Review your content’s performance and reach.
Become your target audience’s go-to resource for today’s hottest topics.
Understand your clients’ strategies and the most pressing issues they are facing.
Keep a step ahead of your key competitors and benchmark against them.
add to folder:
Questions? Please contact [email protected]
Introduction
As at March 2019, Nigeria reportedly had 3.1 million registered companies, business names and incorporated trustees.[1] It is trite that upon incorporation, companies become, in law artificial persons with separate legal personalities from their directors and shareholders.[2] By section 863 CAMA, “a person or association of persons shall not carry on business in Nigeria as a company, limited liability partnership, limited partnership or under a business name without being registered under this Act.” Thus, the only persons free from this requirement are those individuals who intend to do business as sole proprietors or partnerships using their, or combination of their own names.[3]
Effectively, company incorporation is the birthing of a new person in law; hence, choosing a name for a company is almost as important as naming a natural person. As for natural persons, it is names that will distinguish one company, from other companies. Unsurprisingly, many promoters apply their creative gifts to come up with distinct, unique and memorable names, subject to legal restrictions on certain words.[4] Having crafted a ‘nice’ name, should the relevant parties not be entitled to the full benefits of their creativity?[5] The fact that a registered business name does not confer separate legal personality is not a bar to the right of the business name owner or the CAC to prevent improper use of such name through wrongful registration.[6]
This article after examining the reasons corporate names are, and should be fiercely protected, considers issues generated by having similar/conflicting corporate names in Nigeria, and the all-important role played by regulators, especially the Corporate Affairs Commission (CAC), given applicable CAMA provisions.[7] We conclude by stressing the need to keep doing more in this regard as ‘orderliness’ around registration and protection of corporate names in Nigeria, is part of the ‘optics’ on ease of doing business, sending out the right signals to the investment community.
Protection of Corporate Names – Raisons d’ etre
The core aim of every business is to make profits. To achieve this end, a company has to be distinguishable from other similar companies with a name that is easily identifiable by customers, business associates and the general public.[8] A company’s name also protects the interests of its customers as it ensures the distinction, which is useful for making their choices, amongst similar brands.
Hence, companies expend substantial funds on advertising, Corporate Social Responsibility (CSR) and philanthropy, in order to make customers familiar with their names. Names are chosen amongst other reasons, for distinctiveness – to stand out from competitors, and have potential to evoke or build loyalty, have emotional ties with target customers, especially where quality and pricing are also favourable.[9] Consequently, a name plays a very important role in the corporation’s growth and perception,[10] as it not only captures the attention of potential customers; but is also a summation of the essence of its business.
It is not surprising that companies pay great attention to their names, often hinging their substantial investment in building brand equity, on such names, and doing all they can, to avoid reputational risk, with the related negative fallouts: on market perception (and therefore value) of their products/services, and even of their stock prices. It is now common for goodwill to be a substantial part of some companies’ assets.
The company or business that built its goodwill is entitled to profit therefrom, whilst legal policy (exemplified by passing off for example), frowns at ‘impostors’ seeking to profit from where they have not sown. Studies have shown that customers rely on the reputation of corporations in making product and services choices, investment and career decisions, etc.[11] Favourable reputation also enables companies to charge premium prices, and attract top talent and investors.[12] Undoubtedly, reputable companies have an advantage over their counterparts in the same industry.
Legal Regime for the Protection of Corporate Names in Nigeria
Common Law Tort of Passing off
The common law remedy of passing off protects the rights of unregistered companies. Passing off is the making of false representations to the public by businesses about the source or origin of their goods or services.[13]It is the selling of goods or the carrying on of a business in such a manner as to mislead the public into believing that the product or business is that of another.[14]The foundation for the law of passing off is as enunciated in Perry v. Truefitt[15] that: “a man is not to sell his own goods under the pretence that they are the goods of another man.” The same principle was reiterated in Reddaway v. Banhan thus: “nobody has the right to represent his goods as the goods of somebody else.”
The tort of passing off in Nigeria was described by the Court of Appeal (CA) in International Tobacco Nig. Ltd v. British American Tobacco Nig. Ltd[16] to: “consists of the making of false representation to the public, or to a third person(s), which is likely to induce them to believe that the goods and services of another are those of the plaintiff. The applicable test is not whether a customer can distinguish the two marks when placed side by side but whether when he has only his own recollections of the one he likes to go by, he may not accept the other in mistake for it.”
