ABSTRACT
The idea of corporate personhood has influenced company law for more than a century. It gives corporations a legal identity that is distinct from their shareholders. Traditionally recognized under Salomon v. Salomon & Co. Ltd. in English law and codified in India through the Companies Act, 2013, this principle enables corporations to own property, enter into contracts, and sue or be sued in their own name. ¹ However, the emergence of virtual entities, such as AI-driven systems and DAOs, questions traditional legal structures. These entities might not adhere to standard legal frameworks, yet they still participate in important economic activities.
This research paper examines corporate personhood in India. It explores the historical trajectory of juristic personhood in Indian jurisprudence, including its extension to non-human entities such as idols and rivers, and assesses the challenges of extending or adapting this doctrine to virtual actors. ² Using different methods, the paper reviews laws, court cases, and policy discussions in India. It also considers international examples, such as the EU’s perspective on “electronic personhood” and DAOs in Wyoming. The study proposes a mixed regulatory framework for India to ensure accountability and promote innovation.
KEYWORDS
- Corporate Personhood
- Virtual Entities
- Artificial Intelligence (AI)
- Decentralized Autonomous Organizations (DAOs)
- Companies Act, 2013
INTRODUCTION
The concept of corporate personhood, or the recognition of a corporation as a distinct legal entity separate from its members, is one of the most enduring doctrines of modern commercial law. Its origins are traced to the landmark English case of Salomon v. Salomon & Co. Ltd. (1897), which established that once incorporated, a company has its own legal personality, rights, and liabilities independent of its shareholders. ¹ This principle was subsequently absorbed into Indian company law and codified in statutes culminating in the Companies Act, 2013. ² The doctrine provides the foundation for limited liability, perpetual succession, and efficient capital organization attributes that have enabled corporations to become the dominant vehicle of global commerce.
Indian courts have consistently reaffirmed this position. In Tata Engineering and Locomotive Co. Ltd. v. State of Bihar (1965), the Supreme Court held that a corporation has a distinct legal existence separate from its shareholders and managers. ³ Over time, Indian jurisprudence has extended juristic personhood beyond corporations to other entities such as Hindu idols (Yogendra Nath Naskar v. CIT, 1969) ⁴ and even natural resources such as rivers (Mohd. Salim v. State of Uttarakhand, 2017). ⁵ These developments demonstrate the flexibility of the legal system in conferring personhood where functional or symbolic reasons justify it.
The digital age is changing how we understand organizations. New technologies have created virtual entities like Decentralized Autonomous Organizations (DAOs) that use blockchain to manage assets without human leaders. Artificial intelligence (AI) is also involved in contracts and financial dealings, raising questions about its legal rights. Additionally, metaverse companies operate without traditional corporate structures, which adds to the complexity.
India, a fast-growing digital economy, is embracing blockchain, cryptocurrency, and AI services. However, its legal framework remains anchored in a traditional conception of incorporation under the Companies Act, 2013, and the Information Technology Act, 2000.⁶ This creates uncertainty around issues concerning DAOs and AI entities, such as taxation, liability for fraud, and jurisdiction for metaverse companies. Such uncertainty can lead to challenges for businesses and regulators as they address emerging disputes.
The international experience offers valuable insights. The European Union briefly considered recognizing “electronic personhood” for autonomous AI in its 2017 Robotics Report but later rejected this approach in favor of risk-based regulation under the Artificial Intelligence Act, 2023. ⁷ In contrast, the United States, specifically Wyoming, enacted legislation that recognizes DAOs as a form of Limited Liability Company (LLC). This gives them legal personality, allowing them to own property and engage in legal actions, while also protecting members from unlimited liability. ⁸ These different approaches highlight the tension between innovation and accountability, which India must carefully balance.
This research examines the changing concept of corporate personhood in India during the digital age. It focuses on the legal status of virtual entities. The study uses a comparison of laws, court decisions, and academic debates to explore whether Indian law should recognize personhood for AI-driven corporations, DAOs, and similar entities.
