NAME

TAPIWA MARI

REGISTRATION NUMBER

R082098

COURSE

THE LAW OF PRIVATE & PUBLIC

ENTERPRISES

PROGRAMME

LLBS (3)

LECTURER

MR MUCHECHE

QUESTION
:
With reference to decided cases and the Companies Act
(Chapter 24.03), discuss the notion that the conception of a company as a separate legal
persona as articulated in the celebrated English case of Salomon v Salomon & Co. Ltd 1897
C22.

The principle that a company has a distinct legal personality from its members has its origins in
our common law.1 In terms of this principle, a company is liable for its own debts, capable of
owning property, entitled to sue or liable to be sued in its own name and enjoys the privileges of
perpetual succession. As early as Salomon v. Salomon (supra) the court implicitly recognised
that there were circumstances for instance where fraud or dishonesty was found to exist which
justified the removal of the companys legal personality. This has come to be known as piercing
the corporate veil. The effect of piercing the corporate veil is to redirect the focus from the
company to the natural person behind it, as if there were no dichotomy between such person and
the company.2 Thus, the idea that the corporate veil can, in some instances be pierced is an
exception to the legal personality principle. What becomes clear therefore in light of the piercing
of the corporate veil is that the legal personality principle is not absolute- it has its exceptions
and limitations. However what is an established and has become trite is that the principle is valid
at law and is
The concept of a companys legal personality finds its expression in both common law and
statute. In common law it was found in the case of Botha v van Nierkek 1983 that a company
has its own legal status equal to that of a natural person. This necessarily entails that a company
has some of the attributes of a person ie can own property etc. this concept is also encompassed
in Section 9 of the companies act chapter 24:03 which grants to a company the powers of a
natural person.
However, it is important to note that this personification remains theoretical and is an academic
faade which exists to enable a company to function and work. In actual fact a company is an
imaginary person; it does not exist on its own accord. A company itself, unlike a person cannot
talk or write and therefore cannot in reality be said to be like a person. A company acts through
its directors hence their actions have a bearing on its affairs.
There are, however, occasions when the court has the power to peer behind the facade of a
fictitious separate legal persona see Bark and Another NNO v Boesch 1959 (2) SA 377 (TPD)
at 382 C and Cattle Breeders Farm (Pvt) Ltd v Veldman, 1974 (1) SA 169 (RAD). The
circumstances under which the court can or should lift or pierce the veil of corporate
personality is not an issue settled at law.3 In the case of Gloria Mukombachoto v. Commercial
Bank of Zimbabwe & Anor4, the court set out the limitations of piercing the corporate veil. On
page 6 of his cyclostyled judgment, Ndou J said,
1 In the case of Salomon v. Salomon
2 Cape Pacific Limited v. Lubner Controlling Investments (Pty) Ltd 1993 (2) SA 784
(C)
3 RP Crees (Pvt) Ltd v Woodpecker Industries (Pvt) Ltd 1975 (2) SA 485 (R).

the court has no general discretion to disregard the companys separate legal
personality whenever it considers it just to do so.
In itself this statement shows that the concept of a companys legal personality is a principle so
vital in company law that it should not be easily done away with.
There are two instances in which the corporate veil can be pierced. These instances are well
explained in the van Nierkerk case as where otherwise as a result only of its existence fraud
would exist or manifest justice would be denied.5 Thus the corporate veil can only be lifted if
either there has been fraud within the company or the court in its discretion realises that manifest
justice would be denied if the corporate veil is not lifted.
The second instance, which gives the court the

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