Existence and Non-Existence

There is what is, and there is what is not, and it is not easy to say whether what is not, is not, or whether what is, is.
— Chuang Tzu

In legal terms, a company is a person. In the eyes of the law a company is as much a person as a human being is.

Although in other jurisdictions it can take a lot longer and cost a lot more, in England a company, a new legal person, can be formed in a morning at a cost of about £200. This is much easier, quicker and cheaper than having a child.

Legal personality is the creature of the English common law. It underpins modern capitalism. This is what makes it possible to invest in a company’s shares, without being responsible for its debts. The company as a legal person is responsible for its debts, not the shareholders.

The largest companies are giants, with interests and assets around the globe, hundreds of thousands of employees, and an income greater than many countries. They also have a history, a culture and a reputation.

The problem is that a company does not exist. A company is a legal fiction. I have never met a company, or spoken to a company. I have only ever dealt with the human beings who act for it.

If I say this in a business meeting, most people accept it as a self-evident truth. But sometimes the response is different. Some lawyers, in particular, glare at me as if I have not done my homework. One New York lawyer (who also features in another Tale, Red Rag to a Bull) said that I was an ignoramus.

Other people are outraged. In one negotiation, a Shell man explained that, no matter how one-sided their proposed terms were, Shell was an ethical company. Shell would be reasonable, whatever the contract said. When I countered light-heartedly that Shell does not exist, he got quite angry. His career, his security, and his pension, all depended on Shell. He could hardly have been more upset if I said that his family did not exist.

This is more than a jurisprudential debate. In dealing with a company, it makes a difference whether you consider it a real thing or the sum of its human agents. Business people must be clear in what sense a company exists, and in what sense it does not exist.


See also:  Red Rag to a Bull

Chris Thorpe

Chris Thorpe is a respected independent lawyer in the upstream oil and gas industry, and an established lecturer and author. Chris has a LLB in law from Magdalene College, Cambridge and trained as a barrister in London. He worked for eight years' as an in-house lawyer for BP and Marathon. Since 1991, Chris has run his own upstream legal practice, CPTL, which has acted for many upstream clients. He has extensive experience of international upstream transactions, principally in the North Sea, the FSU, Africa and the Middle East. Chris has spoken at many UK and International Conferences and Seminars, both public and in-house. His most popular current lecture is Fundamental of Upstream Petroleum Agreements, a two-day course with accompanying book.