The study has four main goals:
1. To trace the development of corporate personhood in India.
2. To explore issues related to virtual entities.
3. To investigate how other countries handle these matters.
4. To propose reforms for the Indian legal context.
The paper emphasizes corporate personhood under Indian law and does not measure the use of AI or blockchain. Instead, it addresses the legal recognition and responsibility of virtual entities, which are changing the nature of economic actors in India.
RESEARCH METHODOLOGY
This research paper uses a doctrinal legal research method, focusing on primary and secondary legal sources to examine the scope of corporate personhood in India and its possible extension to virtual entities. Doctrinal research fits this inquiry well because the issue whether entities like artificial intelligence (AI)-driven corporations, Decentralized Autonomous Organizations (DAOs), and metaverse-based companies may qualify for legal recognition needs interpretation of laws, court rulings, and constitutional principles rather than collection of empirical data.
Primary sources
The Companies Act, 2013, sets up the legal framework for companies in India, detailing their rights and responsibilities. The Information Technology Act, 2000, provides rules for electronic records and digital contracts that apply to online businesses. Cases from the Supreme Court and High Court, like Tata Engineering v. State of Bihar and Yogendra Nath Naskar v. CIT, explain who is considered a legal person. This includes corporations and idols, and they propose ways to recognize digital entities.
Secondary Sources
Secondary materials include scholarly articles, legal commentaries, and expert committee reports. A. Ramaiya’s Guide to the Companies Act offers key insights on incorporation and legal personality. Indian law journals discuss AI, blockchain, and DAOs. Policy documents, such as NITI Aayog’s National Strategy for Artificial Intelligence (2018), highlight the government’s recognition of AI’s transformative potential and the need for accountability mechanisms. ⁹ . International sources, including the EU Artificial Intelligence Act, and U. S. laws, like Wyoming’s DAO law, provide additional perspectives.
Comparative Method
This research compares different jurisdictions approaches to the legal status of virtual entities. It contrasts the EU’s rejection of electronic personhood with Wyoming’s recognition of DAOs as limited liability companies, highlighting lessons for India to create a balanced framework for virtual entities.
Scope and Limitations
This study focuses on Indian corporate and constitutional law, using international references for comparison. It does not include surveys on technology use or business practices, instead relying on legal sources. As digital technologies evolve, new challenges may arise that are not covered here. The methodology aims to support both current and future legal discussions.
Objective of Methodology
The main goal of this method is to examine whether Indian law should grant corporate personhood to virtual entities or if it should regulate them using different liability frameworks. By combining legal interpretation, court reasoning, and comparative insights, this approach makes sure that the conclusions are based on Indian legal principles and informed by effective practices from around the world.
REVIEW OF LITERATURE
The doctrine of corporate personhood has been extensively examined in legal scholarship, both in the Indian and comparative contexts. Literature on this subject can broadly be divided into three streams: (1) classical corporate law theory, (2) expansion of juristic personhood to non-human entities, and (3) emerging debates on virtual entities such as artificial intelligence (AI), Decentralized Autonomous Organizations (DAOs), and metaverse companies.
1. Classical Corporate Law Theory
Corporate personhood is a legal fiction used for economic and organizational purposes, with precedents like Salomon v. Salomon & Co. Ltd. in the UK and Tata Engineering in India highlighting that incorporated companies acquire distinct rights and liabilities from shareholders.
2. Juristic Personhood Beyond Corporations
The Indian Supreme Court has recognized Hindu idols as juristic persons capable of owning property and declared the Ganga and Yamuna rivers as legal persons for their protection. These developments demonstrate the law’s capacity to treat entities as persons when necessary for protecting rights or interests. These extensions are often justified on functional or symbolic grounds, highlighting that corporate personhood is not the only instance of legal fiction in Indian jurisprudence.
