"The proposals are a good compromise between what trade mark owners want and what the Companies Registry can do," according to Adelaide Yu, a partner of Yu & Partners in Hong Kong, which is a member of Rouse & Co International.
A shadow company is a company incorporated in bad faith whose registered name includes a trade mark belonging to another party. Counterfeiters often incorporate these companies in Hong Kong, where it is relatively easy to set up a business.
They can then add an air of legitimacy to their activities by licensing their corporate names to manufacturers - often in China - who produce trade mark-infringing products.
Taking action against these companies has proved difficult. The Registrar of Companies is allowed to strike off names that are "too like" the name of another registered company, but interprets "too like" very narrowly, according to brand owners. Companies also say it is difficult to prove that a company should be struck off the register for being inactive.
The new
consultation document
admits that authorities in mainland China, Japan, the EU and US have concerns and states "there is a strong case for strengthening the company name registration regime to tackle any possible abuses by 'shadow companies'".
The proposals would allow the Registrar of Companies to act on a court order that directs a shadow company to change its name and, if the shadow company does not comply, to change the company name to its registration number.
This change would avoid a common complaint of trade mark owners - that even when they obtain a court order against a shadow company, the Registrar of Companies still cannot change that company's name.
Last year US beer maker Anheuser-Busch
found a way round this problem
by suing the directors and, crucially, the shareholders of nine companies that were trading under similar names.
In that case, the court ordered the defendants to change their companies' names and said that if the shareholders did not comply then lawyers from Lovells, the firm representing Anheuser-Busch, would be given the power to sign special resolutions on behalf of the shareholders to get the name changed.
Frank Hellwig, senior associate general counsel for Anheuser-Busch described this process as "time consuming and costly".
The proposed changes would simplify the process according to Yu, who told
Managing IP
that it is possible to get a court order against a shadow company within two months.
But the government has rejected the demand of some trade mark owners that company name registration should be denied to companies with names identical or similar to trade marks, saying "it is inequitable to grant trade mark owners monopoly over company names covering all kinds of business activities".
The proposals also reject a system similar to that introduced in the UK in which a person may apply to a company names adjudicator to object to a company's registered name.
The government claims that such a system would not work in Hong Kong because shadow companies are owned by counterfeiters, stating that "it is unlikely that officers of 'shadow companies' would attend the proceedings before an adjudicator".
