted by more than one member.
- Companies, a form of business association that carries on an industrial enterprise, are usually corporations, although some companies may take forms other than a corporation, such as associations, partnership, unions, joint stock companies, trusts, and funds. Limited liability companies are unincorporated associations having certain characteristics of both a corporation and a partnership or sole proprietorship. Different types have a complex variety of advantages and disadvantages.
- Sovereign states are legal persons.
- In the international legal system, various organizations possess legal personality. These include intergovernmental organizations (the United Nations, the Council of Europe) and some other international organizations (including the Sovereign Military Order of Malta, a religious order).
- Temples, in some legal systems, have separate legal personality
Not all organizations have legal personality. For example, the board of directors of a corporation, legislature, or governmental agency typically are not legal persons in that they have no ability to exercise legal rights independent of the corporation or political body which they are a part of.
Creation and history of the doctrine
The doctrine has been attributed to Pope Innocent IV, who seems at least to have helped spread the idea of persona ficta as it is called in Latin. In the early church, the doctrine of persona ficta allowed monasteries to have a legal existence that was apart from the monks, simplifying the difficulty in balancing the need for such groups to have infrastructure though the monks took vows of personal poverty. Another effect of this was that as a fictional person, a monastery could not be held guilty of delict due to not having a soul, helping to protect the organization from non-contractual obligations to surrounding communities. This effectively moved such liability to individuals acting within the organization while protecting the structure itself, since individuals were considered to have a soul and therefore capable of being guilty of negligence and excommunicated.
In the common law tradition, only a person could sue or be sued. This was not a problem in the era before the Industrial Revolution, when the typical business venture was either a sole proprietorship or partnership—the owners were simply liable for the debts of the business. A feature of the corporation, however, is that the owners/shareholders enjoyed limited liability—the owners were not liable for the debts of the company. Thus, when a corporation breached a contract or broke a law, there was no remedy, because limited liability protected the owners and the corporation wasn't a legal person subject to the law. There was no accountability for corporate wrongdoing.
To resolve the issue, the legal personality of a corporation was established to include five legal rights—the right to a common treasury or chest (including the right to own property), the right to a corporate seal (i.e., the right to make and sign contracts), the right to sue and be sued (to enforce contracts), the right to hire agents (employees) and the right to make by-laws (self-governance).
Since the 19th century, legal personhood has been further construed to make it a citizen, resident, or domiciliary of a state (usually for purposes of personal jurisdiction). In Louisville, C. & C.R. Co. v. Letson, 2 How. 497, 558, 11 L.Ed. 353 (1844), the U.S. Supreme Court held that for the purposes of the case at hand, a corporation is "capable of being treated as a citizen of [the State which created it], as much as a natural person." Ten years later, they reaffirmed the result of Letson, though on the somewhat different theory that "those who use the corporate name, and exercise the faculties conferred by it," should be presumed conclusively to be citizens of the corporation's State of incorporation. Marshall v. Baltimore & Ohio R. Co., 16 How. 314, 329, 14 L.Ed. 953 (1854). These concepts have been codified by statute, as U.S. jurisdictional statutes specifically address the domicile of corporations.
There are limitations to the legal recognition of legal persons. Legal entities cannot marry, they usually cannot vote or hold public office, and in most jurisdictions there are certain positions which they cannot occupy. The extent to which a legal entity can commit a crime varies from country to country. Certain countries prohibit a legal entity from holding human rights; other countries permit artificial persons to enjoy certain protections from the state that are traditionally described as human rights.
Special rules apply to legal persons in relation to the law of defamation. Defamation is the area of law in which a person's reputation has been unlawfully damaged. This is considered an ill in itself in regard to natural person, but a legal person is required to show actual or likely monetary loss before a suit for defamation will succeed.[where?]
Extension of basic rights to legal persons
In part based on the principle that legal persons are simply organizations of natural persons, and in part based on the history of statutory interpretation of the word "person", the U.S. Supreme Court has repeatedly held that certain constitutional rights protect legal persons (like corporations and other organizations). Santa Clara County v. Southern Pacific Railroad is sometimes cited for this finding because the court reporter's comments included a statement the Chief Justice made before oral arguments began, telling the attorneys during pre-trial that "the court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of the opinion that it does." Later opinions misinterpreted these pre-argument comments as part of the legal decision. As a result, because of the First Amendment, Congress may not make a law restricting the free speech of a corporation, a political action group or dictating the coverage of a local newspaper, and because of the Due Process Clause, a state government may not take the property of a corporation without using due process of law and providing just compensation. These protections apply to all legal entities, not just corporations.
People's Republic of China
For a typical example of the concept of legal person in a civil law jurisdiction, under the General Principles of Civil Law of the People's Republic of China, Chapter III, Article 36., "A legal person shall be an organization that has capacity for civil rights and capacity for civil conduct and independently enjoys civil rights and assumes civil obligations in accordance with the law." Note however that the term civil right means something altogether different in civil law jurisdictions than in common law jurisdictions.
