A family business’s trade name: the son then sets up his own firm. What happens next?

Recognise this situation? A family business has been running for a while under the family name. One of the sons then starts a similar business elsewhere on his own account, again using the family name in one way or another. So what should happen? In these cases, the departing son should make some distinction between his own (personal) name and the name of the business he sets up. When do things go wrong? If he attaches his name to his new business, the public might think that there is some commercial link between it and the family business. The family business then has an interest in protecting the goodwill it has gradually built up in that trade name, as it might lose customers. A case like this ends up in the courts every so often, as it did this summer. This time, the business in question was a demolition company sold by the father, including the trade name that included the family name. The son had worked for it for years as an apprentice engineer and most recently as a foreman. After it was taken over, he resigned. Five days later, he set up a one-man business under his family name, with ‘Ground and Demolitions’ tacked on – doing exactly the same work as the family business that had been sold. And his name and surname were prominently displayed on his company van. A clear risk of confusion. The provisional relief judge for Gelderland dismissed the application for a general competition injunction. In principle, anyone could set up a competing business, including this son. After all, he had not signed any non-compete clause. The son could also contact customers of his former employer. But it was going too far to use the family name as part of his trade name; that aspect was prohibited.

So watch out if you have a well known family name like Philips. Or Ziengs, or Mandemakers.

Maarten Haak, tradename lawyer

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