§ 114. Corporations.
We have now to consider more particularly the nature and purposes of the legal conception of incorporation, inasmuch as legal personality goes no further than this in English law. Much of what is said in this special connection, however, will be applicable mutatis mutandis to the other classes of legal persons also.
Corporations are of two kinds, distinguished in English law as corporations aggregate and corporations sole. “Persons,” says Coke,[[279]] “are of two sorts, persons natural created of God, ... and persons incorporate or politique created by the policy of man (and therefore they are called bodies politique); and those be of two sorts, viz., either sole, or aggregate of many.” A corporation aggregate is an incorporated group of coexisting persons, and a corporation sole is an incorporated series of successive persons. The former is that which has several members at a time, while the latter is that which has only one member at a time. Corporations aggregate are by far the more numerous and important. Examples are a registered company, consisting of all the shareholders, and a municipal corporation, consisting of the inhabitants of the borough. Corporations sole are found only when the successive holders of some public office are incorporated so as to constitute a single, permanent, and legal person. The Sovereign, for example, is a corporation of this kind at common law, while the Postmaster-General,[[280]] the Solicitor to the Treasury,[[281]] and the Secretary of State for War[[282]] have been endowed by statute with the same nature.[[283]]
It is essential to recognise clearly the element of legal fiction involved in both those forms of incorporation, for this has been made by some writers a matter of dispute. A company is in law something different from its shareholders or members.[[284]] The property of the company is not in law the property of the shareholders. The debts and liabilities of the company are not attributed in law to its members. The company may become insolvent, while its members remain rich. Contracts may be made between the company and a shareholder, as if between two persons entirely distinct from each other. The shareholders may become so reduced in number that there is only one of them left; but he and the company will be distinct persons for all that.[[285]]
May we not go further still, and say that a company is capable of surviving the last of its members? At common law indeed, a corporation is dissolved by the death of all its members.[[286]] There is, however, no logical necessity for any such rule, and it does not apply to corporations sole, for beings of this sort lead a continuous life, notwithstanding the intervals between the death or retirement of each occupant of the office and the appointment of his successor. Nor is there any reason to suppose that such a ground of dissolution is known to the trading corporations which are incorporated under the Companies Acts. Being established by statute, they can be dissolved only in manner provided by the statute to which they owe their origin.[[287]] The representatives of a deceased shareholder are not themselves members of the company, unless they become registered as such with their own consent. If, therefore, on the death of the last surviving members of a private company, their executors refuse or neglect to be registered in their stead, the company will no longer have any members. Is it, for that reason, ipso jure dissolved? If not, it is clear that since a company can survive its members and exist without them, it must be something entirely distinct from them.[[288]]
In all those respects a corporation is essentially different from an unincorporated partnership. A firm is not a person in the eye of the law; it is nothing else than the sum of its individual members. There is no fictitious being, standing over against the partners, as a company stands over against its shareholders. The property and debts of the firm are nothing else than those of the partners. A change in the list of partners is the substitution of a new firm for the old one, and there is no permanent legal unity, as in the case of the company. There can be no firm which consists of one partner only, as a company may consist of one member. The incorporation of a firm—that process by which an ordinary partnership is transmuted into a company—effects a fundamental change in the legal relations of its members. It is nothing less than the birth of a new being, to whom the whole business and property of the partnership is transferred—a being without soul or body, not visible save to the eye of the law, but of a kind whose power and importance, wealth and activity, are already great, and grow greater every day.
In the case of corporations sole, the fictitious nature of their personality is equally apparent. The chief difficulty in apprehending the true nature of a corporation of this description is that it bears the same name as the natural person who is its sole member for the time being, and who represents it and acts for it. Each of them is the Sovereign, or the Solicitor to the Treasury, or the Secretary of State for War. Nevertheless under each of these names two persons live. One is a human being, administering for the time being the duties and affairs of the office. He alone is visible to the eyes of laymen. The other is a mythical being whom only lawyers know of, and whom only the eye of the law can perceive. He is the true occupant of the office; he never dies or retires; the other, the person of flesh and blood, is merely his agent and representative, through whom he performs his functions. The living official comes and goes, but this offspring of the law remains the same for ever.
The doctrine that corporations are personae fictae, though generally received, has not passed unchallenged. Attempts have been made in recent years, especially by German jurists, to establish in place of it a new theory which regards corporate personality as a reality, and not a fictitious construction of the law. A corporation, it is said, is nothing more, in law or in fact, than the aggregate of its members conceived as a unity, and this unity, this organisation of human beings, is a real person and a living organism, possessed of a real will of its own, and capable of actions and of responsibility for them, just as a man is.
With respect to this theory it is to be observed that, even if applicable to corporations aggregate, it must leave corporations sole and the other classes of legal persons to be explained in the older fashion. And even in the case of corporations aggregate it seems impossible to admit that their personality is anything more than the outcome of metaphor and fiction. A society is not a person, but a number of persons. The so-called will of a company is in reality nothing but the wills of a majority of its directors or shareholders. Ten men do not become in fact one person, because they associate themselves together for one end, any more than two horses become one animal when they draw the same cart. The apparent absurdity of holding that a rich and powerful joint-stock company is a mere fiction of the law, and possesses no real existence, proceeds not from the fiction-theory, but from a misunderstanding of it. No one denies the reality of the company (that is to say, the group of shareholders). What is in truth denied is the reality of its personality. A group or society of men is a very real thing, but it is only a fictitious person.[[289]]