The Government has announced its conclusions following a consultation undertaken in relation to the law surrounding company names.
Approximately 30,000 company incorporation applications are received by Companies House each month. Of these, around 4,800 require a specified body (such as a government department) to confirm that it does not intend to object to the name under legislation concerning the use of ‘sensitive’ words. These regulations relate to the use of words which imply (i) pre-eminence in their field; (ii) a connection with a government body or other public authority; (iii) a representative function; or (iv) the carrying out of a specific function (such as a holding company or trust).
A large proportion of these applications are ultimately approved and the government has considered ways in which the system can be simplified in order to reduce the time and costs involved in the incorporation process.
When an incorporation or change of name application is received, Companies House also has to consider whether certain words, characters or symbols should be disregarded in order to determine whether a proposed name is confusingly similar to a company already on the register. These are referred to as the ‘same as’ rules.
Four questions were posed in the consultation document:
- Should all regulations relating to names be repealed?
- Should regulations relating to names be retained but reduced and simplified?
- Should the list of ‘sensitive’ words be reduced, and if so, which words should be removed?
- Should the list of words on the ‘same as’ list be reduced? If so, which words should be removed?
Although there was not overwhelming support to simplify the ‘sensitive’ word regulation, the majority of respondents did acknowledge that some regulation was required in order to protect consumers.
I am pleased to note that, following the consultation, the list of ‘sensitive’ words is to be reduced. The response document suggests that words including Authority, Board, Data protection, Group, Holding, Registry and United Kingdom are to be removed from the list. A significant number of sensitive words will, however, remain subject to appropriate review, including those suggesting a connection with a government or local authority.
The removal of words such as ‘Group’ or ‘Holdings’ from the sensitive words list is particularly welcome as it will simplify incorporations and/or name changes which are required as a matter of internal reorganisation or restructuring. The proposed removal of these (and many other) words from the ‘same as’ list will have a similar effect on proposed name swaps within the same group of companies.
In addition to these simplifications, the government has noted its intention to merge legislation concerning company and business names with laws concerning trading disclosures. These stipulate what information businesses are obliged to display on their stationery, correspondence and signs at business premises.
Clearer laws will assist companies in two respects. First, compliance should be more straightforward, as the government’s proposal is to set out the requirements in a more user-friendly, tabular format. Second, the anticipated laws should aid incorporations and reorganisations by cutting bureaucracy and costs.
We will provide an update when the draft regulations are available. It is anticipated that the legislation will take effect in 2014.
If you would like advice about the points raised in this article, please contact me or another member of the corporate and commercial team.Kelly Craig Solicitor, Corporate & Commercial Team