Here’s a bit on the Insider Trading Companies Act 2008.
Although the incorporation of a company can provide for limitation of liability for its members this principle may not be abused. Therefore the court will under exceptional circumstances lift the corporate veil and dispense with this principle that a company is a separate legal entity. And will hold the members of the company liable in their personal capacities for debts and liabilities incurred by the company.
In terms of the Cape Pacific case such exceptional circumstance would be fraud, dishonesty or improper conduct that will justify the lifting of the corporate veil. According to sections 22 of the Companies Act, reckless trading with gross negligence and the intention to defraud will also amount to the lifting of the corporate veil. And will hold the members and the directors of the company personally liable for the debt incurred by the company.
With reference to Hulse-Reutter V Godde if the members and directors have gained an unfair advantage the corporate veil can also be lifted. This is provided there’s evidence of misuse or abuse of the distinction between the company and those who are in control of the company.
It’s then clear that the protection of a company’s members and directors against personal liability isn’t absolute and that the corporate veil can be lifted under exceptional circumstances.
Insider trading is illegal in South Africa (SA), and SA’s statutory provisions only regulated natural persons as it doesn’t deem a company to be an “insider” even if it repurchases its own shares based on material non-public information.
In essence a company cannot be convicted of “insider-trading”. However a director who encourages a company to deal in securities based on material non-public information, will be held liable and not the company itself.
