How to choose a corporate name

Prior to the incorporation of a corporation, the incorporators need to choose the corporate name.  The incorporators may generally choose and use any name they see fit but there are limitations to the use of a corporate name.  The SEC has the power to disapprove the use of a proposed corporate name (see Corporation Code, sec. 18;  SEC Memorandum Circular No. 5, series of 2008, as amended).

Here are some basic guidelines:

1.    Do not choose a corporate name that is identical or deceptively or confusingly similar to that of any existing corporation, partnership, or registered sole proprietorship, or to any other name already protected by law, or one that is patently deceptive, confusing or contrary to existing laws.

The rational for the above guideline is clear – if any corporation can adopt at pleasure the name of another entity, the practice would cause confusion and unfair/fraudulent competition, open the door to fraud to the public, promote the evasion of legal obligation and duties, and result in difficulties in the administration and supervision of corporations.  (Corporation Code Annotated, p. 177 [2006])

In one case, the Supreme Court held that the name “Universal Mills Corporation” is confusingly and deceptively similar to “Universal Textile Mills, Inc.”, particularly where the former is engaged the manufacture, dyeing and selling of fabrics, which are activities that the latter is engaged in (see Universal Mills Corporation vs. Textile Millls, Inc., G.R. No. L-28351, July 28, 1977).  In another case, the Supreme Court held that “Industrial Refractories Corp. of the Phils.” is patently similar to “Refractories Corp of the Phils.”, especially considering that both cater to the same clientele (i.e., the steel industry). (see Industrial Refractories Corporation vs. Court of Appeals, 390 SCRA 252, 260 [2002]).

2.    Put words that identify the entity as a corporation.

The name of a corporation must end with the word “Inc.” or “Incorporated” or “Corp.” or “Corporation”.  On the other hand, partnerships use the word “Company” or “Co.” and if a limited partnership, the words “Limited” or “Ltd.”;  hence, names such as “ABC Power Company Limited”  or “X & Company Limited Partnership” indicate that the entity involved is a limited partnership.  The corporate name of a foundation must use the word “Foundation”.)

3.    Do not use a tradename or trademark registered with the Intellectual Property Office unless the owner of the tradename or trademark gives consent to its use.

4.    Do not use the name of a deceased person unless consent is given by his or her estate.  The full name or surname of a stockholder may be used in the corporate name, but the SEC may require the registrant to explain the reason for the use of the person’s name.

5.    Do not use the name of an internationally known foreign corporation or one similar to it without the consent of the foreign corporation.  The subsidiary of a foreign corporation may carry the name of its parent company with the word “(Phil.)” or “(Philippines)”.  However, the SEC will not allow the use of a foreign corporate name if the name violates good morals, public order or public policy, or has an offensive or indecorous meaning in any of the country’s official languages or major dialects.

6.    Do not use the words “State”, “National”, “Bureau” “Commission” and other words that have gained wide acceptance in the Philippines by entities that perform governmental functions.

7.    Do not use the name of a local geographical unit, site or location unless it is accompanied by a descriptive word or phrase (e.g., “Pasay Food Store, Inc.”).

8.    Do not use the words “United Nations” or “UN”.

9.    Do not use the words “Finance Company,” “Financing Company,” “Finance and Leasing Company,” “Investment Company,” “Investment House,” “Lending Company,” “Lending Investor,” “Pawnshop,” “Bank,” “Banking,” “Banker,” “Savings and Loan Association,” “Trust Corporation,” “Trust Company,” “Bonded, ” or “SPV-AMC” unless the corporation will engage in the business described in the corporate name.

10.   Do not use the words “Investment(s) or “Capital” unless the corporation is an investment house, investment company, or holding company; the words “Asset,” “Investment.” “Fund.” “Financial Management,” “Asset Management Fund,” or “Financial Advisor” unless the corporation is an investment company or a holder of an investment management license.

11.   Do not use the word “Association” or Organization” unless the corporation is primarily engaged in non-profit activities.

12.   Do not use “Stock Exchange,” “Future Exchange,” “Derivatives Exchange,” “Stock Broker,” “Derivatives Broker,” “Commodity/Financial Futures Broker,” “Securities Clearing, Agency,” “Stock Clearing Agency,” “Plans,” or similar words or phrases unless the corporation is licensed as such under the Securities Regulations Code.

After a corporate name is chosen, a name verification slip must be obtained from the SEC.  The name verification slip will indicate whether the proposed corporate name is available for use.  However, the issuance of the name verification slip does not constitute approval for the use of the corporate name.  The corporation must submit an affidavit (signed by at least 2 incorporators) containing an unqualified undertaking to change its name immediately upon receipt of notice or directive form the SEC that another corporation has acquired a prior right to the use of that name or that the name is misleading, deceptive, confusingly similar to a registered name, or is contrary to public morals, good customs or public policy.  The affidavit is not required if the undertaking is contained in the articles of incorporation.

Next article in this series:  How to draft articles of incorporation

(Note:  This is part of a series of “How To” articles.  These articles intend to give the reader a general overview of the legal aspects of doing certain things and they will not contain all details regarding the proposed action.  There may be changes to applicable laws and regulations after the article is posted.  You should consult your lawyer if you wish to take a particular action.  See Disclaimer page for additional disclaimers.)