Legal Person

LEGAL PERSON, a body of men or of property which the law, in imitation of the personality of human beings, treats artificially as subject of rights and duties independent of its component parts. The classic example of a legal person is the corporation. Although the most familiar type of corporation is that engaged in business activities, history has witnessed corporations formed as the vehicle for charitable enterprises, cooperative nonprofit-making enterprises, municipal and governmental operations, and religious and social activities. For example, in the classical Roman legal system, the universitates – corporate groups which possessed common treasuries and were endowed with a legal personality separate and distinct from that of their individual members – included various municipal and religious, as well as industrial and trading, associations. The corporation has usually featured the following characteristics: a name common to the aggregate of its component individuals or properties; a life independent of the lives of its components; the possession of privileges or rights, liabilities or duties, which do not inhere in its membership as individuals; and the divorce of ownership and management, with the authority of the managers to act as the agents and representatives of the corporation being conferred, limited, and determined not by the consent of the owners but by the law itself.

Talmudic and Post-Talmudic Law

Traditional Jewish law apparently did not recognize the type of ownership implied in the idea of the corporation. Common ownership is ordinarily expressed in terms of *partnership (shuttafut; Maim. Yad, Sheluhin ve-Shuttafin 4–10; Tur. and Sh. Ar., ḤM 157–82). The salient differences whereby the partnership may be distinguished from the corporation are: the continued existence of a partnership is dependent upon the lives of the partners or their respective heirs; the privileges, rights, liabilities, and duties associated with a partnership inhere almost directly in the individual members of the association; the manager of a partnership enterprise is construed as the agent of the component members. Although the corporation is not a juristic category in the classical sources of Jewish law, scholars have attempted, with various degrees of success, to find types of associations and proprietal arrangements in Jewish history which parallel or approximate the corporation and which may be regarded as embodiments of the concept of the legal or artificial person. The fruits of these attempts may be summarized as follows:

Hekdesh

*Hekdesh, the term for objects, animals, and money consecrated for the upkeep of the Temple precincts and for the sacrificial service therein. The administrator of this corporate body was the Temple treasurer (gizbar). All Temple properties were placed under the jurisdiction of the gizbar, at whose discretion acquisitions and sales of these properties were controlled and who was empowered to represent the interests of the Temple in litigation (Ḥag. 11a; BM 58a). Thus the typical feature of the modern corporation, the divorce of ownership and management, was the salient characteristic of hekdesh – for God was viewed as the "owner" and the gizbar the manager thereof.

On the other hand, the Temple corporation was unique in the world of commerce. Its acquisition of property was by consecration and its sales were by redemption; thus its transactions were governed by special rules. Moreover, there were numerous regulations that were inapplicable to hekdesh pos-sessions, e.g., the rules of overreaching (*ona'ah) did not apply to Temple property, so that valuable properties could be redeemed at the cost of a perutah, the smallest coin; theft of hekdesh property was not punishable by the normal legal sanctions; construction of hekdesh appurtenances was accomplished while the materials were still unsanctified, and their consecration to the Temple took place only after the construction was completed (BM 57b; BK 62b; Me'il. 14b). Hence the corporate body of Temple properties may not be regarded as a typical legal person, subject to the normal rights and duties attributed to human beings.

Benei ha-Ir

Benei ha-Ir, the name given to the municipal community in talmudic parlance. In the Talmud, the community is regarded as an aggregate of the individuals who comprise its membership. The legal definition of this aggregate is that of a partnership. Thus, no member of the community could act as a witness in matters which affected communal property; he was disqualified as an interested party. The governing body of the community, known as the "seven notables of the city" (shivah tovei ha-ir), was regarded as an agent of the citizenry, and its acts had to be ratified by the citizenry meeting as a body (bema'amad benei ha-ir; Meg. 26a).

In post-talmudic jurisprudence, the community was converted from a juridical partnership to a corporate body with numerous features characteristic of a legal person. Communal transactions were no longer regarded as those of its constituent members. Municipal ordinances (takkanot *ha-kahal) could no longer be vetoed by individual citizens; the ruling of the majority members of the governing body was binding on all members of the community. Members of the community, no longer regarded as interested parties, were accepted as witnesses in matters affecting the municipality (see Bet Yosef, ḤM 37, notes 12 and 14; Sma, hM 156, note 6). Thus the body politic came to be clothed with an existence juridically independent of the citizens who comprised it.

