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CORPORATE PERSONHOOD: A LOOK INTO THE HUMAN TRAITS OF COMPANIES

Updated: Jan 6

[Pragati Pragi and Divyansh Bhatnagar are students at Damodaram Sanjivayya National Law University, Visakhapatnam]


Introduction:


Within the intricate framework of company law lies a captivating debate: can a corporation, often viewed as a distinct legal entity, possess characteristics akin to human attributes? The concept of a company as a separate legal persona has long been upheld, yet in different jurisdictions across the world the questions persist about whether it can be ascribed a race, religion, or even claim rights to privacy and feelings.


Exploring these intricate facets opens a compelling dialogue in the legal landscape. This blog aims to delve into these complex nuances, navigating through legal precedents and landmark cases to uncover the intriguing realm where corporate identity intersects with fundamental human attributes. 


1. Race


One of the fundamental queries revolves around whether a company can be ascribed a racial identity? Over the years, legal cases have shed light on this aspect. Instances where a company's majority shareholders belong to a specific race have triggered questions of racial identity for the corporation itself as can be seen from the case Bains LLC v. Arco Production Company  that is discussed below. However, courts have consistently ruled that a company, despite the racial composition of its shareholders or management, doesn't inherit a racial identity which is witnessed in the following case:


The case of People’s Pleasure Park Company v. Rohledor  exemplifies this stance, affirming that a company is an entity created by law, devoid of racial characteristics associated with its members. In this case, during the acquisition of a piece of land, there were encumbrances relating to its transfer to a person of colour. Ultimately the land was transferred to the People’s Pleasure Park Company which had the majority of shareholders of African descent. When this transfer was objected to and brought to the court it was held that “Even if all shareholders are coloured persons, a company will not be considered as a coloured person. It is created by law in itself and can’t have a particular colour. The colour of the majority of shareholders doesn’t change the character of the Company. A corporation is a person of its individuality and identity and does not partake of the qualities of its members. The fact that every one of its members was a coloured person did not have the effect of making the artificial person - the People’s Pleasure Park Co. - A person of African descent.”


Then in a different setting in the U.S case of Bains LLC v. Arco Production Company, Flying B was a gasoline corporation owned by the Sikh community having a contract with Arco Productions whose head Bill Davis made them wait purposefully for long hours during deliveries because there was an ethnic animosity on his part against Flying B delivery boys wearing turbans and having a long beard and ultimately terminated the contract with them. This termination of contract was challenged in the court for racial discrimination. Arco Productions argued that Flying B is a corporation and doesn’t have a racial identity. There was a special verdict holding that Arco Productions Co. violated Sec. 42 of the US Code, 1981 which states that all persons within the jurisdiction of the US shall have equal rights in every state to make and enforce contracts. When a corporation has acquired an “imputed” racial identity, it can be the direct target of discrimination and has standing to pursue a claim under the above section.  


In essence, while the People’s Pleasure Park case highlighted the separation of a company's legal identity from the racial makeup of its shareholders, the Bains LLC case acknowledged that under certain circumstances, a corporation could indeed be imputed with a racial identity and be subject to discrimination based on that perceived identity. These differing outcomes showcase the nuanced interpretations within the legal realm regarding the attribution of racial characteristics to corporate entities and their subsequent treatment under the law against discrimination.


2.     Right to Privacy:


The question of whether a company, as a legal entity, can claim the right to privacy akin to natural persons has also surfaced in legal discussions. Courts have tended to support the idea that companies engage in private activities that necessitate protection.


In the case of R v. Broadcasting Standards Commission ex parte BBC  there was secret filming of transactions of a retail company by makers of a broadcasting company, when the retail company got to know about the same they challenged the action of broadcasting company as an infringement of their privacy under Sec. 111 of Broadcasting Act, 1996. It was held that under this act that not giving protection to the company for privacy would infringe on their rights to carry on company operations which is never the intention of the parliament behind this act that a Company could have private activities which needed protection from unwarranted intrusion. 


3.     Feelings and Reputation:


An intriguing dimension emerges when considering whether a company can possess feelings or claim damages to its reputation. The law distinguishes between individuals and companies in matters of defamation. Individuals may be subjected to expressions that could evoke contempt, hatred, or ridicule, but the same doesn't necessarily apply to corporations.

In the case of TVS Employees’ Federation & Others v. TVS & Sons Ltd. & Anrthe issue revolved around the depiction of company workers' conditions through a video cassette, which the company claimed to be a false portrayal. The company alleged defamation, prompting an intriguing exploration into whether defamation laws apply similarly to individuals and companies. The court ruled that while individuals might be subject to expressions that evoke contempt, hatred, or ridicule, companies, as artificial entities, do not possess emotions or feelings that could be affected in the same manner. Consequently, what might lead people to feel negative emotions towards an individual might not evoke the same sentiments towards a company. This distinct differentiation in the application of defamation laws highlights the divergence between the treatment of individuals and corporate entities.


Moreover, instances such as Firma EDV EfS Elektronische Datenverarbeitung Dienstleistungs GmbH v. Germany  brought forth the debate on whether a company's reputation is protected under human rights laws. 


In this case, a news announcement was released by a Bavarian Protestant Lutheran Church spokesman that there is a “Security Leak in software for medical practices - Patient Data accessible to psycho-sect Universelles Leben”. He issued a warning, saying that Firma might misuse its access to patient information and utilise it for the benefit of Universelles Leben, the religious organisation with which it is affiliated. Firma lost its primary source of income when the firm that had granted it a licence to distribute and offer customer support for its software terminated the agreement. The trial court determined that Firma's commercial rights and personality rights had not been infringed.


Firma invoked Articles 8 & 9 of European Convention on Human Rights (ECHR), 1950 and complained that Church had damaged Firma's reputation and destroyed its financial foundation by disclosing the religious affiliation of its management and staff and casting doubt on their dependability.


The main question for the European Court of Human Rights (ECHR)was whether art.8, under its “private life” limb, applied to a legal person, such as Firma EDV, complaining of a violation of its right to reputation?


The decision was not in favour of Firma as there was enough evidence to prove that the termination of the contract was not a result of such publications and was due to the reason of public debates.


However, the court acknowledged that Article 8 of the ECHR, which safeguards private life, extends to protect the reputation of legal persons, including companies. It recognized that safeguarding a company's reputation is a legitimate aim under Article 10(2) of the ECHR. Moreover, the court differentiated between the rights of natural persons and companies under Article 9, which concerns freedom of conscience and religion. It concluded that as Firma was founded exclusively for business purposes and didn't engage in religious activities, it couldn't rely on protections related to freedom of religion.


Ultimately, the former case is distinguishing how emotions and sentiments apply differently to individuals and companies. In contrast, the Firma case delved into the protection of a company's reputation under human rights laws, elucidating the considerations surrounding a company's reputation as a facet of its private life and the boundaries within which such protections are upheld concerning religious affiliations and business purposes.

 

Conclusion:


In the intricate tapestry of Company law, the notion of a company possessing race, religion, feelings, or an absolute right to privacy remains a subject of debate. While legal precedents have established that companies, as separate legal entities, lack racial identities and might not fully align with human attributes, they do hold rights and protections that safeguard their operations and reputation. The evolving nature of law continues to shape and define the boundaries within which corporations operate as distinct legal entities in the eyes of the law.

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