3. Virtual Entities and Emerging Debates
The literature on AI, blockchain, and DAOs has expanded the discussion. Solum (1992) was among the earliest to argue for the possibility of legal personhood for artificial intelligences, suggesting that sufficiently autonomous systems might merit recognition akin to corporations. ¹⁰ However, recent scholarship critiques this idea, highlighting potential undermined accountability and regulatory gaps. In India, emerging scholarship highlights the inadequacy of existing legal frameworks. Moogambigai (2022) argues that AI challenges Indian corporate law by displacing human agency in decision-making and calls for hybrid models of liability that keep natural persons accountable. ¹¹ Similarly, Kashyap (2023) discusses how DAOs and blockchain governance also pose challenges to Indian company law, which requires directors and registered offices. Policy think tanks like NITI Aayog emphasize the importance of ethical AI and accountability, but their reports remain largely aspirational rather than regulatory.
4. Comparative Scholarship
Comparative literature highlights the debate on AI’s legal personhood. Scholars such as Bertolini (2019) argue against granting legal personhood to AI, suggesting instead that liability should remain with human actors. ¹² In the US, Wyoming’s DAO legislation provides limited liability companies legitimacy while ensuring accountability. This is particularly relevant for India, where tensions between innovation and accountability exist. Some scholars suggest India should avoid full personhood for AI or DAOs, focusing on tailored liability regimes, while others propose limited legal recognition for commerce while maintaining safeguards.
5. Gaps in Literature
The paper aims to address the gap in Indian corporate personhood research by providing a comprehensive analysis of how Indian corporate law should adapt to AI, DAOs, and metaverse companies. It also explores how constitutional principles like Article 14 (equality) and Article 19(1)(g) (right to trade) might apply to virtual entities if recognized. The paper aims to provide a doctrinal and comparative analysis tailored to the Indian context.
METHOD (CORE ANALYSIS)
A. Evolution of Corporate Personhood in India
Corporate personhood, established in English law through Salomon v. Salomon & Co. Ltd. (1897), lets a company exist separately from its owners. Indian courts acknowledged this in the Companies Act, 1956, and again in the Companies Act, 2013. The principle was reinforced by the Supreme Court in Tata Engineering and Locomotive Co. Ltd. v. State of Bihar (1965). This separate legal identity helps companies own property, sue, and maintain continuity, aiding India’s industrial growth.
B. Juristic Persons Beyond Corporations
Indian law can recognize personhood beyond corporations for various reasons. The Supreme Court recognized a Hindu idol as a legal person in Yogendra Nath Naskar v. CIT (1969). In Mohd. Salim v. State of Uttarakhand (2017), the Ganga and Yamuna rivers were declared legal persons for their protection. Courts may also grant personhood to virtual entities.
C. Emergence of Virtual Entities in the Digital Age
The digital age has seen the rise of entities that operate beyond the conventional framework of incorporation. Three categories stand out:
- Artificial Intelligence (AI) Entities: AI systems now engage in autonomous decision-making, from executing contracts to managing operations. If such systems cause harm, traditional doctrines struggle to assign liability.
- Decentralized Autonomous Organizations (DAOs): DAOs are blockchain organizations managed by smart contracts, allowing resource pooling, investment, and decision-making without directors or offices. In India, they can’t incorporate under the Companies Act, 2013.
- Metaverse-Based Companies: Virtual worlds host businesses with employees, assets, and customers but without incorporation under Indian law. The legal recognition of these entities remains unclear.
The inability of Indian law to accommodate these forms creates gaps in liability, taxation, and regulation.
D. Liability and Accountability Challenges
Virtual entities challenge accountability in Indian law, as DAOs lack controllers and AI exceeds creators’ foresight.
- Attribution of Acts: Can the acts of an AI system or smart contract be attributed to natural persons?
- Mens Rea and Fault: If criminal liability requires intention, how do we assess AI or DAO actions that lack human will?
- Enforcement: Traditional doctrines may be insufficient when applied to autonomous digital actors, as regulators may struggle to enforce penalties without a registered entity.
E. Comparative Perspectives
European Union: The EU Artificial Intelligence Act, 2023, replaces the 2017 proposal for “electronic personhood” for AI. It uses a risk-based framework for accountability of AI developers and users.
United States: Wyoming legalized DAOs as a new type of LLC in 2021, protecting members from unlimited liability and allowing property ownership.
Other Jurisdictions: Japan and Singapore offer regulatory sandboxes for blockchain, suggesting options for India.
