Part 5 – Business names – trading, company registered, trade marks and domain names
This part provides information concerning business, trading, registered and domain names and trade marks, primarily in relation to companies. It outlines the procedures required to enable a company to change its name, to enable a sale of the “old” name and also, highlights areas where the official receiver may need to take action. This could be where a company’s name is changed immediately before liquidation, or where the name has a possible re-sale value. In both cases the official receiver may need to consider the implications and restrictions arising, particularly with regard to section 216 of the Insolvency Act 1986 regarding company name re-use (see paragraph 31.10A.103). It also examines the tort of “passing off” in relation to the re-use or re-sale of a name or trade mark (see Section B paragraphs 31.10A.93 to 31.10A. 94). Further, actions the official receiver needs to take when dealing with domain names are examined, these include dealing with possible disputes and the valuation and sale of the domain name (see Section D paragraphs 31.10A.111 to 31.10A.119). This part should be read in conjunction with Part 4 of this chapter which deals more comprehensively with trade marks and Part 6 of this chapter relating to goodwill.
31.10A.91 Business, trading and registered names used by companies and sole traders
A business usually has (at least) one name by which it is publicly identifiable. A limited company is also required to have a legal, registered name, which may or may not be the name under which it generally trades. In the case of a sole trader, the business trading name may be simply the trader’s own name, or a close variation of it. Alternatively, a trading style relevant to his/her business may be used. In addition, many limited company and sole trader businesses now also use a domain name to give access to a website through which their business can be advertised or goods and services sold online. This name will often have a close connection or similarity to the business’ trading name. See paragraphs 31.10A.111 to 31.10A.119 for more detailed information on action to be taken by the official receiver in verifying and realising domain names.
31.10A.92Trade or service marks as a business name
Trade marks are usually attached to the products or services offered by a business rather than to the business itself. However, particularly in the case of service marks (which are trade marks used to advertise a service rather than a product), there may be an overlap between the trading name and the service or product (e.g. The Post Office). Section 216 restrictions (see paragraph 31.10A.103) should also be considered where the trade or service mark is also the name of the company’s business. Refer to Part 4 of this chapter for further information regarding trade marks.
31.10A.93 The tort of “passing off”
Where the official receiver is considering selling a registered, business or trading name he/she must establish before any sale is agreed, whether a claim for the tort of “passing off” is likely should the name sale go ahead, as the potential time and monetary costs involved in defending a claim may negate any value in selling the name. The three key elements for there to be a valid action for the tort of “passing off” are:
31.10A.94Initial name searches required to prevent potential “passing off” claims
The official receiver should undertake a variety of searches to establish any similar business or trading names, including:
Other factors which should be considered by the official receiver are:
31.10A.95 Changing a company name prior to winding-up
A company may change its name [note 2], and (prior to liquidation) this will usually be either by a special resolution of its shareholders [note 3], or less commonly, by the use of a suitable provision in its articles of association [note 4]. Neither Table A nor the model articles for private companies limited by shares [note 5] automatically contain such a clause, so it is not likely the official receiver will often encounter a company having this provision in its articles.
Directors may call a general meeting of the shareholders to enable the resolution for a change of name to be passed, however a director’s power to act in the company’s affairs ceases upon the making of a winding-up order, therefore they are not in a position to call a meeting of shareholders following liquidation. In some cases where a company’s registered name has been changed either shortly before or after the winding-up order, the official receiver may have been consulted or have been aware of the change of name, which could have been effected as part of the sale of all or part of the company’s business by e.g. an administrative receiver.
31.10A.96Registration of change of name and effective date of change
Whilst a resolution may have been passed for the name of a company to be changed, for the change to be effective it must be registered by Companies House and a new certificate of incorporation issued [note 6] [note 7]. See also paragraph 31.10A.98 regarding Companies House actions concerning registration of a new name and certificate where a liquidator is in office.
