The Importance of an Effective Name
A corporation’s name is one of the most important assets it owns, excepting perhaps for private investment or holding companies where a numbered name (e.g. 1234567 Ontario Inc.) or an indistinct name will suffice. But generally a company offering goods or services to the public will want an effective name, one that helps attract business and create goodwill. At the same time, the name must not conflict with an existing corporate name, trade style or trade mark used for the same or a related business.
When incorporating a company, selection of a name is not always given the attention it deserves. Not providing enough care and time in this process, in consultation with your legal advisor, can risk complaints from third parties that the name is too close to their own, with the further risk of having to change the name or pay damages. Sometimes a request to change the name can come from the Corporate Branch of particular jurisdiction, especially the one under whose laws the company was incorporated.
Some General Name Rules
Under regulations enacted pursuant to the Ontario Business Corporations Act, a corporate name must not be too general, (e.g. ABC Industry Inc.) only descriptive of the business of the corporation (e.g. Fine Drapes Inc. except for perhaps if Fine was a surname), the name or surname of an individual who is living or had died within 30 years prior to the date of filing the articles, or is primarily or only a geographic name used along (example Northern Ontario Inc.). There are, however, certain exceptions for these situations including where through use a general name has become distinctive in the mind of the public. Particular statutes sometimes impact on the corporate name selected, this is so with most of the laws that regulate establishing personal corporations for various professions including engineering and architecture. These laws set out how, from their perspective, how profession can be referred to in the corporate name.
These rules may sound technical or even arbitrary, but they generally work to protect the interest of the name-holder when properly applied. For example, if a name is too general, such as Taret Inc. (I have made up this name for the purpose hereof), someone else can choose a similar-sounding name and following the above rules, incorporate words to indicate what the business does. For example, it might choose Tarret Meat Products Inc. The first business, Taret Inc., would in our view have real difficulty to stop the second business from using its name if it too was in the meat business and serving similar customers. Thus, while clients will sometimes ask why a proposed corporate name should have a descriptive element, it is usually in the client’s interest to have a name with that characteristic. Exceptions are provided where general names acquire distinctiveness through long use, e.g. McDonald’s. The same logic applies to a corporate name which is only descriptive of the business, but in reverse.
The Ontario Business Corporations Act also provides that a name must not contain certain enumerated words or expressions (in particular to suggest a government connection, for example “Veteran”), and also must not be the same as or similar to the name of a known body corporate, trust, association, partnership, sole proprietorship or individual, whether in existence or not, if the use of the name would be likely to mislead the public. The same rule applies where a corporation identifies itself to the public under a name different from its corporate name. (These are so-called assumed, unit or divisional names). Thus, subject to limited exceptions, it is not lawful to use a name similar to one already in use where the customer base might be confused as to the source of the goods or services. For example, if a company exists called John’s Tech Ball Bearings Inc., it would not be prudent for a new company making similar or related products to call itself Joan’s Hi-Tech Ball Bearings Ltd., if again they potentially will serve the same market. At a minimum, similarity of names in appearance or sound entails a consideration of the relevant product and geographical markets.
A further rule is that an Ontario corporation may only have a name that is English only, French only, that combines English and French, or is comprised of equivalent, separately used English and French names. There are also limitations on the length of corporate names and the kinds of letters, numerals and grammatical symbols that can be used to form them.
If you require assistance in selecting a corporate name for your business, contact us.