THE LAW FIRM OF HAZIM AL MADANI ATTORNEYS AND LEGAL CONSULTANTS
Trade Name and Its Disposition for Business Owners
The trade name is one of the most critical elements of a business’s identity. It distinguishes an enterprise from its competitors in the same field. As a result, companies and institutions strive to choose distinctive, easy-to-pronounce, and memorable trade names that reflect their mission and vision.
The Kingdom sets legal regulations for registering trade names and the necessary licenses to conduct commercial activities under a specific name. It is illegal for any commercial entity to use a name identical or similar to another already registered in the same field.
Here, let’s briefly mention the importance of registering a trade name:
- Protecting the trader's rights to use the trade name without imitation or duplication.
- Proving the trader's ownership of the trade name.
- Allowing the trader to relinquish or license the use of the trade name to others.
- Distinguishing the trader and their commercial activity from other traders.
We would like to refer to the latest amendments to the Intellectual Property Law in 2023, which included the following:
- Abolition of the temporary protection period for an unregistered trade name, which was previously three years. Full protection is now acquired immediately upon use.
- Allowing the registration of a trademark as a trade name, in addition to the trader's right to use it as a trade name immediately upon registration.
- Permitting the transfer of ownership of the trade name or its disposal, either with the transfer of the shop ownership or separately.
- Allowing the licensing of the use of the trade name to others, either with the transfer of the shop ownership or separately.
These amendments have made the trader’s rights in dealing with the trade name more flexible and have increased the legal protection for the unregistered trade name.
Now, we pose a question: Can one dispose of the trade name?
The owner of the trade name may dispose of it by selling, mortgaging, or relinquishing it to others, either individually or with the transfer of shop ownership. It is also permissible to rent the trade name. However, for the disposition to be valid against others, it must be registered with the Companies Registration Department at the Ministry of Commerce.
Here, we briefly mention the main features of the trade name and its disposition according to the text of the system:
The process of transferring the ownership of the trade name happens when selling the establishment or merging it with another establishment in the Kingdom according to the following mechanism:
- The new owner of the establishment submits a request to transfer the ownership of the registered trade name to the Companies Registration Department at the Ministry of Commerce.
- The application includes the sale contract of the establishment or the merger contract authenticated according to the legal rules.
- In the case of selling the establishment, the old owner's relinquishment of the trade name in favor of the new owner is attached and authenticated.
- In the case of a merger, the new trade name of the merging establishment is agreed upon and submitted for registration.
- The Ministry issues a decision to transfer the ownership of the trade name after verifying that the required documents are fulfilled.
- The amendment is registered, published in the commercial register, and announced according to the legal procedures.
- The decision to transfer ownership becomes valid against others after completing the publication and announcement.
Finally, by following the steps mentioned above, the ownership of the registered trade name officially transfers to the new owner of the establishment without the need to register a new trade name.