Cutting the Red Tape: BIS Launches Company and Business Names Consultation
As part of HM Government’s Red Tape Challenge, in February this year, the BIS launched the Company and Business Names Consultation to seek the opinion of the business community about the appropriateness (or otherwise) of the current regulations relating to company and business names.
At the centre of the controversy are the Company and Business Names (Miscellaneous Provisions) Regulations 2009 (SI 2009/1085) (2009 Regulations) which prescribe that certain words and expressions are to be disregarded by Companies House when making their assessment as to whether a name which has been proposed for registration is too similar to an existing name on the Register.
The legislation places restrictions (amongst others) on the registration of “sensitive” words and names which are the “same as” existing names. However this mechanism has felt by many to be lacking in transparency and concerns have been raised as to there being a disproportionate inhibition on the commercial freedom of many businesses as a result.
Rick Smyth, Partner in the Corporate Department comments: “the 2009 Regulations have given rise to a significantly harder line being taken by Companies House on name applications. This has proved to be a source of frustration for our clients who have encountered difficulties both when seeking to incorporate new companies and when they wish to swap existing company names within a corporate group.”
The legislation aims to protect the public from harm caused by the use of names which are false or misleading and to ensure sufficient clarity in the use of names, such that the public are able to locate information on a particular business with certainty.
However, in certain circumstances this has prohibited the transfer of company names (already registered prior to the coming into force of Companies Act 2006) within corporate groups, because of other (unrelated) companies having names which are now regarded as being too similar.
Rick comments: “We have had a number of clients who have recently experienced difficulties with name applications. It is counter-intuitive that established companies are being told that they cannot swap their own names between group companies, but can continue to trade under that existing name as a trademark (if it is retained by the original company). One has to question how that is increasing transparency or protecting the public.”
“Companies do now need to check with Companies House before they perform a name swap; otherwise they could risk losing their trade name if they first rename the trade name company and the re-registration of the original trade name is subsequently refused elsewhere in the group.”
The consultation proposes various solutions including the complete repeal of regulations relating to company names and the replacement of those regulations with a post registration complaints system. Alternatively it is suggested that the list of “sensitive” and “same as” words be reduced in order to allow for greater freedom.
Responses to the consultation are invited and can be made via the Wilkes Partnership or directly through the gov.co.uk website. We would encourage all those affected to voice their concerns and would be delighted to discuss their issues with them.