DEPUTY SHERIFF, HARARE v ECOPLASTICS (PVT) LTD & ANOR 2011 (2) ZLR 104 (H)

Flynote

Company — corporate veil — lifting of — when permissible — fraud and other improper conduct shown — separate identity a sham or device — companies forming part of a single economic entity — when permissible to treat such companies as a whole instead of as separate units

Headnote

The law is far from settled with regard to the circumstances under which a court may pierce the corporate veil. Each case is determined according to its facts. The court does not have a general discretion to simply disregard a company's separate legal personality whenever it considers it just to do so, but should strive to give effect to and uphold it. To do otherwise would negate or undermine the policy and principles that underpin the concept of separate corporate personality and the legal consequences that attach to it.

Proof of fraud, dishonesty or other improper conduct might justify piercing the corporate veil. The need to preserve the separate corporate identity would in such circumstances have to be balanced against policy considerations which arise in favour of piercing the corporate veil. Generally, though, there would have to be an element of fraud or other improper conduct of the company's affairs; similarly, where the separate corporate identity can be said to be a device, stratagem, cloak or sham, the corporate veil might be lifted.

The corporate veil is not lifted specifically to expose fraudulent activity on the part of a company and its shareholders. It can be lifted where it is necessary to reveal the alter ego of the company, even for the benefit of the company concerned.

Where one company is part of a group and where a parent company owns all the shares of the subsidiaries, so much so that it can control every movement of the subsidiaries and the subsidiaries must do what the parent company says, then it is right to treat them as a single unit.