Registering a business name is, generally, one of the first things you should do when setting up a business. If you have a complicated business structure that involves more than one company, you will need to think carefully about which group entity should own the business name. If you get this wrong, the consequences could be severe.
Which entity should own the business name?
It may be an offence under the Business Names Registration Act 2011 to carry on a business without being the registered owner of the relevant business name. Accordingly, the business name should be owned by the entity that carries on the business, namely the operating/trading entity. The holding company (which generally holds all of the valuable assets and intellectual property of the business) does not carry on the business and, therefore, should not own the business name.
If the holding company owns the business name rather than the operating company, it will expose the business’ assets to considerable risk. It is also likely that the operating company may be potentially committing an offence under the Business Names Registration Act 2011.
Customers of the business may sue the holding company (which holds all of the valuable business assets) instead of the operating company (which usually has no real value). It is critical that the holding company is isolated from the risk of having proceedings brought against it.
What about word trade marks?
Some businesses register the business name with the holding company because it owns the trade mark or other intellectual property relating to it. However, business names have nothing to do with intellectual property. The purpose of the business names register is to protect the public by letting them know who exactly they are dealing with and who they can sue if something goes wrong.
Even though it is generally not possible for someone else to register a business name if your business has already registered it, the business name does not give your business exclusive use of its brand. If your business registers a business name and someone else holds the corresponding name trade mark, you are exposing yourself to being sued for infringement.
You should consider applying to register a trade mark for your business name to maintain a competitive advantage. Registration will also assist in avoiding disputes as to which entity owns the intellectual property.
The holding company should hold the name trade mark and liencese it to the operating company for use. The terms of the licence should permit the operating company to register the corresponding business name.
Registering a business name with your operating company, and also registering a name trade mark with your holding company, are important considerations when setting up your business. If you need assistance with the relevant applications or have any questions, please get in touch with LegalVision today. One of our experienced business lawyers would be delighted to assist you!