In the Business Report on 10 January 2008, an article was published regarding the High Court establishing new case law in terms of lifting the liability veil on Close Corporations. The key point in this case is that the corporate veil can be pierced in special circumstances, e.g. fraud.

Whilst the Close Corporation is a simplified entity, this certainly does not absolve the members from ensuring that the necessary statutory laws are followed, especially when considering the existent personal liability implications that would result from certain circumstances.

The sections of the Close Corporations Act that were contravened included the following:

  1. S63(h) – where if a CC operates without an Accounting Officer for longer than 6 months the members will be held personally liable for the debts of the Close Corporation;
  2. S64 – where if at any time it appears that the business of the Close Corporation was or is being carried on recklessly, with gross negligence or with intent to defraud any person, the members can be held personally liable for the debts of the Close Corporation.

Should you have any queries regarding this new case law please do not hesitate to contact Karen Jackson at our offices.


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