JOHANNESBURG - The Companies and Intellectual Property Registration Office (CIPRO) has acted to try and stem the registration of a flood of fraudulent duplicate companies. In a practice note issued on Wednesday, and posted on the organisation's website, acting CEO Lungile Dukwana announced the imposition of new controls on CIPRO's name reservation process.

This action follows the publication of an exposé on Politicsweb documenting how counterfeit companies, established through CIPRO, were being used to perpetrate fraud on a massive scale in South Africa (see article). Politicsweb also published a list of 114 companies - registered over the past two years - which it believed to be counterfeit (see here).

Section C of the current Application for Reservation of Name form asks whether the proposed name is associated with "a person, corporation or company? If so, what is the name and number (if a corporation or company) and the nature of the association (e.g. member, holding / subsidiary / director etc.)."

According to the new directives this section was being "used by a number of applicants to misrepresent facts. Applicants have been found to be claiming some form of association with entities that are already registered on our database. At times, this is a deliberate duplication."

To put a stop to such abuses, the Registrar of Companies and Close Corporations, now requires "of all applicants who claim to be having an association with some entity already registered and active in our database, to present written proof of an original letter signed by the most senior officer(s) of the company on the company's letterhead as well as the certified copy of the identity document of the director(s) or a member(s), together with their application."

CIPRO has also terminated, with immediate effect, the facility for a separate name reservation process for shelf company names. This was apparently being abused by certain applicants "to obtain reservation of names identical to names already on the database except for the addition of a sequential number."

The above steps, the new directives state, are being taken to "ensure that further proliferation of these practices is curbed. Protection of the goodwill of entities that have rightful ownership to specific names is very important to CIPRO."

There has been a long standing prohibition by the Registrar of Companies against the registration of new companies with names similar to old ones. According to directives published in 1973 ‘undesirable names' included a "name which is identical to a name already registered, or so nearly resembling such a name as to be calculated to deceive or mislead the public. Only in the most exceptional circumstances will a non-generic identical name be allowed with different descriptive wording for controlled, subsidiary or associated companies."

More recently, in Practice Note no. 1 of January 2008, the Registrar of Companies stated that "any name may be allowed, provided that it does not prejudice the existing rights of any person, or that such a name is, in the opinion of the Registrar undesirable. A name will be considered undesirable if - [inter alia] it is identical or confusingly similar to a name already on the register of the Registrar [or] words pertaining to a trade mark are contained in a name."

The well known companies and organisations counterfeited by fraudsters over the past two years - through CIPRO - include: Adcock Ingram, Avusa Media, Cadac, Distillers Corporation, Eli Lilly, MacSteel, Monsanto, Sun Microsystems, the SA Guide Dogs Association, the SPCA and Trident Steel.

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