Managing Company Acquisitions

What happens when a small to medium-sized security company that has traditionally provided guarding, patrol and monitoring services, merges with another company that also provides installation services for security equipment as an example? Typically, as part of the merger, both organisation will either come together under a new company name or perhaps keep one of the previous names. However, both organisations have a significant portfolio of existing contracts with clients with whom they have been working for years, all signed under the previous company names.

Do they need to re-draft all of their old contracts for both companies and have their clients re-sign new contracts, or can they simply keep the old contracts in place until they are up for renewal?

 A company is a separate legal entity. This means that it can enter into contracts and do all other things at law that any private individual is capable of doing. However, unlike people, a company can change both its identity and appearance with the stroke of a pen. So how does the law keep tabs on this?

The way that the law requires a company to identify and distinguish itself is not via its name, but via its Australian Company Number (ACN).

Under the Corporations Act, a company must ensure that its ACN appears on all of its “public documents” and “eligible negotiable instruments”. These include all documents lodged with the Australian Securities and Investments Commission, invoices, receipts, orders for goods and services, letterheads, official company notices, cheques and written advertisements which make a specific offer.

A company is not required to include its ACN on packaging and labelling, advertisements which do not make a specific offer, credit cards, business cards and with compliments slips, and items which are not documents.

The purpose of the ACN is to ensure that companies can be easily identified. It does not matter what the name of the company is and nor does it matter how often the company changes its name. The constant is the ACN. If the ACN remains the same, then the company is the same entity and can be distinguished from any other company, including a company of a similar name.

You do not need to alter your contract documents after changing the name of your company. If your ACN appeared in the set of contract documents executed by you and the other party, then the fact that you have changed the name of your company is irrelevant. For the sake of completeness, however, you might like to write to all of those parties to confirm that the company name has been changed and to reassure them that the company with whom they contracted remains the same and that the name change is merely cosmetic. To further reassure them, you might wish to point out that the ACN relating to both company names has not changed, and that is really what matters.

Once your existing contracts come up for renewal, you can substitute the old company name for the new one. Again, as long as the same ACN appears, the other party can feel comfortable in knowing that while the name of the company might have changed, the company itself remains the same.