Controversies about "corporate personhood" in the United States
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Since the mid-19th century, corporate personhood has become increasingly controversial, as courts have extended other rights to the corporation beyond those necessary to ensure their liability for debts. Other commentators argue that corporate personhood is not a fiction anymore—it simply means that for some legal purposes, "person" has now a wider meaning than it has in non-legal uses.
In part as a matter of subsequent interpretations of the word "person" in the Fourteenth Amendment, U.S. courts have extended certain constitutional protections to corporations. Opponents of "corporate personhood" don't necessarily want to eliminate legal entities, but do want to limit these rights to those provided by state constitutions through constitutional amendment. Often, this is motivated by a desire to restrict the political speech and donations of corporations, lobby groups, lobbyists, and political parties. Social commentator Thom Hartmann is among those that share this view. Because legal persons have limited "free speech" rights, legislation meant to eliminate campaign contributions by legal persons (notably, corporations and labor unions) has been repeatedly struck down by various courts. On January 21, 2010, the Supreme Court of the United States, deciding Citizens United v. Federal Election Commission by a 5-4 majority, removed restrictions on some types of corporate spending in support of (or in opposition to) specific candidates. This dramatically expanded the free speech rights of corporations.
- List of United States Supreme Court cases, volume 118
- Paul v. Virginia ("... in which the United States Supreme Court held that a corporation is not a citizen ...")
- Netscape Communications Corp. v. Konrad for what it means for two entities to be separate
- Elizabeth A. Martin (2003). Oxford Dictionary of Law (7th ed. ed.). Oxford: Oxford University Press. ISBN 0198607563.
- Smith, Bryant (January 1928). "Legal Personality". Yale Law Journal 37 (3): 283–299. Retrieved 7 June 2013.
- Lewis A. Kornhauser and W. Bentley MacLeod (June 2010). "Contracts between Legal Persons". National Bureau of Economic Research. Retrieved 7 June 2013.
- [...] men in law and philosophy are natural persons. This might be taken to imply there are persons of another sort. And that is a fact. They are artificial persons or corporations [...] Deiser, George F. (December 1908). "The Juristic Person. I". University of Pennsylvania Law Review and American Law Register. 48 New Series (3): 131–142. Retrieved 7 June 2013.
- Besides men or “natural persons,” law knows persons of another kind. In particular it knows the corporation, and for a multitude of purposes it treats the corporation very much as it treats the man. Like the man, the corporation is (forgive this compound adjective) a right-and-duty-bearing unit. H.A.L. Fisher, ed. (1911). "Moral Personality And Legal Personality 1". The Collected Papers of Frederic William Maitland. Cambridge University Press.
- The Juristic Person. I, George F. Deiser, University of Pennsylvania Law Review and American Law Register, Vol. 57, No. 3, Volume 48 New Series. (Dec., 1908), pp. 131-142.
- Frisch D. (2011). Commercial Law's Complexity. George Mason Law Review.
- Williams v The Shipping Corporation of India (US District Court, Eastern District Virginia), 10 March 1980, 63 ILR 363
- (John Dewey, “The Historic Background of Corporate Legal Personality,” Yale Law Journal, Vol. XXXV, April 1926, pages 655-673)
- In Hong Kong, artificial persons are granted the right to vote in functional constituencies elections.
- These restrictions vary from country to country. Some countries do not permit a corporate entity to be a director or a liquidator while others do.
- Most commonly in the area of taxation and in relation to search warrants.
- New Zealand Defamation Act 1992, s 6.
- People v. Frazier, 173 Cal. App. 4th 613 (2009). In this case, the California Court of Appeal explained: "Despite the physical ability to commit vicious and violent acts, dogs do not possess the legal ability to commit crimes."
- See, for example, Noble v. Union River Logging
- First Nat. Bank of Boston v. Bellotti
- Basic Law. Art. 19 Abs. 3 GG
- Gary J. Dernelle. "DIRECT FOREIGN INVESTMENT AND CONTRACTUAL RELATIONS IN THE PEOPLE'S REPUBLIC OF CHINA." DePaul Business Law Journal, Spring/Summer 1994. (6 DePaul Bus. L.J. 331)
- For example, the organization ReclaimDemocracy.org has such a proposal on their website
- Thom Hartmann's website
- http://origin.www.supremecourt.gov/docket/08-205.htm[dead link]
- J Binder, Das Problem der juristischen Persönlichkeit, (1907)
- R Saleilles, De La Personalité Juridique: Histoire et Théories (1922)
- F Hallis, Corporate Personality: A Study in Jurisprudence (1930)
- PW Duff, Personality in Roman Private Law, (1938)
- CA Cooke, Corporation, Trust and Company: A Legal History, (1950)
- A Watson, The Law of Persons in the Later Roman Republic (1967)
- S Guterman, The Principle of the Personality of Law in the Germanic Kingdoms of Western Europe from the Fifth to the Eleventh Century (1990)
- J Dewey, 'The Historic Background of Corporate Legal Personality' (1926) 35 Yale Law Journal 655
- AW Machen, 'Corporate Personality' (1910) 24 Harvard Law Review 253