F. Constitutional Implications in India
India’s decision to give legal status to virtual entities raises constitutional questions. Corporations already have some fundamental rights, such as equality under Article 14 and the right to trade under Article 19(1)(g). ¹³ However, they do not have rights related to human dignity, like the right to life. If DAOs or AI entities are recognized as legal persons, we would need to make similar distinctions. Granting too many rights could weaken human-focused constitutional values, while not providing recognition would leave victims without solutions. The challenge lies in balancing innovation and responsibility with constitutional protections.
G. Open Questions Under Indian Law
The question of whether DAOs should be taxed as “associations of persons” under the Income Tax Act, whether AI systems should be treated like corporate agents, and whether Indian courts should recognize DAOs as juristic persons remains unresolved.
SUMMARY OF ANALYSIS
The history of corporate personhood in India shows flexibility in recognizing non-human actors. The growth of AI, DAOs, and metaverse companies reveals gaps in regulation and enforcement. Comparative models suggest two options: (1) avoid personhood and rely on human accountability (as seen in the EU), or (2) offer limited legal recognition with safeguards (like the Wyoming DAO law). For India, a hybrid model may be suitable, allowing optional recognition of virtual entities while making sure natural persons are still accountable.
SUGGESTIONS
The previous analysis points out major challenges in applying traditional corporate personhood rules to new virtual entities. To fill these gaps, India needs a regulatory framework that balances innovation and accountability. The following suggestions are proposed:
1. Optional Legal Recognition for Virtual Entities
India could adopt a Wyoming model by introducing statutory provisions allowing virtual entities (DAOs) to register as legal persons under the Companies Act, 2013. This would clarify taxation, liability, and governance while preserving decentralization options. This would incentivize registration without hindering technological innovation.
2. Hybrid Liability Models for AI and DAOs
Hybrid models for AI or DAOs can ensure accountability by primarily focusing on natural persons as developers, operators, or controlling members, but attaching certain legal rights and obligations to the virtual entity itself, aligning with scholarly arguments emphasizing shared responsibility between human actors and technological agents.
3. Regulatory Sandboxes for Experimentation
India’s regulators, including SEBI, RBI, and MeitY, may create regulatory sandboxes for AI-driven corporations and DAOs, allowing controlled experimentation and risk observation before granting full legal recognition, allowing regulators to adapt rules before granting full recognition.
4. Clear Constitutional Guardrails
Indian law must clearly define the scope of virtual entities’ constitutional rights, as corporations already enjoy certain rights like equality and freedom to trade, but not personal liberties like the right to life under Article 21. Courts and legislatures must ensure virtual entities’ recognition doesn’t undermine human dignity.
5. Strengthening Data and AI Accountability Laws
The Digital Personal Data Protection Act, 2023, already creates a foundation for data governance in India. ¹⁴ However, it lacks AI-specific accountability measures, such as mandatory impact assessments for high-risk AI entities, which could prevent harms caused by autonomous systems.
6. Judicial Doctrines for Attribution of Acts
Indian courts could modify vicarious liability and agency law to address virtual entities, such as AI systems, where acts can be attributed to controllers or owners, similar to corporate agents. This would extend “lifting the veil” doctrines to DAOs, providing remedies even before legislative reform is complete.
7. Capacity-Building for Regulators
Regulatory agencies need technical expertise to handle complex technologies, including specialized AI and blockchain cells, to ensure effective oversight and enforce laws, preventing unenforceable laws.
SUMMARY OF SUGGESTIONS
In summary, India should take a careful but active approach. It should introduce optional legal recognition for DAOs. It should adopt hybrid liability models for AI. Strengthening constitutional and statutory protections is also important. Finally, promoting international cooperation is key. These steps would not only close current regulatory gaps but also help India become a leader in shaping global discussions on corporate personhood in the digital age.
CONCLUSION
The concept of corporate personhood is one of the most influential legal ideas in modern law. By recognizing corporations as separate legal entities, Indian law following the English example in Salomon v. Salomon allowed for limited liability, ongoing existence, and the gathering of capital needed for industrial and commercial development. The Indian Supreme Court has consistently supported this principle, also extending legal status to other entities like idols, rivers, and trusts when practical or symbolic concerns required it.
