Article I: Name that corporation

By Atty. Lorna Patajo-Kapunan - October 19, 2015

In my long years of law practice, I have been a corporate secretary

of so many corporations. Being a corporate secretary has taught me
one fundamental precept: corporate identity sets a corporation apart
from the others. Of the numerous existing corporations engaged in
the same line of business, one has to establish an image in the minds
of diverse publics, such as customers, investors and employees that
would make the corporation identifiable and remarkable. A
corporation, as early as its inception, needs to answer questions as
basic as “who we are?” and “what do we do?” in order to facilitate
the so-called branding. And how does a corporation concretize the
concept of branding at the outset? None other than through a powerful and enduring corporate name.

Well known to most of us, a corporation should have full and complete existence as an entity before it
can transact business. The incorporation, which marks the birth of a corporation, is carried out
through the filing of the Articles of Incorporation, among other requirements. The Articles of
Incorporation of a corporation must, first and foremost, set out the name of the corporation. Section 18
of the Corporation Code of the Philippines establishes a restrictive rule insofar as corporate names are
concerned.

No corporate name may be allowed if the proposed name is identical or deceptively or confusingly
similar to that of any existing corporation or to any other name already protected by law or is patently
deceptive, confusing or contrary to existing laws. It is for this reason that prior to incorporation, the
Securities and Exchange Commission (SEC) requires the reservation of a corporate name. The initial
registration will already give a cue if the corporate name is registrable and if the same is not similar to
the name of an existing corporation. The name reservation will provisionally protect the name until the
corporation is duly incorporated.

A corporation seeking to prevent another corporation from using its name must prove that the
corporation has acquired prior right over the use of such corporate name, which is determined by
priority of adoption. The dates of incorporation of the companies having confusingly similar names
will be considered. The earliest to register its name with the SEC will be prioritized in using such name.

Based on Philippine jurisprudence, in determining the existence of confusing similarity in corporate

names, the test is whether the similarity is such as to mislead a person using ordinary care and
discrimination. In cases decided by the Supreme Court, confusing similarity in corporate names was
held to exist if the corporations using the same name are engaged in the same line of business or cater
to the same clientele. If a corporate name, however, has been used for so long and exclusively by one
corporation and has become associated with that corporation alone in the mind of the public, another
corporation cannot register said name as a corporate name.

Pursuant to the Revised Guidelines on the Approval of Corporate and Partnership Names issued by the SEC: 1) a
corporate name shall not be identical, misleading or confusingly similar to one already registered by
another corporation with the Commission; and 2) the name which contains a word identical to a work
of a registered name shall not be allowed if such word is coined or already appropriated by a registered
firm, unless there is consent from this registered firm, or the registered firm is one of the stockholders
or partners of the entity to be registered.

In the case of Lyceum of the Philippines  Inc. v Court of Appeals (GR   101897,  March 5, 1993), the
Supreme Court explained that the purpose of the prohibition under Section 18 are: 1) the avoidance of
fraud upon the public, which would have occasion to deal with the entity concerned, 2) the evasion of
legal obligations and duties; and 3) the reduction of difficulties of administration and supervision over
corporations.

Along with the Articles of Incorporation earlier mentioned, a joint affidavit of undertaking to change
name to be signed by two or more incorporators has to be submitted to the SEC during the
incorporation.  In the event of any finding that there exists confusion in the names of two or more
corporations, the SEC may direct a corporation to change its name in accordance with the said
undertaking.

A corporation aggrieved by the subsequent use of its name by

another corporation, may pursue a claim with the SEC for the exclusive use of its name, considering
that it acquired prior right over its use and the use of such name by another company will, likely, cause
confusion to the public.

Just like any other invaluable right, the corporate name is a property right, which cannot be impaired or
defeated if another corporation will appropriate the same. It is the nature of a right in rem which can be
asserted against the world. (Philips Export, B.V. v Court of Appeals, GR 96161, 21 February 1992)  A
corporate name either stands out or fades out. As the author David Brier creatively puts it: “Branding
is the art of differentiation.”  Thus, a corporation name must be carefully concocted to set the
corporation apart from others.

For comments, you may e-mail me at lpkapunan@kapunanlaw.com.

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Atty. Lorna Patajo-Kapunan

FO LLO W U S O N I N STAG RAM

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