31.10A.97Shareholder resolution to change a company name without reference to the liquidator
Official receivers have encountered problems where the company name is changed after the winding up proceedings have commenced. Members of a company may seek to transfer the registered name without advising the official receiver or liquidator or obtaining his/her consent, and thus avoid paying any consideration for the goodwill attached to the company’s registered name (see Part 6 regarding the value of goodwill, in particular paragraphs 31.10A.120 to 31.10A.122). The shareholders achieve this by passing a resolution to change the name of the company in liquidation, and then use the name vacated by the company in liquidation for another limited company. Shareholders in a company acting unanimously have at common law the ability to waive irregularities to achieve informally a result which would otherwise require the observance of a specified procedure. This means that, where all other requirements are met in full, there may be nothing the official receiver can do to stop or amend the change, as it has been lawfully made. For more information on “Decision making and meetings” go to Chapter 75 Part 11, and more specifically paragraph 75.194, for further information on shareholder resolutions.
31.10A.98Companies House registration of a change of company name
Companies House has confirmed that where a request to register a change of the name of a company in compulsory liquidation is received, its practice is to contact the liquidator. This is to establish, before the application is registered, whether the liquidator approves of the change of name and whether the resolution is valid. Once Companies House is satisfied the resolution is valid, it registers the change of name and issues a certificate of incorporation in the company’s new name (the company’s registration number remains unchanged). An application can then made to court to change the title of the liquidation proceedings (see paragraph 31.10A.99).
31.10A.99 Applying to court to amend the title of the insolvency proceedings
In the event that the official receiver becomes aware that the registered name of a company in liquidation has been changed, the official receiver should make an application to court to change the title of the insolvency proceedings, including a direction that this new title be used in future. The new title should follow the format below:
XYZ Limited formerly known as ABC Limited (company number 1234567) (IN LIQUIDATION).
The application can be made without notice and should be supported by a short report explaining how the change of name came to be effected and including, as exhibits, a record of the resolution (if any) and certificate of incorporation showing the change of name.
31.10A.100 Consequences of failing to apply to change title of insolvency proceedings
Failure to apply to change the title of the insolvency proceedings following a company name change may leave the official receiver open to allegations of defamation as in the course of the liquidation, he/she would be referring to the wrong company. It is important that the ISCIS record is updated as soon as possible after the official receiver is made aware of the new registered name, and from then on only the new name of the company should be used.
If the change is not made it may cause difficulties for the official receiver when applying for release, as the application for release will refer to a company that is not in liquidation. It could also potentially lead to the wrong company (the company which is now known by the old company name) being dissolved in error, following the conclusion of the liquidation.
31.10A.101Insolvency Act provisions to be considered by the official receiver following the change of a company name
The official receiver should consider the following provisions where a company’s name has been changed:
(a) Section 207 [note 8] (transactions in fraud of creditors). This section might be relevant if there is a value attaching to a company name and the shareholders who effect the change of name are also officers of the company.
(b) Section 208 [note 9] (misconduct in the course of winding up). This section might be relevant if an officer of the company, having knowledge of the passing of a resolution, does not disclose such information to the official receiver.
31.10A.102 Restrictions to be considered by the official receiver when selling or transferring a registered, business or trading name
A registered, business or trading name used by a limited company may have a value, and the official receiver may seek to sell or transfer one or all of these names following liquidation. He/she should be aware that certain restrictions need to be considered, e.g. alimited company may not have a registered name which is the same as or very similar to a name already appearing in the registrar’s index of company names [note 11][note 12].
Before offering the company’s name for sale the official receiver should also ensure that the name has not been registered by a third party as a trade mark or that he/she is likely to be sued under the tort of “passing off” (see Section B paragraphs 31.10A.93 to 31.10A.94).
31.10A.103 Section 216 restrictions
Section 216[note 10] prohibits a person who is, or has been in the 12 months prior to the date of liquidation, a director or shadow director of the company in liquidation, from using (for a period of five years) a name which is the same or similar to the name (registered or trading) of the company in liquidation [note 10].
These restrictions should obviously be considered where the directors or shadow directors of the company in liquidation are to be involved in the management of the new company purchasing the name of the old company.
31.10A.104Notice required of name sale
The purchaser, prior to his/her acting in circumstances which would otherwise contravene the section 216 prohibition, must give notice to every creditor whose name and address is known to him/her (or is ascertainable on the making of reasonable enquiries) and also publish the notice in the Gazette [note 13]. The purchaser may give and publish such notice prior to the sale of the business, but the notice must be given and published no later than 28 days after that sale is completed.
