Piercing the corporate veil is a legal doctrine that allows a court to disregard the separate legal personality of a company and hold its shareholders or directors personally liable for the company’s debts or wrongdoing. This doctrine is typically invoked in cases where a company has been used as a shield to perpetrate fraud, avoid liability, or breach legal obligations.

Recent case law in South Africa has highlighted the importance of ensuring that the requirements for piercing the corporate veil are properly established before invoking this doctrine. In the case of A Company and Another v CSARS (389/2018) [2019] ZASCA 171, the court emphasized that the mere fact that a company has acted in bad faith or breached its legal obligations is not sufficient to justify piercing the corporate veil. Rather, the court must consider a range of factors, including the degree of control exercised by the shareholders or directors over the company, the extent to which the company has been used to benefit the shareholders or directors, and the degree of prejudice suffered by the affected parties.

Similarly, in the case of WBHO Construction (Pty) Ltd v Sargon Engineering (Pty) Ltd and Others (JA88/2015) [2016] ZALAC 53 (23 November 2016), the court stressed the need for a clear causal link between the company’s actions and the harm suffered by the affected parties before piercing the corporate veil can be justified. The court also noted that the mere fact that a company is undercapitalized or insolvent is not sufficient to justify piercing the corporate veil, as this is a normal commercial risk that is borne by the company’s creditors and shareholders.


Overall, recent case law in South Africa suggests that the courts are reluctant to pierce the corporate veil, and will only do so in exceptional circumstances where there is clear evidence of abuse or wrongdoing by the company’s shareholders or directors.

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