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In terms of Section 11 of the Companies Act, Act 71 of 2008 (the “Companies Act”), a company’s name may, inter alia, not be the same as, or confusingly similar to a name of an incorporated company, close corporation or co-operative.
Should you reserve a name on CIPC’s electronic portal which is the same as, or confusingly similar to another company’s name, CIPC will issue a COR9.5 stating the following:
“Unfortunately, none of your name/s can be approved due to the fact that it is confusingly similar to name/s already registered within the meaning of our name register in particular in terms of Section 11(2)(b) of the Companies Act”
In the event that one of your already registered companies has a similar name to the name you wish to reserve, who may manually file a COR9.1 together with a letter confirming that you are the owner of the already registered company and that you consent to the reservation of a similar name.
Despite the above, it is common practice for entrepreneurs to acquire shelf companies or to register a company with a non-distinctive name and to simply trade under a different name, however, in terms of sections 79 to 81 of the Consumer Protection Act 68 of 2008 (“CPA”) companies will no longer be allowed to trade under names which are not similar to their registered names.
The provisions of section 79(1) stipulate as follows:
“79(1) A person must not carry on business, advertise, promote, offer to supply or supply any goods or services, or enter into a transaction or agreement with a consumer under any name except:
a) the person’s full name as:
i) recorded in an identity document or any other recognised identification document, in the case of an individual; or
ii) registered in terms of a public regulation, in the case of a juristic person; or
b) a business name registered to, and for the use of, that person in terms of section 80, or any other public regulation.”
It is necessary to note that section 79 must be read in conjunction with Item 5 of Schedule 2 of the CPA. Item 5 of Schedule 2 stipulates that sections 79 to 81 will come into operation on such date as published by the Minister of Trade and Industry in the Government Gazette. Even though the CPA came into effect during 2008, the Minister has not published the date on which using trading names in their current form will no longer be permitted. Therefor, the use of trading names remains an option for companies wishing to trade under a trading name.
It should however be taken into account that as soon as the Minister announces the date on which sections 79 to 81 in the CPA will take effect, all companies using trading names, will be required to register those names with the CIPC.
Should companies not comply with the provisions of the CPA once the aforesaid date is known, the Consumer Commission may penalise companies by issuing fines. It is at this time unsure what amount such a fine may be.
The CPA however provides a certain degree of leniency for businesses that has been trading before the business name provisions will come into force. The Consumer Commission may not enforce the business name requirements against a business if it has been trading under the business name for a period of at least one year prior to the date on which the Minister announces that sections 79 to 81 in the CPA will take effect.
The intention of the legislature is to seek to enforce the consumer’s right to information concerning suppliers. The aim is to prevent a situation where a business would trade under one name but fail to disclose the identity of the actual entity behind the transactions, thereby frustrating the attempts by the consumers to seek redress in pursuing the correct entity.
In the interests of avoiding the rush of changing branding and registering new names at the CIPC, the provisions above should be duly considered when choosing a business name as the criteria will most likely need to be adhered to in the near future.
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