When I got in from work recently, I told my flatmate that I was getting to write an article about my pet peeve the next day. He responded without blinking, “You mean companies who don’t use their proper company names on invoices and stuff.” I suppose that’s what you get when you flat with a lawyer.
Legally, companies are “people”, with most of the same rights as you and me. Just like us, companies can make contracts, they can issue tax invoices and they can buy and sell land and goods and services. Companies exist because traders of all kinds want to do business within a framework that limits the trader’s personal liability. Limited liability means that individual people can limit their exposure to financial losses if their business goes horribly wrong. That’s the theory, anyway.
Which brings me to my pet peeve: The Companies Act requires that every company must state its full legal name (including ‘Ltd’ or ‘Limited’ at the end) on every written communication sent by the company (including emails), and on every document that is issued or signed by the company and that creates a legal obligation, or is evidence of a legal obligation. This requirement applies to a broad range of documents: invoices, quotations, contracts, letters, emails, freight documents and more.
People who start companies and use the benefits of a company’s limited liability have a responsibility to tell others who they are dealing with – and that the liability of the shareholders and directors will be limited. Even if you want to use a trading name, you have to use the company’s full legal name as well.
This rule is a simple and effective way of keeping track of companies. It means that people who do business with companies know who they are dealing with. If a product goes wrong, customers know who to chase for warranty claims and support.
This can also be a Fair Trading Act issue if traders do mislead the public about their identity. People who fail to properly name their company can sometimes mislead consumers and other law abiding traders about how to enforce their legal rights, such as who to approach to have a product repaired under warranty, or who is going to pay a supplier’s bill. Also, in practical terms, once you know a company’s name you can find out that company’s basic contact information for free, online, at www.companies.govt.nz. This can be particularly handy when things go bad – for example, a company’s premises are vacant and suppliers’ bills remain unpaid.
It makes good business sense to use the correct company name: traders who just use a trading name risk being personally liable when things go wrong in their business. Their personal assets might be put at risk even though they have set up a company (much to the horror of their families, no doubt). All that risk, just because the company’s name was missing from documents.
And that’s not surprising: there’s nothing like hearing from a shocked client who says “I thought I was dealing with Joe Bloggs, but now he says I was actually dealing with Joe Bloggs Ltd and it has just gone into liquidation”. If Joe has the money, we will be looking pretty hard at him and he might get a bit of a surprise!
It’s not hard to make sure that all of your documentation properly identifies your company. It’s the name of the game, so play by the rules.
Richard Anstice is a staff solicitor in Rae Nield’s office. This article is intended for general information, and should not be relied on as specific legal advice. You should consult a lawyer for advice relating to your own specific legal problems. Rae and Richard can be contacted at email@example.com.