Court order cuts through the corporate veil of Trillian companies funnelling Gupta SOE 'proceeds of crime'

A Supreme Court of Appeal (SCA) ruling demonstrates the ex­­tent of judicial discretion when it comes to piercing the corporate veil of companies and spells out how Trillian director Eric Wood blatantly shuffled money be­­tween companies.

Lucinde Rhoodie, director of dispute resolution at Cliffe Dekker Hofmeyr, says one of the sacred rules in South African business law is that companies are seen as separate from the people who own or run them.

This means that, in most cases, directors and shareholders are not personally responsible for a company’s debts. It also means that, even if companies are part of the same group, they are treated as separate entities.

However, as the SCA ruling at the end of March showed, if shareholders or directors do something illegal, the courts can decide to ignore this separation and treat all the companies in the group as if they’re just one big company.

In a case brought by Centaur Mining of South Africa against the liquidators of Trillian Management Consulting (TMC), Trillian Capital Partners (TCP), Trillian Securities, Trillian Nominees, Trillian Shared Services, Trillian Property, Trillian Financial Advisory (TFA) and Zara W; the Master of the High Court Pretoria and the Companies and Intellectual Property Commission, the SCA dismissed Centaur’s appeal against a ruling that the companies were to be merged into one entity, affecting all subsidiaries, including one already in liquidation.

If you’re wondering why the Trillian names are ringing bells in your head, it’s because they were linked to the now infamous Guptas through their association with Wood, the Trillian director.

In 2022, the National Prosecuting Authority said in court that the Gupta family’s proceeds of crime were laundered on a route through Centaur Ventures, Centaur Mining, Bank of Baroda and Optimum Coal, then back to the Bank of Baroda, back to Centaur Mining, back to Centaur Ventures and then to Optimum Coal again.

The Trillian companies were structured so that the Zara family trust owned 100% of Zara W, which in turn owned 100% of TCP, which owned 100% of all the other Trillian companies named in the order. Wood, a director of all the Trillian companies, was the founder, trustee and a beneficiary of the Zara family trust, with the other beneficiaries being his family members.

According to the SCA judgment handed down on 28 March: “During January 2020 the South African Revenue Service (SARS) formed the view that Mr Wood was treating the Trillian group of companies under his control as a mere extension of himself. He was at all relevant times responsible for the financial affairs of the companies but either failed to submit tax returns when due or submitted returns that contained incorrect declarations.

“It appeared to SARS that the preferred modus operandi of Mr Wood was to funnel funds through the various Trillian companies, thereby creating many layers between the original source of income and the final destination of the funds.

“Mr Wood, according to SARS’s investigation, would receive SOE [state-owned enterprise] funds in the hands of a Trillian company and the funds would subsequently be channelled to various other entities through the creation of what appears to have been fictitious invoices purportedly issued by another Trillian company which to all intents and purposes was not trading or conducting any form of business.”

Rhoodie says the SARS investigation, based on Wood failing to file his taxes, found that he treated the companies as personal extensions and used them to divert funds fraudulently from Eskom and Transnet.

“This verdict highlights that deceitful actions by shareholders and directors can no longer hide behind the shield of separate legal identities for group companies,” she says. However, she adds that the ruling does not change the law.

“The risk [of separate legal identities being collapsed into one] has always been there in the event of a director abusing a corporate entity … The SCA ruling reaffirms the law and, for this to happen, you would have to prove that there was an unconscionable abuse of the juristic personality of the company as a separate entity,” she says.

Rhoodie adds that there has been a traditional view looking beyond a company to its shareholders and directors to hold them liable for debt. This judgment has not only collapsed the vertical structure but also the horizontal structure, knocking brother and sister companies all into one bucket.

After SARS applied for a preservation order, Cloete Murray was named as a curator. Murray then appointed a forensic investigator, Stephen Robinson, to investigate TMC and TCP. His first report showed that TMC had received R595.2-million from Eskom. “It [TMC] almost immediately dispersed that amount to other Trillian associated or connected companies, some of whom carried on no form of legitimate enterprise,” the judgment says.

After this came to light, the scope of Robinson’s investigation was expanded to include the other Trillian companies. He found that the Trillian companies were not only incorporated or used in a manner that constituted an unconscionable abuse of the juristic personality, but also that the companies conducted business fraudulently.

In June 2019, the Gauteng High Court ordered TMC and TCP to repay Eskom R596-million, plus interest and costs. When this was not repaid, Eskom issued a liquidation application. At this point, Wood revealed that there was further litigation against the Trillian group, including these claims:

Transnet against Trillian Asset Management (TAM) and others for R93.5-million.

Transnet against TFA, Trillian Capital and others for R11-million.

Transnet against TCP, TFA and others for R41-million.

Transnet Second Defined Benefit Fund against TCP, TFA, TAM, TMC and Wood for R179.5-million.

After TMC was found to be insolvent, the liquidators sought relief under Section 20 of the Companies Act, which states that, if there is unconscionable abuse of the juristic personality of a company as a separate entity, the court can declare that the company is deemed not to be a juristic person.

Centaur Mining then applied for a rescission order of the Section 20 ruling in 2021, but the application was dismissed. The explanation for the application lies in a R400-million claim against Centaur Mining by the Trillian liquidators.

Wood was arrested in May 2022. Daily Maverick tried to contact him for comment, but calls were not answered and WhatsApp messages were not replied to. DM

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