Consequences of Using an Existing Company Name apropos Incorporation
Table of Contents
In relation to Roy wanting to name his company â€˜Mini-Mahogany Ltd.â€™, the Minister for Enterprise, Trade and Employment could refuse to allow the registration of the afore mentioned business as it could be misleading to the consumers. There is already a company registered in Dublin called â€˜Mega-Mahogany Ltd.â€™ This minor difference between the names of the two companies could lead some people to become confused as both companies deal in timber products. One such case that this infringement can be seen is the case of:
Jacob Fruitfield was previously in the Irish market selling Fig Rolls and Cream Crackers when the defendants, United Biscuits (U.K.) Limited, tried to enter the market selling their version of both products. Jacobs sought an injunction to stop United Biscuits selling the biscuits using the same name and they were successful. To have the injunction passed, the judge tried a test. He asked for these three statements to be proved either true or false;
- The existence of a reputation or goodwill in the claimantâ€™s product including, where appropriate, in a brand name or get-up.
- The risk of confusion between what is alleged to be the offending product and the claimantâ€™s product.
- Whether damage to the claimants’ goodwill by virtue of any such confusion has been established. (Simon McAleese – Passing Off)
Having then found that United Biscuits were indeed failing on these three tests, Clarke J granted the injunction for to prevent the sale of United Biscuitsâ€™ Fig Rolls on the Irish market as they were too similar to the Jacobs Fig Rolls.
Wrappers of both Jacobs and United Biscuits Fig Rolls and Cream Crackers
Roy would also need to know that he would need to have a Memorandum and Articles drawn up for his company. Memorandum of Association and Articles of Association are separately very important documents and together they serve as the constitution of a company.
A Memorandum is a document which outlines the rules and regulations of the proposed company and its dealings with the outside world. The Memorandum has the following features included;
- The name, address and the office of the company that has been registered.
- The way the share capital of the company has been structured
- The aims and the objectives of the company being set up.
The Articles of Association is a document that contains the rules of the company which are used by all employees of the company. This is an internal document and is filed with the Registrar of Companies on Parnell Square, Dublin 1. Some of the major features of the Articles include;
- The structure of the company
- The rights of the employees and the voting pattern if needed
- Conduct of Directors meetings
- Conduct of Shareholders
- Difference in the structures of Shares
The main differences that Roy would need to understand between the two documents would be the following:
The Memorandum is also called the Charter of an organisation. This document is a helpful document for future investors as it gives them an insight into how their money will be used by the company. The Articles, however, is the document that allows the structure of the company and the breakdown of the power in the company. The Articles contain all the laws by which the company will adhere to and also the rules that the employees must follow. (Difference Between Memorandum of Association and Articles of Association, 2011)
When a Director is appointed to a company, they are given a list of duties which they must follow for the wellbeing of the organisation. Some of these duties are common law duties; they are also called â€˜Fiduciary Dutiesâ€™. Other duties fall under the heading of â€˜Statutory Dutiesâ€™. These duties include the following points;
- Duty to maintain proper books of the company accounts.
- Duty to prepare the annual accounts of the company.
- Duty to file the necessary documentation with the Companies Registration Office.
- Duty of disclosure on personal information.
- Duty to call general meetings within the company.
- Duty to have an annual audit carried out in the company.
- Duty to write reports for the members of the company.
(Pearse Trust Blog, 2014)
Companies can only make loans to the directors of the company for a small number of circumstances and once the loan is fully disclosed in the companyâ€™s accounts. As mentioned in Section 31 of the Companies Act 1990, if the company has given a loan to a director and not followed all the necessary protocols, the director who granted the loan or who received the loan may be held liable for the cost of the loan. The same director could also be liable if the company goes into liquidation. For the director to avoid this punishment, they must follow all steps in that have been outlined in the Companies Act (see appendix). (McNulty, 2014)
Directors must also disclose any interests they have in the company or in any company associated with the company they work for. Every company must keep a registry of these interests. The keeping of this registry is to avoid any situation where any person may claim that the company was fully aware of the directorâ€™s interest. Any such failing could result in criminal sanctions and/or the interested shares being void for that director.
