Corporation Law: The Revised Corporation Code of the Philippines - Sec 17

    THE REVISED CORPORATION CODE  OF THE PHILIPPINES  

Republic Act No. 11232 

TITLE II -  INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATIONS

Sec. 17. Corporation Name. -

No corporate name shall be allowed by the Commission if it is not distinguishable from that already reserved or registered for the use if another corporation, or if such name is already protected by law, rules and regulations.

A name is not distinguishable even if it contains one or more of the following:

(a) The word "corporation", "company", incorporated", "limited", "limited liability", or an abbreviation ofone if such words; and

(b) Punctuations, articles, conjunctions, contractions, prepositions, abbreviations, different tenses, spacing, or number of the same word or phrase.

The Commission upon determination that the corporate name is: (1) not distinguishable from a name already reserved or registered for the use of another corporation; (2) already protected by law; or (3) contrary to law, rules and regulations, may summarily order the corporation to immediately cease and desist from using such name and require the corporation to register a new one. The Commission shall also cause the removal of all visible signages, marks, advertisements, labels prints and other effects bearing such coroporate name. Upon the approval of the new corporate name, the Commission shall issue a certificate of incorporation under the amended name.

If the corporation fails to comply with the Commission's order, the Commission may hold the corporation and its responsible directors or officers in contempt and/or hold them administratively, civilly and/or criminally liable under this Code and other applicable laws and/or revoke the registration of the corporation.

NOTES 

1. Basic Policy.

• A corporation cannot use a name that belongs to another even as a trade name. 
• If any corporation could assume at pleasure as an unregistered trade name the name of another corporation, this practice would result in confusion and open the door to frauds and evasions and difficulties of administration and supervision. 
• The policy of the law expressed in our corporate statute is clearly against such a practice. 

2. What Must be Proved by Oppositor.

• A corporation seeking to prevent another corporation from using its name under Section 17 must prove that: 
1. The corporation has acquired a prior right over the use of such corporate name; and 
2. It is any of the cases mentioned under Section 17 of the RCCP, that is: 
• the name is not distinguishable from that already reserved or registered for the use of another corporation; or 
• the name is already protected by law; or
•  the use of the name is contrary to existing law, rules and regulations.

3. Power of SEC.

• The enforcement of the protection accorded by Section 17 of the RCCP to corporate names is lodged exclusively in the SEC. 
• The jurisdiction of the SEC is not merely confined to the adjudicative functions provided in Section 5 of the SEC Reorganization Act, as amended. 
• By express mandate, the SEC has absolute jurisdiction, supervision and control over all corporations. 
• It is the SEC's duty to prevent confusion in the use of corporate names not only for the protection of the corporations involved, but more so for the protection of the public.
• It has authority to de-register at all times, and under all circumstances corporate names which in its estimation are not distinguishable from existing corporate name. 
• The SEC, after finding merit in the claims of the real owner of the corporate name, can compel the other corporation that is invalidly using the name of another to abide by its commitment "to change its corporate name in the event that another person, firm or entity has acquired a prior right to the use of said name or one similar to it."
• Section 17 now expressly grants the SEC the following powers if it finds that the name of a corporation is not distinguishable from a name already reserved or registered for the use of another corporation or is already protected by law or is contrary to law, rules and regulations:
1. reject the Articles of Incorporation;
2. summarily order the corporation to cease and desist from using such name; 
3. summarily order the corporation to register a new name and amend its Articles of Incorporation bearing the new name;
4. cause the removal of all visible signages, marks, advertisements, labels, prints and other effects bearing such corporate name.
• Section 17 of the RCCP further provides that if the corporation fails to comply with the  the SEC (2, 3 and 4 above), the SEC may:
1. hold the corporation or its responsible directors and officers in contempt; and/or 
2. hold them (corporation and directors/officers) administratively, civilly and/or criminally liable; and/or 
3. revoke the registration/certificate of incorporation of the corporation.
• Penal sanctions under Section 159 of the RCCP.
• Section 159 provides that "the unauthorized us of a corporate name shall be punished with a fine ranging from Ten thousand pesos (P 10,000.00) to Two hundred thousand pesos (P 200,000.00)."

