Guidelines on business naming, product packaging and labeling.
When setting up a new business venture, due consideration and research should be applied to naming the business. The name should distinguish the business from other businesses, be search-friendly, and easily recognisable.
Before the Companies Act 71 of 2008 (“Companies Act”) and the Consumer Protection Act 68 of 2008 (“CPA”) came into effect, it was common practice for new entrepreneurs to acquire shelf companies or close corporations with non distinctive names and to simply trade under a different name. This frequently led to an infringement on third party trademarks, entirely unbeknown to those third parties, as there was no requirement to register a trade name.
The CPA now prohibits this conduct. According to section 79 (1), a person is no longer permitted to trade, advertise, do promotions, offer for sale or supply goods and services or enter into an agreement or business transaction under any name unless, in the case of a sole proprietor, the person’s full name is recorded in an identity document, or the business name is registered as either a close corporation, company, partnership or association.
The business name must be registered with the Registrar of Companies, and may contain words in any language, certain symbols, any letters, numbers or punctuation either alone or in combination. Moreover, it does not matter if the words are in common use or not.
Certain words must appear in, or at the end of, a business’s name:
1. A profit company’s name may be its registration number, but must then immediately be followed by the expression “(South Africa)”.
2. If the company’s Memorandum of Incorporation (“MOI”), which is the company’s constitutional document, includes any provision restricting or prohibiting the amendment of any particular provision of the MOI, the name must end in “(RF)”;
3. A company name must end with one of the following expressions, as appropriate for the category of the particular company:
Words that may not appear in the name include any word, expression or symbol that would constitute propaganda for war, violence or hatred towards others. The use of the word “bank”, “deposit-taking institution” or “building society” in a business name is also prohibited unless the business is registered as a deposit-taking institution, or unless the business is incorporated under the Banks Act 94 of 1990 or any other legislation relating to a particular type of company.
A business name must not be the same as, or confusingly similar to:
It is furthermore required that a business name must not falsely imply or suggest that the business is associated with or part of, inter alia, other persons or entities, the state and its related bodies, or persons or bodies with any particular educational designation.
Should the name fail the tests as stated above, the Registrar may refuse to register the name or request that notice of the name be sent to any party who may have an interest in objecting to it.
In terms of the Companies Act, a company is required to display its registered name and registration number on all forms, notices and correspondence, electronic or otherwise, including letters, invoices, receipts, delivery notes, and all bills of exchange, promissory notes, endorsements, cheques and orders for money or goods. Failure to do so constitutes an offence punishable with a fine and/or imprisonment.
A sole proprietor can trade under his own name, or can choose a different business name. If a business name is chosen which differs from the sole proprietor’s own name, the sole proprietor must include his own name and the business address on all letterheads and written communications.
A partnership is required to include the names of all partners and the address of the main office on all letterheads, order forms, receipts and even invoices. If there are numerous partners, it is also acceptable to state where a list of partners may be found.
Product packaging must be appealing in order to attract consumers, and also serves as an efficient and functional shipping container. Apart from the esthetics, the packaging and labeling must meet certain legal requirements.
Product labels must contain the following information:
The purpose of the CPA is to prevent exploitation or harm to consumers by regulating the way in which businesses interact with consumers, and market their products and services. Packaging and labeling must not mislead or deceive consumers, or make any representation about a supplier or any goods or services unless there are reasonable grounds for believing that the representation is true.
The CPA prohibits misleading trade descriptions, which includes any statement made in an advertisement, label or packaging, or any display of a supplier which describes the number, quantity, measure, weight or gauge of the goods advertised and/or referred to on the labels or packaging. An example would be that a supplier must not knowingly use a trade description that is likely to mislead the consumer as to any matter implied or expressed in that trade description, for instance “low fat” or “slimming”. The packaging and labeling must furthermore be in clear and plain language.
Packages containing any hazardous or unsafe goods must have sufficient information advising the consumer of the risk of such goods. Should a consumer suffer harm due to unsafe goods, the supplier may be held liable without needing to prove negligence on the part of the supplier. The type of harm suffered may include death, injury, illness, loss of or damage to property, or any economic loss that results from any of the types of harm listed above.
In addition to the CPA, there are specific labelling requirements for various types of products. Some examples of specific legislation, regulations and standards include:
1. the Foodstuffs Cosmetics and Disinfectants Act and its Regulations, the Food Labelling Regulations (R146), and the Regulations Relating to Foodstuffs for Infants and Young Children R991, setting out specific labelling requirements for various types of foodstuffs;
2. the Agricultural Products and Standards Act and its regulations, which govern the labelling of agricultural products;
3. the Liquor Act and Liquor Products Act, setting out requirements for the labelling of alcoholic beverages; and
4. The South African Bureau of Standards, who have formulated a number of labeling standards which are industry specific, setting out the quality or standards specification marking for different products.
Certain words and phrases have been banned from product labels in South Africa, such as “rich in”, “excellent source of’”, “enriched with X”, “with added Y”, and “contains Z”. Words and phrases that may still be used on product labels include “low”, “free”, “virtually free’”, “high”, or “very high”. With food labeling, one must state “contains xx % fat” and not “x % fat free”.
All descriptive words must therefore be cautiously chosen to ensure that no implied claims are inadvertently made and that descriptions are allowable in law.
When packaging and labeling products, suppliers should keep the following in mind:
1. Ensure that the product labeling is not false or misleading.
2. Include a warning on all packaging in respect of unusual hazards which may be caused as a result of i.e. allergens, additives or colourants.
3. The consumer must be clear on what the intended purpose of the product is and that harm may ensue should the consumer not use the product for that intended purpose.
4. Before packaging and labeling is released for any product, it should be reviewed in terms of the applicable labelling legislation, regulations and standards.
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