Where a company’s name is so similar to another and likely to deceive the public about the relationship between two businesses, the common law of passing off would apply to protect the earlier company. In Niger Chemists Ltd v. Nigeria Chemists,[17] the Plaintiff had established a chemist business using the name “Niger Chemist”. The Defendant also started a chemist with the name “Nigeria Chemist”, on the same street as the Plaintiff. The Plaintiff sued the Defendant claiming that the name was too similar and likely to deceive the public.
The Court agreed and granted an injunction restraining the Defendant from using the name “Nigeria Chemist” holding that “in an action to refrain the Defendant from using a business name similar to that of the Plaintiff it is not necessary to prove either intent to deceive or actual deception. The Plaintiff need only prove that the name used by the Defendant is so similar to his own as to be likely to cause confusion in the mind of the public.”[18]
In order to sustain a claim for the tort of passing off, the Plaintiff must prove that:[19]
Passing-off is not only of common law origin, but it also has statutory backing in Nigeria. The common law action is preserved in section 3 Trade Mark Act (TA)[20] that states thus: “…nothing in this Act shall be taken to affect rights of action against any person for passing off goods as the goods of another person or the remedies in respect thereof.”
Protection under the Trade Mark Act of Nigeria
A company’s name that has been registered as a trade mark under the TA is afforded statutory protection from all infringement; with registration generally conferring exclusive right to the use of that name. Section 67 TA stated that trade mark means “except in relation to a certification trade mark a mark used or proposed to be used in relation to goods for the purpose of indicating, or so as to indicate a connection in the course of trade between the goods and some person having the right either as proprietor or as registered user to use the mark, whether with or without any indication of the identity of that person.”
In Ferodo Ltd v. Ibeto Industries Ltd,[21] the SC held that “A trade mark if registered gives its proprietor the exclusive right to use the trade mark in marketing or selling his goods. And without his consent, if anyone else uses an identical mark; or any mark so nearly resembling it as to likely deceive or cause confusion between his own goods and the proprietor’s goods, will entitle the proprietor to sue for infringement of the trademark, or to sue in action for passing-off or both.”
An infringement of a trademarked corporate name occurs where a company other than the owner of the trademarked name, uses a name identical with it or resembling it as is likely to deceive, or cause confusion.[22] What the Courts consider in determining whether there is an infringement is if there is a semblance between the basic idea of the infringed trademark and the other name and the Court does this by placing both of them side by side for comparison.[23] It is the offending name that is considered such that whether a person who sees the name in the absence of the trademarked corporate name, is likely to be deceived into thinking that the name is the trade mark.[24] Thus, a trademarked corporate name cannot be used by another.
In a case for the infringement of a trade mark name, the motive behind the adoption of the offending name need not be fraudulent or intended to deceive.[25] All that is relevant is the effect the offending name would have on members of the public. If the name is likely to confuse, the likelihood of deceit is deemed to be present irrespective of whether or not the company intended to be present.
Exceptions to the Protection Afforded by the TA
An exception to the exclusive use of a trademarked name is where there is proof of continuous use of a similar name prior to the registration of the trade mark. Section 7 TA recognises and protects the right of owners of unregistered names similar to registered trademarks if they have been in continuous use from a date previous to the use and registration of the trade mark. This was the upheld by the SC in American Cyanamid Co v. Vitality Pharmaceuticals Ltd[26] thus: “Concisely stated, the proprietor or registered user of a trade mark, is not entitled to interfere with an existing trade mark, even if identical with or nearly resembling his own if it has been in continuous use before the use of or registration of his own trade mark.”
Other exceptions are provided in section 13 TA. For instance, registration of similar trade marks by more than one proprietor may be allowed in a case of honest concurrent use, or any other special circumstances which, in the opinion of the Court or the Registrar, make it proper so to do.
Protection under the CAMA
CAMA is the primary legislation governing the formation, management and liquidation of companies in Nigeria. It provides for the protection of already registered companies names with the CAC. By section 852(1):
“No company, limited liability partnership, limited partnership, business name or incorporated trustee shall be registered under this Act by a name or trade mark which–
The above section underpins the CAC’s practice of rejecting for registration, any name that resembles an already existing name of a registered company/business or association in Nigeria. However, occasionally CAC inadvertently registers a name similar to that of a company already in existence; and the pertinent question then is: ‘what happens in such a scenario?’
