The reflective loss principle in South African company law

Abstract

The DTI, in the Guidelines, expressed a desire that South Africa begin to expand its company law principles beyond the heavy English law influence from which it originates. Section 5(2) of the Companies Act explicitly authorises a court to take cognisance of the principles of foreign company law. The principle of reflective loss in South Africa derives from English law. South Africa has also enacted statutory provisions that impact the application of the principle of reflective loss. It is important to distinguish between cases where claimants are permitted to claim against directors for personal losses arising from directors’ actions, and that fall within the categories where claiming for reflective loss is not permitted. Recent case law has confirmed the common law position that a shareholder has no cause of action where the actions of the company directors cause personal damages to the shareholder