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Session 2007 - 08
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Public Bill Committee Debates

Company and Business Names (Amendment) (No. 2) Regulations 2007

The Committee consisted of the following Members:

Chairman: David Taylor
Baron, Mr. John (Billericay) (Con)
Burt, Lorely (Solihull) (LD)
Corbyn, Jeremy (Islington, North) (Lab)
Dobbin, Jim (Heywood and Middleton) (Lab/Co-op)
Hendry, Charles (Wealden) (Con)
Hill, Keith (Streatham) (Lab)
Iddon, Dr. Brian (Bolton, South-East) (Lab)
Kawczynski, Daniel (Shrewsbury and Atcham) (Con)
McCarthy, Kerry (Bristol, East) (Lab)
Main, Anne (St. Albans) (Con)
Naysmith, Dr. Doug (Bristol, North-West) (Lab/Co-op)
Öpik, Lembit (Montgomeryshire) (LD)
Penrose, John (Weston-super-Mare) (Con)
Pound, Stephen (Ealing, North) (Lab)
Seabeck, Alison (Plymouth, Devonport) (Lab)
Timms, Mr. Stephen (Minister for Competitiveness)
Truswell, Mr. Paul (Pudsey) (Lab)
Celia Blacklock, David Slater, Committee Clerk s
† attended the Committee
The following also attended, pursuant to Standing Order No. 118(2):
Prisk, Mr. Mark (Hertford and Stortford) (Con)

Fifth Delegated Legislation Committee

Wednesday 21 November 2007

[David Taylor in the Chair]

