Piercing the corporate veil since the enactment of the New Companies Act.
Piercing the corporate veil since the enactment of the New Companies Act.1
A company, as a separate entity, is an acknowledged concept in South African law.
It is clearly stated in the Constitution:
A provision of the Bill of Rights binds a natural or a juristic person if, and to the extent that, it is applicable, taking into account the nature of the right and the nature of the duty imposed by the right.2
Although a company is acknowledged as a separate entity, it is common sense that a company cannot act by itself, because it is not a living person. A natural person will always be the face of a company to the outside world. This is why capacity and representation of a company are some of the most important principles of a company. There is an existence of a misconception that a company’s separate entity is absolute and untouchable. In fact, there is a tendency for natural persons to use a company’s separate legal personality as a shield to elude liability.3 To remedy this, courts have, in certain circumstances, to what is referred to as ‘pierced the corporate veil’ of a company.4
‘Piercing the corporate veil’ entails the disregarding of a
company’s corporate entity. Although a company’s separate entity should not be disregarded if another remedy exists.5 There is no doubt that courts are inclined to disregard the personality when it is convenient to do so. The separate legal personality of a company is to be recognised and upheld in the most unusual of circumstances.6 In the words of the learned Scott JA:
Nonetheless what is, I think, clear is that as a matter of principle in a case such as the present there must be at least some misuse of abuse of the distinction
1
Act 71 of 2008.
The Constitution of the Republic of South Africa Act 108 of 1996.
3
Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd 1995 (4) SA 790 (A); Botha v Van Niekerk 1983 (3)
SA 513 (W); Consolidated News Agencies (Pty) Ltd (in liquidation) v
A company, as a separate entity, is an acknowledged concept in South African law.
It is clearly stated in the Constitution:
A provision of the Bill of Rights binds a natural or a juristic person if, and to the extent that, it is applicable, taking into account the nature of the right and the nature of the duty imposed by the right.2
Although a company is acknowledged as a separate entity, it is common sense that a company cannot act by itself, because it is not a living person. A natural person will always be the face of a company to the outside world. This is why capacity and representation of a company are some of the most important principles of a company. There is an existence of a misconception that a company’s separate entity is absolute and untouchable. In fact, there is a tendency for natural persons to use a company’s separate legal personality as a shield to elude liability.3 To remedy this, courts have, in certain circumstances, to what is referred to as ‘pierced the corporate veil’ of a company.4
‘Piercing the corporate veil’ entails the disregarding of a
company’s corporate entity. Although a company’s separate entity should not be disregarded if another remedy exists.5 There is no doubt that courts are inclined to disregard the personality when it is convenient to do so. The separate legal personality of a company is to be recognised and upheld in the most unusual of circumstances.6 In the words of the learned Scott JA:
Nonetheless what is, I think, clear is that as a matter of principle in a case such as the present there must be at least some misuse of abuse of the distinction
1
Act 71 of 2008.
The Constitution of the Republic of South Africa Act 108 of 1996.
3
Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd 1995 (4) SA 790 (A); Botha v Van Niekerk 1983 (3)
SA 513 (W); Consolidated News Agencies (Pty) Ltd (in liquidation) v