The turquand rule in South African company law: a(nother) suggested solution
Authors Etienne Aubrey Olivier
Affiliations: LLD candidate, University of the Western Cape
Source: Journal of Corporate and Commercial Law & Practice, Volume 5 Issue 2, 2019, p. 1 – 28
The common-law Turquand rule in South African law protects persons from being affected by a company’s non-compliance with an internal formality pertaining to the authority of its representatives. The Turquand rule should not be regarded as an independent rule of South African company law, but as part of the law of agency, particularly the principles of agency by estoppel. Section 20(7) of the Companies Act 71 of 2008 attempts to protect bona fide third parties dealing with companies. However, this section is likely to create uncertainty as it fails to clarify its impact on other provisions in the Act that prescribe requirements for company decisions. It is argued that s 20(7) of the Act is unnecessary and potentially dangerous, and should be repealed.