Havurat Ẓedakah

Havurat Ẓedakah, the communal charity fund, which eventually evolved into a legal person. In the Talmud, the poor were construed as owners of the monies deposited in the charity fund, and the communal collectors were viewed as their agents (BK 36b). This created disadvantages for the poor, for the rule of procedure in the Talmud was that interests of indeterminate plaintiffs were not actionable (mamon she-ein lo tovin, Rashi, BK 93a). As in the case of benei ha-ir, here, too, post-talmudic jurisprudence endowed charity funds with the character of an artificial person. An association (ḥavurah) founded for charitable purposes was regarded as somewhat akin to the modern corporation, i.e., an aggregate of property earmarked for specific purpose, with the ḥavurah construed as the means created for the advancement of this purpose. The collectors and administrators of the charitable ḥavurah were henceforth classed as its managerial staff fully authorized to conduct its affairs. This authorization included the power to bring suit in court to protect the interests of the funds under its supervision (see Beit Yosef, ḤM 149, note 37; Netivot ha-Mishpat, ḤM 149, Mishpat ha-Kohanim, note 46). It is quite possible that an additional example of a legal person in Jewish history may be found among the *Qumran and *Essene sects, which were based upon the renunciation of private property on the part of their members (cf. E. Koffmahn, in Biblica, 42 (1961), 433–42, and 44 (1963), 46–61).

In Modern Rabbinic Law

The problem of the corporation and its application to Jewish law has arisen in the following areas:

Interest on Loans

Inasmuch as Jewish law forbids lending and borrowing money on interest to or from Jews (see *Usury), the question has arisen whether (or how) Jewish people may conduct the normal transactions involved in banking, *insurance, and the like, and whether (or how) they may invest in such companies without violating the religious restrictions created by the participation of other Jewish people therein.

Sabbath Law

The religious restriction on labor on the Sabbath includes the prohibition of aiding and abetting, as well as deriving benefit from, the labor of others, non-Jews and, more so, Jews. How may a Jew be a stockholder in a company whose operations include Sabbath labor?

Passover Restrictions

A Jew may not eat, derive benefit from, or possess Ḥameẓ during the Passover season. How do these restrictions affect the permissibility to invest in companies which do business with ḤameḤ?

The response of the rabbinic authorities of the past one hundred years has been divided. The controversy may be summarized in the following manner. One school of rabbis is of the opinion that, inasmuch as the traditional sources do not recognize the concept of legal personality in normal commerce and trade, the corporation is, halakhically, nothing more than the conventional partnership. Hence, the rules of partnership are to be applied to the questions of loans on interest, Sabbath labor, and Ḥameẓ, and only the dispensations traditionally allowed within the framework of partnerships may be allowed with regard to corporations. These, it must be added, are highly circumscribed (e.g., Solomon Ganzfried, Kiẓẓur Shulhan Arukh 65:28 and Isaac Wasserman, in: No'am, 3 (1960), 195–203, regarding loans; Moses Feinstein, Iggerot Moshe, vol. 1, OḤ 90, regarding the Sabbath; Israel Be'eri, in: Ha-Torah ve-ha-Medinah, 11–13 (1960–62), 454–62, regarding all three questions). Another group of authorities, although in agreement with the first group in refusing to recognize the corporation as a unique and novel halakhic category, has nevertheless, through involved reasoning, found ways of avoiding the traditional restrictions and has been able to permit Orthodox Jews to invest in and conduct transactions with corporations (e.g., Ẓevi Hirsch Shapiro, Darkhei Teshuvah, YD 160:15, note 121, and M.N. Lemberger, in: No'am, 2 (1959), 33–37; 4 (1961), 251–7. Both these authorities address themselves to the problem of loans. Moses Feinstein, Iggerot Moshe, EH 7, places great stress on the extent to which management is divorced from ownership).

There is, however, a third group of modern talmudists who have taken full cognizance of the divorce of ownership from management in the corporation and of the artificiality of the corporate personality. This school of rabbis has come to the resultant conclusion that the traditional restrictions placed upon individual businessmen or partnerships with regard to the laws of usury, Sabbath rest, and Ḥameẓ, are inapplicable to the corporation (e.g., Aryeh Leib Horowitz, Harei Besamim, 115; Moses Sternbuch, Mo'adim u-Zemannim, vol. 1, p. 203f.; Joseph Rosin, Ẓafenat Pa'ne'aḥ, 184, regarding loans; David Ẓvi Hoffmann, Melammed le-Ho'il, OḤ 91, regarding ḥameẒ). Permission has also been granted to buy and sell shares in companies that do business in non-kosher foods, although an individual is forbidden by the halakhah to engage in regular transactions involving such foods (Gedaliah Felder, in: Kol Torah, 6 (1959), nos. 7–11).

In connection with the ritual requirement that one who "takes" the lulav and etrog on the holiday of Sukkot must havetitle in it in order to fulfill the commandment properly, an interesting discussion arose in the circles of the religious kibbutzim in Israel whether, and to what extent, the kibbutzim constituted a legal person and what their status was in the eyes of Jewish traditional law (cf. A. Nachlon, in: Ammudim (Ha-Kibbutz ha-Dati, 1956), nos. 123, 124; (1957), nos. 126, 128).

Sources: Encyclopaedia Judaica. © 2007 The Gale Group. All Rights Reserved.