A recent Gauteng High Court judgment has brought clarity on the interaction between consolidation orders under the Companies Act and the South African Revenue Service’s (SARS) powers to raise tax assessments.
In Prinsloo and Others N.O. vs CSARS and Another (020214-2023) [2025] ZAGPJHC (29 August 2025), the court quashed an attempt by liquidators to set aside SARS assessments against a Ponzi scheme.
The ruling confirms that liquidation processes may consolidate multiple companies under section 20(9) of the Companies Act. However, such consolidation does not erase the tax liabilities of individual companies.
For professional liquidators and corporate taxpayers, the judgment highlights that SARS’s powers to assess tax liabilities remain intact even when companies are collapsed into a single liquidation scheme. Indeed, SARS assessments survive Ponzi scheme liquidation orders, regardless of corporate restructuring or consolidation.
The dispute – details and background
This case arose from the amalgamation of a fraudulent investment scheme operated by Johan and Riaan Smit through multiple entities.
These included:
- Johan A Smit and Associates (Pty) Ltd (JASA).
- QSG Consult International (Pty) Ltd (QSG-I).
- Rialis Consultants (Pty) Ltd.
Investors in these entities were promised high returns through complex cross-border arbitrage transactions. In simpler terms, funds moved offshore and later returned to South Africa. When the scheme collapsed, the companies were wound up and consolidated.
During 2019, the liquidators applied under section 20(9) of the Companies Act to treat the companies as a single entity, the “QSG Investment Scheme”. This allowed a consolidated liquidation process. Notably, SARS was not cited as a respondent in that application.
In 2021, SARS issued income tax assessments against the individual entities within the QSG Investment Scheme. These assessments covered the 2013 to 2018 years of assessment. The liquidators challenged the assessments, claiming they were invalid because of the earlier consolidation order. Once again, SARS assessments survive Ponzi scheme liquidation orders, and this dispute directly tested that principle.
The liquidators’ arguments
The liquidators argued that the 2019 consolidation order stripped the companies of their separate legal personality. They maintained that once the companies lost distinct legal identity, they could not acquire new rights, obligations or liabilities, including tax debts.
They also claimed that SARS had no authority to issue assessments against JASA and QSG-I after the order was granted. In their view, SARS should have directed assessments solely at the consolidated QSG Investment Scheme.
Accordingly, the liquidators asked the court to declare that the companies no longer existed as juristic persons for tax purposes. They also requested that the court review and set aside SARS’s tax assessments.
SARS’s arguments
SARS opposed the liquidators’ application and raised two preliminary objections before addressing the merits.
First, SARS argued that under section 105 of the Tax Administration Act (TAA), tax disputes must be resolved through the objection and appeal process outlined in the TAA and the Tax Court. This applies unless a High Court directs otherwise. SARS contended that the liquidators were attempting to bypass the TAA framework by disguising their challenge as a declaratory application.
Second, SARS maintained that the QSG Investment Scheme was not a taxpayer under the TAA. Therefore, the liquidators lacked standing to challenge tax assessments issued against the individual companies. On the merits, SARS submitted that the consolidation order did not extinguish the juristic existence of JASA and QSG-I. It only allowed a single liquidation process. The tax liabilities arose within the individual companies, giving SARS the right to raise assessments against them.
While SARS’s claims had to be proved in the consolidated liquidation of the QSG Investment Scheme, the underlying debts remained tied to the original companies.
The High Court’s ruling
The High Court dismissed the liquidators’ application with costs, including the costs of two counsel. The court held that it had jurisdiction to interpret the liquidators’ order. However, it found the liquidators’ interpretation incorrect.
Section 20(9) of the Companies Act is a deeming provision. It empowers the High Court to pierce the corporate veil and consolidate liquidation processes. It does not, however, erase a company’s legal personality. Therefore, the companies’ tax assessments and corresponding liabilities did not disappear with the consolidation order. SARS remained entitled to raise assessments against JASA and QSG-I.
The court clarified that the order’s only practical effect was that debt recovery would occur through the consolidated liquidation of the QSG Investment Scheme. The individual debts, however, continued to exist.
Granting the relief sought would have created an untenable situation by extinguishing the companies’ tax liabilities entirely. This outcome was never the purpose of section 20(9) of the Companies Act. Once more, the judgment reinforces that SARS assessments survive Ponzi scheme liquidation orders, even in consolidated insolvency proceedings.
Legal merits and litigation strategy
This case illustrates the complex intersection between company law and tax law, particularly where liquidation and consolidation orders meet. It shows that relying solely on a professional liquidator is not enough to secure a successful court outcome. Involving specialist tax attorneys from the outset can make a major difference.
While section 20(9) of the Companies Act provides a strong remedy for consolidating companies in cases of fiscal abuse, it cannot eliminate statutory obligations such as tax debts.
For liquidators, this ruling serves as a reminder that consolidation orders under the Companies Act do not shield them from SARS. For SARS, the decision reinforces its ability to protect the fiscus and enforce compliance, even in complex commercial and insolvency scenarios.
As SARS continues to report a high litigation success rate, this judgment signals that attempts to sidestep the statutory tax dispute resolution process, or rely on broad corporate law remedies, are unlikely to succeed.
Key takeaways
Consolidation under section 20(9) of the Companies Act may streamline liquidation, but it does not erase tax liabilities. Engaging seasoned tax attorneys alongside liquidators ensures that tax compliance hurdles are effectively managed.
SARS remains entitled to issue tax assessments against collapsed entities. Liquidators, supported by expert tax practitioners, must plan for these debts in the winding-up process. Ultimately, SARS assessments survive Ponzi scheme liquidation orders, confirming the enduring power of tax law in the face of corporate restructuring.
Andre Daniels | Head | Tax Controversy and Dispute Resolution | mail me | |
Richan Schwellnus | Tax Attorney | mail me | |
| | Tax Consulting SA | | |
