1st Recruitment, which set up its Guernsey office in October, was taken to court by Guernsey firm Firstcall Recruitment, who argued that the similarity in name was causing confusion to clients.
The court has given 1st Recruitment eight weeks to change its name.
But the firm says it followed the correct procedures and even employed lawyers to check whether there were potential problems.
Spokesman Sara Lloyd said: ‘My clients have been based in Jersey for three years and were asked to come to Guernsey by their sister companies to offer the same service in a new branch.
‘1st Recruitment consulted Guernsey lawyers and accountants to see if it was possible to use their established name.
I am confident that the correct procedures have been followed.
But Firstcall managing director Tina Magloire said: ‘We are delighted that the court ruled in our favour and stress to any company thinking of setting up their business in Guernsey to research the local marketplace and competitors thoroughly before making the move.
