Friday, 21 October 2011

REMEDIES AVAILABLE ON REGISTRATION OF TWO COMPANY WITH SIMILAR NAMES



INTRODUCTION

In law, the registration of a company name disentitles all and sundry from using or attempting to use the company’s name without its consent, since the existence of two or more companies with similar names is likely to occasion confusion in the exercise of their respective rights.

Such as state of affairs is untenable in law and may result of huge losses from passing off, loss of goods and documents due to deliveries to wrong destinations, loss of reputation as a result of actions of another company with similar name.

For these reasons, Section 19 of the Companies Act, Cap 489 of the Laws of Kenya stipulates that:

No name shall be reserved, and no company shall be registered by a name which consists of abbreviations, initials or by a name, which, in the opinion of the registrar, is undesirable.

The Companies Act provides a window of redress by virtue of section 20 (2) (a) of the Act. This section provides as follows:

“If, through inadvertence or otherwise, a company on its first registration or on its registration by a new name is registered by a name which, in the opinion of the registrar, is too like the name by which a company in existence is previously registered, the first-mentioned company may change its name WITH THE SANCTION OF THE REGISTRAR and, if he so directs within six months of its being registered by that name, shall change it within a period of six weeks from the date of the direction or such longer period as the registrar may think fit to allow.”

This provision is succinct in that it empowers the Registrar of Companies to direct such a subsequently registered company to change its name, which notice must be complied with within six (6) months, failure of which its officers becomes liable to a fine of Kshs. 100/= for every day during which the default subsists.

As such, where two names exists, the first company to be incorporated should write to the Registrar of Companies to require the second company to change its name within the stipulated statutory period.

REMEDY ON NON-COMPLIANCE WITH THE REGISTRAR’S NOTICE TO CHANGE NAME

Regrettably, however, the Companies Act does not stipulate that the Registrar may revoke a Company name suo moto notwithstanding the expiry of a notice to change name and/or non-compliance therewith. He can only subject such Company and its officers to a fine of a paltry Kshs. 100 for each day of such non-compliance.

For these reasons, we advise that one may request the Registrar of Companies to move the Court under Section 385 (1) of the Companies Act for an order compelling the defaulting company to change its name within a specified number of days, or risk having the said Company name being revoked and hence effectively deregistered by the Court. The said section provides that:

1)       If a company, having made default in complying with any provision of this Act which requires it to file with, deliver or send to the registrar any return, account or other document, or TO GIVE NOTICE TO HIM OF ANY MATTER[1], fails to make good the default within fourteen days after the service of a notice on the company requiring it to do so, THE COURT MAY, ON AN APPLICATION MADE TO THE COURT BY any member or creditor of the company OR BY THE REGISTRAR, make an order directing the company and any officer thereof to make good the default within such time as may be specified in the order.

2)       Any such order may provide that all costs of and incidental to the application shall be borne by the company or by any officer of the company responsible for the default.

3)       Nothing in this section shall be taken to prejudice the operation of any written law imposing penalties on a company or its officers in respect of any such default as
aforesaid.

REMEDY ON REGISTRAR’S FAILURE TO GO TO COURT

In the event that the Registrar does not comply with your request, you may instructive your attorney to file a suit under Certificate of Urgency for INTERIM-INJUNCTION ORDERS restraining the second company from transacting any business under the relevant name, pending you application of PERMANENT INJUNCTION against second Company.

Such an application would be supported by the Registrar’s letter directing second company to change its name, an Affidavit from the Registrar to the effect that he had issued a notice to the said company to change its name but the second company has inordinately declined to comply therewith, and finally, annex an Affidavit from one of the Directors of your company verifying facts contained in your application of for injunction.    

CONCLUSION

The law permits the change of name where two companies have been incorporated with a similar name. Ordinarily, principles of equity comes into play and the first in time can request the registrar to direct the subsequently incorporated company to change its name. However where such a second company refuses to comply with the notice, the Registrar have no power to revoke the name. As such, the remedy is found in the liberal construction of the Companies Act which permits the Registrar to proceed to Court for the appropriate orders. As such, until the Companies Act is amended to empower the Registrar of Companies to strike off the name of non-compliant companies, the remedy is to initiate Injunction proceedings against the infringing company.

We hope this opinion suffices your concerns on legal remedies in the event of double registration of a company name. However, should you need further clarification, please do contact us at stralexgroup@gmail.com.    

               
Teddy OKELLO
MD & Group CEO
Corporate & Company Law Consulting Group - a practice division of Strategic Legal Solutions Group


[1] We opine that this includes the Registrar’s Notice to Change Name under the Act.


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