This is the organic theory or identification theory.
This is a principle of company law which attempts to connect the living to the non-living.
This principle attributes to the company the mind and will of the natural persons who manage and control its affairs. Under the doctrine, the thoughts and deeds of the responsible officers of the company are deemed to be the though and deeds of the company. The company thinks and acts through them.
Under this theory, the knowledge of the responsible officers of the company is deemed to be the company‟s knowledge. It was so held in Lennards Carrying Company Ltd v.Ascatic Petroleum Co. where under the Merchants Shipping Act a ship owner was onlyliable for loss in certain circumstances. He let the ship set sail. As a consequence, there was an explosion and the ship and its cargo were lost.
Held: The company was liable for the loss since it was aware of the faulty boilers. Themanaging directors knowledge was imputed to the company. In the words of Haldane L.J
„A corporation is an abstraction. It has no mind of its own any more than it has a body of its own. Its acting and directing will most consequently be sought in the person of somebody who for some purpose, may be called an agent but who is actually the directing mind and will of the corporation‟.
Under the organic theory, the thoughts of the responsible officers are deemed to be the thoughts of the company. Their mind is the company‟s state of mind and their intention is that of the company.
In Bolton Engineering Co. v. Graham & Sons a company owned rental premises. The tenant was entitled to a renewal of the tenancy unless the company intended to occupy the premises. Directors of the company had thought of the company occupying its premises but had not resolved in board meetings. The company refused to renew the lease and was sued. It was held that the company was not liable since it had manifested its intention to occupy the premises. The thoughts of the directors were imputed to the company. In the words of Lord Benning, “a company may in many ways be likened to a human body. It has a brain and a nerve center which controls what it does. It also has hands which hold the tools. Some of the people in the company are mere servants and agents who are nothing more than mere hands to do the work. Others are directors and control what it does. The state of mind of these managers is the state of mind of the company and is treated law as such”.
If the responsible officers of the company delegate powers to junior officers, the company thinks and acts through the delegate. However, under the organic theory, the thoughts and deeds of junior officers of the company, are not deemed to be those of the company. It was so held in Tesco Supermarkets v. Natrass Ltd where it was held that the manager of a supermarket was not a responsible officer for purposes of the organic theory hence his acts would not be imputed to the company.