Understanding Legal Personality in Nepal’s Civil Code

Introduction

The concept of legal personality is a fundamental principle in law, allowing entities other than human beings to possess rights and obligations. A legal person refers to any entity, such as a corporation, institution, or organization, that the law recognizes as having its own distinct identity separate from its members. This concept enables legal persons to own property, enter into contracts, sue, and be sued in their name. The personality of legal persons is a legal fiction developed to facilitate the functioning of complex societies and commercial activities. While they do not have physical existence like natural persons, legal persons are treated as "persons" before the law to ensure accountability and the smooth operation of legal and economic systems. The recognition of legal personality reflects the flexibility of the legal system to adapt and regulate collective human activity under a unified legal framework, promoting justice, efficiency, and order in society.

Legal Provisions Related to Personality as per Muluki (National) Civil Code, 2074/2017

Some legal provisions from Sections 42 to 53 of Chapter regarding legal person and its Personality under Part 1 of the National Civil Code, 2074/2017 are found to have been elaboratively discussed as per the changing context of society and constitutional framework, which are as follows:

1. Legal Person to Acquire Competency

A body corporate incorporated pursuant to law shall obtain legal personality and legal competency in the same capacity. In order to obtain legal competency, anybody shall be registered under the law

Except where a separate provision has been made by law for registration, an application shall be made to the competent authority, setting out the following matters:-

• Name of the body corporate,
• Head office of the body corporate, and address of such office,
• Objectives and functions of the body corporate,
• Details of the capital structure, if any, of the body corporate,
• Other necessary details.

After the registration of a body corporate, such body shall be deemed to have been incorporated.

A legal person shall have a corporate personality and use a separate seal for its activities.

A body incorporated shall be an autonomous body corporate with perpetual succession, and may, in the same capacity, subject to law, carry out as a person the following functions:

• To acquire, hold, earn, possess, dispose, sell or otherwise manage a property,
• To make a contract, exercise rights and discharge obligations under the contract, or to assume any kind of right or obligation in any other way,
• To frame statutes or bylaws required to operate its functions, proceedings, or business,
• To appoint necessary employees to carry out its functions, provided that the commissions, institutions, or bodies shall not be allowed to appoint employees.
• To open branches or other offices subject to its statute and by-laws,
• To open an account in a bank or financial institution and to operate the account,
• To do other functions according to law.

A legal person may sue or take other legal action and may also be sued or subjected to other legal action by its name.

2. To Obtain Legal Competency upon Incorporation

A legal person shall, upon its incorporation, obtain legal competency to carry out civil and commerce-related acts, in addition to the acts mentioned in Section 4221. The legal competency obtained shall continue to exist until the legal person is liquidated, dissolved, or wound up in accordance with law.

3. Legal Competency Deemed to be Acquired Ipso Facto

Notwithstanding anything contained in Section 42, the following body as a legal person shall be deemed to have ipso facto obtained competency

• The State of Nepal,
• The Government of Nepal,
• The Federal Parliament or the Legislature-Parliament,
• A court, constitutional body, or anybody thereunder
• A Ministry, Secretariat, Department of the Government of Nepal, and any other government office,
• A State,
• The State Government or State-level government offices,
• A State Assembly,
• A Village Body, Municipality, or District Assembly, or a Local Level government office under such body,
• A commission, committee, or similar other body set up in accordance with law by the Government of Nepal, State Government, or Local Level Government,
• A corporation, corporate body, or body set up in accordance with law,
• Any organization established for a public purpose, such as a shrine, temple, deity place, Chaitya, monastery, mosque, church, public rest house, public inn, and graveyard remained in operation from time immemorial and owns property.
• A community school, college, or university established for public purposes.

4. Address of Location of Legal Person

The address of location of a legal person shall be as specified at the time of incorporation of the body corporate, and where such address is not so specified, the address where its headquarters or registered office is located and where such office or address also is not specified, the address where the main administrative office or transaction and business of such body corporate is located shall be considered to be its address of location.

5. Management and Operation of a Legal Person

A legal person shall, except as otherwise provided by law, be managed and operated in accordance with the provisions outlined in the statute of such person, and failing such provisions, it shall be managed and operated by directors. The legal person shall be responsible for the management and operation made by the director or directors.

6. Operation of the Business of a Legal Person

In operating a business on behalf of a legal person, the business shall, except as otherwise provided by law, be operated by the decision of the directors of such person. In operating a business, the director may delegate powers to any director or other person to do any business.

7. Right or Liability to Devolve upon Merger of Legal Person

If a legal person is, for any reason, merged with another legal person, the right or liability of such person shall be as specified at the time of such merger. If not specified , the right or liability of the legal person to be merged shall devolve on the legal person with which such person is merged.

8. Legal Person may Become Agent

A legal person may, subject to law, act as an agent of any other person.

9. Not to Participate in Decision-making in case of Conflict of Interest

A member or director of anybody or institution shall not take part in the decision-making process on a matter involving his or her interest. If a decision is affected by a conflict of interest then such a decision shall be void.

10. Legal Person to be Liable

If a loss or damage is caused to a person from an act done and action taken by a-compensation therefor a legal person, such legal person shall be liable and bear compensation thereof.

provided that if any loss is caused by doing an act beyond the objective and competency of the legal person or dishonestly, the director or person doing such act shall personally be liable thereof.

11. Assets or Liabilities to be Settled

If a legal person is dissolved for any reason, the assets and liabilities of such a person shall be settled in accordance with the law.

Conclusion

In conclusion, the concept of legal personality is vital for regulating non-human entities within the legal framework. The Muluki Civil Code, 2074/2017, has comprehensively defined and elaborated the legal status, rights, and responsibilities of legal persons in Nepal. By recognizing entities such as corporations, government bodies, and public institutions as legal persons, the Code ensures they can function independently, enter contracts, own property, and be held accountable. These provisions promote transparency, efficiency, and legal certainty. The evolving nature of legal personality reflects the adaptability of the legal system to meet the needs of a modern and organized society.