The Approach of the Supreme Court of Appeal to the Enterprise Reality in Company Groups

JurisdictionSouth Africa
Published date16 August 2019
Pages476-489
Date16 August 2019
Citation(2012) 23 Stell LR 476
AuthorNatania Locke
476
THE APPROACH OF THE SUPREME COURT
OF APPEAL TO THE ENTERPRISE REALITY
IN COMPANY GROUPS
[DISCUSSION OF ConSolIdAted newS AgenCIeS
(Pty) ltd (In lIQUIdAtIon) v MobIle telePhone
netwoRkS (Pty) ltd 2010 3 SA 382 (SCA)]
Natania Locke
BA LLB LLM LLD
Professor, University of the Witwatersrand*
1 Introduction
Each of the companies in a company g roup remains a separate legal person
that is the owner of its own assets a nd liable for its own obligations.1 I shall
refer to this as the entit y principle for purposes of th is case discussion. The
entity principle poses u nique challenges to corpor ate law when dealing with
company groups, because t he economic reality in most i nstances is that
company groups are man aged as a single economic unit, als o referred to as
a single enterpris e. Upholding the entity principle from a legal pe rspective,
but managing the affai rs of the company group as a single ente rprise from
a business perspect ive, provides the opportu nity for innovative str ucturing
of business enterpr ises to minim ise intra-group liabil ity. However, it may
also lead to unexpecte d consequences for those who consider the di fferent
companies in a group to for m a unit, when the law treat s them as strictly
separate entities.
It is important to d istinguish bet ween the concept of separate legal
personality and t he concept of limited liability. General enabling companies
legislation was rst introduced in English law by the Joint Stock Companies
Act of 1844 (7 & 8 Vict, c 110). While this legislation, as well as c ompanies
created by charte r before that, acknowledged the entity pr inciple of
companies, shareholders of the compa ny were usually liable for the debts
of the company until adoption of the Lim ited Liability Act of 1855 (18 & 19
Vict, c 133).
* This case di scussion is based on a paper delive red at the Society of Law Teache rs of Southern Africa
Conference hosted by Stellen bosch University, 17-01-2011–20-01-2011
1 Salomon v Salo mon & Co Ltd [1897] AC 22 (HL); Dadoo Ltd v Krug ersdorp Municip al Council 1920 AD
530
(2012) 23 Stell LR 476
© Juta and Company (Pty) Ltd

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