Company Names

A company’s name is integral to the company’s identity. Apart from being a legal requirement in South Africa, a company’s name builds brand recognition, ensures compliance with regulations, and establishes its legal identity, amongst other reasons.

Companies, however, sometimes choose to use a name which differs from its registered name, which may lead to potential conflicts if a company chooses to use a name identical or similar to other companies registered name. Alternatively, a third party might attempt  to trademark another company’s registered name.

Understanding the legal framework for company names is crucial for companies to comply with legislation and to avoid potential legal disputes.

Why Trade As?

In South Africa, companies often use “trading as” (t/a), also known as the trading name, to operate under a name which differs from its registered name. Companies use trading names for a variety of reasons, including creating a unified identity across multiple companies within the same structure, preserving an established identity following rebranding or mergers, adopting a more attractive and relevant name, and as a cost-efficient solution compared to registering separate company names or amending existing ones.

Why Trademark?

A trademark is a distinctive symbol, word, or combination thereof, which identifies and distinguishes a person or entities goods and services and provides legal protection against unauthorised use of the symbol, word, or combination. There are also different reasons why a company would choose to trademark their registered name including that it provides exclusive rights to use the name, protects against infringement, reduces the risk of consumer confusion, strengthens brand recognition, and enables legal action against imitators. It is important to note that trademark registration in South Africa is territorial, offering protection only within the country. For international protection, the trademark must be registered in other countries or through systems like the Madrid Protocol.

There are also several reasons why a third party might want to trademark another company’s registered name, including opportunistic squatting in which the intention is to sell the trademark back to the company, gaining a competitive advantage, exploiting a company’s goodwill, blocking market expansion, securing domain names or international rights, as a speculative investment, or unintentionally by not doing due diligence.

Companies Act and the CPA

Section 11 of the Companies Act 71 of 2008 provides that a company’s name must not be confusingly similar to another existing registered company name. Although this provision applies to company names formally registered with the Companies and Intellectual Property Commission (CIPC), it illustrates the importance of ensuring that a company’s name is distinct and does not mislead or cause confusion among consumers or other companies.

Sections 79 to 81 of the Consumer Protection Act 68 of 2008 (CPA) prohibits misleading business names and representations which may confuse consumers, including those suggesting one entity is associated with another. Section 79 specifically addresses the use of deceptive business names, whereas section 80 focuses on misleading advertising and marketing that could deceive consumers about a business’s identity or origin. Section 81 further confirms that any misleading conduct, including the use of a deceptive business name, is considered unlawful under the CPA.

However, to date, apart from section 79(3)(c) and (4), the remaining provisions of sections 78 to 81 are not yet in force since the commencement date has not yet been announced. Once the commencement date has been communicated, businesses have a grace period but will ultimately need to conform to these provisions in the CPA.

Ultimately, both the Companies Act and CPA seeks to protect consumers from being misled. A trading name that closely resembles an existing company name may mislead consumers into thinking they are engaging with a different entity and may not  Entities should prepare to ensure compliance with the CPA provisions once they come into effect, as failure to do so could result in legal consequences and reputational damage.

Passing off

Regardless of the statutory laws protecting consumers from being misled, a trading name which is similar to another registered name, could also be challenged under common law principles such as passing off. Since passing off is a common law principle, it extends to situations in which a third party seeks to trademark another company’s registered name.

Passing off is when an entity misrepresents that it is associated with another, causing harm to the original entity’s goodwill or reputation. To succeed in a passing-off claim, the company must demonstrate that it has established goodwill or reputation associated with the name and that the trading name is likely to cause confusion.

Although it is technically possible for a third party to use a trade name or trademark a name that is already registered as a company name, doing so is risky and could result legal action being brought against them. Companies should be aware that relying solely on common law rights to a company name without securing a trademark may result in legal disputes. Registering a trademark does, however, provide a stronger legal foundation for enforcing rights, especially in cases of passing off.

Company Names in South Africa

A company’s name is integral to its identity and is not only a legal requirement but also a critical element as part of its brand.

South African legislation such as the Companies Act and the CPA aim to protect consumers and businesses from misleading practices, emphasizing the importance of having a distinct and non-deceptive name. Common law principles like passing off further protect against misrepresentation.

Companies can reduce potential risks and enhance legal security by trademarking their names, ensuring exclusive rights in the event of disputes.

While it is unclear when the remaining CPA provisions come into effect the, it should be born in mind that once implemented, businesses will need to ensure their name complies with to avoid legal consequences.