The conceptual structure of modern company law reveals much about the social relations of capitalist society and their reified and fetishised forms of appearance. Indeed, its historical emergence and development can only be properly understood in the context of an analysis of the various forms taken by capital. In standard company law texts, however, the conceptual structure of company law and the forms of consciousness of which it is part are treated as a historical givens and left unexamined. A critical approach to company law must begin with what these texts take for granted.

The Doctrine of Separate Personality

The doctrine of separate corporate personality is the cornerstone of modern company law. It is founded on a conception of the incorporated company not simply as an entity with an independent legal existence from its shareholders but as an object which is cleansed and emptied of them. It is this depersonalised and reified conception of the company that enables it to be 'completely separated' (Gower, 1979, p. 100) from its members. Traditionally, this 'complete separation' is seen as flowing from the legal act of incorporation, a point usually illustrated by reference to Salomon v. Salomon and Co. Ltd ([1897] AC 22). Correspondingly, a sharp line is drawn between incorporated companies, which are objects in themselves whose members stand in a completely external relationship to them, and unincorporated organisations which are merely collection(s) or aggregation(s) of individuals, in which the members are the company.

This view as to the origins of the complete separation of companies and their members - and, therefore, of the conceptual foundations of modern company law - is untenable. An examination of eighteenth-and early nineteenth-century cases and texts makes it clear that at that time incorporation did not entail such a separation. Incorporation did create an entity, the incorporated company, which was legally distinguishable from the people composing it, but there was no suggestion that this entity was completely separate from its members. On the contrary, up to the middle of the nineteenth century incorporated joint stock companies were consistently' identified with their component members and conceptualised not as depersonalised objects, but as entities composed of those members merged Into one, legally distinguishable, body. An incorporated company was its members 'united so as to be but one person in law ...'.

The prevalence in the early nineteenth century of this view is revealed, with particular clarity, linguistically. Nowadays, an incorporated company is usually referred to in the singular, as 'it', confirming its depersonalised, reified status. In the early nineteenth century, however, when they were perceived as associations of people merged into one body, joint stock companies - incorporated and unincorporated - were frequently referred to in the plural, as 'they'. (For one example see Ex parte the Lancaster Canal Co. (Mont & Bligh 94 [1828]).)

Those who adhere to the conventional view that complete separation is a function of the legal act of incorporation sometimes recognise that up to the mid-nineteenth century incorporation did not have this effect. However, they attribute this either to the confusing influence on the law of unincorporated joint stock companies, or to contemporary misapprehensions about the nature and effects of incorporation. It was not until Salomon in 1897, they argue, that the 'implications' of incorporation 'were fully grasped even by the courts', since which time 'the complete separation of the company and its members has never been doubted' (Cower, 1979, pp. 97-100). Neither of these explanations stands close scrutiny. The 'complete separation' of companies and their members emerged for the first time in the mid-nineteenth century. It was reflected in the changed consequences attributed to incorporation, but incorporation was not its source. Its origins are to be found in the changing economic and legal nature of the joint stock company share.

The Changing Legal Nature of the Share

Throughout the eighteenth and early nineteenth centuries, the term 'share' was 'used in its natural sense to denote ownership of an appreciable part of [a] whole undertaking' (Scott, 1912, vol. I, p. 45). Legally, shares in joint stock companies, incorporated and unincorporated, were viewed as equitable interests in the assets of the company. Their legal nature, therefore, depended on the nature of those assets: they could be either real or personal estate depending on whether or not the company owned land. Up to the early 1830s it was consistently being held that company shares were realty if the company owned land. Crucially, while the share was legally perceived in this way, shareholders - the equitable co-owners of those assets - were necessarily closely identified with their companies. They could not be 'completely separate'.

