What to do if Someone Incorporated a Company with a name confusingly similar to your Company?
The problem with shadow companies in Hong Kong has been rampant in recent years. The present practice of the Companies Registrar is not to screen company names for potential infringement, thus allowing many shadow companies to be incorporated in Hong Kong which are employed to imply an association with the well-known brands and legitimize infringing activities across the border. Suing a shadow company for trademark infringement and passing off can be costly and time-consuming, and a court order mandating the shadow company to change its name can be practically useless. Without a special resolution by the shareholders of the shadow company, the Companies Registrar cannot effect the change of named ordered by the courts of Hong Kong. Of course it borders on naivety to expect the infringing company’s shareholders to co-operate.
Hitachi Ltd v Hticahi Wei Chu (Hong Kong) Ltd (HCA 2520/2006)
The case is a typical example of a well-known brand’s unavailing attempt to change the name of a shadow company. In this case, the Defendant was sued by the Plaintiff for trademark infringement and passing-off.As expected, the action was uncontested and a default judgment was entered against the Defendant including an order that the shadow company within 14 days change its name to a name not incorporating the Plaintiff’s trademark.
Contrary to the order, nothing had been done by the Defendant to effect change of its name.The Plaintiff then brought an application for an order pursuant to Order 45, rule 8 of the Rules of High Court (Cap. 4A) that the plaintiff’s solicitors be empowered to sign and file all such documents and forms on the Defendant’s behalf to change its company name.The application was rejected by Master A. Ho, stating that the court could not allow the Plaintiff to choose a new name for the Defendant.The Plaintiff lodged an appeal against the decision.
On appeal, Suffiad J held that Order 45 rule 8 does not enable a court to give authority to a person to change a company name in a manner which does not comply with the requirement in section 22 of the Companies Ordinance (“CO”) that a special resolution is needed to effect the change.Also, Suffiad J found a conflict of interest for the Plaintiff’s own solicitors to be acting on behalf of the Defendant in having to choose a new name for the Defendant company.The appeal was therefore dismissed.
Suffiad J also commented in postscript that the Plaintiff adopted the wrong approach in its attempt to change the name of a shadow company without the involvement of the Defendant.According to Suffiad J, there are other avenues open to the plaintiff even leaving aside contempt proceedings.The Plaintiff may armed with the order to approach the Registrar of Companies and seek his assistance in the exercise of his power under section 22A of the CO to direct the Defendant to change its name. (Section 22A enables the Registrar to direct a company its name if, in the opinion of the Registrar, the name by which a company is registered gives so misleading an indication of the nature of its activities as to be likely to cause harm to the public.)The Registrar has power to impose a daily fine of $700 upon the company in default of such direction.
The Companies Registrar’s Practice
With respect, it seems Suffiad J has not been alerted to the fact that there has not been a single successful Section 22A application for a long time.It seems the Registrar takes the position that safeguarding the goodwill of existing companies is not his statutory duty.Rather, it is more important for it to establish and maintain an efficient companies registration system.
The Registrar is also empowered to direct a company to change its name if it is the same as or “too like” the name of a company that has already been registered under section 22(2) of the CO, yet in practice the Registrar only require those with virtually identical names to change.
Section 291 empowers the Registrar to strike off a company if it is not carrying on business or in operation.Yet simply telling the Registrar that it is carrying on business or mere filing an annual return can be sufficient evidence to defeat an application of the section.
Anheuser-Busch: Light of Hope?
In the meantime, ad hoc success has been seen in the Anheuser-Busch case.In that case, the shareholders of the Defendant companies were sued along with the companies.They did not comply with the court order compelling changes of company names, the Plaintiff’s solicitors successfully obtained an interim order that they be given power to sign special resolutions on behalf of the shareholders to get the names changed.The Companies Registrar eventually accepted the special resolutions filed by the Plaintiff’s solicitors and issued the new Certificates of Change of Name.
Despite the Anheuser-Busch case, there remain considerable uncertainties.Firstly, since the interim order was granted before the Hitachi case, whether the court would follow the Anheuser-Busch decision or the Hitachi case in the future is yet to be seen.Secondly, joining all shareholders of the Defendant company could be a costly process as many of them may be residents outside Hong Kong, thus necessitating the Plaintiff to apply for and effect service of the writ outside jurisdiction.
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|Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.|
|Published by ONC Lawyers © 2007|