Section 30(1) CAMA provides the answer thus: “if a company through inadvertence or otherwise, on its first registration or on its registration by a new name, is registered under a name identical with that by which a company in existence is previously registered, or nearly resembling it to be likely to deceive, the first mentioned company may with the approval of the Commission, change its name, and if the Commission directs, the company concerned shall change its name within six weeks from the date of the direction or any such period as the Commission may allow.”[28] The CAC is also empowered to request the Company to change its name if it discovers that its name conflicts with an existing trademark or business name prior to the registration, and the consent of the owner of the trademark or business was not obtained.[29]
The CA, whilst interpreting section 30 CAMA in Mustapha v. CAC,[30] held that: “the provisions of Section 30(1) & (2) of the Act regarding the prohibition and restriction of names of companies are very clear and unambiguous. The criteria for such do not include consideration and application of English meanings of the words used in names of proposed companies. All that need be established is similarity in names as are likely to cause confusion in the mind of the public. It is a settled principle of law that statutes are to be given their simple and clearly unambiguous meaning. The Courts are enjoined in the discharge of their duties of interpretation to avoid going beyond the meaning and intendment of the legislator.”[31]
A similar situation occurred in Maersk (Nig) Ltd. & Anor. v. Maersk Nig. Ltd. & Anor.[32] The 1st Appellant Company was registered on 26th January, 1998. CAC registered the 1st Appellant after it confirmed that no other company bears the proposed name of Maersk Nig. Ltd. Thereafter, the 1st Respondent laid claim to the same name, contending that it was registered first in time to the 1st Appellant, as a company formerly known as Niger Nordic Ltd. in 1988, which it later changed to Maersk Nig. Ltd. in 1991. It therefore instituted an action against the 1st Appellant.
The CA held that “…the admission by the 2nd Respondent that it made a mistake in registering the 1st Appellant as ‘Maersk Nigeria Limited’, albeit belated, cannot be overlooked. It sufficiently answered the question of: which of the Companies between the 1st Respondent and the 1st Appellant was registered first in time by the 2nd Respondent, CAC. Clearly, this is precisely the mischief that Section 30(1)(a) & (c) of the Companies and Allied Matters Act, 1990 was designed to address.”[33]
Supervisory Role of the Company Affairs Commission
The CAC is the body saddled with the responsibility of registering company names in Nigeria.[34]The CAC is a body corporate with perpetual succession and a common seal. Its functions includes the administration of the Act including the registration, regulation and supervision of the formation, incorporation, management, striking off and winding- up of companies amongst others.[35] Thus, the CAC plays a central role in conflict of company names. In fact, CAC is the decider on whether or not a name conflicts with an existing name. It is mandated by CAMA to refuse the registration of a conflicting name and also to direct the change of a conflicting name.
In Mustapha (supra) the Plaintiff presented the names of three proposed companies to the CAC for registration/reservation. The CAC refused to reserve the names on the grounds that there were in existence registered companies with identical or similar names. The Plaintiff, not satisfied with the CAC’s decision, filed a writ of certiorari praying the Court to quash same and compelling acceptance of the names for registration. The Court held per Aboki JCA, thus:
“It is clear from the provisions of Section 30(1)(a),(b),(c) and (d) that the Respondent is under a mandatory duty to refuse to register any company in Nigeria with a name identical or so resembling another company already registered. In carrying out this duty, the Respondent is required to compare names from the list of companies already registered and stored in its data bank with the proposed names seeking to be registered. Where in the course of such comparison it is discovered that there are already names registered which have semblance or identical features with the proposed names, the Respondent has the responsibility to refuse to register such names. The Statute did not place any duty on the Respondent to undertake an etymology of the words used in formulating the names to be registered in ascertaining whether they are identical as to mislead or deceive people as to the identity of the names already registered. All that is required of the Respondent by law is a comparative analysis of the names from the ways they look or sound in the mouth and ears of ordinary citizens on the street of Nigerian towns and cities and in particular those doing business in markets in the commercial cities who may be potential business customers of these companies.”[36]
Given the unsavoury effects including financial, and particularly the embarrassment that could result from wrongful company name registrations, the CAC needs to up the ante, on its processes for ensuring near nil occurrences of such scenario. We are aware that the CAC maintains register of companies, LLPs business names, in Nigeria, pursuant to sections 8(1), 805, 811, 816 CAMA. The Register needs to be updated real time and relevant algorithms employed so that artificial intelligence also aids the CAC’s leverage on the human factor in the discharge of its duty to approve company, business names and those for incorporated trustees.
