When deciding to set up a new business venture, it is very important to put thought and research into naming the business.
The name should distinguish the business from other businesses, be search-friendly, and easily recognisable in order to avoid losing out on word-of-mouth business.
Registration and criteria for business names
Before the Companies Act 71 of 2008 (Companies Act) and the Consumer Protection Act 68 of 2008 (CPA) came into effect, it was common practice for entrepreneurs to acquire shelf companies or close corporations with non distinctive names and to simply trade under a different name. This frequently led to an infringement on third party trademarks, entirely unbeknownst to those third parties, as there was no requirement to register a trade name.
The CPA now prohibits this conduct. According to section 79 (1) of the CPA, a person is no longer permitted to trade, advertise, do promotions, offer for sale or supply goods and services or enter into an agreement or business transaction under any name unless, in the case of a sole proprietor, the person’s full name is recorded in an identity document, or the business name is registered as either a close corporation, company, partnership or association.
The business name must be registered with the Registrar of Companies, and may contain words in any language, certain symbols, any letters, numbers or punctuation either alone or in combination. Moreover, it does not matter if the words are in common use or not.
Required and prohibited words
Certain words must appear in, or at the end of, a business’s name:
1. A profit company’s name may be its registration number, but must then immediately be followed by the expression “(South Africa)”.
2. If the company’s Memorandum of Incorporation (MOI), which is the company’s constitutional document, includes any provision restricting or prohibiting the amendment of any particular provision of the MOI, the name must end in “(RF)”;
3. A company name must end with one of the following expressions, as appropriate for the category of the particular company:
- In the case of a personal liability company, the name must end in “Incorporated” or “Inc.”;
- In the case of a private company, the name must end in “Proprietary Limited” or “(Pty) Ltd.”;
- In the case of a public company, the name must end in “Limited” or “Ltd.”;
- In the case of a state-owned company, the name must end in “SOC Ltd.”;
- In the case of a non-profit company, the name must end in “NPC”.
Words that may not appear in the name include any word, expression or symbol that would constitute propaganda for war, violence or hatred towards others. The use of the word “bank”, “deposit-taking institution” or “building society” in a business name is also prohibited unless the business is registered as a deposit-taking institution, or unless the business is incorporated under the Banks Act 94 of 1990 or any other legislation relating to a particular type of company.
What are the restrictions?
A business name must not be the same as, or confusingly similar to:
- a name of an incorporated company, close corporation or co-operative;
- a pending or registered trade mark belonging to a person other than the company, or a well-known trademark in terms of section 35 of the Trade Marks Act 194 of 1993.; or
- a mark, word or expression protected under the Merchandise Marks Act 17 of 1941.
It is furthermore required that a business name must not falsely imply or suggest that the business is associated with or part of, inter alia, other persons or entities, the state and its related bodies, or persons or bodies with any particular educational designation.
Should the name fail the tests as stated above, the Registrar may refuse to register the name or request that notice of the name be sent to any party who may have an interest in objecting to it.
Use of name in written communications
In terms of the Companies Act, a company is required to display its registered name and registration number on all forms, notices and correspondence, electronic or otherwise, including letters, invoices, receipts, delivery notes, and all bills of exchange, promissory notes, endorsements, cheques and orders for money or goods. Failure to do so constitutes an offence punishable with a fine and/or imprisonment.
A sole proprietor can trade under his own name, or can choose a different business name. If a business name is chosen which differs from the sole proprietor’s own name, the sole proprietor must include his own name and the business address on all letterheads and written communications.
A partnership is required to include the names of all partners and the address of the main office on all letterheads, order forms, receipts and even invoices. If there are numerous partners, it is also acceptable to state where a list of partners may be found.
About the author: Monisha Prem (BA MBA) is the CEO and senior legal practitioner at Excelsur Legal Services. Monisha is an admitted attorney with over 10 years post-article experience in law.