A company which is the subject matter of a sale and purchase transaction may have certain words as part of its name, which are same as the names of other companies incorporated by the same shareholder.

Where shares of such company are sold to a buyer who is unrelated to the seller, the buyer and seller should consider setting out the following in the sale and purchase agreement:

• whether the seller is obliged to procure the change of names of other companies owned by the seller, which have similar names as the target company. This is usually required by the buyer if there is goodwill attached to the name of the target company.

• whether the target company is to change its name to avoid being wrongly associated with the seller/other companies owned by the seller after completion of the sale and purchase.

• who will bear the cost for the change of name.

• when must the change of name happen.

• the aggrieved party’s remedies if the change of name does not happen within the agreed period. Ideally, the aggrieved party should be able to exercise the remedies without the need to involve the court such as reduction in the consideration paid to the seller in the event of breach by the seller.

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This post was first posted on Linkedin on 3 March 2021.