Company and Business Names (Amendment) (No. 2) Regulations 2007

2.30 pm
The Minister for Competitiveness (Mr. Stephen Timms): I beg to move,
That the Committee has considered the Company and Business Names (Amendment) (No. 2) Regulations 2007 (S.I. 2007, No. 3152).
I bid you a warm welcome to your role as the Chairman of the Committee, Mr. Taylor. This is the first time that I have had the privilege of addressing a Committee under your chairmanship, and it is an experience that I relish.
The regulations make additions to the terms for which the Secretary of State’s prior approval is required either for their inclusion in the name under which any trader, whether or not incorporated, carries on business in Great Britain, or for their inclusion in a company’s registered name. The additional terms are “Government”, “NHS”, “HSC” and “HPSS”.
We made the regulations on 5 November and they came into force on the following day. As laid down in the parent legislation and to ensure continuing effect, they require approval by a resolution of each House within 28 sitting days of their coming into operation. That special procedure, not often used, is needed because otherwise the publication of the regulations would draw attention to a last chance to register a company in a name including a word about to be prescribed. There are people who are alert to the opportunities of registering a company in a potentially valuable name. Once a name is registered or a business has traded lawfully under it, rights to use it are established.
In the case of the word “Government”, this is the second time that we have made such regulations. We did so in July but I regret to say that as a result of an oversight, we did not obtain the approval of either House in time, so the regulations ceased to have effect from 16 October. We are now restoring the position.
I shall explain the difference between business names and companies’ registered names. Business names are those under which any person trades; a company’s registered name is its legal name, under which it appears on the index of company names held by the registrar of companies. Registration of a name does not automatically bring the right to use it as a business name; either trademark law or the common law on passing off may prevent a company from trading under its registered name. If a company chooses to trade under a different business name, it must disclose its registered name in most company documentation and on its website.
There are not many restrictions on business names and there has not been a statutory register of businesses names for more than 20 years. The misuse of “plc” and “Ltd” is not permitted, and the Secretary of State’s prior approval is required for certain names—both a name that gives the impression that the business is connected in any way with the Government or any local authority, and a name that includes a term specified in regulations. For some terms, the regulations require the applicant to seek the views of a specified body before seeking approval from the Secretary of State. The regulations do not apply if the prescribed word or expression is part of the surname, first name or initials of a trader using their own name, or of one of the partners in a partnership doing business under the names of the partners.
The requirements for prior approval are backed by criminal sanctions, and in exercising his power the Secretary of State’s primary concern is to prevent harm to the public from a business using a name that suggests an authority, status or pre-eminence that is not justified. In practice, the registrar of companies considers applications on behalf of the Secretary of State.
Most companies trade under their registered names. To protect the public from harm, the Secretary of State’s approval is also required before a company can register under a name for which his approval would be needed for it to be a business name, whether because the name would give the impression that the company was connected in any way with the Government or any local authority, or because it includes a prescribed word or expression.
The regulations prescribing the words are made under the Companies Act 1985 and the Business Names Act 1985. The list of prescribed words goes back to 1981, when the register of business names was abolished. It is kept under review and the 1981 regulations were amended in 1982, 1992, 1995 and 2001. The existing regulations specify nearly 90 words that may imply business pre-eminence, a particular status or specific function. They include “chamber of commerce”, “charity”, “dental”, “duke”, “European”, “friendly society”, “Her Majesty”, “international”, “national”, “nurse”, “police”, “royal”, “stock exchange”, “trade union”, “Wales” and, since 6 November and coming from the list in the regulations, “Government”, “NHS”, “HSC” and “HPSS”. In each case, we were convinced that unrestricted use of the word could result in harm to the public, and that we needed to act quickly.
In the case of “Government”, the public are already protected, as I said, from businesses or companies adopting a name to imply a connection where none exists with the UK Government or any local authority. However, the public could be misled by a name suggesting a connection to a foreign Government. The risk might be less but it is likely to be more difficult to check whether the connection is genuine. It is not difficult to imagine scams to exploit such a misapprehension.
I should emphasise that the purpose of the regulations is not to protect foreign Governments from embarrassment or anything else. The purpose is to protect the public, in particular those who might trade with the company or business in question. The regulations will prevent people from being misled by a company’s name into believing that the company has a connection with an overseas Government that in practice it does not.
In the case of “NHS”, I fear that there are already some companies and businesses whose names have clearly been chosen to exploit the familiar meaning of the abbreviation. The Department of Health has had discussions with those concerned. It is clear that patients and other members of the public need protection from people passing themselves off without foundation as part of the national health service.
