When choosing a name for a new company you should be aware of various factors that may restrict your choice of name.  Certain words and expressions are not permitted or are restricted from use depending on the circumstances.  The name must not be the same as any other company name and you should also consider the risk of having a name that is similar to an existing name, which might lead to rejection of the name or potential litigation.

The first step in choosing a suitable name should be to instruct a search of the company registers in the UK to see if the proposed name or a similar name is already registered.  Names that are spelt differently to a name that is already registered may be accepted although if trading under the chosen name misleads the public into mistaking your business for that of another you may be liable under an action of "passing off."  Under new companies legislation where there is a "suggested link" with the name of an existing company, written consent from the existing company will be required before the new name will be accepted.

You must specify whether the company is limited, unlimited or a public limited company at the end of the name (unless the company falls under a limited number of exceptions, for instance certain charities incorporated as guarantee companies).  Names that are offensive or use of which would constitute a criminal offence (for example breach racial hatred laws) will be rejected.  Certain names may only be used with explicit approval under various statutory enactments.  These include names which might indicate a connection to the government or local authority.  Words that relate to health, nationality, insurance or banking activity, higher education and royalty must be justified.

You should also be aware of the phoenix trading rules which prevent use of the name of a previously insolvent company and restrict using a similar name for a period of five years from the date of the first company's insolvent liquidation.  Directors who break these rules can be comejointly and severally liable for the debts of the new company unless certain criteria laid down in the rules are met.

Therefore it is important to carefully consider the name for a new company, not only for the purposes of branding but also in order to comply with various regulations and to minimise the risk of potential litigation claims.

George Boyle is a partner specialising in Corporate Finance at UK law firm Shepherd and Wedderburn
0141-566 8515

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