Who are you?
Last month we started a series on the new Consumer Protection Act, which came into effect earlier this year. It was an introductory article in which we covered the fact that the new Act was brought into being because we had no proper protection for consumers in our country especially those who were particularly vulnerable. We also made mention of the National Consumer Commission who would be the enforces of the new Act so that it would actually make a difference in our lives. We also looked at the Consumer Protection Regulations, which supplement the Act in interpreting and applying it.
This month we will take a look at Business Names and what is required in the new Act.
The CPA requires that a supplier must identify themselves correctly when conducting transactions and correspondence with consumers. This provides consumers with protection in so far as they know who they are dealing with especially in the case of them needing to exercise their consumer rights and holding suppliers accountable.
The identification needs to be visible on things like Sales Invoices or Receipts, Stock Orders, Brochures, Business Letters, Client Accounts and on signage at your premises.
This seems simple enough as you would assume that you simply need to put your name on things, which in most cases you probably have already. Unfortunately the new act is a little stricter than this as it requires that the name you display is registered.
How does this apply?
Apart from displaying your name the new act says that you are only allowed to trade under your registered name.
For individuals (sole proprietors) this would be the full name that appears in your I.D book. For Close Corporations and Companies this is the name as registered with CIPRO (now called CIPC).
For many businesses this causes a problem as they have their registered names as one name but trade as another name.
Therefore if your name is Joe Soap and you are a sole proprietor but your salons trading name is Joe’s Amazing Hair then you will either need to start displaying Joe Soap or register Joe’s Amazing Hair as a Business Name (we’ll discuss what a constitutes a Business Name shortly).
For close corporations or companies if your registered name is Banana Trading 137 but you trade as Amazing Hair then you will need to start displaying Banana Trading 137 or register the name Amazing Hair as a Business Name.
If you are part of a franchise and required/allowed to use the franchise group name you will need to register it as well if your registered name is different, which in most cases it is. For example if your business is part of the Amazing Hair franchise and you are in Sandton and you wanted to display Amazing Hair Sandton (but your registered company is called Banana Trading 137) then you will need to register Amazing Hair Sandton as a Business Name.
The same would apply if you own a group of salons. If each salon is set up as a different company/cc but trades under the group name then each one will need to register their trading name accordingly.
Business Names (previously commonly known as “Trading As” names) were not required to be registered and there was no way to register them but with the CPA provision has been made by CIPRO/CIPC for the registration of Business Names.
When registering a Business name you will need to ensure that it is not the same as or confusingly similar to another registered company name or trade mark. You are, however, given the freedom of what characters and languages you use. For example you could use letters, numbers, punctuation marks or symbols. So you could end up with a registered Business Name like @Hair.
You can register as many Business Names as you like and have them registered in all of South Africa’s official languages. You can also change the name or transfer the name to someone else.
However, if you register and use a Business Name you will still need to list who the name is registered under in your trading correspondence.
If the name does not infringe on another registered company name or trade mark and does not mislead consumers in any way then the registrar (CIPC) is obliged to register your Business Name.
If, however, the registrar believes that you have not traded under that name for at least 6 months you may be asked to justify why you should retain ownership and if you fail to respond in the required time or if your reasons are not sufficient they may cancel this registration.
What action should you take
Ensure that the name you trade under is either the same as your registered name as per your I.D book the same as your registered company name.
If not then either start displaying your registered name (most unlikely) or register a Business Name.
Once you have covered the above then ensure that you display your name wherever it needs to be displayed. This means possibly re-printing certain stationary, editing email templates and letterheads and updating signage. You may get away with getting a rubber stamp made to stamp things like manual sales dockets or brochures. If you have a computerised point of sale system then enter all the correct details so that they appear on your sales invoices and receipts.
Remember to include the physical address of the primary place at which your business is being carried out as this is also a requirement of the act.
What happens if you fail to comply
If you fail to comply the National Consumer Commission (the CPA enforcer) may issue you with a compliance notice asking you to register a business name to make you legal, or alternatively they may ask you to stop trading under that name.
If your application for whatever reason is unsuccessful then they will ask you to discontinue business under that name within 40 days of getting notice that your application was unsuccessful.
One would assume that it would be a disgruntled client that ends up reporting you to the Consumer Commission in the case that you are not trading under the correct name but be on the lookout for other salons that trade under the same name as you do. You may find that they have their affairs in order and wish to retain exclusive use of their trading name and report you as a result.
At first glance it would appear that the CPA’s new trading name requirements are an absolute administration nightmare but the provision made by the Business Name option seems to make allowance without too much difficulty.
Visit www.cipc.co.za and search for your own name to double check what you are registered as and also your trading name to see who is registered under that name and think about making the necessary applications if required.
Please also talk to your accountant or lawyer for best advice in this regard as they will help you understand and apply this new law.