The term “NHS” is used extensively by the public in relation to health care, but in Northern Ireland such services are provided by Health and Social Care, which until recently was called Health and Personal Social Services. Like the NHS, both organisations are better known by their initials. In Northern Ireland, the use of either “HSC” or “HPSS” as part of a company or business name could foster confusion. Without the regulations, it would be possible for a company to set up in Great Britain using the initials “HSC” or “HPSS” in its name and then to trade in Northern Ireland. That is why we needed to include those two sets of initials, as well. The Northern Ireland Government made a similar provision in respect of “Government” on 23 July, and in respect of “NHS”, “HSC” and “HPSS” on 7 November, to ensure that the restrictions apply throughout the United Kingdom; otherwise, it would be very easy to get around the control.
I should emphasise that the regulations do not include a prohibition of the use of the terms in company or business names but rather, a requirement for prior approval. In the case of “NHS”, the regulations require the applicant first to seek the views of the Department of Health. The regulations do not specify a body whose views must first be sought in the case of “HSC” or “HPSS” as the appropriate body is outside the jurisdiction of these Great Britain regulations. Therefore, it is more appropriate for the registrar of companies to seek the views of the appropriate Northern Ireland Department.
Nor is there a requirement to seek the views of a body in the case of the term “Government”. In all cases, the Secretary of State will consider the risk to the public when deciding whether to give approval. There are 57 companies with the word “Government” in their registered names, and 16, 31, and three respectively with the terms “NHS”, “HSC” and “HPSS”. There is no way of knowing how many businesses use those names. None of the companies or other businesses will be required by the regulations to change their names.
The powers to make these regulations will be replaced by those in the Companies Act 2006. We intend to use the powers in that Act to make new regulations to replace the company and business names regulations. Earlier this year, we consulted on the use of the replacement powers. Several suggestions were made for additions to and deletions from the list. We are considering them with a view to making new regulations when the relevant provisions of the 2006 Act come into force on 1 October 2009. However, I should like to announce this afternoon that, contrary to what we suggested when we launched that consultation, “Sheffield” will continue to be included in the list, reflecting representations made to us over the past few months.
The regulations are unusual in that they are subject to approval after being made, which allows us to act quickly and prevents the registration of a company in a name that is about to be prohibited. If both Houses do not approve the regulations, they will cease to have effect, and that would leave open the possibility of the public being misled and suffering financial detriment by a company or business having a name that wrongly suggested a connection with a foreign Government. I commend the regulations to the Committee.
2.41 pm
Mr. Mark Prisk (Hertford and Stortford) (Con): May I also express my delight at your chairmanship, Mr. Taylor? Like the Minister, I do not think that I have been under your stewardship before, and I am sure that you will keep us on the reasonably straight and narrow. I also thank the Minister, who is always a quiet and patient soul, for his opening remarks, in which I detected a slight hint of jauntiness. He used to be a Treasury Minister and thankfully today, that is no longer the case, but I cannot imagine that there is any connection in that regard. However, I am sure that he will wish to elucidate for us at the end of these deliberations.
The regulations are entirely reasonable and do not contain anything contentious, although some Labour members of the Committee might wish to debate a concern about the list including “duke”, “dentist” and “Her Majesty the Queen”, and whether this is merely some form of Scrabble.
Jeremy Corbyn (Islington, North) (Lab): We are all dukes over here.
Mr. Prisk: Indeed—as the hon. Gentleman rightly points out, we all have a certain background. Therefore, we have no wish to divide the Committee, but it would be remiss of me not to raise a couple of questions arising from the regulations and the Minister’s opening remarks.
The Minister said that these regulations are the second such set, and he alluded to an oversight. Will he explain the exact nature of that oversight, which led to the wrong regulations being printed and presented? The explanatory notes refer to, and the Minister highlighted, a perceived risk arising from businesses using these expressions, which might mislead the public; that seems to be at the heart of this measure. If the perceived risk exists, how will existing businesses that use such expressions be regulated, given that they are, as the Minister says, exempt from the measure? He mentioned that the Department has had discussions with them, but it would be helpful for the Committee to understand whether the potential exists for a different market environment for two sets of competing businesses, and how the Department intends to regulate that. My third question relates to the timing of the measure. The Government tell us that there is a risk involved, so when did they first become aware of it?
Finally, will the Minister confirm that the regulations apply only to companies registered in the UK, and not to foreign-based companies? What consideration has he given to whether the measure might create the danger of some members of the public being misled?
2.44 pm
Lorely Burt (Solihull) (LD): Unlike the other two protagonists, I am well used to your excellent chairmanship, Mr. Taylor, and I welcome you to the Chair this afternoon.
Clearly, it is important that we protect valued brand names, and as the Minister said, the public’s interest must be paramount and they must be protected. I am not familiar with the original legislation relating to this matter and I am most concerned that other valuable Department brands, such as “HMRC” or the “Home Office”, should also be included. Can the Minister reassure me on that question?
I have some technical questions. Presumably, the registrar of companies will alert the applying company to the fact that their proposed registration name may cause a problem and will keep them informed while consideration of the company name is being undertaken. The guidance notes state that no cost is foreseen as a consequence of the legislation. However, can the Minister reassure the Committee that the time taken for registration will not be undue? If a company’s registration is held up for a long time, that could be detrimental to its application. Can the Minister estimate the sort of delay that a registering company might expect?
2.46 pm
