Corporations, associations, multinational corporations and transnational juristic personality

1. Kinds of corporations

• Corporation sole: a single office-holder incorporated so that the office continues beyond any individual: the Crown, a bishop, in India statutory offices such as the Official Trustee and the Administrator-General, and the Treasurer of Charitable Endowments.
• Corporation aggregate: a group of persons united in one body: companies, municipal corporations, universities, statutory corporations (LIC, State Bank of India).
• By mode of creation: by charter (East India Company, 1600), by special statute, or by registration under a general law (Companies Act, 2013).
• By liability: companies limited by shares, limited by guarantee, or unlimited (Companies Act, 2013, section 2(20) and related definitions); limited liability partnerships under the LLP Act, 2008; one-person companies since 2013.

2. Registered and friendly associations

Between natural persons and corporations sit associations whose personality is partial. Friendly societies in English law (mutual-help societies under the Friendly Societies Acts) and in India societies registered under the Societies Registration Act, 1860, co-operative societies, and trade unions (registered under the Trade Unions Act, 1926, now under the Industrial Relations Code, 2020) can hold property and sue or be sued in their registered name, without being companies. Unregistered associations, partnerships under the Indian Partnership Act, 1932 and Hindu undivided families are not juristic persons in the full sense, though statutes (income tax, procedure) treat them as units. The existence of these graded forms supports the view that personality is a matter of degree, a set of legal capacities granted for a purpose, rather than a single status.

3. Separate personality and lifting the veil

• Salomon v. A. Salomon & Co. Ltd. (House of Lords, 1897): a duly incorporated company is a separate person from its members, even a one-man company.
• Lee v. Lee’s Air Farming Ltd. (Privy Council, 1961): a controlling shareholder could be an employee of his own company.
• Indian courts lift the veil for fraud, evasion of tax or law, enemy character, and where the company is a sham. LIC v. Escorts Ltd., 1985 INSC 251, listed these situations; Prest v. Petrodel Resources Ltd. (UK Supreme Court, 2013) confined true piercing to evasion of an existing legal obligation.
• A company is a person but not a citizen: State Trading Corporation of India v. CTO, 1963 INSC 157, and Tata Engineering and Locomotive Co. v. State of Bihar, 1964 INSC 44, so it cannot claim Article 19 in its own right, though shareholders may.
• Balwant Rai Saluja v. Air India Ltd., 2014 INSC 561, restated that the veil may be pierced only where the corporate form is a sham or a device to defeat law, not merely because of control by a holding company.

4. The multinational corporation

An MNC is not one legal person. It is a group of separately incorporated companies in many states, linked by ownership and control, operating under a common strategy. Each subsidiary is a person under its local law, and the parent is a separate person in its home state. This produces the central problem: economic unity, legal plurality. A parent can profit from a subsidiary’s operations while limited liability and separate personality shield it from the subsidiary’s wrongs.

Bhopal. The 1984 gas leak at Union Carbide India Ltd.’s plant killed thousands. India sued the US parent, Union Carbide Corporation, in New York; the federal court dismissed the suit on forum non conveniens (In re Union Carbide Corporation Gas Plant Disaster, SDNY, 1986), on condition that UCC submit to Indian jurisdiction. The Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 made the Union the claimants’ representative, and the claims were settled for US$470 million under orders of the Supreme Court (Union Carbide Corporation v. Union of India, 1989 INSC 60), upheld on review in Union Carbide Corporation v. Union of India, 1991 INSC 250. The Union’s curative petition to top up the settlement was dismissed in Union of India v. Union Carbide Corporation, 2023 INSC 222. The Oleum gas case (M.C. Mehta v. Union of India, 1987 INSC 261) was the Court’s doctrinal response: enterprise liability for hazardous industry, measured by the enterprise’s capacity.

Tax and corporate structure. In Vodafone International Holdings B.V. v. Union of India, 2012 INSC 45, the Court refused to look through an offshore holding structure to tax a transfer of shares between two non-resident companies, treating the corporate form as genuine unless it was a sham. Parliament responded with retrospective amendments in 2012, which were themselves withdrawn in 2021. The episode shows the tension between separate personality and the economic reality of the group.

5. Transnational juristic personality

International organisations. In Reparation for Injuries Suffered in the Service of the United Nations (ICJ, advisory opinion, 1949) the Court held that the UN has international legal personality, distinct from its members, to the extent necessary for its functions, and could claim against a state for injury to its agent. This is a functional, concession-type personality granted by the member states through the Charter.

Corporations in international law. MNCs are not traditional subjects of international law: they cannot make treaties and are not generally bound by human rights treaties. But they have partial personality in specific regimes:

• investment treaties and the ICSID Convention (1965) let investors sue host states;
• the European Convention on Human Rights protects companies’ rights to property and fair trial;
• international criminal law has debated corporate liability, though the Rome Statute covers only natural persons.

Accountability instruments. The OECD Guidelines for Multinational Enterprises (1976, revised since), the UN Global Compact (2000), and the UN Guiding Principles on Business and Human Rights (2011), with their three pillars: the state duty to protect, the corporate responsibility to respect, and access to remedy. A UN working group has negotiated a legally binding treaty since 2014. The EU’s Corporate Sustainability Due Diligence Directive (2024) requires large companies to identify and address human rights and environmental harm in their chains of activity, though its application has since been postponed and narrowed. India’s response includes CSR under section 135 of the Companies Act, 2013 and SEBI’s Business Responsibility and Sustainability Reporting for listed companies.

Parent company liability in tort. English courts now hold that a parent may owe a duty of care to those harmed by its subsidiary where it controls or advises on the relevant operations: Chandler v. Cape plc (Court of Appeal, 2012); Vedanta Resources plc v. Lungowe (UK Supreme Court, 2019, Zambian villagers); Okpabi v. Royal Dutch Shell (UK Supreme Court, 2021, Nigeria). In the United States, by contrast, the Alien Tort Statute route has narrowed (Kiobel v. Royal Dutch Petroleum, 2013; Jesner v. Arab Bank, 2018).

6. The theories applied to transnational personality

• Fiction and concession: each state grants personality to its own company; the group as a whole has none. This is the theory behind the accountability gap.
• Realist: the MNC is a real economic organism with a single will (the parent’s); law should recognise it as one, supporting enterprise liability.
• Bracket: look through the corporate form to the controllers, as in lifting the veil.
• Kelsenian and Hohfeldian: personality is a bundle of legal relations; there is no reason the bundle cannot be assembled across legal systems, as the Guiding Principles and the EU directive attempt.

How this is examined

For a short note: define the MNC as a group, state the gap, give Bhopal and Vedanta, the UN Guiding Principles, and Reparation for international organisations. For the internal question, add section 6 to connect the theories. A question on kinds of corporations uses sections 1 to 3.