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New rules on company names and trading disclosures coming into force on 31 January 2015

View profile for Tanya Shillingford
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As part of the government’s “red tape challenge” aiming to reduce the level of administrative burdens on businesses, two new regulations are due to come into force on 31 January 2015, which will amend the rules on company names and trading disclosures.

The two new regulations are:

  • The Company, Limited Liability Partnership and Business Names (Sensitive Words and Expressions) Regulations 2014; and
  • The Company, Limited Liability Partnership and Business Names (Names and Trading Disclosures) Regulations 2014 (currently in draft).

There are currently six sets of regulations in force which govern the rules on company names and trading disclosures. This update summarises the changes to the law in the light of these new regulations.

Sensitive names

Current rules: Amid the current sets of regulations is a list of 150 sensitive words and expressions which cannot be used by companies, LLPs or businesses in their names without prior approval from the Secretary of State or the appropriate public body because using those words or expressions could mislead the public or cause confusion. For example, a company may not use the words “bank” or “insurance” without prior approval from the Secretary of State and the Financial Conduct Authority. This is because these words could imply a connection with the FCA or other government departments, and the use of such terms in a business name may falsely suggest that it is authorised to carry out certain regulated activities and might not in fact reflect the type of business actually conducted.

New rules: The new 2014 regulations introduce a reduced list of sensitive words and expressions. 26 words have been deleted from the current list and these include, among others, “Group”, “Holding”, “National”, “International” and “United Kingdom”. This means that a business no longer needs to seek permission from the Secretary of State if it wishes to use any of the deleted words in its name. The change has come about because it can often cause delays and extra costs in registering a new company if the company has to first seek authority from the relevant public authorities. The change is therefore thought to be helpful in removing this extra administrative step.

Permitted characters

Current rules: The current rules only allow for company names to consist of letters from the Roman alphabet and a restricted number of additional characters. This approach does not allow for the use of accents, diacritical marks and ligatures. Some businesses are therefore restricted in using exactly the name that they wish to use for their registered name.

New rules: The new regulations will increase the range of characters, signs, symbols and punctuation that can be used in company names; this is now possible due to changes in technology at Companies House. As a result of this change, the rules relating to when a name may be considered the “same as” another has also been changed. A proposed name will not be registered if the difference between the two names is, for example, the mere inclusion of an accent; the proposed name will be considered the “same as” the name already registered. For example, “Red Café Limited” will be considered the same as “Red Cafe Limited” and therefore would not be registered.

Trading disclosures

Current rules: Multiple companies often operate from one location. In such circumstances, the current regulations require that, where more than five companies share the same location, the details of all those companies at the location have to be on constant display.

New rules: Where six or more companies share the same location, the details of those companies now have to be held and made available for inspection on request, rather than having to ensure that the company name is “displayed” at all times.

Comment

The aim of the changes being made to the regulations was to simplify the process and reduce the number of times that a company might have a proposed name rejected by the register. Although the changes might be helpful to an extent, the rules remain substantively the same, and the effect on the overall regulatory burden on companies is negligible. However, the government continues to pursue its “red tape challenge”, stating that the programme has saved businesses £10 billion over four years.

This article was written by Tanya Shillingford, with assistance from Sona Voreux.

This article is for general information and interest only and should not be relied upon as providing specific legal advice.  If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.