What's in a name?

The problem

A company which has been trading under a particular name for a number of years is thinking of changing it, as part of a rebranding exercise. The directors believe that changing a company name is a straightforward procedure. Is this the case?

Expert Advice

There is no prohibition on registering a company or business name similar to one already in use. However, there is a risk that an action for "passing off" could be raised where the proposed name makes use of the goodwill of an existing business.

A good example would be a restaurant using a logo or name for "McDonalds" which gives the impression to potential customers that they would be dealing with US burger chain McDonald's, when that would not be the case.

In such an instance, McDonald's could raise an action to establish that it is being impersonated and show that this damages its trading reputation. But it would also need to show an overlap in the type of business carried out by the impersonator as, for example, MacDonalds the kilt maker is obviously far removed from McDonald's the burger chain.

The law

The procedures relating to company names are found in the Companies Act 1985. The general rule is that any name can be used and that the word "Limited" has to appear in the name. The registrar of companies has discretion as to whether a name can be registered. The main reasons for refusing to register are:

*  The word "Limited" or the words "Public Limited Company" do not appear (or, if registered in Wales, their Welsh equivalents).
*  It is the same as another company's name.
*  The name is too similar to an existing name. It may be that the company with the similar name objects to the registering of the name.
*  The name would cause offence.

The secretary of state for trade and industry must also give consent for the use of certain "sensitive" words which suggest:

*  National or international pre-eminence - for example, "United Kingdom".
*  Representative status - for example, "federation" or "institution".
*  Specific objects - for example, "insurance" or "pharmacy".

A list of the words which require consent can be found on the Companies House website.

Under the Business Names Act 1985, a company can trade under a different name provided this is made clear in all correspondence. Business names still require the secretary of state's consent for the use of "sensitive" words.

Changing the name of a company requires a special resolution. To pass this, at least 75% of the company members present at a shareholders' meeting must agree to it. A copy of the resolution passed, and a fee of £10, then has to be sent to the registrar of companies for the name change to take effect.

If a company doesn't think the shareholders would agree to a name change, it may be easier for the directors to decide at a board meeting to trade under a different name.

Check list

*  Check the register of company names to make sure there are no identical or similar names to the one proposed. The list of names in use can be checked on the Companies House website.
*  If a trading name does not appear on a formal register, check trade journals or the Yellow Pages.
*  When the company or trading name is changed, all letters, invoices, cheques and notices issued by the company should state the new company or trading name clearly.
*  Notify the Inland Revenue.
*  The company name should be clearly displayed at its registered office in a prominent position (usually on a nameplate at the front door).

Beware!

The new company or trading name must appear correctly on any cheques issued by the company, otherwise the person signing the cheque may be fined and held personally liable for payment if the company fails to honour it.

Contacts

Dundas & Wilson
Tel: 0131-228 8000
E-mail: james.mccubbin@dundas-wilson.com

Companies House
Web: www.companies-house.org.uk