Protecting a Company Name
Most individuals who register a company do so for the purposes of carrying out a trade as in the case of incorporating an entity limited by shares, or to carry out some non-profit activity as in the case of those forming a company limited by guarantee.
There are however significant proportions of people whose primary motivation is that of registering a company name with the view of protecting the name and preventing others from using it.
Sole Traders and Partnerships Protecting a Business Name
An example of this might be where a sole trader or partnership trade using a particular name which has value and recognition to their business. If someone else were to register a limited company using that name, then there might be a risk that passing off may occur.
Names used by unincorporated businesses are not regulated or controlled (unless subject to a trademark or some other restriction), and therefore it is perfectly permissible for a separate individual to register a company name which is identical to the one that business uses.
Once a person has registered the company and thus is protecting the name, it is usual for the entity to remain as a dormant company. There is no rule which states that companies have to trade throughout or at any time in their existence.