Whatever its back office arrangements are, the desirable outcome-expectation of the investing public is that any conflicting name with an already existing business name, would not successfully scale CAC’s name reservation/approval stage. This is more so that the CAC now aims to complete the registration of new companies within three (3) hours.[37]
In addition, the import of the first part of section 30 CAMA implies that the CAC ought to be aware of trademarked corporate names in Nigeria.[38] The CAC ought to have access and should cross-check the register of Trademarks in Nigeria against a proposed name submitted for registration before approval of same for registration.[39] Preventing wrongful registration is more efficient and therefore preferable, to ‘after the fact’ regularisation or salvage efforts, envisaged by section 30(4) CAMA.
Is There a Regulatory Duty of Care?
We submit that the CAC owes a duty of care to companies not to register another company with a similar name that is likely to confuse the public as held in Dikko & Sons Ltd. v. CAC.[40] The jurisprudential basis of such duty of care would be statutory/public duty (for example, per section 8(1)(d)CAMA).[41] Perhaps a stronger and more direct basis is section 41(1)(e) CAMA that prohibits the CAC from registering memorandum and articles where “the proposed name conflicts with or is likely to conflict with an existing company, trade mark or business name registered in Nigeria.”[42] Thus, although the section 41(2) CAMA remedy[43] can only be leveraged by the prospective registrant of the proposed name, the question could arise whether the CAC owes a higher duty of care to the first company or to the subsequent one? In our view, section 41(1)(e) favours the former – which also presumably might have been in business earlier and therefore enjoys the equity of being the first in time.[44] However, as we show subsequently, a higher duty to the first party does not mean that CAC’s duty to the other (subsequent registrant), is totally erased.
Additional reinforcement of the need to protect the name owner’s rights can be seen in section 857(1) and (2) CAMA whereby “A person (‘the applicant’) may object to the registered name on the ground that it is – (a) the same as a name associated with the applicant in which he has goodwill; or (b) sufficiently similar to such a name that its use in Nigeria would be likely to mislead by suggesting a connection between the [prospective registrant] and the applicant. (2) The objection must be made by application to the Administrative Proceedings committee established under this Act.”[45] Section 587(4) outlines relevant considerations for responding to the objection.[46] By section 587(5), “If the facts mentioned in subsection (4)(a) or (b) are established, the objection shall nevertheless be upheld if the applicant shows that the main purpose of the respondents (or any of them) in registering the name was to obtain money (or other consideration) from the applicant or prevent him from registering the name.”[47]
Interestingly, in Dikko & Sons, the Appellant (Dikko & Sons. Ltd) alleged that the CAC registered another company, “A. Dikko and Sons Nigeria Limited” and that cheques meant for the Appellant were cleared by the said company. The Appellant then sued the CAC contending that it would not have suffered the losses it did, but for CAC’s negligence. However, the CAC denied that it registered such a company. The CA and the trial Court dismissed the suit, because of the Appellant’s inability to produce the certificate of incorporation of the company.[48]
We submit that the CAC should be liable for losses suffered by a company as a result of the change of its ‘conflicting’ name, albeit such company would have the requisite evidential burden to discharge in order to show entitlement to damages.[49] This is because the losses were occasioned by the negligence of the CAC in registering the company with a name already in use by another company. For example, CAC should waive statutory fees incidental to effecting such change of name and obtaining new certificate of incorporation pursuant thereto.[50] However, the aggrieved company might encounter some difficulty in instituting the action against the CAC, as Section 2(a) Public Officers Protection Act[51] states that an action against public officers shall be instituted within three months after the neglect complained of.[52]
Also section 17 CAMA stipulates that a 1 month pre-action notice must be given to the CAC prior to the institution of any suit. Thus any such action must be commenced within three months of the registration of the company with one month notice to the CAC. This would be a stumbling block to such action as non-compliance would strip the Court of jurisdiction over such a suit.
Historically, the CAC has not been very effective in its duty not to register names that are similar to already registered corporate names and trademarks. Anecdotal evidence from CAC practice has shown that the CAC does not act promptly to regularise things, where it becomes aware that it has inadvertently registered a conflicting name. Sometimes, a name that successfully scales through the name availability check and reservation process, ends up being an issue at the time of completing the incorporation; holding up the process when CAC flags the conflict late in the day and requires a name change, prior to issuing the incorporation certificate.
