When a new business is born, one of the central questions is what name the owners should give to their new company, especially if they want to use it to advertise their business, even to create a new brand. But when it comes to the use of a company name, there are rules that limit the imagination of members and shareholders.
When a new business is born, one of the central questions is what name the owners should give to their new company, especially if they want to use it to advertise their business, even to create a new brand. But when it comes to the use of a company name, there are rules that limit the imagination of members and shareholders.
Act No V of 2006 on company registration, court proceedings and winding-up (Ctv.) lays down the rules and provisions that set the framework for the choice of company name. A company name must consist of two, typically three, elements. The two obligatory elements are the keyword, which is the first element in the company name, and the unique element, which can be a creative fancy name to help identify the company and distinguish it from other companies with the same or similar activities (e.g. Wolters Kluwer). The keyword can be a Hungarian or foreign language term, an abbreviation or even an acronym. It is also an important rule that it should be defined in Latin letters and Arabic numerals.
Another mandatory element of the company name is the name of the chosen company form (e.g. limited liability company, limited partnership). The abbreviated version of these in the short name is a kft., bt. or zrt. In addition to these, a third term indicating the activity (e.g. service or trade) may also be included in the company name. In the company name, the term referring to the activity and the chosen company form may only consist of Hungarian words, in accordance with the rules of Hungarian spelling. In the company name, abbreviations are only possible in the case of a keyword or when defining the company form.
This rule provides guidance to companies on whether a multi-word keyword in an abbreviated name can consist only of initials (e.g. Men In Red Korlátolt Felelősségű Társaság and M.I.R. Kft.). The answer to this question is no, as a rule, the prefix cannot be abbreviated in the short company name, it must appear in the same way as the full company name. The abbreviated name of the company consists only of the motto and the designation of the form of the company (e.g. Men In Red Ltd.).
The company name must be clearly distinguishable from the name of any other company registered in the country. The company name must not give the impression that it is misleading as to the company's field of activity and the form of the company chosen, and must also be clearly distinguishable from the official and colloquial names of public authorities and administrations.
A court decision has also pointed out that where the name of a company refers to a particular activity, it must not give the impression that it is engaged in an economic activity which it does not, or could not, in fact carry out, because the company name cannot be misleading in that context either. Thus, it cannot be a "tax authority limited company." or "limited liability limited partnership". Nor may the name of the company include the name of a person who played a leading role in the establishment, development or maintenance of authoritarian political regimes in the 20th century, or the name of a term or organisation directly associated with an authoritarian political regime in the 20th century.
The company name may also include the name of the owner or members of the company. In its decision on the use of a family surname as a company name, the Curia also ruled that the identity of a surname and a company name does not mean that the natural person concerned can automatically be identified with the company. It also allows the name of the company to be defined in a term, even if used as a surname by others, which is not used as a proper name by the owners or the managers.
If the company is established for non-profit purposes and carries out non-profit activities, the non-profit character of the company must be indicated in the company name before the indication of the legal form (e.g. XY Nonprofit Ltd.), and in the case of public benefit status, this organisational capacity may be indicated in the company name (e.g. XY Public Benefit Ltd.).
The terms "state" or "national" may appear in the company name only if the state directly or indirectly holds a majority stake in the company, or if the company is permanently state-owned, or if a government decision authorises it to do so in connection with the performance of a public task of major importance.
The name of an eminent historical figure (e.g. Petőfi) may be used in the name of a company with the permission of the Centre for the Study of Humanities (in Hungarian: Bölcsészettudományi Kutatóközpont), and a name in which another party has a legal interest (e.g. the use of an already registered trade mark or a unique identifier, trade or other name) may be used only with the consent of the rightholder. Interestingly, the opinion of the Centre for the Study of Humanities is not required if it is clear from the company documents that the name of a member of the company is included in the company name. Thus, if the owner of the company is called Lajos Kossuth, he or she is able to set up Lajos Kossuth Ltd. without any further authorisation.
If two new companies apply to register the same name with the same name, the court will approve the application of the one that filed the application for company registration first or the one that used the name reservation.
The author of the article is Dr György Zalavári, partner lawyer. Ecovis Zalavári Legal Hungary.