Business names registration - the rules just changed!
Sep 2015 |
Introduction
Just when we thought we knew how business names registration worked in Australia, the Federal Government changed the system with the introduction of the ‘Business Names Registration (Availability of Names) Determination 2015’ (New Rules) on 14 July 2015. The New Rules reflect the ability of the Minister to make rules under the Business Names Registration Act 2011 (Cth). The Explanatory Memorandum accompanying the New Rules does not refer to any reasons to justify the New Rules. However, it makes sense to ensure that the existing criteria against having identical names or nearly identical names is supported.
How did business name registration work before the New Rules?
Since 28 May 2012, registration of all Australian business names has been administered by the Australian Securities and Investments Commission (ASIC), under the Business Names Registration Act 2011 (Cth). ASIC utilised a single national register of business names which resulted in removing the previous requirement where business names were registered separately in each Australian jurisdiction where business was to be carried on.
As at 28 July 2012, registered business names on state and territory registers automatically transitioned to the new national register. If one business name originating on the national register was identical to one or more identical names transitioning across from a state/territory register, ASIC imposed a geographical identifier to distinguish names. For example, Joe’s Carwash from the Australian Capital Territory (ACT) being identical in name to Joe’s Carwash from Queensland (Qld) would lead to both names being altered to Joe’s Carwash ACT and Joe’s Carwash Qld. ASIC gave people the right to object to a geographical ‘identifier’ (such a a state acronym), but if business name owners were not happy with the identifier chosen for them, they were required to identify a suitable alternative.
New business names could be registered online and ASIC provided users with connection to ASIC Connect. An ABN had to be provided along with information about the underlying business holders, addresses etc. This process required you to check beforehand to see if your proposed business name was available i.e. not already registered.
The new name, if available, would be registered by ASIC provided it was not identical or nearly identical to a registered name and provided it was not undesirable, not comprised of non-dictionary words, or had a restricted word or expression, such as ‘commonwealth’ or ‘federal’. A registration fee applied, recognising a discount for registration over three years rather than one year.
ASIC then issued Regulatory Guide 235 to help the public understand the system of business names registration.
How will the New Rules work?
The New Rules will not affect ASIC’s role as regulator and will not affect any names that were already registered. The New Rules only affect applications for new business names made on or after 20 July 2015.
The New Rules introduced subjective tests in order to determine whether, for registration purposes, one name is identical to, or nearly identical to, another business name. The subjective tests, which ASIC is to apply, are to ignore:
- the use of the definite or indefinite article (a, an, the) unless it is the whole name;
- the use of ‘Association’, ‘Co-operative’, ‘Incorporated’, ‘Limited’, ‘Ltd’, ‘No Liability’, ‘NL’, ‘Proprietary’ or ‘Pty’ in one or both names;
- whether a word is in the plural or singular number in one or both names;
- the size of characters, and the type and case of letters, any accents, spaces between characters and punctuation marks, used in one or both names;
- the order of words in the names, so that each of the following is to be treated as a word:
a. a character separated by spaces;
b. a group of characters separated by spaces;
c. an abbreviation;
d. an acronym. - whether one or both names include a host name such as ‘www’ or a domain extension such as ‘net’, ‘org’, or ‘com’.
Easy examples of the tests applying are these
- If ‘Joe’s Carwash’ is registered, then ‘Joes’ Carwashes’ won’t be allowed because the plural and the singular are treated as the same.
- If ‘Joe’s Carwash’ is registered, then ‘Joe’s Carwash.com’ also won’t be allowed because it has a domain extension added to an existing name.
- If ‘Joe’s Carwash’ is registered then ‘Joes Carwash’ will not be allowed because punctuation marks are to be disregarded as differences.
Not to be content with a test to distinguish identical (or nearly identical) names, the New Rules also introduce supplementary tests.
The supplementary tests
There is now a schedule of 210 separate items which results in each item identifying alternative meanings for the same word. For example, item 109 of sch 1 to the New Rules specifies that ‘cakes, cake shop, cupcakes’ are taken to be the same. Putting this in perspective, if there was a registered business name called ‘Sweet Tooth Cakes’, then ‘Sweet Tooth Cupcakes’ would not be accepted for registration.
Similar pronunciation is another stumbling block. If ‘The Dollar and Cents Shop’ was an existing registered name, then the name ‘The $ & C Shop’ would not be allowed as a business name. This is regardless of any spaces or abbreviations.
A more complex example of the application of the tests is the scenario where ‘XYZ123’ is a registered business name and where ‘XYZ 123’ is a new name submitted for registration. The tests indicate that the new name (because of the space) constitutes two words whereas the existing name (with no spaces) is treated as one word. However, the tests specify this difference is to be disregarded resulting in the submitted new name being unacceptable.
What about identical business names and company names?
The criteria for acceptable company names are a combination of the application of s 147, 148 and 149 of the Corporations Act 2001 (Cth) and pt 2B.6 of the Corporations Regulations 2001. However, companies are primarily subject to ‘identical’ as the main test, i.e. a company name is not to be registered if identical to an existing reserved or registered company name or business name. There is no ‘nearly identical’ test for companies. It may be upsetting for some companies to find out about the existence of similarly worded business names to their company name.
What the New Rules do is ignore the problem of there being business names similar to company names. This is a direct consequence of s 147(1)(b) of the Corporations Act 2001 (Cth). This provision effectively states that a company name is available unless it is identical to a reserved or registered company name or business name.
The tests that a new business name has to go through for comparison with company names is to ignore ‘Pty Ltd’ components, plural or singular punctuation etc (see pt 1 sch 6 of the Corporation Regulations 2001).
However, the names registration process has nothing to do with offering any business proprietary protection to their name. The names registration process was designed to enable people to tell businesses apart, not to protect name ownership.
The New Rules for registering a new business name have become more prescriptive. However, at the outset, each new registrant should have the capacity to assess their chances of name registration by stepping through the name testing process.
Undesirable names and restricted words and expressions for business names
Similar to undesirable names being prescribed for companies, business names also cannot utilise classified names in s 8 of the New Rules.
Similar restrictions on using certain words, expressions or abbreviations are continued in ss 9 and 10 of the New Rules. The restricted words and expressions are set out in sch 2 to the New Rules.
Conclusion
Many people are often frustrated when they try to register a new business name. Frustration will not be solved by the New Rules. In fact, there will be greater pressure to compromise on the name you may want because of identical or nearly identical existing registered names.
If you wanted to register a business name tomorrow, you should compare your choice against the alphabetical list of existing company and existing business names. You cannot reserve a business name (though you can reserve a company name). You should also check the Trade Marks Register held by IP Australia to ensure that your chosen business name will not conflict with a registered trademark. This exercise should allow you to assess how difficult it might be to trademark your chosen business name.
The last thing you want is for third parties to claim that you are operating a new business by reliance on their reputation, through a similar name. By trademarking your business name, you gain the intellectual property rights to the name and this is the protective element you want. Apart from registration of business names being a means by which the public can distinguish one name from another, be aware that the law requires you to register a business name if it is not your own name.