The historical background of corporate legal theories in Anglo-American law

Abstract

The fiction theory is probably that most widely held by lawyers who practise or study the English legal system. The advocates of the fiction theory maintain that an incorporated association has no real existence but that the law, by a dogmatic fiction, treats an association, when incorporated, as though it were an existing entity and attributes to this fictious being legal rights and duties. That theory was promulgated by Coke and Blackstone. It is essentially a product of the feudal structure of medieval society, for the fiction theory and the concession theory flowed together. The rigidity of the common law was the other foundation of that theory.
The rise of capitalism and the prosperity of companies lean towards the real personality theory. In particular, the old traditional dogmas have been discarded under the influence of equity. The realists insist that an association is a reality and that, when incorporated, it can have rights and duties and that incorporation is merely the recognition by the state of this fact. This theory served simplification of business transactions.
The non-entity theory grew up behind a screen of trustees or through the co-ownership doctrine of partnership. The external wall of trustees was kept in good repair and the aggregate theory of partnership stressed the individuality. The proponents of the non-entity theory are not interested in the question of whether or not an association is a reality. According to their conception only human beings can have rights and duties, and where an association is incorporated, rights and duties are in the human beings who are its members, although as a matter of convenience, they are spoken of as being in the incorporated entity.
In conclusion, corporate theories have been consistently maintained by artificial and technical fiction and whole theories developed aiming at equity and the needs of the times. In other words, English law expect that organized group will be reduced to the natural person, that is, right-and-duty-bearing unit. If we must find a fundamental idea of corporate theories, in Anglo-American law, it is relation, not will.