From 1 October 2008 it will be possible for anyone (not simply registered companies as was previously the case) to object to the registration of a company name if it is the same as a name in which the objector has any goodwill. Richard Menzies reports.
Who: UK Government
When: 1 October 2008
Law stated as at: 29 August 2008
Part 5 of the Companies Act 2006 (the "2006 Act"), which deals with company names will be introduced from 1 October 2008.
Section 69 of the 2006 Act brings in a new right for any person (not just another company) to object to a company's registered name on the grounds:
- that it is the same as a name associated with the applicant in which the applicant has goodwill (which includes reputation of any description); or
- that it is sufficiently similar to such a name that its use in the UK would be likely to mislead by suggesting a connection between the company and the applicant.
If either of the above grounds is established, the company must show one of the following grounds applies, otherwise the objection will be upheld:
- that the name was registered before the start of the activities on which the applicant relies to show goodwill; or
- that the company is either (i) operating under the name; or (ii) proposing to do so and has incurred substantial start up costs in preparation; or (iii) was formerly operating under the name and is now dormant; or
- that the name was registered in the ordinary course of a company formation business and the company is available for sale to the applicant on the standard terms of that business; or
- that the name was adopted in good faith; or
- that the interests of the applicant are not adversely affected to any significant extent.
Even if one of the first three grounds above is established, the objection will still be upheld if the applicant shows that the main purpose of the company in registering the name was to obtain money or other consideration from the applicant, or to prevent him from registering the name.
If an objection is upheld, the company names adjudicator (appointed by the Secretary of State for these purposes) will make an order directing the company to change its name to one that does not offend these rules, by a specified date. If the company fails to do so, then the adjudicator can apply the ultimate sanction of determining a new name for the company, notifying the applicant, the company and the company names registrar. That decision can be appealed, and the court can determine a new name for the company.
Why this matters:
Many businesses are operated other than through registered companies, whether as sole traders, partnerships or otherwise. These businesses may expend a great deal of hard work and investment, which is reflected in the reputation and value that customers attach to their trading names and brands. It can be highly damaging if that goodwill is allowed to diminish because another business deliberately chooses to register a similar company name. Although the scope of the new provision is severely limited by the scope of the defences, it is still a useful new route for those with goodwill in a name to prevent "opportunistic registrations" of similar company names.