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Company trading names still an issue

3 Aug 2011

Commenting on the Companies and Intellectual Property Commission (CIPC) assurance to business owners that a company can be registered with the commission and trade without a company name, if it has been issued with a unique number, Dominique Mulder, candidate attorney at Spoor & Fisher said, "These provisions seem to make life easier for those wishing to start a business. Practically, however, the situation is somewhat less straightforward."

In theory, business owners can also obtain a tax number from SARS, using the registered number, while awaiting confirmation from the CIPC that one of their requested names is available to be recorded as the company's name.

While this procedure is set out in the new Companies Act, which states that a for-profit company may use its registration number as a name, if number is followed by the words 'South Africa', for some reason, this procedure is only available to for-profit companies and not to non-profit companies.

Although business owners may apply for tax numbers and bank accounts, SARS and most banking systems would need to be updated to accommodate this and are therefore unlikely to be able to help business owners right now.

"If a business owner manages to open an account and get a tax number under the company's registration number, all of that information and all bank and other accounts will have to be changed again, once the company's name is approved by the CIPC," says Mulder.

Having a number, as a company name, is also problematic for another reason; enterprises are likely to adopt a temporary business name, while awaiting the approval of their preferred registered name at the CIPC.

"That does not pose a problem now, but we need to consider what will happen when Schedule 2 section 5 (3) of the Consumer Protection Act is implemented. It deals with the enforcement of business names and is likely to have an impact on those who need to use a trading name of some sort while awaiting their company name's approval," adds Mulder.

Those who are awaiting approval of company names before April 2012, and who are using a business name in the interim, will be exempted from registering their 'trading as' business name. However, those companies using a trading name less than a year before the implementation of this schedule will be in a tight spot should both the company name and business name be refused by the CIPC.

For companies, which do not engage in marketing or deal largely with consumers, this registration process could work, as a commercially friendly name is not necessary. However, for those who need to use a consumer-friendly trading name that is more inspiring than the equivalent of a 10-digit combination lock, the process of obtaining a company name is likely to turn into a long-term headache.