3. Distinguishability Test.

• The RCCP adopts the Distinguishability Test with respect to corporate names. This test was adopted as part of the reform to enhance the ease of doing business. 
• It was observed that: "The present name verification system, with the confusingly similar' standard imposed, is indeed confusing.  Hence, a shift to the "distinguishability" test will no doubt allow the full and seamless automation of name registration. 
• For example, under the law today, you cannot register 'XYZ Dream Network' because of a previously registered "XYZ Dream Hospital". Under the proposed amendment, you can do so, because one of the key words is different, that is network and hospital.
• Section 18 of the Corporation Code: the corporate name was prohibited if it was "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, confusingly similar or contrary to existing laws."
• However, it is believed that the basic principle is still the same. 
• A corporation has an exclusive right to use its name, which may be protected by injunction upon a principle similar to that upon which persons are protected in the use of trademarks and trade names. 
• Such principle proceeds upon the theory that it is a fraud on the corporation which has acquired a right to that name and carried on its business thereunder, that another would attempt to use the same name, or the same name with slight variation in such a way as to induce persons to deal with it in the belief that they are dealing with the corporation which has given a reputation to the name.
• The concern of the legislators is that mere use of the same word immediately results in the rejection of the application for reservation of the corporate name although the business of the new corporation is not the same as the business of the existing corporation and although other words are included to distinguish a name from another. 
• It should be noted that even under our trademark laws, use of identical marks is not necessarily prohibited. 
• The use of identical mark does not, by itself, lead to a legal conclusion that there is trademark infringement if the mark is not used for identical, similar or related goods.
• Thus, the following are cited as examples:
• Registration of the trademark "SHELL" for cigarettes was allowed although there is prior registrant for gasoline and petroleum products;
• The trademark ESSO was allowed for cigarettes although the same was registered by another for petroleum products;
• The registration of the trademark CANNON was allowed for sandals despite the prior registration of the same for paints, chemical products, toner and dyestuff;
• The mark which contains the word GALLO can be used for cigarettes without infringing the rights of the owner of another mark which also contains the same word but which was registered for wine. It was noted that the dominant feature of the GALLO cigarette trademark is the device of a rooster and the name of the manufacturer are clearly stated. The labels for the GALLO wine are diverse.

Prior Right.

• The right to the exclusive use of a corporate name with freedom from infringement by similarity is determined by priority of adoption.
• A corporation that is incorporated and adopts a corporate name earlier acquires a prior right over the use of the corporate name. 
• On the other hand, with respect to the second requisite, the test is whether the name is such as to mislead a person using ordinary care and discrimination and the Court must look to the record as well as the name themselves.
• While distinguishability is the present test, the prior right of a person should be respected.

Dominancy Test 

• In the Intellectual Property Code, there will be infringement if the mark contains the dominant feature of the mark of a trademark belonging to another.
• This rule applies to corporate names.
1. Thus, the name cannot be used if the name indicated in the Articles of Incorporation adopts the dominant feature of an existing corporate name or even a trademark belonging to another.
2. The name cannot likewise be used if it is the essential and distinguishing feature of another corporation's registered and protected corporate name.
• In Universal Mills Corporation v. Universal Textile Mills, Inc., the Supreme Court ruled that the corporate names Universal Mills Corporation and Universal Textile Mills, Inc., are indisputably so similar that even under the test of "reasonable care and observation" confusion may arise. 
• In another case, the use of the words "Family Bank" by a bank was disallowed because the same already belonged to an existing bank.
• Similarly, the name Ang Mga Kaanib sa Iglesia ng Diyos Kay Kristo Hesus, H.S.K, sa Bansang Pilipinas cannot be registered because it is strikingly similar to the name of an existing corporation Iglesia ng Dias kay Cristo Jesus, Haligi at Suhay ng Katotohanan. Adding the words "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc." will not matter because the same words are merely descriptive of and referring to the members or the corporation. The dominant words are Iglesia ng Diyos Kay Kristo Hesus, Haligi at Saligan ng Katotohanan. 

