Supreme Court of Appeal Refuses ‘Reverse’ Piercing of the Corporate Veil

• Jurisdiction: South Africa
• Date: 01 April 2024
• Pages: 1-8
• Author: Albertus Marais
• Published date: 01 April 2024
• Published By: Siber Ink
• DOI: 10.10520/ejc-btclq_v15_n1_a2

1

© Juta and Company (Pty) Ltd

Supreme Court of Appeal Refuses

‘Reverse’ Piercing of the Corporate

Veil

ALBERTUS MARAIS*

ABSTRACT

A company is a separate legal person in terms of South African law. That prin-

ciple is also widely recognised in most countries. Sometimes, however, either

through common law or statutory operation, the separate legal personality

of a company may be ignored. Where a company’s separate legal personality

is ignored for limited purposes, it is often referred to as a court ‘piercing the

corporate veil’ of the company.

In South Africa, the piercing doctrine has historically been developed under

the common law. More recently, however, that doctrine has now been incor-

porated into statute and, more specifi cally, section 20(9) of the Companies

Act. The codifi cation of the piercing doctrine is still rather new, and the recent

case in The Butcher Shop and Grill is important because it reasserts the princi-

ples that have recently emerged in South African law in this regard.

That case is also important because it not only reasserts the interaction

between section 20(9) and the common law but also because it deals with the

interesting concept of so-called ‘reverse piercing’, that is, where a company’s

shareholder approaches a court to have the separate legal personality of the

company in which shares are owned disregarded. The Butcher Shop and Grill is

important in this sense because it confi rms the basic principle that a company

is a legal person, the existence of which must at all times be acknowledged

unless the separate identity of the legal person was the subject of abuse. This

makes reverse piercing highly unlikely, if not impossible.

Introduction

It is not often that one fi nds cases where a court is asked to pierce the corpo-

rate veil, that is, to ignore the company’s separate legal persona. It is even

rarer for cases to involve the ‘reverse piercing’ of the corporate veil where a

shareholder approaches the court rather than another affected third party,

asking for the separate legal persona of the company to be ignored.

Such a case recently appeared in the Supreme Court of Appeal in The

Butcher Shop and Grill.1 That judgment is important, not just for dealing

* Advocate of the High Court, CA (SA), Certifi ed Tax Advisor (SAIT), Adjunct Senior

Lecturer (UCT Law Faculty) and Director at AJM.

1

The Butcher Shop and Grill CC v Trustees for the time being of the Bymyam Trust [2023]

3 All SA 40 (SCA).