If your company plans to change its name, and its intended new name is announced or leaked in advance of the change, there is a risk that someone may decide to register the new name before you, thus preventing your company’s intended name change from taking place. Indeed, anecdotal evidence suggests that there are operators, commonly known as ‘name squatters’, who monitor public company announcements and, as soon as an intended change of name is announced, immediately apply to register the name.
The practice of registering a company name purely to prevent another from registering it, or in order to obtain money (or other consideration) from another person who wants to register the name is now outlawed by section 69 of the Companies Act 2006 (s.69 CA06).
Companies House takes all name-change applications in good faith and will not get involved in any dispute. The formal procedure for making a complaint under s.69 CA06 involves bringing a claim in the Company Names Tribunal (the Tribunal). Making an application costs £400, but that will be only the beginning of the legal expense if the claim is defended.
The burden is on the applicant to show that the holder of your intended company name registered the name for the main purpose of obtaining money from you. Gathering and presenting the evidence takes time and costs money, and after several months following the Tribunal procedure you may find that your costs are not recoverable and, worse still, that you have not managed to prove your case.
There is a temptation, therefore, to attempt to settle a dispute outside the official forum, and of course name squatters are well aware that, below a certain threshold, they can demand money in return for the release of a company name. Although what they are doing is unlawful it will often make economic sense for a person who wants the name to meet the name squatter’s demand, rather than go to the trouble and expense of bringing a claim in the Tribunal.
However, care needs to be taken if you find yourself in the awkward position of having to barter for your chosen company name with a name squatter. Making an offer to pay a sum of, say, £500 in return for a special resolution and a Companies House form NM01 is not without its difficulties and legal advice should be sought on the correct way to approach such a dilemma. If a payment is agreed, it should not be made until the name changes are effected at Companies House: and don’t forget to factor in the two same-day change of name fees of £50 each!
Of course, the most effective way to avoid these problems is to register the intended new company name yourself, by establishing a shelf company before making any public announcement. The name can then be easily transferred to the intended company when you are ready to make the change.