The rise of virtual entities, including Artificial Intelligence (AI) systems, Decentralized Autonomous Organizations (DAOs), and companies in the metaverse, challenges this established idea. Unlike traditional corporations, these entities often do not have formal registration, directors, or a physical location, yet they carry out important economic functions. Their presence raises urgent legal questions: How should we assign liability when problems arise? Can these entities be taxed or sued? Should Indian law treat them as legal persons or manage them indirectly through individuals?
This paper argues that Indian law currently struggles to tackle these challenges. The Companies Act, 2013, and the Information Technology Act, 2000, were created before DAOs and AI-driven companies emerged. Consequently, they leave gaps in regulation concerning liability, taxation, and constitutional rights. While courts have previously shown flexibility granting personhood to idols or rivers extending this recognition to AI or DAOs requires careful consideration, as it affects constitutional rights and human dignity.
Looking at other countries offers valuable insights. The European Union has chosen not to grant electronic personhood to AI, opting instead for a risk-based regulatory framework under the AI Act, 2023, which keeps responsibility with individuals and established companies. In contrast, Wyoming’s acceptance of DAOs as a type of limited liability company illustrates that legal systems can experiment with granting limited personhood to virtual entities to meet commercial needs. For India, a mixed approach may be the best path forward granting optional recognition for DAOs and virtual entities, while ensuring that ultimate liability remains with identifiable individuals.
This paper also suggests additional reforms regulatory sandboxes to evaluate new structures, mixed liability models, enhanced accountability under data protection and AI regulations, clear constitutional limits, and training for regulators. These steps would help India tackle the immediate challenges posed by virtual entities while also allowing the country to take a leading role in the global conversation about corporate personhood in the digital era.
In conclusion, corporate personhood in India is at a crucial point. The law must change to keep up with technological progress while staying grounded in constitutional values. Granting personhood to virtual entities is not just a technical matter of commercial law. It is a larger question about the essence of legal personhood, accountability, and the preservation of human dignity. If done carefully, India can create a framework that encourages innovation while maintaining fundamental principles. The recognition or regulation of virtual entities marks not the end of corporate personhood, but its adjustment to the realities of the twenty-first-century digital economy.
FOOTNOTES
¹ Salomon v. Salomon & Co. Ltd., [1897] A.C. 22 (H.L.).
² Companies Act, No. 18 of 2013, INDIA CODE (2013).
³ Tata Eng’g & Locomotive Co. Ltd. v. State of Bihar, A.I.R. 1965 S.C. 40 (India).
⁴ Yogendra Nath Naskar v. C.I.T., (1969) 1 S.C.C. 555 (India).
⁵ Mohd. Salim v. State of Uttarakhand, W.P. (PIL) No. 126 of 2014, Uttarakhand High Court (2017).
⁶ Information Technology Act, No. 21 of 2000, INDIA CODE (2000).
⁷ European Union, Artificial Intelligence Act, COM/2021/206 final (2023).
⁸ Wyoming Decentralized Autonomous Organization Supplement, WYO. STAT. § 17-31-101 (2021).
⁹ NITI Aayog, National Strategy for Artificial Intelligence (2018).
¹⁰ Lawrence B. Solum, Legal Personhood for Artificial Intelligences, 70 N.C. L. Rev. 1231 (1992).
¹¹ R. Moogambigai, Artificial Intelligence and Corporate Law: Challenges for Indian Jurisprudence, 14 NUJS L. Rev. 201 (2022).
¹² Andrea Bertolini, Artificial Intelligence and Civil Liability: Legal Personality, Causality, and Responsibility, 25 Artificial Intelligence & L. 157 (2019).
¹³ Bennett Coleman & Co. v. Union of India, (1973) 2 S.C.C. 788 (India).
¹⁴ The Digital Personal Data Protection Act, No. 22 of 2023, Gazette of India (Aug. 11, 2023).
Author:
Pranav Bhatt
Gujarat University Ahmedabad