March 8, 2013 What’s in a name?
The Government is considering simplifying the rules on what names a company can use when registering at Companies House. As part of the Red Tape Challenge, the Department for Business Innovation and Skills is consulting on the regulations relating to company and business names.
The consultation is asking whether all of the secondary legislation relating to names should be repealed, merely leaving the primary rules set out in the primary legislation. The primary legislation provides for the following:
- A name that is offensive would be prohibited;
- A name that suggests a connection with government or a local authority would require approval;
- A name could not be so misleading as to be likely to cause harm to the public;
- All companies would still need to indicate their legal form (eg plc/ltd); and
- A new company would be required to change its name following a complaint.
The detailed rules would be repealed, including such rules as the ‘same as’ rules, the types of characters that may be used and the specific words that require approval.
The government are also specifically looking at the list of sensitive words and whether these can be simplified and clarified. Sensitive words are not banned, they merely require the permission of a relevant person or body before they can be used.
Finally, they are considering the use of the ‘same as’ rules. These rules deem that certain names are to be considered the same as each other if they only differ in small ways or because of common ‘extra’ words. So, for example, Stone UK Limited is deemed to be the same as Stone Holdings Limited.
The consultation is considering scrapping these rules and merely relying on the primary legislation.
The Red Tape Challenge is a bold initiative and one that is easy to applaud in the abstract, but harder in the specific. There is no doubt that the company name regulations are complicated and onerous.
Elemental CoSec have had numerous conversations with clients forming companies and we struggle to explain why a name is not permitted or why they need to get the consent of a odd third party. We have even had difficult conversations with Companies House about how they are applying their own rules incorrectly.
It is tempting to conclude that if the authors of a rule cannot apply it properly then the benefits must be outweighed by the confusion, hassle and delay that these regulations cause businesses. However, these rules provide genuine protections to the public, by helping them to identify a specific company by its name (rather than relying on a number as in many European jurisdictions) and avoiding confusion, with names suggesting a company has a certain connection or pre-eminence that it does not have.
The suggestion that all of the secondary legislation is repealed would do away with many of these protections and, to the extent that they are retained by the primary legislation, there would be no clear guidance on how the primary legislation would be applied (presumably Companies House would be forced to produce ‘guidance’ which was very similar to the current secondary legislation).
The consultation has raised the possibility of merely simplifying or pruning the company name regulations which may well have some merit. Elemental CoSec will be considering the detail of the consultation over the coming weeks.