Determination of Enemy Character of Corporations

Abstract

Much controversy has raged for a long period of time over the precise nature of what Wormser refers to as the “anatomy” of a corporation. Wormser himself defines a corporation as a “group of one or more persons authorized by sovereign authority to act as a unit and a personality in the eye of the law.” The definition indicates, on the one hand, that the act of incorporation creates a new person or entity, on the other that this new entity is in fact composite, made up of one or more pre-existing entities. The question arises, at what times will the court regard the corporate entity, and at what times will it look to the real persons who compose it ? A key to the solution of the problem is offered by Lord Mansfield. “A fiction of law shall never be contradicted so as to defeat the end for which it was invented, but for every other purpose it may be contradicted.” By the separate entity theory is meant that a corporation is to be regarded as an entity separate and apart from its corporators and that it is to be treated like any other independent person. That this is the theory of corporations generally accepted by the courts need hardly be proved. It will only be noted that the ruling English case on the subject is that of Salomon and Co. v. Salomon. In his opinion in that case Lord Halsbury said: “Once the company is legally incorporated it must be treated like any other independent person.”