From the 1830s, however, the legal nature of shares began to be reconceptualised, and by the mid-nineteenth century the close link between shares and the assets of companies had been severed. In the crucial case, Bligh v. Brent (2 Y & C Ex. 268), decided in 1837, the issue before the court was whether a company's shares were realty and within the Statute of Mortmain. In accordance with the prevailing view counsel argued that the company's shares were realty because the company owned land. In every joint stock company, he asserted, 'the shareholder has an estate of the same nature as the company'. Despite the overwhelming weight of the authorities, the Court rejected this view. The case, they argued, turned on 'the nature of the interest which each shareholder is to have', and In their view shareholders in incorporated joint stock companies had Interests only in the profits of companies and no Interest whatsoever in their assets. The shares were personality, irrespective of the nature of the company's ownership of land.

Bligh v. Brent was the turning point, although uncertainties remained for some years after, particularly in relation to the nature of shares in unincorporated companies and In companies whose business activities were closely connected to land. By the mid 1850s, however, these had largely disappeared. In Watson v. Spratley (10 Ex. 222), decided in 1854, the court had to determine the nature of the shares of an unincorporated mining company. It held that the matter turned on 'the essential nature and quality of a share in a joint stock company', and declared its shares to be interests only in profits. Henceforth, shareholders, even in unincorporated joint stock companies, had no direct interest in the assets of their companies. Shares were personalty irrespective not only of the nature of a company's assets, but of its legal status. In short, they were an entirely separate form of property; legal objects in their own right. Critically, with this development, a legal space emerged between joint stock companies and their shareholders. The company owned the assets, both in law and in equity; the shareholders owned the shares, a new, quite separate and intangible type of property In the form of a right to revenue.

To understand the emergence of the modern doctrine of separate personality, with its reified conception of the company and complete separation of company and members, we need to trace the historical processes whereby the share and other similar titles to revenue emerge as legally recognised, autonomous forms of property.

Rights to Revenue as Forms of Money Capital

The most appropriate starting point is Marx's analysis of these titles to revenue as forms of what he calls interest-bearing or money capital. The Ideal typical money capital transaction is a loan in which, in return for an increment in the form of interest, money is temporarily transferred from its legal owner to another person who uses it in the production process. Analytically the transaction involves the transformation of money Into money capital: a move from money as a means of facilitating exchange to money as a commodity in itself which commands a price. As Marx explains, this transformation can only take place under certain historical conditions - conditions in which labour power has become a commodity? It Is the class relation between capitalist and wage-labourer which permits the transformation of mere money into cap ital. Interest, the return that accrues to money capital, is part of the surplus value produced by wage-labour (Harvey 1982; Marx 1974a).

This transformation of money into money capital is not, however, apparent in the basic motion underlying the capitalist mode of production:

The capitalist spends money (M) to purchase certain commodities (C), labour power (LP) and means of production (MP). These are utilised in the production Process (P) to produce other commodities (C1) whose value is greater than those used in their production? The latter commodities are then sold for a sum of money (M1) which is greater than the original money expended. The difference in magnitude between M and Ml constitutes surplus value or profit and accrues to the capitalist. Money here is merely a means of facilitating exchange although it operates as 'capital in the production process' (Marx, 1974b).

For this movement to occur, however, capitalists must have sufficient money to start production. Historically, from the early days of industrial capitalism, the development of a credit system, in which money was transformed into money capital, was essential to enable the centralisation of sufficient capital for production to begin. This was especially true in areas where fixed capital costs were high such as canals and railways (Landes, 1960). In this process the 'normal' circuit of capital became:

The functions of contributing  funds and of utilising those funds in the production Process came to be performed by different people: money capitalists contributed funds, industrial capitalists utilised them. The industrial capitalists ensure that surplus value is produced, but as they borrow the capital they use they have to surrender part of the surplus value created to the money capitalists. The surplus value generated in production thereby comes to be divided into two qualitatively distinct parts: profit of enterprise which accrues to the industrial capitalist and interest which accrues to the money capitalist. Interest represents a relationship between two capitalists, and as such, necessarily entails antagonism between them as they contest the division of surplus value. With the development of an ever more sophisticated credit system, new financial Instruments emerge, pushing money and Interest bearing capital into a prominent role in relation to accumulation (Marx, 1974b). In this process, usury, which had for centuries been outlawed as against nature, came to be seen as natural and common-sense (Koffler, 1979).

