CORPORATE TRANSACTIONS & COMPLIANCE BLOG

New Company Name Regulation in Delaware Formalizes Existing Policy

By: Pia Angelikis, Esq., COGENCY GLOBAL INC. on Thu, Dec 12, 2019

The Delaware Division of Corporations released a new regulation in October 2019, formalizing existing state policy on what is considered an acceptable company name.

Delaware Business Entity Name Regulations October 2019

In the October 2019 issue of the Delaware Register of Regulations, the Delaware Division of Corporations announced a new business entity name regulation (23 DE Reg. 323) effective October 11th, 2019.

The Division explained that the purpose of this regulation is to clarify existing name standards in Delaware and prevent business entity names that negatively impact the interests of the state of Delaware and the public at large.

Delaware’s Business Name Restrictions

The new regulation co-exists with the prohibited and restricted words indicated in the Delaware business entity statutes. So, in addition to name rejection reasons under those statutes, under this regulation, the Division may reject a name reservation request or a filing if the business entity name contains a word or words:

  • Discriminating against, disparaging or denigrating any Federally-protected classes.

  • Likely to facilitate, incite or foster any criminal acts or offenses prohibited under Delaware law, including – but not limited to – terrorism, endangering life or public safety, hate crimes, fraud, use of deadly weapons or dangerous instruments, obscene or libelous language, or narcotic drug, opioid or controlled substances (e.g. ‘Opioids-R-Us’).

  • Likely to cause public deception or confusion, or resulting in administration difficulties for the Division (e.g. an entity name that’s 500 characters long).
  • Likely to mislead the public about the business purpose of the entity.

  • Likely to lead to a pattern and practice of abuse that would cause harm to the interests of the public or Delaware.

While the new regulation provides a framework and some guidance, your filings may be delayed or rejected based on the entity name and it still may not be obvious how a name violates the regulation.

It doesn’t appear that the Division will issue a comprehensive list of words that violate the regulation due to the subjective/contextual nature of the analysis. For instance, an entity name could contain words that, on their own, are not prohibited but become problematic when taken in context with the rest of the name, the business type or other factors.

Importantly, for those names requiring subjective/contextual determination, it may take several days or even weeks before the Division can issue a determination as to whether it will accept or reject a name reservation or filing. And currently, the Division is unable to offer preclearance for names.

What Happens If Delaware Holds Your Filing

Should the Division hold your filing based on possible name regulation violations, keep in mind that:

  • If accepted, the filing will be file-stamped with the submission date, regardless of how many days the Division held the filing to make its determination.

  • If the filing is rejected based on the name, the Division will allow filers to submit an acceptable name revision within 5 business days of the rejection date. (Note: The filing will lose the original submission date if no acceptable name revision is submitted during that time.)

When you ask an experienced professional service company to handle your Delaware filing, they will likely notify you if it’s apparent that the business entity name on the filing contains words that may violate the name regulation. In those instances, the service company may ask for the entity’s business purpose to help expedite the Division’s determination.

 

Filing outside of Delaware? Here’s additional information about entity name regulations across the U.S.:

 

This content is provided for informational purposes only and should not be considered, or relied upon, as legal advice.

Topics: Company Formation and Filing Considerations, Delaware Corporate, UCC and Compliance