• The Supreme Court explained that the purposes of the prohibitions under Section 18 of the Corporation Code (now Section 17 of the RCCP) are:
1. the avoidance of fraud upon the public which would have occasion to deal with the entity concerned
2. the evasion of legal obligation and duties, and 
3. the reduction of difficulties of administration and supervision over corporations

• As a rule, generic, descriptive and geographical cannot be exclusively appropriated. 
• For example, the the term "international" is a generic or descriptive term.
• Hence, a corporation cannot appropriate it. 
• Even if the word "international" is used by one corporation as part of its corporate name, the term can still be used by other corporations. 
• Similarly, the word "Filipino" in the name "Filipino Indian Chamber of Commerce in the Philippines, Inc." is merely a description, referring to a Filipino citizen or one living in the Philippines, to describe the corporation's members. 
• On the other hand, the words 'in the Philippines' and 'Phils., Inc.' are simply geographical locations of the corporations which, even if appended to both the corporate names, will not make one distinct from the other. 
• Under the facts of this case, these words cannot be separated from each other such that each word can be considered to add distinction to the corporate names. 
• Taken together, the words in the phrase 'in the Philippines' and in the phrase 'Phils., Inc.' are synonymous - they both mean the location of the corporation.

Doctrine of Secondary Meaning.

• Under said doctrine in trademark law, a word or phrase, which is originally incapable of exclusive appropriation because the word or phrase is geographic or otherwise descriptive, might nevertheless have been used for so long and so exclusively by one producer with reference to an article and the purchasing public has considered the word or phrase as associated to his product.
• Thus, if a corporate name, though descriptive, 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. 

5. Priority of Adoption Rule. 

• It cannot be overemphasized that a corporation chooses its name at its own peril; and the use of a name similar to one adopted by another corporation, whether a business or a non-profit organization, if misleading or likely to injure in the exercise of its corporate functions, regardless of intent, may be prevented by the corporation having a prior right, by a suit for injunction to prevent its use. 
• Under the Priority of Adoption Rule, the corporation that first adopts a corporation name has the right thereto and a subsequent corporation cannot use the same name.
• A corporation may likewise be directed to change its corporate name in accordance with the undertaking that it submitted to the SEC together with its Articles of Incorporation.
• The corporate name is a property right that cannot be impaired or defeated if another corporation will appropriate the same.
• It is in the nature of a right in rem that can be asserted against the whole world. 
• A corporation may have a better right to use its corporate name on the ground of priority of adoption. 
• Even a foreign corporation may sue a domestic corporation to prevent the latter from using its name. 
• The foreign corporation has a legal right to restrain an officer of the Government "from issuing a certificate of incorporation to residents of the Philippines who are attempting to organize a corporation for the purpose of pirating the corporate name of a foreign corporation and of engaging in the same business, for the purpose of making the public believe that the goods it proposes to sell are the goods of the foreign corporation and of defrauding it and its local dealers of their legitimate trade."
• A corporation can use a trademark or trade name that is separate from its corporate name. 
• However, the corporation cannot use the name of another corporation even if the corporate name is an unregistered trade name or mark. Otherwise, this practice would result in confusion and open the door to frauds and evasions and difficulties administration and supervision. 

6. Name in Articles of Incorporation. 

• A corporation cannot use any corporate name other than what is reflected in the the Articles of Incorporation. 
• For instance, in intervening in or filing a case, the corporation should use its corporate name and not another that it had not registered.
• A corporation may use a trade name or business name at is different from its corporate name.
• In fact under paragraph 4 of SEC Memorandum Circular No. 13, Series of 2019 dated June 21, 2019 quoted below, ''business or trade name which is different from the corporate or partnership name shall be indicated in the articles of incorporation or partnership. A company may have more than one business or trade name." 
• It should be noted that under the Business Name Law, juridical persons need not register the corporate or partnership name that they registered with the Securities and Exchange Commission. 
• These juridical persons are required to register only if they are using business names that are different from their corporate or partnership names.
• However, the SEC pointed out that there are instances wherein a corporation is mandated to use, issue and/ or submit papers reflecting therein not only just the business name but also its corporate name. 
• An example is when the corporation files official papers, such as Financial Statements and the like, with the SEC and other agencies like the Bureau of Internal Revenue or for the Official Receipts issued by the corporation in the conduct of its business. 
• A case may proceed against a corporation even if the name of the real party in interest was not specified in the case. 
• In one case,  the petitioner was not named as the respondent in the case and the complainants named as the respondent the non-juridical arm of the petitioner called "Hacienda Lanutan." 
• The Supreme Court allowed the case to prosper against the petitioner corporation because the petitioner represented itself to be "Hacienda Lanutan" in dealing with the complainants. 
• "Hacienda Lanutan" was considered by the Court as "roughly equivalent to its trade name or even nickname or alias." 
• Although the name used by the complainant is different, there was no dispute as to the identity of the petitioner.