Welding the Big Stick
In the case of recalcitrant companies that refuse to change their names (because they have been doing business in such names, especially if they have been so trading for quite a while), the CAC should strictly apply the relevant CAMA enforcement provisions.[53] Whilst section 30(1) and (2) can be regarded as the direct enforcement provisions, CAC has in practice also employed administrative actions like placing a caveat on the company’s file (suspending any filings by the company), pending compliance.[54] However, where such does not yield the intended result, resort may arguably be had to more drastic action, such as striking off the conflicting name from the Companies’ Register.[55]
However, our view is that the CAMA does not empower the CAC to strike off the recalcitrant company’s name on this basis; support for our view can be found from the community reading of section 692 CAMA.[56] Also, would there not be a moral burden in the CAC increasing the daily fine contemplated by section 31(2) CAMA to incentivise prompt compliance with its directive for change of name, albeit it was the CAC’s error that led to the debacle in the first place?[57] Again, the issue of recovering compensation for CAC’s error should surface in such proceedings.
It is also possible that the CAC may disagree that the subsequent name is conflicting, when same is brought to its attention by the aggrieved company with the original names. Based on such view, if the CAC refuses or is slow to act, what are the remedies available to the aggrieved company? The SC in Amasike v. Registrar of CAC & Anor[58] held in interpreting section 30(1) CAMA 1990 which is in pari materia with section 30(1) CAMA that the by virtue of the words “In the opinion of the Commission”, contained in the section, the CAC has a very wide discretion to decide on whether or not the proposed name for the registration of any company submitted is registrable under the Act.
However, this discretion could be challenged by the aggrieved company, since the SC went further to hold that “where a party to a suit has complained that the provisions of a statute have been breached against him or that the mandatory provision of a statute was not complied with, thus making the interpretation of a statutory provision an issue it becomes the duty of the court to examine the act or acts complained of and compare it or them with the relevant statutory provision and resolve appropriately whether there was a breach, non-compliance or substantial compliance with the law in question.”[59]
The above case confirms judicial recognition of the statutory right of companies to challenge the CAC for any wrongful registration of a name that is similar to theirs, as likely to confuse the public. An action against the CAC and the ‘company registered later in time’ can be instituted for the Court to decide on whether CAC was right in registering the company with such name.
CAC registration errors resulting in conflicting corporate names does not bode well for CAC’s image nor for Nigeria’s as we seek to improve the perceptions and reality of the ease of doing in Nigeria. Recent significant strides in the streamlining of CAC’s processes exemplified by its upgraded website and search/registration portals, we believe, will going forward, drastically reduce instances of CAC’s “inadvertence or otherwise” (per section 30(1) CAMA) that results in wrongful registration of conflicting names. That is also in tandem with marked improvements in Nigeria’s ease of doing business ratings, largely due to reforms championed by the Presidential Enabling Business Environment Council (PEBEC) established in July 2016.[60] PEBEC’s focus on encouraging inter-agency co-operation to promote ease of doing business in Nigeria,[61] can underpin a more robust collaborative work-approach between the CAC and the Registrar of Trade Marks to further improve the administrative framework for corporate names and thereby boost Nigeria’s investment attractiveness narrative.
In order to build its reputation as an organised, efficient and proactive regulator, the CAC has to be effective in ensuring that similar names are not registered; and also in taking prompt corrective actions in strict compliance with CAMA when the isolated error occurs. Hopefully, with CAC’s embrace of increasing automation as reflected in the revamping of both its website and its online registration portals, the days of registration of companies with similar names is behind us.[62]
Conclusion
In our analysis, we have posited that it is imperative that the respective uniqueness of ‘business names’ in corporate Nigeria be protected. The primary regulator, the CAC is central to achieving this objective, whilst registering company names in Nigeria. Effective discharge of such responsibility would obviate embarrassments, reputational risk and costs of instituting and defending actions for the infringement of the registered corporate names in Nigeria. We hope that the CAC’s commendable announcement of 3 hour timeline for completing name reservation process for companies and business names’, will not in any way translate into outcomes that results in more instances of wrongful name registrations.[63]
In the United Kingdom, where a name proposed is imputed for registration, within three seconds the result of the search showed a conflicting name, the registration number and the date of incorporation.[64] We believe that whilst the CAC is on the right track, it must not rest on its oars, but continually challenge itself and benchmark its service delivery (as much as possible), against global standards.[65]
add to folder:
If you would like to learn how Lexology can drive your content marketing strategy forward, please email [email protected].
“I find the newsfeeds to be extremely helpful and relevant to my practice area and to the issues facing my company. As I am extremely happy with the newsfeed (it is one of the best I receive) I have no suggestions at this time for improvement.”
© Copyright 2006 – 2022 Law Business Research
Menu
