Tighter Rules On Company Names Now In Force
‘What’s in a name?’ writes playwright William Shakespeare in Romeo and Juliet. Quite a lot, in fact, for directors and for individuals choosing a company name for their new business. Companies House now has greater power to scrutinise, challenge and even alter a company name if it deems necessary.
For decades, there have been important rules in place governing what words and phrases are permitted when naming and registering a new company (they apply to England, Wales, Scotland and Northern Ireland). Some of the rules are basic common sense, eg it cannot be the same or too similar to a company already registered; it cannot be offensive or include a word prescribed as insensitive; or indicate a connection to the government.
With the rollout of sweeping changes to the Companies Act 2006, Companies House (CH) will be ‘name-calling’ companies that breach, or apparently breach the newly tightened rules on company names. There have been concerns that there are, or could be in future, company names that are potentially false or giving a misleading impression the members of the public.
Anyone considering setting up and registering a new company need to be aware of the potential implications as early as possible to avoid unnecessary expense and questions raised by CH.
What’s new?
Since 4 March, CH has been able to use greater powers to check company names, which includes challenging and even changing a company name. It reflects increasing concern around the misuse of company names to the extent that stronger checks have been considered necessary.
Applications rejected
If CH has reason to believe an intended company name is:
· intended to facilitate fraud
· comprises or contains computer code or
· the name is likely to give the false impression the company is connected to a foreign government or an international organisation whose members include two or more countries or territories (or their governments)
then the application to register the name can be rejected.
Name change
In certain cases, a company can be ordered to change its name where, eg its name has been used, or is intended to be used, by the company to facilitate fraudulent activity. Company names already on the register can also be suppressed by CH pending a required change.
It’s important to note that reusing a name which has been subject to a CH direction (or an order from the Company Names Tribunal) is prohibited.
Penalties
Companies will be given 28 days to make the appropriate name change. If they don’t – CH can decide a new name for the company (that could simply be its registered company number).
The company concerned will also be committing an offence where:
· It fails to respond to a CH direction to change its name within 28 days
· It continues to use the company name despite a direction to change it The government guidance, fully updated with the new powers of CH, can be found here.
The tightening of the rules around company names is just one element of several new provisions introduced under the Economic Crime and Corporate Transparency Act 2023, aimed at tackling corporate crime.
If you would like us to cover an issue in the next NGM Tax Law Newsletter, we would be pleased to hear from you.