Rights to Revenue as Property: the Nature of Fictitious Capital

Part of the process whereby this happens is the legal constitution and recognition of these new financial instruments - these new forms of money capital - as autonomous forms of property. At common law these titles to revenue were initially classified as' choses in action'. This category - which by the eighteenth century covered instruments such as bills, notes, cheques, government stock and joint stock company shares - was used to describe all personal rights enforceable only by action and not by taking physical possess ion. Titles to revenue were, therefore, conceptualised as rights personal to the parties bound by the obligation. As such they were non-assignable and incapable of being independent forms of alienable property. At common law they could not even be stolen and legislation was needed to deal with them. Similarly, in early incorporated companies, the instrument of incorporation had to specifically provide for the transferability of shares, which were otherwise considered to be non-assignable. Gradually, however, 'some of the choses in action ... changed their original character and [became] very much less like merely personal rights of action and very much more like rights of property' (Holdsworth, 1937,  pp. 531-2).

Marx argued that the key to understanding this development lies   in the barriers that inhibit the circulation of money capital and the need to overcome them. When capital exists as money it is exchangeable, liquid and mobile. Once 'loaned' against future surplus-value production, however, it becomes tied to specific assets, and problems arise if lenders are not willing to give up control of their money for sufficient time for borrowers to finance their operations. Historically, the principal solution to these problems was the establishment of   developed markets for titles to revenue, Permitting money capital to  preserve its flexibility and liquidity. Crucially, under these condition these titles develop a capital value of their own, and become a form of capital in themselves, emerging as 'fictitious capital'. As such they come to be legally recognised as new autonomous forms of property.

The separate capital value of these titles is established in the market through the process whereby revenues are capitalised. A periodic income or revenue is capitalised by calculating it, on the basis of the prevailing rate of interest, as an income which would be realised by a capital loaned at this rate of interest. So, for example, if one had an annual income of £50 and the prevailing rate of interest was 10 per cent, that income would represent the annual interest on £500. That £500 would be the fictitious capital value of the legal title to the annual £50 (Hilferding, 1981, pp. 107-16).

It is as markets develop in these titles, enabling them to develop capital values of their own, that they emerge as autonomous forms of property. As Marx noted, as this happens,' capital more and more acquires a material form, is [increasingly] transformed from a relationship into a thing'. This thing,' which embodies ... the social relationship, ... acquire[s] a fictitious life and independent existence'. It is in this form that the social relationship comes to exist in our consciousness. Moreover, as this occurs,' the conception of [such] capital as a self-reproducing and self-expanding value, lasting and growing eternally by virtue of its innate properties, is thereby established'. In short, the circuit of money capital appears as M >>> M1, money capital seeming to possess the inherent ability to command interest. Interest seems to accrue merely as a result of legal agreement between two individuals, and the circuit of money capital assumes a phenomenal form that appears quite separate from, and external to, the circuit of productive capital (Marx, 1972, p. 483; Marx, 1974b, p. 394).

One of the major purposes of Marx 's analysis of fictitious capital was to expose the fetishisation of money that underlies the legal recognition of these titles to revenue as new forms of property, as self-expanding 'things'. In the eighteenth and early nineteenth centuries, when titles to revenue were still usually regarded as choses in action rather than property in themselves, revenues were generally seen as connected to specific social relations, as reflected in classical political economy. The reification and fetishisation of these titles broke the direct link between revenues and productive activity, and were the basis for the development of new forms of economic, political and social consciousness (see Ireland and Kelly in this chapter). These new forms of consciousness abandoned the notion of labour as the source of value and declared capital - a thing - to be equally productive. The fetishisation of money capital, through the legal constitution of its phenomenal forms as property in themselves, led inexorably, therefore, to the dominance of exchange or market ideologies from the mid-nineteenth century and to a view of capitalism as a non-exploitative and classless system (Clarke, 1982).

