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

• Jurisdiction: South Africa
• Pages: 476-489
• Date: 16 August 2019
• Published date: 16 August 2019
• 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 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

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