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 Shabbat Parashat Behar| 5766P’ninat MishpatMishpat Ve halacha Be Israel - Part IX - A Corporation as a Litigant (II)
Par. 9 of our beit din’sRules and Procedures relates to a corporation as a litigant: “A. The litigants recognize the principle that a corporation has rights and liabilities and can sue or be sued. B. The litigants recognize the principle that corporations have limited liability. Therefore, claims are made in relation to the corporation’s assets, not those of its representatives, who act in its name, or of its stockholders, unless beit din decides that the corporation’s director, representatives, or shareholders are personally responsible. C. Subject to that which is stated in subsection B, the litigants relinquish any possibility of making claims on assets that are beyond those of the corporations.”
We discussed last time the machloket among Acharonim regarding the status of a corporation, which legally is characterized by the concept of limited liability. Does halacha view a corporation as a case of classic joint ownership or does there exist an independent category for a joint venture of people who operate and have financial interests in it without ownership?
In most instances, this question is not pertinent in regard to the protection from personal liability of one who acted as a corporation’s representative. Along with and included in the set halachot of the Torah for civil law, there are Torah-recognized mechanisms that can create halachot. One is the concept of dina d’malchuta dina (the law of the land is the law), whose exact parameters are complex and disputed (we discussed the matter in the past). A somewhat related concept, whose use is widespread in many areas of halachic civil law, is “hakol k’minhag hamedina” (everything follows the practice of the region) (Bava Metzia 83a). One context is the work conditions that apply when the sides made no explicit agreement in advance. The concept applies to varied agreements between people without discussing details, on matters where there are clear societal norms.
One who does business with a corporation is aware that both the law and the societal norm usually preclude the ability to sue individual employees, officers, or stockholders or receive payment from their personal assets. Thus all agreements, including loans, investments, sales, etc. include an implied agreement to the concept of limited liability. Therefore, in the great majority of cases that come before a beit din, the corporation’s legal status should be recognized by halacha even by those who, in regard to ritual matters, do not view it as an independent entity.
In order to cover other cases and remove any doubt, we have included the concept of accepting limited liability in the arbitration agreement. However, we left the possibility that in certain uncommon cases, when someone who represented the corporation hid behind the “corporate mask” to act irresponsibly or criminally, we can hold him personally responsible for his actions.
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