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Thread: Lifting the Corporate Veil

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    Lifting the Corporate Veil

    We have all heard the phrase "Lifting of the corporate veil". However, what does it mean? I am going to try and explain this by making use of an example.

    An employee refers an unfair dismissal dispute to the CCMA. At the arbitration hearing, which has been attended by the employer, the commissioner finds that the dismissal was procedurally and substantively unfair, and makes an award against the employer. The employers fails to comply with the award.

    The next moment the employee finds out that the employer has closed down his business, which in this particular instance is a private company.

    It was further established that the same director had commenced trading under a new name and under a new company. However, most of the assets that belonged to the old company was transferred to the new company. The new company is conducting business from the same premises as the old business.

    What can the employee do against the employer? Can the employee proceed against the director of the old company? Can die employee proceed against the new company?

    The answer is YES, the employee can proceed with action against both the director of the old company, and against the new company. The employee has to bring an application to court, first to lift the corporate veil of the old company, and simultaneously an application that the court order that the director and the new company be held liable for the award made by the commissioner.

    However, it is not always easy to prove that the circumstances warrant the so-called lifting of the corporate veil. It will depend on the circumstances and facts of each case.

    We currently have 3 such applications pending. I will keep you updated of the court's rulings in these matters as and when we receive judgments, which is only expected early 2011.

  2. Thanks given for this post:

    Dave A (20-Nov-10)

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