Guidelines on Name Approval of Company in India
The name of the proposed company is very important for any startup, sometimes we get clients for incorporation of a company, where they come up with a name and claim to have searched at MCA website, Trademark site or Google search engine etc, however, they seemed unfamiliar with the law on name approval of the company. Though the searches conducted at MCA, Google or Trademark Public Search is useful and basic, but it lacks a very important aspect of what the law of land has in store for you. The Companies Act, 2013 through section 4 and rule 8 of the incorporation of companies rules provides an exhaustive guide which is to be referred by the promoters while deciding upon a name of the company and the registrar of companies including their subordinate officers while approving or rejecting the name of a proposed company.
Name of Company Guidelines under section 4 and rule 8
The Companies Act, 2013 provides for five essential concepts on name approval and the remedy in case a name is approved in error and the penalty on the non-compliance of the legal provision of name approval. The fundamental concepts are as under
- The name of the company shall not be identical with or resemble too nearly to the name of an already registered company
- Any words or expression which may violate any law for the time being in force
- The name is undesirable in the opinion of the government.
- Any words or expression which may give an impression that the proposed company is in anyway connected to the government or have its patronage
- In cases where a company gets registered with a name in violation of the above broad principles, the ROC may insist on a change of name or can strike down the company and impose a penalty of up to Rs. 1 Lac.
Having understood the basic principles of the name availability as above, it can be easily concluded that the Registrar of Companies has been vested with discretionary powers while approving the name of a company, which he uses while approving a proposed name and is further empowered to see if there has been any violation of section 4 even after the company has been incorporated. Thus it is on the applicant to be very careful and vigilant while applying for the name of the company. There is no absolute discretion and the same has to be applied judiciously by the registrar of companies. Rule 8 of Companies (Incorporation) Rules, 2014 addresses two key concepts in details, i.e. What constitutes a name as identical and what is an undesirable name
In determining whether a proposed name is identical with another, the differences on account of the following shall be disregarded-
- Words, Private, Pvt, Pvt., (P), Limited, Ltd, Ltd., LLP, Limited Liability Partnership;
- Words appearing at the end of the names – company, and company, co., co, corporation, corp, corpn, corp.;
- Plural version of any of the words appearing in the name;
- Type and case of letters, spacing between letters and punctuation marks;
- Joining words together or separating the words does not make a name distinguishable from a name that uses the similar, separated or joined words;
- Use of a different tense or number of the same word does not distinguish one name from another;
- Using different phonetic spellings or spelling variations will not be considered as distinguishing one name from another. Illustration (For example, P.Q. Industries limited is existing then P and Q Industries or Pee Que Industries or P n Q Industries or P & Q Industries will not be allowed. Similarly, if a name contains numeric character like 3, resemblance shall be checked with ‘Three’ also;)
- Misspelled words, whether intentionally misspelled or not, do not conflict with the similar, properly spelled words;
- The addition of an internet related designation, such as .com, .net, .edu, .gov, .org, .in does not make a name distinguishable from another, even where (.) is written as ‘dot’;
- The addition of words like New, Modern, Nav, Shri, Sri, Shree, Sree, Om, Jai, Sai, The, etc. does not make a name distinguishable from an existing name. Similarly, if it is different from the name of the existing company only to the extent of adding the name of the place, the same shall not be allowed; Such names may be allowed only if no objection from the existing company by way of Board resolution is submitted;
- Different combination of the same words does not make a name distinguishable from an existing name, e.g., if there is a company in existence by the name of “Builders and Contractors Limited”, the name “Contractors and Builders Limited” will not be allowed unless it is a change of name of existing company;
- If the proposed name is the Hindi or English translation or transliteration of the name of an existing company or limited liability partnership in English or Hindi, as the case may be.