The notice must specify the following:
31.10A.105Removal of requirement to obtain leave of the court
If the name of the company represents the whole or substantially the whole of the business of the company in liquidation, or if the sale of the name is part of a sale of the whole of the business, then the purchaser must follow the procedure outlined in rule 4.228 [note 15] in order to avoid contravening the section 216 prohibition.
Any person who correctly follows this procedure may then act without the leave of court required under section 216(3) [note 10]. The notice is seen as being prospective in that its effect is from the date of the notice, and is not retrospective. Any actions carried out by the directors of the successor company prior to the issue of the notice may leave them open to an allegation that they have contravened section 216 [note 10] and to personal liability for debts incurred [note 16] [note 17].
Any sale of the name in this respect should be conditional on the requirements of rule 4.228 [note 15] being followed and a note to that effect should be included in the sale contract.
31.10A.106Leave of court required - name not representing the whole of the business
If the name of the company does not represent the whole or substantially the whole of the business then the exemption offered by rule 4.228 [note 15] does not apply and an application for leave of court to use the name will be required [note 18] [note 19]. In these circumstances, the prospective purchasers should produce evidence to the official receiver that such application has been made and no sale of the name should be concluded until leave has been obtained.
Please see Chapter 45 of the Enforcement Investigation Guide for further details.
31.10A.107 Liquidator’s authority following a winding-up order
A company’s liquidator (following the making of the winding-up order) assumes all decision making authority on behalf of the company, including that held previously by shareholders, such as the power to pass a resolution.
Schedule 4 to the Insolvency Act 1986, in particular Part III, provides the liquidator with substantial powers to sell the company’s property in a winding up and to wind up its affairs and distribute its assets, often without sanction. No reference is made to the obtaining of shareholder approval [note 20].
Further, for example there is no need following the winding-up order for shareholder approval to be obtained to enable the liquidator to effect substantial property transactions, something ordinarily requiring shareholder approval [note 21] [note 22] [note 23].
31.10A.108Use of agents to value a company’s registered name
Whether the sale is to be made to the former directors of the company in liquidation or to an un-connected party, and the name appears to have a considerable value (perhaps, because it is well known), or a valuation cannot be agreed between the parties, agents should then be engaged to provide an independent valuation. The potential purchasers should meet the costs of the valuation and agents should not be instructed until the official receiver is in receipt of funds, or a written undertaking to provide funds to cover the costs. A chartered surveyor or an accountant may carry out the valuation.
Where the official receiver is seeking to realise the value in the registered name of the company in liquidation by sale or transfer to a third party (having taken into consideration any potential restrictions regarding the re-use of the name as detailed in paragraphs 36.10A.103 to 36.10A.106), he/she will need to draw up a special resolution to change the name. Annex A to this chapter provides a template with suggested wording for the liquidator to use.
As detailed at paragraph 31.10A.107, the liquidator has the authority to sign the special resolution without the consent of the contributories (shareholders) or any need to call a shareholders’ meeting to pass a resolution for the name change.
The official receiver as liquidator should sign the resolution and complete and sign Companies House form NM01 (Notice of change of name by resolution & Special Resolution (RES15)), which can be accessed on the Companies House website. This form, together with the signed resolution and appropriate fee (£8 as at May 2013) should be sent to the Registrar of Companies. The Registrar will then agree the company’s name change, releasing the old name which can then be sold for the agreed consideration.
31.10A.110Bankruptcy - business (or trading) names
A trading name used by a sole-trader in bankruptcy may be sold to a third party as part of a sale of the whole of the business or in its own right. In particular the official receiver should consider whether there is any possibility of a likely action under the tort of “passing off” if he/she intends to sell the business or trading name to a third party, especially where he/she is aware of any other business with a similar name (see Section B paragraphs 31.10A.93 to 31.10A.94 regarding the tort of “passing off”). It is considered inappropriate to seek any payment from the bankrupt for the re-use of a trading name as he/she is under an obligation to trade using or disclosing the name under which he/she was made bankrupt [note 24].
