It may be easy to decide on the directors and shareholders but coming up with a name can be fraught with difficulty, not least due to the rules which must be followed. Fortunately, following the introduction of the snappily titled Company, Limited Liability Partnership and Business Names (Sensitive Words and Expressions) Regulations 2014, the process of naming a company is about to become (slightly) easier.
Certain words have long required the approval of official bodies to be used. For example you cannot set up a company containing the word "dentist" unless you actually hold some qualifications in practising dentistry and have a letter from the General Dental Council confirming this fact. Such restrictions seem sensible in trying to ensure that the public is protected from companies giving themselves a name which implies some special qualifications or skills. You should be entitled to assume that a company with the word "dentist" in the name will be run by qualified dental professionals.
Similarly you cannot call a company by the same name as another current company due to the inevitable confusion which would arise. So far so simple. The issue becomes complex when we consider we have to look at the thorny issue of "disregards".
A "disregard" is a word which will be ignored by Companies House when considering whether two names are the same as one another. An example of this would be two companies named Tesco Limited and Tesco International Limited. In the eyes of Companies House, these two names would be considered to be the same, as the word 'international' is disregarded.
The intention is clear in that Companies House is seeking to prevent companies having names which are so similar as to cause confusion in the minds of people dealing with them. Another company cannot simply add a generic word to your company name and hope to incorporate and potentially enjoy (or indeed damage) the goodwill which you have built up.
This can pose a problem when trying to name a company, as you need to find a name which is not only unique, but also unique when any other company name containing a disregarded word is considered. With over 3.38 million companies registered in the UK it can be difficult to get the name you want. The register is UK-wide so there is potential for a clash of names even when the companies are separated by hundreds of miles and the practical risk of confusion is low.
From the 31st January these restrictions will be relaxed with several sensitive and disregarded words removed from the list (such as "holdings", "international" and "services") along with the addition of new characters and accents which can be used in a company name. This should allow us and our clients greater flexibility in choosing a company name and (hopefully) less frustration for clients in coming up with a suitable name for their business.