A rose by any other name would smell just as sweet? The effect of registering a company without a name

The Companies and Intellectual Property Commission (CIPC) has assured business owners that a company can be registered and trade without a company name, provided that the entity is registered with the commission and has been issued with a unique number. Business owners can also, in theory, obtain a tax number from the South African Revenue Service using the registered number whilst awaiting confirmation from the CIPC that one of their requested names is available to be recorded as the company’s name. This allows enterprises to start trading while they wait for their requested name reservation. The rejection of all the names requested, however, does not delay the formal incorporation of the company, as the designated company registration number assigned by the commission, becomes the name of the company. This procedure is set out in the new Companies Act under section 11(1) (b) and section 11 (3) (a), which state as follows: Section 11:

(1) Subject to subsections (2) and (3), a company name— .....

(b) in the case of a profit company, may be the registration number of the company together with the relevant expressions required by subsection (3)

(3) In addition to complying with the requirements of subsections (1) and (2)

(a) if the name of a profit company is the company’s registration number, as contemplated in subsection (1)(b), that number must be immediately followed by the expression “(South Africa)”

When looking at these provisions in the moment they seem to make life much easier for those wishing to start up there business as soon as possible, and for the CIPC for that matter, the practical implications seem to be somewhat less rosey. It seems that, for some inexplicable reason, this procedure is only available to for-profit companies and not to non-profit companies. With regards to profit companies, although business owners are in theory able to apply for tax numbers and bank accounts, SARS and most banking systems would need to be updated to accomodate this and are therefore unlikely to assist business owners at this stage. The practical implication is that if a business owner manages to open an account / get a tax number under its company’s registration number, if that company’s name is approved by the CIPC, all bank accounts etc. will need to be changed again to reflect the new company name. Having a number as a company name is also likely to result in a tendancy for enterprises to adopt a trading style or business name while awaiting the approval of their preferred registered name at the CIPC. Whilst at present this does not pose a problem, consideration must be made for the future implementation of Schedule 2 section 5(3) of the Consumer Protection Act which deals with enforcement of business names.

Commission may not take any action to enforce-

(a) section 79(1) at any time against a person for use of a business name, if that person:

(i) Had registered business name before general effective date in terms of public regulation.

(ii) Was actively conducting business under that business name for a period of at least one year before date on which section 79 took effect

This schedule is likely to have an impact on the procedure of section 11 of the Companies Act for those who need to use a trading name of some sort whilst awaiting their company name’s approval. Those who are awaiting approval of company names before April 2012 who fall within the group of those using a business name in the interim will exempted from registering their “trading as” business name. However, those companies using a trading style less than a year before the implementation of this schedule will be in a bit of a tight spot should the company name and business name be refused by the CIPC. For those companies that do not need to deal with marketing and consumers, this registration process can work, as a commercially friendly name is not neccessary. However, for those who need something that consumers can remember a bit more easily than the equivalent to a ten digit combination lock, this instant pudding process is likely to turn the process of obtaining a company name into a long term headache.

Date published: 2011/07/26
Author: Dominique Mulder

Tags: registering company cipc