Putting a Name on It – Business Disclosure Requirements
Iain Wilson (Solicitor)
An
e-trader, or merely a business which uses its website as a shop window, may
be conducting an otherwise honest, lawful and legitimate business but
unless they comply with domestic and European regulations properly
identifying the name and address of the trader or trading enterprise, they
could find themselves at the wrong end of a criminal prosecution.
Trading
Standards and other regulatory bodies have the ability to prosecute for breaches
of disclosure requirements. For
instance, a person guilty of an
offence under the Companies Act 2006 is liable on summary conviction of up
to £1,000 and, for continued contravention, a default fine of up to £100
per day. This is unlikely to
be the kind of punishment that will ruin a business in itself, but the stigma
of a criminal conviction can have a damaging effect on a business’s public
image. As with the Consumer
Protection (Distance Selling) Regulations 2001 and Electronic Commerce (EC Directive) Regulations
2002 (which impose even wider obligations on e-traders and other distances
sellers), there are also potential civil consequences arising out of
breaches of disclosure requirements which may effect the enforceability of
contracts, adversely to the trader and to the advantage of the customer.
It is not an unfamiliar
scenario – an internet shopper thinks they have found the perfect gift at
the perfect price. They click
on the little trolley icon, send their money and wait for the item to arrive
on their doormat. Except it
never arrives. Initially, the
shopper puts it down to a mix-up at the depot or the postal strike. They send a polite email
enquiry. A week later no reply
has been received to this and a slightly less polite chaser email is
sent. It starts to dawn on the
shopper that they may have overestimated their faith in humanity. The shopper returns to the website
and looks more carefully at the small print. Surely somewhere behind the glossy fascia is a phone
number or address?
Unfortunately, 10 minutes of frantic clicking takes the matter no
further and the shopper finally realises they have “been done”. The salt in the wound is that they
don’t even know who to sue or report.
In cyberspace no-one can hear you scream.
As
websites have no bricks and mortar, the operator can effectively disappear
into thin air once they have taken your cash. An individual can check the registrant of a site, but
this may reveal little more than the details of a domain-hosting company
in, say, Russia.
This,
in part, is the mischief that has been keeping legal draftsmen busy in
recent years.
The Consumer Protection
(Distance Selling) Regulations 2001, Electronic
Commerce (EC Directive) Regulations 2002, Companies Act 2006, Companies
(Trading Disclosure) Regulations 2008, Companies (Trading
Disclosures) (Amendment) Regulations 2008 all deal, inter alia, with businesses’ disclosure requirements – that is,
what they have to say about who and where they are.
There
is far too much law here for the average businessman to see the wood for
the trees. The Companies Act 2006 is the longest Act on the statute book
with 1,300 sections and a contents chapter that runs to 59 pages alone.
However, anyone who gets as far as section 1,200 will discover important
issues that are significantly under-appreciated: namely strict requirements
for businesses to disclose information or face civil or criminal sanctions.
The
law in this area now relates as much to modern media (such as the internet
and email) as it does to more traditional means of communication. Regardless of the medium, a flick
through your post, a scroll down your inbox or a surf on the web will
demonstrate the wide-spread ignorance of the law. So, in a nutshell, what are the requirements?
Signs
Limited
companies are required to display a sign outside their registered office,
inspection place or any other place it carries on business (unless the
primary purpose of the place is residential accommodation). The same requirement applies to
limited liability partnerships.
“Communications”
A limited company or limited
liability partnership must display its full name on its website and all
business letters (including emails).
As with all such disclosure requirements, “Limited” or “Ltd” must
never be omitted (such would be misleading). Business letters and websites must also state the
address of its registered office, the company number and where it is
registered (e.g. “Registered in England and Wales”).
In
addition to the above, a limited company must include its full name on
all:-
- notices and other official publications;
- bills of exchange, promissory notes,
endorsements and order forms;
- cheques purporting to be signed by or on
behalf of the company;
- orders for money, goods or services; and
- bills of parcels, invoices and other
demands for payment, receipts and letters of credit.
Additionally, if a person
who deals with the company in a course of business requests any of the
following the company must provide it within five working days: -
·
the address of its
registered office;
·
the address of any
place of inspection; or
·
the type of company
records kept at the registered office or inspection place.
Directors
A company does not need to
disclose the names of its directors.
However, if it displays the name of one director (and refers to
him/her as being a director) it must disclose the names of all directors.
Sole traders and partnerships
There
is nothing wrong with a sole trader or a partnership using a trading
name. However, the individuals
behind the name need to be identified. For instance, John Smith and David Jones may trade as Blue
Horizon Builders. The
issue here is that Blue Horizon Builders is not a legal entity, it
will not be registered and it cannot be sued. The law therefore imposes a strict disclosure regime on
unincorporated businesses to identify the dramatis personę (i.e. the disclosure of the sole
trader’s/partners’ name(s)).
This would not be the case if the name of the business was simply
the name of the partners - Smith and Jones. There is an exception for
partnerships greater than 20 in number: here, communications may simply state the address of the partnership’s principal
place of business and that the list of the partners' names is open to
inspection there (providing of course that this is the case).
Additionally,
in the case of sole traders and partnerships, an address must also be
provided at which service of any document relating to the business will be
effective.
Disclosure
of the names and addresses must appear on the following communications:-
- business
letters;
- written orders
for goods or services to be supplied to the business;
- business
emails;
- invoices and
receipts issued in the course of the business;
- written demands
for payment of debts arising in the course of the business; and
- websites
Such
disclosure must also be made on signage at the place of business.
As
for the internet shopper, if you cannot find all this information on the
site then you have to ask yourself whether there might be a sinister reason
for this before parting with your cash.
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