Mr. Timms: I thank the hon. Members for Hertford and Stortford and for Solihull for their support for the regulations. I will address the points that have been raised. The hon. Member for Hertford and Stortford asked why the wrong regulations were printed, and I can reassure him that that was not the case. There should have been a debate of this kind following the introduction of the regulations in July, but that did not occur. That was the oversight, which was a timetabling one relating to the summer recess. However, it has had the fortuitous advantage of our being able to deal with a single set of regulations today covering the use not only of the word “Government”, which we should have done before, but of “NHS”, “HSC” and “HPSS”, which we would have had to do anyway.
The hon. Gentleman asked about the position of businesses that currently have names that might be regarded as inappropriate, particularly in light of these regulations. As I said earlier, the regulations do not enable us to compel a company to change a name that it is currently using. However, a business can be required to change its name if the conditions for its approval are not met. The new Companies Act will give the power to withdraw approval if it appears that there are overriding considerations of public policy, or if a business trades under a name that is so misleading about its activities that it is likely to cause harm to the public. A rather higher threshold is therefore being set in the new Companies Act, but there will be such a power.
Mr. Prisk: I understand that there has been some delay in the implementation of parts of the new Companies Act. On what date will the regulations to which the Minister has just referred be enforced?
Mr. Timms: In October 2009.
In asking why this step had not been taken before, perhaps the hon. Gentleman meant: what triggered this particular case? There was an attempt earlier this year to register a company with the name “Government of Zimbabwe in Exile Ltd”. I do not think that a scam was being attempted, but that led us to consider whether it was appropriate for companies with such names to be registered in the UK; we felt that it was not. That development triggered consideration of the use of the term “Government”, in particular, and as I said, the term “NHS” has also been used. Indeed, a company was so registered in August that would probably not get approval under these regulations. A number of such examples have been occurring.
Mr. Prisk: I am slightly concerned about this issue. I understand that timetabling errors will occur, but it appears that because that business was able to register in August due to the mistake with the original regulations, it can trade until October 2009. Will the Minister confirm that, and is it not a regrettable incident?
Mr. Timms: No, that is not the case because the regulations introduced in July were only about the term “Government”. The hon. Gentleman is right, in that there was a window between 16 October and 5 November in which a company could legally have been registered with the name “Government”. My officials advise me that nobody did so, however, so there was not a problem. This is the first time that we have prescribed the term “NHS”, which was not covered in the July regulations.
The hon. Gentleman asked me, fairly, about the position of overseas companies. An overseas company with a place of business or a branch in Great Britain is required to register with Companies House. Generally, such companies register under their existing name, but they can register under a different name for their operations in Great Britain. In certain cases they may be required to register under a name other than their existing one—for example, if the Secretary of State would not have approved a UK company registering in that name. Therefore, the requirement for prior approval for a name applies to an overseas company registering a name with Companies House.
Mr. Prisk: The brand issue is one that I would like to explore for a moment. Brand names are not registered with Companies House as corporate names, so the question of patent law and intellectual property rights arises. The Government see a risk that the public will be deceived by a business name, but there is a danger that the same could happen with a brand name. Instead of calling a company “Cleethorpes Health Service Ltd”, for example, because of the perceived danger associated with such a name, it could be called “Cleethorpes HS Limited” but provide a service called “Cleethorpes Health Service”, which is branded and trademarked. I assume from what the Minister said that that would not be covered by the regulations.
Mr. Timms: I do not think that the term “Cleethorpes Health Service” would be covered by the regulations. Of course, under trademark law trademarks are protected in a rather different way from the content of these regulations, but I think that the example that the hon. Gentleman gives is right.
Mr. Prisk: I am not sure that the risk is so enormous that one wants to press this matter too far. Nevertheless, the Government feel that there is a risk that the public could be deceived, and I wonder whether they have considered that a company could set up and register and provide a service that is not registered, and which is not covered by these regulations. Have the Government considered that the danger of such deception therefore still exists?
Mr. Timms: I have just remembered that “Health Service” is already a prescribed term, so I was wrong in that regard. The other point that I did not make is about a name that implies a connection to a local authority. I do not think that “Cleethorpes Health Service” would do that, but if it did imply such a connection, it would be prescribed.
Lastly, the hon. Member for Solihull asked me about potential difficulties associated with delays. It would depend on the particulars of the case in question, but a company could always start trading under a temporary name while awaiting approval if it needed to. I agree that those decisions should be made quickly and without undue delay, but that possibility could be available.
Lorely Burt: Could the temporary name be the proposed name?
Mr. Timms: No, it could not, but the company could function and trade while it was waiting.
I am grateful to the hon. Members for Hertford and Stortford and for Solihull for their support, and to other members of the Committee for their interest. I commend the regulations to the Committee.
Question put and agreed to.
That the Committee has considered the Company and Business Names (Amendment) (No. 2) Regulations 2007 (S.I. 2007, No. 3152).
Committee rose at four minutes to Three o’clock.

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