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

• Jurisdiction: South Africa
• Published date: 16 August 2019
• Pages: 476-489
• Date: 16 August 2019
• Citation: (2012) 23 Stell LR 476
• Author: Natania 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 and liable for its own obligations.1 I shall

refer to this as the entity principle for purposes of this case discussion. The

entity principle poses unique challenges to corporate law when dealing with

company groups, because the economic reality in most instances is that

company groups are managed as a single economic unit, also referred to as

a single enterprise. Upholding the entity principle from a legal perspective,

but managing the affairs of the company group as a single enterprise from

a business perspective, provides the opportunity for innovative structuring

of business enterprises to minimise intra-group liability. However, it may

also lead to unexpected consequences for those who consider the different

companies in a group to form a unit, when the law treats them as strictly

separate entities.

It is important to distinguish between 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 companies

created by charter before that, acknowledged the entity principle of

companies, shareholders of the company were usually liable for the debts

of the company until adoption of the Limited 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