Wednesday, February 12, 2014

Why Business Name Registrations Matter in Australia

Under section 18 of the Business Names Registration Act 2011 (BNRA), it is an offence to carry on a business under an unregistered business name in Australia.

The business name registration system is quite different to the trade mark registration system. It is a form of consumer protection, enabling consumers to look behind a trading name and see the name of the actual entity or entities using the business name. This is very commonplace in partnerships, but it is also a frequent occurrence for companies which, for whatever reason, choose to use a trading name which is different from the company name. In recent times, management of the business name regime has shifted from the various State governments to the Australian Securities and Investments Commission (ASIC).

ASIC have been fairly strict recently in rejecting some business name applications. Some businesses have as a result not taken the business name regime very seriously.

The penalty for failing to register a business name is 30 penalty units. The Crimes Act 1914 states that a penalty unit equals $170. As such, the penalty for contravening section 18 of the BNRA is $5,100.

For companies, however, there is a nastier sanction. Section 4B(3) of the Crimes Act allows a court to impose a pecuniary penalty on a body corporate of an amount equal to 5 times the maximum pecuniary penalty that could be imposed ( in other words, $25,500).

Section 4K of the Crimes Act states “Where a refusal or failure to comply with a requirement referred to in subsection (1) is an offence against a law of the Commonwealth, a person is guilty of an offence in respect of each day during which the person refuses or fails to comply with that requirement, including the day of a conviction for any such offence or any later day.”

So, ASIC can seek to impose a fine of $25,500 (or just $5,100 for individuals) for each day that a business has not complied with the BNRA. This is self-evidently an extremely costly penalty. I expect there would be reputation issues arising out of a prosecution for non-compliance, too.

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