Piercing of the corporate veil in terms of Gore: Section 20(9) of the new Companies Act 17 of 2008
The first part of this minor dissertation will examine the historical development of the common law doctrine of piercing the corporate veil, its status and the concerns raised against the rule. In light of the fact that veil piercing erodes the limited liability of a company, it is necessary to appreciate both the relevance and the significance of separate legal personality and the historical development of the doctrine that carves out exceptions to limited liability in this context. The concept of separate legal personality goes hand in hand with the doctrine of veil piercing. This part will further illustrate the various approaches that courts have taken in deciding whether or not to pierce the corporate veil. A criticism of the doctrine is that it comes with no clear guidelines directing courts to the appropriate circumstances for piercing the corporate veil. It will be argued that the courts have relied invariably on a number of discrete, unrelated categories of conduct upon which to base decisions to disregard the corporate personality of a company, but this approach in the end is unsatisfactory. The concept of corporate personality will be discussed in this part in order to achieve a better understanding of the concept itself and to shed some light on the legal nature of the corporate personality. Furthermore, this part will examine recent trends in foreign law in regard to the doctrine of piercing the corporate veil that may serve as guidelines to the interpretation and the application of the doctrine in South African law. Particularly, the English judicial approach to piercing the corporate veil will be discussed. This in turn will lead to a consideration of the question whether further development is necessary, and if so, which direction is best suited for South African company law. The second part of this dissertation will discuss the rules of interpretation, the basic approaches to statutory interpretation followed by our courts and which approach has enjoyed preference in recent judgments. These approaches will assist in the discussion on the interpretation of section 20 (9) of the Companies Act. Section 20(9) will be examined, and the concerns that writers have raised will be discussed. This part will further examine the judgment delivered in Gore with specific reference to the theories of statutory interpretation used, and the final interpretation applied by the court and what effect this has on the existing rules of piercing the corporate veil. It will be contended that courts must interpret and apply section 20(9) in a way that gives effect to the purport and spirit of the Constitution and results in clarity and simplicity in the statutory doctrine of piercing the corporate veil. The fourth and final part of this research will summarize the discussion, where the research will be considered and recommendations made as to how section 20 (9) should be best interpreted. Given the lack of a unified approach to the scope and conditions of application of the doctrine of veil piercing, which allegedly leads to confusion and frequent misuse, this study aims at clarifying the scope of the doctrine and conditions under which it can be applied. It will attempt to clear up some of the mist enveloping the concept of corporate veil piercing.
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