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PIERCING THE CORPORATE VEIL



‘From existing case law, it is clear that the Plaintiff / Applicant, in attempting to pierce the corporate veil (“PCV”), would have to prove that there has been fraud or misuse of juristic personality as simply proving control, or domination of same would not suffice’. This statement, though compelling, is not factually correct because even though fraud and misuse have commonly been important requirements when deciding to PCV, it cannot be said to be the only factor.


The common law, legislation, and case law have consistently made the point that the law is neither absolute nor settled in relation to setting out requirements for PCV. The legislative regulation of PCV set out in the Companies Act 71 of 2008 (“the CA”) and the Close Corporations Act 69 of 1984 (“the CCA”) are, arguably, couched in wide terms that lack specificity. The application of this legislation in case law have similarly reflected the same, arguably, non-distinct attitude of the law to setting specific requirements.

Section 20(9) of the CA states that the courts will PCV if the court finds that the incorporation, use or any act of the company constitutes an unconscionable abuse of the juristic personality. This is, unfortunately, the only provision in the CA dealing with PCV with no further explanation of what an ‘unconscionable abuse’ entails. The general nature of this provision does not provide clarity on the issue of PCV.

Section 65 of the CCA states that if a court finds that the incorporation of, any act by, or any use of a corporation constitutes a gross abuse of juristic personality, the court may PCV. Despite section 65 being more robust, it, like the CA, contains undefined terms such as ‘gross abuse’ which, again, does not clarify or detail if, when or how one can PCV.

In Cape Pacific Ltd v Lubner (“Cape Pacific”) the court expressly held that ‘the law was far from settled with regard to the circumstances in which it would be permissible to pierce the corporate veil’.[1]This position was augmented by the court holding that it did not deem it necessary or advisable to attempt to formulate any general requirements[2]and by disagreeing with other judgements in other jurisdictions that have attempted to formulate same.[3]When pressed on the issue of fraud or misuse as the most important requirement, the court used ambiguous, non-distinct words like “might”[4]and “could”[5]and therefore avoided making distinct proclamations or setting precedents.

The court in Ex parte Gore (“Gore”),[6]was tasked with applying the newly enacted CA. Despite the new legislation, the court did not stray from the path set by Cape Pacific. As in Cape Pacific, the court in Goreconsistently declined to set out requirements that could or should be met to PCV. The court reaffirmed its position by referencing other case law which described the requirements for PCV as “varied”[7], impossible to define”[8], “no common unifying principle”[9], “somewhat obscure”[10], and “difficult to state with certainty”.[11]Furthermore, in considering and applying the newly enacted CA, specifically section 20(9), the court merely explained that it was cast in wide terms which led to the courts most ‘precedent-like’ statement which was that one must consider the factual circumstances when deciding whether to permit PCV.[12]

The assumption that misuse of juristic personality or the abuse of same to commit fraud is an absolute requirement to PCV is one that stems from a desire to clarify what the law has consistently been ambiguous about. However, if one follows the progression outlined above, two facts become abundantly clear. Firstly, the assumption directly and indirectly contradicts the courts consistent refusal to define what the requirements are or should be and second, the consistent ambiguity is arguably intentional and therefore a position that those who seek clarity will have to be satisfied with.


The law as it stands is and has remained unclear about what requirements must be present to PCV. The common laws’ position requiring special or exceptional circumstances to justify PCV does not shed light on any potentially specific requirements. The arguably robust provision in the CCA requiring gross abuse of the juristic personality would have provided some form of guidance had ‘gross abuse’ been defined. Like the common law, the provision remains open-ended and provides no guidance. The enactment of the CA which set, as a requirement, an unconscionable abuse of the juristic personality, again provided no clarity as to what one must establish to PCV. Finally, case law, being the last hope for those seeking clarity, has echoed the ambiguity contained in the legislation in that the courts have refused and furthermore warned against the formulation of categorical requirements for PCV. Arguing that misuse or fraud are absolute requirements is clearly contrary to what the law has consistently maintained – which is that no set requirements do or should exist. Attempting to interpret the law to fit the assumption above is also directly contrary to the position set in Botha v Van Niekerk where the court held that it ‘is probably incorrect to say that fraud is always an essential prerequisite’.[13]As such, the assumption that misuse or fraud are crucial requirements in PCV is factually incorrect and contrary to what the law has held.

The intentional and consistent ambiguity on the part of the legislature and the judiciary, coupled with the judiciaries’ express refusal to formulate requirements has created a distinct position that bears setting out. Specific and distinct requirements for PCV should not be created and any attempt to do so should be avoided. In light of this position, those seeking clarity will have to be satisfied with open-ended, vague requirements that are context specific. Furthermore, any attempt to categorically define and list requirements, as the assumption and the discussion above illustrates, will contradict the laws, already settled, position.

Attempting to formulate requirements for PCV, that can be consistently applied is a justifiable response to the laws refusal to do so. Assuming that the misuse of juristic personality or the abuse of same to commit fraud is a requirement for PCV is, in light of existing case law, also arguably justifiable. Notwithstanding the justification for the assumption, the position, set out in legislation and case law, contradicts this assumption. Despite the ambiguity in the legislation and the court’s refusal to formulate requirements, what has been the consistent position is that requirements for PCV are context specific, open-ended and should not be developed. Thus, any attempt to formulate requirements or any argument that lays down specific requirements would not be in line with the law as it stands.

[1] Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd and Others[1995] 2 All SA 543 (A) at page 552. [2] Ibid [3] Ibid at page 555. [4] Ibid at page 553. [5] Ibid. [6] Ex parte Gore NO and others[2013] JOL 30155 (WCC) [7] Ibid para 19. [8] Ibid [9] Briggs v James Hardie & Co Pty Ltd(1989) 16 NSWLR 549 (NSWCA). [10] Supra note 6, para 20. [11]Ibid para 21. [12] Ibid para 4. [13] 1983 3 SA 513 (W) para 519.


- Oliver Marshall

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