Abstract

MUDZAMIRI, Justice. Revisiting the no reflective loss principle under the South African company law regulation: A reflective assessment through the lens of Hlumisa Investment Holdings RRF) Ltd v Kirkinis 2020 3 All SA 650 (SCA). De Jure (Pretoria) [online]. 2023, vol.56, n.1, pp.157-173. ISSN 2225-7160.  http://dx.doi.org/10.17159/2225-7160/2023/v56a12.

One of the central concepts in company law is that a company is a juristic person with a separate legal personality. Several consequences flow from the doctrine of separate legal personality, among other things, that a company owns its property and assets and may sue or be sued in its name. Therefore, shareholders do not have a direct right of action for a company's loss. The company itself should institute such a claim save for certain exceptional circumstances like derivative actions. Both the High Court (court a quo) and the Supreme Court of Appeal in Hlumisa Investment Holdings (RF) Ltd v Kirkinis (the Hlumisa case) confirmed that shareholders cannot claim diminution of share value that is linked to the misconduct of company directors and auditors. This article concurs with the court a quo and the Supreme Court of Appeal's interpretations that as a general rule, directors owe fiduciary duty only to the company and that shareholders cannot rely on a claim for reflective loss in company law. This article assesses the proper plaintiff and reflective loss rules against the backdrop of the Hlumisa case.

Keywords : proper plaintiff; reflective loss; separate legal personality; fiduciary duties.

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