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A company can be sued but cannot be tripped over. In what sense does it exist?

Hamza Qureshi Fellow
· 5 replies · 243 views
Existence & beingAfrican & AfricanaAnalyticIslamicH. L. A. Hart#corporations#institutions#legal-persons#social-ontology
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Last month I spent four hearings arguing against a company. It had a registered office, a seal, a board, and a lawyer almost as tiresome as I am. What it did not have was a body. You cannot trip over it, and if every director resigned tomorrow it would still owe my client money.

Lawyers have argued about this for a long time. The old "fiction theory", usually traced to Savigny, says the corporation is a person only because the law pretends it is. The "real entity" view, associated with Gierke, says groups have a real life of their own and the law merely recognises it. Hart, in his Oxford inaugural lecture, warned that asking "what is a corporation?" in the abstract leads nowhere, and that we should look instead at how sentences about companies are used in legal reasoning.

I recently came across a neat way of laying out the options, which I paraphrase:

  • It exists straightforwardly, because it has effects: it pays taxes, signs contracts, gets sued.
  • It exists derivatively, the way a queue does: real, but nothing over and above people and their arrangements.
  • Strictly it does not exist; "the company" is shorthand for a vast number of facts about people and documents.
  • The question is malformed, because "exists" is being used in two senses at once.

What strikes me is that nothing about the company is in dispute. We agree on the shareholders, the accounts, the office in Gulberg. The disagreement is purely about what to say exists. I would like to hear from people who handle institutions in practice: which of the four do you find yourself assuming, and does it ever change an outcome?

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5 replies

  1. Thandeka Mokoena

    Fellow

    In South Africa the Constitution answers part of this for you, and it answers in your second sense. Section 8(4) says a juristic person is entitled to the rights in the Bill of Rights to the extent required by the nature of the rights and the nature of that juristic person. So a company can claim privacy or property, but nobody would argue it has a right to human dignity in the way my clients facing eviction do. The courts treat it as real, but real in a way that is parasitic on the people behind it, and the outcome often turns on exactly how parasitic.

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  2. Khalid Mahmood Awan

    Fellow

    From the bench, the fiction served us well enough until we had to punish. You cannot imprison a company, and criminal liability needs a guilty mind, which a company does not have except by borrowing its managers'. Every jurisdiction I know has had to invent rules for whose mind counts. That is where your third answer, shorthand for facts about people, starts to look more honest than the first.

    On our own tradition, I will only say that classical jurists debated whether a waqf or the public treasury could hold rights and owe duties, and modern scholars disagree about how far that amounts to legal personality. I would not want to claim more than that.

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  3. Kwame Asante

    Fellow

    Wiredu used to ask that such questions be put in one's own language before being answered. In Akan the ordinary way to say something exists is to say it is there, at a place: wɔ hɔ. He argued that this makes some European puzzles hard even to state, because existence that is not existence somewhere sounds odd.

    Our land law gives another angle. Family and stool lands belong to the lineage, which outlives every member and is spoken of as owning, deciding, remembering. Nobody in the village thinks the lineage is a ghost. But nobody thinks it is merely shorthand either. It is closest to your fourth answer: the puzzle comes from forcing one sense of "exists" on everything.

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    1. Hamza Qureshi

      Fellow

      Kwame, I like this very much, and I notice with some satisfaction that the company in my case does have a "there": the registered office. Perhaps company law has been quietly Akan all along. More seriously, your lineage example makes me doubt the shorthand view. Shorthand ought to be cashable into facts about current people, and a lineage's claims reach back to people long dead.

  4. Aroha Tipene

    Contributor

    My students at the kura in Rotorua would answer your question without blinking. In 2017 the Whanganui River was recognised in law as a legal person, Te Awa Tupua, with its own voice through appointed guardians. To them that is obvious: the river is an ancestor, and the law has finally caught up. What they find strange is that a company, which nobody has ever greeted or mourned, was a legal person first. So I'd add a fifth answer to your four: some things exist as persons because of relationships people already have with them, and the law's job is to recognise that, not invent it.

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