7. SEC Rules. 

• The rules on corporate names as embodied in SEC Memorandum Circular No. 13, Series of 2019 dated June 21, 2019 entitled "Amended Guidelines and Procedures on the Use of Corporate and Partnership Names" provide as follows:

See:  SEC Memorandum Circular No. 13, Series of 2019 dated June 21, 2019 entitled "Amended Guidelines and Procedures on the Use of Corporate and Partnership Names"

Corporation and Incorporated. 

• The rules require the inclusion in the corporate name of the word "Corporation" or "Incorporated," or the abbreviations "Corp." or "Inc." 
• The requirement is imposed to distinguish corporations from the other business organizations like partnerships, sole proprietorships and unregistered associations.
• This requirement is also reflected in Section 14 of the RCCP which requires as the First Paragraph of the Articles the following: "That the name of said corporation shall be __ _____ , Inc., Corporation or 'OPC'." 

Revocation, Dissolution and Expiration of Term.

• The rules provide that the name of a corporation or partnership that has been dissolved or whose registration has been revoked shall not be used by another corporation or partnership unless approved by the SEC. 
• However, only expired corporations may apply for re-registration using the same corporate name. 
• If a new corporation is organized using the name of a dissolved corporation, the newly formed corporation cannot be considered as the legal successor of the dissolved corporation. 
• The new corporation has a personality separate and distinct from the dissolved corporation.
  
• The new corporation cannot enjoy the rights and privileges of the dissolved corporation although the new corporation has the same or similar name. 
• Under the present rules, "the name of a corporation or partnership that has been dissolved or whose registration has been revoked shall not be used by another corporation, within five years from the approval of dissolution or five years from the date of revocation.
• Dissolved Corporation 一 five years from the approval of dissolution
• Revoked Corporation 一 five years from the date of revocation

8. Change of Name. 

• A corporation may change its corporate name. 
• Even in the absence of Section 17 of the RCCP that expressly allows change of name, a corporation has the right to apply for such change if there is no express prohibition in the statute. 
• The name of a corporation in this respect designates the corporation in the same manner as the name of an individual designates the person. Since an individual has the right to change his name under certain conditions, there is no compelling reason why a corporation may not enjoy the same right. 
• There is nothing sacrosanct in a name when it comes to artificial beings. The sentimental considerations that individuals attach to their names are not present in corporations and partnerships. 
• Of course, as in the case of an individual, such change may not be made exclusively by the corporation's own act. It has to follow the procedure prescribed by law for the purpose; and this is what is important and indispensably prescribed - strict adherence to such procedure.
• A general power to alter or amend the charter of a corporation necessarily includes the power to alter the name of the corporation.
• Statutes are to be found in the various jurisdictions dealing with the matter of change in corporate names.
• Such statutes have been subjected to judicial construction and have, in the main, been upheld as constitutional.  In direct terms or by necessary implication, they authorize corporations to adopt new names and prescribe the mode of procedure for that purpose. The same steps must be taken under some statutes to effect a change in a corporate name, as when any other amendment of the corporate charter is sought. What the general law thus deals with the subject, a corporation change its name only in the manner provided. 
• A deed of land to a church by a particular name has been held not to be affected by the fact that the church afterwards took a different name.
• A change in the name of a corporation is not a divestiture of title or such a change as requires a regular transfer of title to property whether real or personal, from the corporation under one name to the same corporation under another name.
• The changing of the name of a corporation is no more the creation of a corpoation than the changing of the name of a natural person is the begetting of a natural person. The act, in both cases, would seem to be what the language which we use to designate it imports - a change of name and not a change of being.
• Actions brought by a corporation after it has changed its name should be brought under the new name although for the enforcement of rights existing at the time the change was made.
• The change in the name of the corporation does not affect its right to bring an action on a note given to the corporation under its former name.
• A change in corporate name does not make a new corporation, whether effected by a special act or under a general law. 
• It has no effect on the identity of the corporation or on its property, rights or liabilities. 
• The corporation, upon such change in its name, is in no sense a new corporation; it is not the successor of the original corporation.
•  It is the same corporation with a different name, and its character is in no respect changed.
• Consequently, the renamed corporation remains liable for the illegal dismissal of its employees who were separated under the guise that a new corporation was created when the employer corporation was renamed.
• The corporation that changed its name was not required under the RCCP to formally notify its debtors. 
• Notification to debtors is discretionary. 
• Courts cannot impose on a corporation that changes its name the duty to notify a debtor of such change absent any law, circular or regulation requiring such notice. 
• Courts will be engaged in judicial legislation if the obligation to notify is imposed in the absence of statutory or administrative rule to that effect.
• However, applicable rules require notice to government agencies like the Bureau of Internal Revenue or the Philippine Economic Zone Authority for registered companies.
• The old name of the corporation shall be indicated in the Certificate of Filing of Amended Articles of Incorporation. 
• Another corporation cannot appropriate such old name. 
• The former corporate name of a corporation cannot likewise be registered by other individuals with the SEC.
• In practice, a corporation that applies for the approval of the amendment of its Articles of Incorporation to change its corporate name usually includes the amendment of its By-Laws. 
• However, there is an opinion to the effect that it is not necessary to amend the By-Laws in order to reflect the new corporate name. The amendment of the Articles of Incorporation to change the corporate name impliedly amends the name appearing in the By-Laws.