The Share as Fictitious Capital

As with other forms of money capital, the basic condition for joint stock company shares to emerge as separate forms of property with capital value fn themselves Is the development of a generalised market in them. This generalised market in shares did not emerge until after 1825 (Reed, 1969). Prior to this Period there was no public market in shares and therefore shares could not develop as fictitious capital with a value in themselves. As a consequence, they inevitably retained a direct link to a company's productive assets and were legally conceptualised not as property in their own right, but as equitable interests in those assets. In these circumstances, shareholders could not be 'completely separated' from their companies. This was reflected in the contemporary view of feint stock companies, incorporated and unincorporated, as entities composed of shareholders merged into one body; as aggregates of people; as 'they's. People still 'formed themselves' into companies as in the 1856 Companies Act (19 & 20 Vict. c 40).

In the period after 1825 the nature of the share was transformed. The principal cause was the rapid development of the railway system. Railways involved massive outlays on fixed capital, requiring the aggregation of large amounts of money capital. The smaller denomination, freely transferable share was the chosen form of centralisation. The railways brought, therefore, a dramatic increase both in the number of shareholders and in the number of shares available for trading.

The effects of these developments on shares, however, were qualitative as well as quantitative. Shares were not only more numerous, they were now marketable commodities, liquid assets, easily converted by their holders into money. They were titles to revenue capable of being capitalised; a form of fictitious capital, separate from the productive capital of the company. Legally, they were judicially redefined as objects of property in themselves. Most important of all for the future development of company law, with the legal constitution of this new form of property, a gulf emerged between companies and their share holders and between shareholders and their shares. Companies owned the productive capital, the actual assets; shareholders owned the fictitious share capital, the shares, which they could now sell at will. Shareholders were not completely separate from their companies. They no longer formed themselves into companies, but formed companies, objects external to them as in the 1862 Companies Act (25 6r 26 Vict. c. 89). A company was no longer a plural entity, a 'they', people merged into one body; it was now a singular entity, an 'it', an object emptied of people. Both the company and the share had been reified.

Reconsidering Company Law

Contrary to the orthodox view, therefore, the source of the modern ; principle of separate personality is not incorporation but the historical  processes whereby the joint stock company share emerges as a form of fictitious money capital. Analysis of these processes offers a methodology for the study of company law which involves an excavation of   the specifically historical conditions and social relations which led to   the emergence of joint stock companies as a phenomenal form of   industrial capital and the share as one of the phenomenal forms of   money capital. This method 'reasons from the forms in which economic   phenomena present themselves on the surface of society to the material   network of essential relations peculiar to the mode of production in   question which explain why the phenomena should take such forms'  (Sayer, 1979, p. 17). Such an analysis not only enables us to understand the conceptual foundations of modern company law, it also enables us to grasp that exploitation and class struggle between wage-labour and capital and between fractions of capital (industrial and money) are  the essential relations underlying the joint stock company and the share. We can also begin to see how the company and share forms serve to obscure those relations.

We believe that this analysis, in demonstrating the centrality of law to the development of the circuits of money capital, has some important implications for critical legal studies in general. Recently, a number of critical legal theorists have correctly emphasised the ways in which law, as well as being constituted by capitalist social relations, is actually constitutive of them. For example, in forwarding such a constitutive theory of law, Karl Klare suggests that the legal process is 'one of the primary forms of social practice through which actual relationships embodying class power [are] created and articulated' (Klare, 1979). Having made this important point, however, Klare tends to focus specifically on people: on the legal dimensions of their personal relationships and on their legal constitution as individual legal subjects. In so doing, he fails to recognise that capitalist social relations come to be reified and depersonalised; that is, that class relations underdeveloped capitalism cease to be personal but come, to a significant extent, to be embodied in things, some of which - like the joint stock company share - are constituted in law as autonomous forms of property. To oversimplify, a precondition of the full development of the notion of the individual legal subject existing in apparent isolation (the premise of fully developed bourgeois theory) is the disconnection of revenues from social relations. Crucial to this Process Is the legal reification and mystification of titles to revenue; that is, their constitution as things in themselves, as self-expanding, autonomous forms of property.