Legal personality

"Business entity" redirects here. For the concept in computer science, see Business entity (computer science). For types of business entities, see Business Entity.

To have legal personality means to be capable of having legal rights and obligations within a certain legal system, such as entering into contracts, suing, and being sued. Legal personality is a prerequisite to legal capacity, the ability of any legal person to amend (enter into, transfer, etc.) rights and obligations. In international law, consequently, legal personality is a prerequisite for an international organization to be able to sign international treaties in its own name.

Legal persons (lat. persona iuris) are of two kinds: natural persons (also called physical persons) and juridical persons (also called juridic, juristic, artificial, or fictitious persons, lat. persona ficta) – groups of individuals, such as corporations, which are treated by law as if they are persons. While human beings acquire legal personhood when they are born, juridical persons do so when they are incorporated in accordance with law.

Juridical persons

Artificial personality, juridical personality, or juristic personality is the characteristic of a non-living entity regarded by law to have the status of personhood.

A juridical or artificial person (Latin: persona ficta; also juristic person) has a legal name and has certain rights, protections, privileges, responsibilities, and liabilities in law, similar to those of a natural person. The concept of a juridical 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).

Juridical personality allows one or more natural persons (universitas personarum) to act as a single entity (body corporate) for legal purposes. In many jurisdictions, artificial personality allows that entity to be considered under law separately from its individual members (for example in a company limited by shares, its 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 members from personal liability.

In some common law jurisdictions a distinction is drawn between corporation aggregate (such as a company, which has a number of members) and a corporation sole (which is where a person's public office is deemed to have a separate personality from them as an individual). Both have separate legal personality. Historically most corporations sole were ecclesiastical in nature (for example, the Archbishop of Canterbury is a corporation sole), but a number of other public offices are now formed as corporations sole.

The concept of juridical personality is not absolute. "Piercing the corporate veil" refers to looking at the individual natural persons acting as agents involved in a company action or decision; this may result in a legal decision in which the rights or duties of a corporation or public limited company are treated as the rights or liabilities of that corporation's members or directors.

The concept of a juridical person is now central to Western law in both common-law and civil-law countries, but it is also found in virtually every legal system.

Examples

Some examples of juridical persons include:

• Cooperatives (co-ops), business organization owned and democratically operated by a group of individuals for their mutual benefit
• Corporations are bodies corporate created by statute or charter. A corporation sole is a corporation constituted by a single member, in a particular capacity, and that person's successors in the same capacity, in order to give them some legal benefit or advantage, particularly that of perpetuity, which a natural person could not have had. Examples are a religious officiant in that capacity, or The Crown in the Commonwealth realms. A corporation aggregate is a corporation constituted by more than one member.
  • Municipal corporations (municipalities) are "creatures of statute." Other organizations may be created by statute as legal persons, including European economic interest groupings (EEIGs).
• Unincorporated associations, that is aggregates of two or more persons, are treated as juridical persons in some jurisdictions but not others.
• Partnerships, an aggregate of two or more persons to carry on a business in common for profit and created by agreement. Traditionally, partnerships did not have continuing legal personality, but many jurisdictions now treat them as having an independent legal personality.
• Companies, a form of business association that carries on an industrial enterprise, are often corporations, although companies may take other forms, such as trade unions, unlimited companies, trusts, and funds. Limited liability companies—be they a private company limited by guarantee, private company limited by shares, or public limited company—are entities having certain characteristics of both a corporation and a partnership. 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).
• The European Union has legal personality since the Lisbon Treaty entered into force on 1 December 2009. That the EU has legal personality is a prerequisite for the EU to join the European Convention on Human Rights (ECHR).
• 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 concept of legal personhood for organizations of people is at least as old as Ancient Rome: a variety of collegial institutions enjoyed the benefit under Roman law.

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 canon law, 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.

Extension of basic rights to legal persons

Brazil

The term legal person ("pessoa jurídica" in Portuguese) is used in legal science for designating an entity with rights and liabilities which also has legal personality. Its regulations are largely based on Brazil's Civil Code, among other normative documents.

Germany

Article 19(3) of the German Constitution sets forth: "Fundamental rights shall also apply to domestic artificial persons insofar as the nature of such rights shall permit."

Italy

In Italy trade unions have legal personality, as stated in Article 39, Paragraph 4 of the Constitution:

"Registered trade unions are legal persons. They may, through a unified representation that is proportional to their membership, enter into collective labour agreements that have a mandatory effect for all persons belonging to the categories referred to in the agreement."

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.

United States

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 US Supreme Court has repeatedly held that certain constitutional rights protect legal persons (such as 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 interpreted 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.

A prominent component of relevant case law is the Supreme Court decision Citizens United v. Federal Election Commission, which ruled unconstitutional certain restrictions on corporate campaign spending during elections.

See also

• Corporate personhood
• European Convention on the Recognition of the Legal Personality of International Non-Governmental Organizations
• Institution
• List of United States Supreme Court cases, volume 118
• Natural person
• Netscape Communications Corp. v. Konrad for what it means for two entities to be separate
• Paul v. Virginia ("... in which the United States Supreme Court held that a corporation is not a citizen ...")
• Separate legal entity