A purposive perspective on piercing the corporate veil under Section 20(9) of the Companies Act 71 of 2008
Author: Etienne Olivier
Affiliations: Lecturer, Department of Mercantile and Labour Law, Faculty of Law, University of the Western Cape
Source: South African Mercantile Law Journal, Volume 34 Issue 3, 2022, p. 348 – 381
Section 20(9) of the Companies Act 71 of 2008 (the Act) is a statutory version of the common-law remedy of piercing the corporate veil. Unfortunately, the legislature, by leaving undefined the phrases ‘interested person’, ‘unconscionable abuse’ and ‘any further order necessary to give effect to the declaration’ in s 20(9) of the Act, has left room for uncertainty regarding the interpretation of the section. After discussing the purpose of s 20(9) of the Act, the article makes recommendations for how the statutory veil-piercing remedy should be interpreted. The article suggests the inclusion in the Act of an extensive and open-ended definition of ‘unconscionable abuse’ that describes categories of abuse sufficient to justify piercing of the corporate veil. It is argued that the term ‘interested person’ should be read to exclude a company’s controllers acting for their own benefit when the controllers themselves have committed the unconscionable abuse. It is argued further that a court’s power to grant ‘any further order’ in addition to a disregarding of separate legal personality should be limited to orders that are necessary to provide adequate relief for the litigant that invokes s 20(9), namely impositions of rights and liabilities.