31.10A.111Domain names and their use
A domain name is a word sequence or “string” which can be entered into an internet search engine to gain access to a specific web site. A domain name represents an internet protocol (IP) resource (the name of every organisation, individual , personal computer, server computer, website or any other service connected to the Internet. It has to be uniquely defined (identified) so that others wishing to make contact can do so without the risk of communications being misdirected. Each domain name is assigned to a specific internet service provider (ISP). The domain system is used to translate the address of the ISP into words. Domain name registration is now big business and nearly every domain name is registered, and some change hands for a significant amount of money.
The Internet Corporation for Assigned Names and Numbers ICANN is responsible for awarding contracts to registries to operate top-level domain names.
31.10A.112Top level domain names
A top-level domain is the last part of an internet domain name, that is, the letters which follow the final dot of any domain name e.g. uk as in http://www.bis.gov.uk. Each country has its own two-letter top domain name.
The .uk top-level domain was first used in the 1980's and at that time a voluntary group managed the .uk domain names. By the early 1990's commercial companies started to sell domain names to companies. As demand for domain names registration grew the voluntary group could not cope and Nominet UK (a private, not for profit company limited by guarantee) was set up to manage the .uk top-level domain. Top-level names ending in .com, .net and .org are registered with Network Solution Inc http://www.netsolinc.com/. The names are registered for a fee and have a limited registration time (usually three years) after which they must be re-registered or will become available for sale to the general public.
31.10A.113 Realising domain names held under licence
Domain names are not actually owned by the user or registrant. They are effectively a licence from the appropriate registrar to use the domain name during the period paid for. Title for the domain name always belonging to the registrar. Details of the registrant’s rights to use and transfer the domain name will be provided in the appropriate registrar's terms and conditions.
If the domain name is registered to the insolvent, breaches no trademarks and has no outstanding fees it can be dealt with as any other asset. The name has little intrinsic value but there are various auction sites on the web which can give an indication as to the value of the name and deal with its transfer for value if the official receiver considers it would benefit the creditors of the insolvent estate.
31.10A.114Action to be taken by official receiver when dealing with domain names
31.10A.115Verify registration of domain name.
The registration certificate issued by the internet service provider ISP in respect of each domain name registered. This certificate should verify proper registration to a named person. The official receiver should endeavor to recover this certificate from the insolvent’s records and if this certificate cannot be found enquiries should be made from the relevant internet service provided. The ownership of a domain name may be established by reference to the web-site www.who.is.
31.10A.116Resolve disputes relating to domain names
Most domain names are allocated on a first come first served basis without investigation into the applicant’s right to use the name. It is therefore possible to register a name that another party considers infringes its rights. This is occasionally done on purpose where the registrant wishes to harm the business or reputation of the other party. This can result in court action or in the use of the registrar or ICANN's dispute procedure. An example of this is “cyber squatting”, where the “squatter” searches out all the registered domain names associated with a particular product or a business’s trade mark or trading name, purchases the near variations (e.g. “.co.uk” instead of “.com”), and then sells either counterfeit goods or an imitation brand, or seeks to undermine the brand reputation, so that the “squatter” can then sell back the similar domain name to the well known company or business at an inflated fee. In the case of British Telecommunications Plc. and Another V One in A Million Ltd. and Others  1 W.L.R. 903 the laws governing trade marks were used to challenge this behaviour, citing “passing off” in relation to internet domain names purchased by the company, where use of the trade marked name implied that a website had a connection to the owner of that trade mark, which was in direct violation of the Trade Marks Act 1994 [note 25].
Any disputes should be resolved before any transfer is undertaken, although it is possible the transfer of the domain name to the other party may be a way of settling the dispute.
31.10A.117Verify the domain name value.
Certain firms will provide a professional valuation of a domain name over the internet and these can be used to test the value. Depending on the costs involved and the value of the domain name the official receiver should consider seeking more than one valuation.
31.10A.118 Sellor transfer the domain name.
If the domain name has a value the official receiver should arrange for its transfer. Some local agents used by official receivers have experience in transferring domain names. In addition there are numerous auction sites brokering domain names on the internet. The amount of commission charged and the buyer reach varies between sites. In order to transfer the name to the purchaser the registration certificate is required. If this cannot be found Nominet UK should be contacted for guidance on transferring domain names without the registration certificate.
31.10A.119Action where domain name has no value
Where a domain name has no value, the registration may be cancelled subject to the registrar's terms and conditions or left to lapse at the end of the registration period.