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ASA agree it is possible to trade on reputation of defunct company

10 January 2014

The ASA has rejected a complaint that Abacus Lighting Ltd was misleading as to their reputation and history when claims made on their website - to ‘extensive experience and a proven track record’ and  a ‘hard earned reputation’ dating back ‘over 55 years’  - related to previous companies that had gone into administration.

The original company in fact went into administration for one minute before acquisition and a name change had occurred simultaneously.  Abacus could demonstrate  it had purchased the trading assets, goodwill, intellectual property rights and shares of the defunct organisation.

It was particularly relevant that Abacus had taken on the debts and liabilities and were honouring the guarantees of the previous company; therefore companies should carefully consider what exactly they are signing up for in an asset purchase.  If they wish to rely on the purchased company’s reputation and trading history in future advertising it may not be sufficient in the eyes of the ASA to merely have purchased the goodwill, they will need to be seen to be maintaining it too.

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