COMMONS AMENDMENT (Hansard, 27 October 1981)

§ Lord Trefgarne
My Lords, I fear it will be necessary for me to speak at a little greater length on this amendment, as it is an important one. This amendment, and the ones associated with it, have been introduced to allow the Secretary of State to direct a company to change its name if that name is, in his opinion, too like that of a body already appearing on the index. I would remind your Lordships of our previous discussions on this question, both at the Committee and Report stages of this Bill, and at Third Reading. The noble Lord, Lord Mishcon, and others, including the noble Lord, Lord Lloyd of Kilgerran had pressed that powers should be retained to protect existing companies against the commercial consequence of the subsequent registration of other companies by names which were too like their own, and had proposed a number of amendments designed to achieve such protection.
Although the Government maintained their view that they could no longer exercise the subjective executive judgment which had previously been applied to all applicators in order to eliminate those which might conflict with existing companies, they accepted that a case had been made out for residual powers to deal with the problem. To this end a consultative document was prepared suggesting alternative methods of dealing with this problem. These alternatives were: (a) a requirement for the advertisement of any proposed company name in the London or Edinburgh Gazettes 21 days before application was made for its registration so that the Secretary of State might take account of any objection received before a certificate was issued; (b) a provision for a change of name to be directed within 12 months following registration, if a name was considered to be "too like". The document was 937 subsequently distributed to some 24 organisations including the Law Society, the Institute of Chartered Secretaries and Administrators, the Confederation of British Industry, the Consultative Committee of Accountancy Bodies, and the Association of Company Registration Agents. Given the two alternatives, the overwhelming majority of the response preferred the second.
The pre-registration proposals attracted little support, on the grounds that they would cause delays and more expense in the registration of companies, and create an unwarranted burden on the smaller companies in finding resources for a regular perusal of advertisements in the London and Edinburgh Gazettes. Difficulties were also envisaged in searching for names during holiday periods or due to administrative failures such as late or mis-delivery of the Gazettes. The time limit of 21 days for objection was also considered to be short and the point was stressed that failure to take action at this stage would be irreparable. On the other hand, it was recognised that the post-registration proposals would allow a considerably longer period of 12 months for objections to be lodged.
A number of organisations urged that the time limit for the exercise of the power of direction should be extended or abolished. The reasons advanced were that a company might be formed with a "too like" name but, by chance or deliberate intent, might not start trading for some time after incorporation and that, by the time the existing company became aware of the danger, it would be too late to take action. However, although the sense of this argument was recognised, it was also felt that a newly-formed company should not be left in lengthy or indefinite doubt as to its right to its name. Moreover, the general availability of the index, and the commercial "name watching" services based upon it which have been developed in recent months, provide means for existing companies to protect their interests. On balance, therefore, it was felt that the 12-month limit should be maintained. The key factor in this amendment is, of course, the definition of names which may be considered "too like". Interpretation of "too likeness" necessarily entails subjective judgment and, in consequence, cannot be enshrined in legislation. However, taking into account the arguments advanced in debate and in correspondence, not least with Lord Lloyd of Kilgerran, guidelines are being formulated against which requests for directions can be considered.
First suggestions are that a company name, including that of an overseas company registered under Part X of the Companies Act 1948, may be considered "too like" an existing name if, first, it is phonetically identical to the existing name; secondly, there is a difference of only one letter except where, in the Secretary of State's opinion, the letter makes a significant difference in the names; thirdly, in the case of oversea companies registered under Part X the only difference is by the substitution of qualifications equivalent to "Limited", et cetera, for example, "Inc", which is the American suffix, "SA" or "GmbH"; fourthly, the proposed name and an existing name have a distinctive element in common, for example, Widget Holdings Limited versus Widget Limited (in this context distinctive elements will not normally 938 include place names, personal names or everyday descriptive words in general use) and, fifthly, if the names are otherwise similar and the circumstances of the companies' operations, including location, nature of business and any other relevant factors are such as to be likely to create risk of confusion.
These guidelines, after further discussion with relevant professional organisations, will be published in the notes for guidance issued by the Registrar of Companies. They will supplement the statutory provisions and thus enable persons forming companies and their advisers to decide with reasonable certainty not only whether their proposed name will be acceptable under law, but also whether it is likely to avoid an objection from an existing body.
I hope your Lordships may accept that, while the amendments now in the Bill approach the problem in a different way from that proposed by the noble Lord, Lord Mishcon, and others, they do embody the same principle of the exercise by the Secretary of State of subjective judgment on a selective basis in respect of names which may be "too like" those of existing companies. I believe—and my view is supported by the great majority of the professional organisations we have consulted—that they will provide the safeguards which we all agree to be necessary in this area. I beg to move.

§ Lord Ponsonby of Shulbrede
My Lords, I thank the Minister for explaining the amendment in detail and for bringing it forward. We regard this as an improvement to the Bill, as it meets some of the fears expressed in Committee and on Report, particularly by my noble friend Lord Mishcon; post-registration change of name instead of pre-registration change of name provides an element of protection. While having welcomed this proposal, we would on the whole have felt it better had the Government stuck to the present system, which allows subjective assessment of an individual name to be made on registration. Nevertheless, we regard the amendment as an improvement to the Bill.

§ Lord Lloyd of Kilgerran
My Lords, I support the noble Lord, Lord Ponsonby, in those remarks. I welcome this and the other amendments which contain the words "too like" because they recognise the practical fears expressed by myself and others, those who have experience of dealing with trade name matters. As for the indications we have had of what the guidelines will be, I was not too happy with what the Minister said about those; I assume they will not have statutory significance and that the Secretary of State will have a further discretion to those set out in the guidelines.

§ Lord Trefgarne
Yes, my Lords; the guidelines will not have statutory force, and furthermore they are still subject to some consultation. Thus, if the noble Lord still has doubts, he will be able to participate in that further consideration.