The new system of business names will reduce costs and make renewals simpler
New rules for business names will largely be good news for medium-to-large businesses. However, there are a few downsides as well.
The rules are contained in a Business Names Registration Bill passed by Federal Parliament earlier this month. They will replace individual State and Territory business names legislation when the States and Territories have made the necessary legislative changes.
If you carry on business under a name which isn't your personal name or company name, you must register it as a business name.
At present, business names are registered on a State-by-State basis. That means that a name must be registered in each State and Territory in which it is used.
In mid-2008, the Council of Australian Governments agreed to move to a single national business name registration system. The new Bill is the result.
The new national system will be administered by ASIC. It will only be necessary to register a name once in order to use it in every State and Territory. Registration will last for one or three years (whichever the business chooses).
For businesses which operate across Australia, this will have two main benefits:
- costs will come down; and
- renewals will be a lot simpler.
That's the big picture. Some of the details will require closer attention.
Under the new rules, all existing business names will be automatically migrated to the new national register.
The obvious question is: what happens if an established business in NSW has the same registered business name as an established business name registered in WA?
The new Bill says that both existing business names will be registered, and neither will have to change.
The same issue arose when the Corporations Law came into operation in 1991, and companies from different States were all placed on a single register. The government's attitude at that time was that companies with identical names would still be distinguishable because they would have different ACNs.
This time around, of course, the situation is different, because the national business names register will include both companies (which have ACNs) and sole traders (not all of which have ABNs).
ASIC may allocate each name a geographical identifier in the register, but there will be no requirement for the businesses to use those geographical identifiers: "Davros' Imperial Emporium" in Perth and "Davros' Imperial Emporium" in Sydney will be able to carry on business without changing their signage, stationery, etc.
However, new business names will not be able to be registered if they are identical "or nearly identical" to an already-registered business name or company name.
This will not be particularly onerous for medium-to-large businesses. They currently encounter a similar restriction when, as a matter of course, they seek to register a new name in every State and Territory. Small businesses, on the other hand, are more likely to encounter problems, because an existing business name used in, say, a village in Tasmania will prevent any new use of identical or similar names anywhere else in Australia.
The issue may be exacerbated because of the prohibition on names that are only "nearly identical" (the Corporations Act just prohibits new names which are actually identical to existing names). A prohibition on names which are "nearly identical" to any name registered anywhere in Australia may produce some interesting results. A draft "availability of names determination" issued by the Government indicated that:
"Creative@Work" is the same as "Kre8tive at Work";
"100% Cats" is the same as "100 percent Kats"; and
"Dollar Shop" is the same as "$ Shop".
Big brother is watching
Never one to let an opportunity pass it by, the Government has taken advantage of one of the possibilities offered by the national register: no new business names will be accepted for registration unless the applicant has an ABN.
According to the Explanatory Memorandum, this is "to assist with identification of the entity behind a business name"; it's probably no coincidence that it may also facilitate taxation collection. To make this requirement a little easier, it will be possible to lodge a single application for both an ABN and the registration of a business name.
The ABN requirement will not apply to existing registered business names that are migrated to the national register.
The new register requires complementary legislation from the States and Territories.
According to the Federal Government, the current planned date for achieving this is March next year, with May being the commencement date for the national register system.
Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.