Abstract
This dissertation analyses the reasoning and verdicts of local and foreign Courts in cases where a complaint is made that the separate legal personality of a company is abused by a director in order to breach fiduciary duties or escape contractual obligations. In this dissertation contractual obligations are discussed in the context of contracts in restraint of trade on directors. The facts, law and the judgment of the Court shall be stated in each of the cases analysed.
This analysis of the cases shall be confined to instances where a director of company A incorporates company B to use it to breach fiduciary duties he/she owes to company A and where a director has a contractual undertaking to company C but incorporates company D and trades though it thereby escaping restraint of trade obligations owed to company C.
The separate legal personality of a company principle is not absolute in law but a general rule hence the exception of piercing of the corporate veil is discussed. The discussion on piercing of the corporate veil commences by first discussing what piercing of the veil actually means and thereafter proceeds to explain the principles applicable in piercing the corporate veil and finally the application of the piercing principles to the various cases discussed.
In the analysis of cases where the Courts (local and foreign) adjudicated matters of abuse of separate legal personality of a company by directors, the Courts at times find it unnecessary to disregard the separate existence of a company’s personality but rather elect to identify the company with the director.
Notwithstanding the known common law guidelines in English and South African jurisprudence for piercing the corporate veil such as façade, sham, fraud and alter ego, the United Kingdom Supreme Court in a recent case of Prest v Petrodel Resources Ltd1has streamlined the guidelines into two main principles being the evasion and concealment principles...
LL.M. (Corporate Law)