Veil Piercing

In: Business and Management

Submitted By bangwayo
Words 1536
Pages 7
in this essay one is required to discuss whether section 163 (4) of the Companies Act, No 71 of 2008 codified the common law approach in piercing the corporate veil i.e. to what extent did the 2008 Act brought some certainty regarding to the grounds in which the courts will disregard the juristic existence of a company. To achieve this I’m going to first explore the position of common law in this field of law.
As a point of departure, the company is equal in law to a natural person. This is one of the cornerstones of South African company law, and has been since 1897 handed down in the Salomon case namely that a company is a legal entity distinct from its shareholders. It allows a company to perform juristic acts in its own name, as well as to sue and to be sued. Further, members and directors enjoy protection against personal liability. The corporate veil is a fundamental aspect of a company law and is a protective stratagem for those who exist behind it .
Although this fundamental rule has a considerable influence in company law, it cannot be absolute and, as such, according to the case of Lock harts ltd v Excalibur Holdings ltd it can be saved for certain exceptions (where the courts may disregard the separate legal personality of the company)
Herron CJ in Commissioner of Land Tax v Theosophical Foundation described lifting of the corporate veil as an ‘esoteric’ label, stating further that authorities in which the veil of incorporation has been lifted have not been of such consistency that any principle can be adduced. This was also affirmed by Hope and Meagher JJA in the case of Briggs v James Hardie . One can therefore say that, because veil piercing is an exception to the rule of separate legal personality and not the rule itself, it is probably rationale to say that a court must be careful to permit veil piercing only in egregious cases and not whenever…...

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