The effectiveness of section 20(9) of the Companies Act 71 of 2008 in reaching its stated objective

Abstract

The Companies Act 71 of 2008 (hereinafter referred to as the Companies Act)1 is the cornerstone of Company law in the Republic of South Africa. It can be argued that section 20(9) of the Companies Act extended the common law position of the piercing of the corporate veil and made it easier for courts to lift or pierce the corporate veil.2 Piercing of the corporate veil takes place when the separate legal personality of a company has been mistreated resulting in the company no longer be viewed as a separate legal personality.3 The main focus of this legal research will assess the effectiveness of section 20(9) of the Companies Act4 in reaching its stated objective. An analysis of the interpretation of section 20(9) of the current Companies Act5 will be executed whilst clarifying concepts such as who is an ‘interested party’ and what ‘unconscionable abuse’ means. The circumstances under which the corporate veil can be pierced will aid the researcher in the process of establishing the effectiveness of section 20(9) of the Companies Act.6 The effectiveness will be discussed and analysed through the common law positions (case law) and legislation established in relation to the piercing of the corporate veil to supplement section 20(9) of the Companies Act7 which codified and adopted the common-law position related to the piercing of the corporate veil.8COMPANIES ACT