Roy also needs to know about the different types of charges he would face if he needs to take out a loan from the company in the future. Fixed and floating charges are used by companies to secure borrowing. This type of borrowing is typically arranged under the terms of a debenture. Any charge on a companyâ€™s assets must be recorded at the Companies Registry Office. A fixed charge is a mortgage that is secured on a piece of property owned by the company. These pieces of property could include land or buildings, machinery, shares, copyrights, patents, etc. Whereas floating charges are much easier for a company to handle as they can be taken without any specific asset being registered to the company. This means that any stock that the company holds or vehicles used by the company can be charged to obtain the loan. The speciality of the floating charges means that the company can go about normal business, buy and sell its stock, change machinery or vehicles without needing prior permission from the person or organisation they are paying mortgage to. As most borrowing is done through banks, it is these banks that then set the type of charge being applied to the company. Most of the time the bank will apply fixed charges on any asset which the company owns that already has fixed charges on. All other charges are then floating charges. Most banks want more than just this type of guarantee and will often ask the directors of the company for personal guarantees. (Fixed & Floating Charges)
A personal guarantee is a pledge in which an individual agrees to be responsible for the financial obligations of a debtor or a borrower to a lender in the event that the debtor or borrower fails to pay an amount owing under the loan agreement. A personal guarantee signifies that the lender can lay claim to the guarantorâ€™s assets in case the borrower defaults. It is the equivalent of a signed blank cheque without a date. The guarantee can only be cancelled by the lender, not the borrower. In the event of the guarantorâ€™s death, normally the lender will not void the personal guarantee but will seek for a new guarantor to fill in the deceased place and continue the guarantee. (McManus, 2011)
In the case of Bank of Scotland vs Jim Mansfield, Bank of Scotland (B.o.S.) granted Jim Mansfield a loan to further his empire at CityWest. Mansfield gave a personal guarantee that the loan would be repaid in full. When Mansfield refused to pay back the money to NAMA, they sought an injunction in the Commercial Court where they successfully won and the court forced Mr. Mansfield to repay the â‚¬204m. Mr. Mansfield passed away before he could pay back the loan which now leaves his family liable to repay the fortune.
Companies Act 1990. (n.d.). Retrieved December 01, 2014, from :
Difference Between Memorandum of Association and Articles of Association. (2011, May 10). Retrieved November 30, 2014, from :
Fixed & Floating Charges. (n.d.). Retrieved November 30, 2014, from :
McManus, F. (2011, February). The Dangers of Personal Guarantees. Retrieved November 30, 2014, from :
McNulty, T. (2014). Class Notes. Company Law. Dunlin.
Pearse Trust Blog. (2014). Retrieved November 30, 2014, from :
Simon McAleese – Passing Off. (n.d.). Retrieved November 30, 2014, from :
United Biscuits, more commonly known as McVities, sought to introduce fig roll biscuits and cream crackers into the Irish market. The packaging of both products was strikingly similar to comparable products already available on the Irish market by Jacobs. Jacobs successfully obtained an injunction in the High Court preventing the distribution of the McVitie fig rolls in packaging which was confusingly similar to that of Jacobs.
What is the test to be met in determining whether packaging is so strikingly similar that it is in fact passing off? Clarke J set down a three part test to be applied in assessing whether or not there is an action for passing off:
The existence of a reputation or goodwill in the claimantâ€™s product including, where appropriate, in a brand name or get-up;
The risk of confusion between what is alleged to be the offending product and the claimants product; and
Whether damage to the claimants’ goodwill by virtue of any such confusion has been established.
Clarke J specifically considered that the similarity between the two products should be judged, to a significant extent, as a matter of first impression. He stated:
“Firstly I should have regard to the circumstances in which the products are likely to be purchased, the sort of customers who are likely to purchase them, and the amount of attention which, at least the less careful of those purchasers, are likely to apply to their considerations. The competing get ups should be judged as a matter of first impression but also by reference to the type of features which, in all the circumstances of the case, are likely to attract the attention of a purchaser in those circumstances.”
Having considered the colour combinations, style of lettering and the ‘suggested serving’ photograph of each of the packaging, he considered thatthe fig roll packaging was “extremely similar”, but that the packaging on the cream crackers was distinguishable.
In deciding whether or not the balance of convenience lay with granting the injunction against the distribution of the McVitie’s fig rolls, the court stated that it was never a presumption that the balance of convenience would lie with granting the injunction and that damages may sometimes be an adequate remedy. Nevertheless, Clarke J held that the balance of convenience in this case did lie with granting the injunction preventing the distribution of the McVitie fig rolls in packaging which was confusingly similar to that of Jacobs.
(Simon McAleese – Passing Off)
31.â€”(1) a company shall notâ€”
(a) make a loan or a quasi-loan to a director of the company or of its holding company or to a person connected with such a director;
(b) enter into a credit transaction as creditor for such a director or a person so connected;
(c) enter into a guarantee or provide any security in connection with a loan, quasi-loan or credit transaction made by any other person for such a director or a person so connected.
(2) A company shall not arrange for the assignment to it or the assumption by it of any rights, obligations or liabilities under a transaction which, if it had been entered into by the company, would have contravened subsection (1); but for the purposes of this Part the transaction shall be treated as having been entered into on the date of the arrangement.
(3) A company shall not take part in any arrangement wherebyâ€”
(a) another person enters into a transaction which, if it had been entered into by the company, would have contravened subsection (1) or (2); and
(b) that other person, in pursuance of the arrangement, has obtained or is to obtain any benefit from the company or its holding company or a subsidiary of the company or its holding company.
(Companies Act 1990)
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