Law "New company using the same trade name after business transfer, 'Innovative Small Business' renewal denied"

The court ruled that a newly established company that took over part of a business license from another company and used the previous trade name of that company cannot have its status as a Technology Innovative Small and Medium Enterprise (Inno-Biz) renewed.

According to the legal community on the 19th, the Seoul Administrative Court, Administrative Division 4 (Presiding Judge Kim Jeong-jung) recently ruled against Corporation A in the first trial of the "Inno-Biz Selection Cancellation Disposition Cancellation Lawsuit" filed against the Seoul Regional Small and Medium Venture Business Administration, stating, "The plaintiff is responsible for causing the defendant to mistake the subject of the reissuance application by using the previous trade name of another company."

Seoul Administrative Court, Seocho-gu, Seoul. / Photo by Hyunmin Kim kimhyun81@

Previously, Company B was selected as an Inno-Biz in 2014, 12 years after its establishment, and received various benefits from the government such as financial and tax incentives, manpower, research and development (R&D), and export support. Through two renewals, Company B maintained its qualification until October 2020 and changed its trade name in early December 2019.

At the end of the same month, a separate company, Company A, was newly established, and this new company used the exact name that Company B had previously used. Company A even acquired part of Company B's business rights through a transfer agreement in January of the following year.

The Small and Medium Venture Business Administration initially renewed Company A's Inno-Biz qualification in March of that year citing reasons such as 'representative change' and 'merger,' but about a year later canceled it, stating that "the business history is less than three years, so it is not eligible to apply, and it does not fall under the exception of a newly established merger."

According to the regulations related to the Small and Medium Enterprise Technology Innovation Promotion Act, if the two companies have undergone a 'newly established merger,' the business history of the previous company is recognized for Inno-Biz selection; otherwise, the business history must be at least three years.

Company A filed an appeal. During the trial, it claimed that "due to the cancellation disposition by the Small and Medium Venture Business Administration, participation in government agency projects was canceled, and employees faced the risk of resignation, causing significant damage."

The first trial dismissed Company A's claim, stating, "Unless it is a newly established merger, the Inno-Biz qualification cannot be recognized." The court explained, "Company B continued to exist while Company A, established separately before the contract, only acquired the business division," and "this cannot be considered a newly established merger."

Furthermore, the court stated, "Company A appears to have intended to cause confusion about the subject of the certificate reissuance application by using Company B's previous trade name," and "the disposition in this case is a legitimate cancellation of a certificate that was mistakenly issued due to the plaintiff's responsibility."

The court added, "The Inno-Biz selection system aims to discover and nurture small and medium enterprises capable of securing technological competitiveness or having future growth potential through technological innovation activities," and "Considering that benefits for Inno-Biz companies cannot be unlimited at the national level, selection must be conducted fairly according to the criteria."

This content was produced with the assistance of AI translation services.