9. Corporations with Same Name.

• Even if two corporations have the same name, the corporations do not have a single legal personality. 
• The two registration, certificates show the separate nature of these juridical entities. 

Problems:

Q: a. Can a corporation validly change its corporate name under its general power to amend its Articles of Incorporation? 

    b. Does a change in the name of a corporation result in its dissolution? Explain your answer.

A: a. Yes, a corporation may validly change its name. However, the corporation must comply with the procedure for amendment of the Articles of Incorporation. In fact, the right to change the corporation name is recognized under Section 18 of the Corporation Code, now Section 17 of the RCCP, but subject to the approval of the SEC. Section 18 of the Corporation Code provided that when a change in the corporate name is approved, the SEC shall issue an amended certificate of incorporation under the amended name. The new provision (Section 17, RCCP) is substantially the same and states that: "Upon the approval of the new corporate name, the Commission shall issue a certificate of incorporation under the amended name."

    b. No, the change in name does not result in the corporation's dissolution. The juridical entity is the same although under a different name. The situation is no different from a natural person who does not cease to exist due to a change of name. (1976 Bar)

Q: The Court of Appeals (CA) dismissed outright a Certiorari Petition on the ground that petitioner BDO Leasing and Finance, Inc. (BDO) lacked "legal capacity to initiate or file the instant petition" on account of the change of name of petitioner BDO from "PCI Leasing and Finance, Inc." to "BDO Leasing and Finance Inc." The CA opined that since the Board Resolution and Special Power of Attorney issued by petitioner BDO authorizing its officer to initiate the appropriate court action on behalf of the company was still under the name of "PCI Leasing and Finance, Inc.," and considering that petitioner BDO has already changed its name, the aforesaid Board Resolution and Special Power of Attorney have no more binding effect. Was the dismissal proper?

A: No. The dismissal was not proper. A corporation that changes its name is in no sense a new corporation, nor the successor of the original corporation. It is the same corporation with a different name and its character is in no respect changed. A change m the corporate name does not make a new corporation. Hence, with petitioner BDO's change of name from "PCI Leasing and Finance, Inc." to "BDO Leasing and Finance, Inc." having no effect on the identity of the corporation, on its property, rights, or liabilities with its character remaining very much intact, the Board Resolution and Special Power of Attorney authorizing its officer to institute the Certiorari Petition did not lose any binding effect whatsoever. The officer remains authorized to file a petition for the same entity which is now named BDO.