UNDESIRABLE NAMES: The name shall be considered undesirable, if-
- It attracts the provisions of section 3 of the Emblems and Names (Prevention and Improper Use) Act, 1950 (12 of 1950);
- It includes the name of a registered trademark or a trademark which is subject of an application for registration, unless the consent of the owner or applicant for registration, of the trademark, as the case may be, has been obtained and produced by the promoters;
- It includes any word or words which are offensive to any section of the people;
- The proposed name is identical with or too nearly resembles the name of a limited liability partnership;
- It is not in consonance with the principal objects of the company as set out in the memorandum of association:Provided that every name need not be necessarily indicative of the objects of the company, but when there is some indication of objects in the name, then it shall be in conformity with the objects mentioned in the memorandum;
- The Company’s main business is financing, leasing, chit fund, investments, securities or a combination thereof, such name shall not be allowed unless the name is indicative of such related financial activities, viz., Chit Fund/ Investment/ Loan, etc.;
- It resembles closely the popular or abbreviated description of an existing company or limited liability partnership;
- The proposed name is identical with or too nearly resembles the name of a company or limited liability partnership incorporated outside India and reserved by such company or limited liability partnership with the Registrar: Provided that if a foreign company is incorporating its subsidiary company in India, then the original name of the holding company as it is may be allowed with the addition of word India or name of any Indian state or city, if otherwise available;
- Any part of the proposed name includes the words indicative of a separate type of business constitution or legal person or any connotation thereof e.g. co-operative, sehkari, trust, LLP, partnership, society, proprietor, HUF, firm, Inc., PLC, GmbH, SA, PTE, Sdn, AG etc.; Explanation: Name including phrase ‘Electoral Trust’ may be allowed for Registration of companies to be formed under section 8 of the Act, in accordance with the Electoral Trusts Scheme 2013 notified by the Central Board of Direct Taxes (CBDT): Provided that name application is accompanied with an affidavit to the effect that the name to be obtained shall be only for the purpose of registration of companies under the Electoral Trust Scheme as notified by the CBDT.
- The proposed name contains the words ‘British India’;
- The proposed name implies association or connection with embassy or consulate or a foreign government;
- The proposed name includes or implies association or connection with or patronage of a national hero or any person held in high esteem or important personages who occupied or are occupying important positions in Government;
- The proposed name is vague or an abbreviated name such as ‘ABC limited’ or ‘23K limited’ or ‘DJMO’ Ltd: abbreviated name based on the name of the promoters will not be allowed. For example – BMCD Limited representing the first alphabet of the name of the promoter like Bharat, Mahesh, Chandan, and David. Provided that existing company may use its abbreviated name as part of the name for formation of a new company as a subsidiary or joint venture or associate company but such joint venture or associated company shall not have an abbreviated name only e.g. Delhi Paper Mills Limited can get a joint venture or associated company as DPM Papers Limited and not as DPM Limited However the companies well known in their respective field by abbreviated names are allowed to change their names to abbreviation of their existing name after following the requirements of the Act;
- The proposed name is identical to the name of a company dissolved as a result of liquidation proceeding and a period of two years have not elapsed from the date of such dissolution. Further, if the proposed name is identical with the name of a company which is struck off in pursuance of action under section 248 of the Act, then the same shall not be allowed before the expiry of twenty years from the publication in the Official Gazette being so struck off;
- It is identical with or too nearly resembles the name of a limited liability partnership in liquidation or the name of a limited liability partnership which is struck off up to a period of five years;
- The proposed name include words such as ‘Insurance’, ‘Bank’, ‘Stock Exchange’, ‘Venture Capital’, ‘Asset Management’, ‘Nidhi’, ‘Mutual fund’ etc., unless a declaration is submitted by the applicant that the requirements mandated by the respective regulator, such as IRDA, RBI, SEBI, MCA etc. have been complied with by the applicant;
- The proposed name includes the word “State”, the same shall be allowed only in case the company is a government company.
- the proposed name is containing only the name of a continent, country, state, city such as Asia limited, Germany Limited, Haryana Limited, Mysore Limited
- The name is only a general one, like Cotton Textile Mills Ltd. or Silk Manufacturing Ltd., and not Lakshmi Silk Manufacturing Co. Ltd;
- it is intended or likely to produce a misleading impression regarding the scope or scale of its activities which would be beyond the resources at its disposal:
- The proposed name includes name of any foreign country or any city in a foreign country, the same shall be allowed if the applicant produces any proof of significance of business relations with such foreign country like MOU with a company of such country: Provided further the name combining the name of a foreign country with the use of India like India Japan or Japan India shall be allowed if, there is a government to government participation or patronage. No company shall be incorporated using the name of an enemy country. (Enemy country means so declared by the Central Government from time to time).
- If any company has changed its activities which are not reflected in its name, it shall change its name in line with its activities within a period of six months from the change of activities after complying with all the provisions as applicable to change of name.
- In case the keyword used in the name proposed is the name of a person other than the name(s) of the promoters or their close blood relatives, No objection from such other (s) shall be attached with the application for the name. In case the name includes the name of relatives, the proof of relation shall be attached. It shall be mandatory to furnish the significance and proof thereof for use of coined words made out of the name of the promoters or their relatives.
- The applicant shall declare in affirmative or negative ( to affirm or deny ) whether they are using or have been using in the last 5 years, the name applied for incorporation of company or LLP in any other business constitution like Sole proprietor or Partnership or any other incorporated or unincorporated entity and if, yes details thereof and NOC from other partners and associates for use of such name by the proposed Company or LLP as the case may be and also a declaration as to whether such other business shall be taken over by the proposed company or LLP or not .
- For the purposes of clause (b) of sub-section (3) of section 4, the following words and combinations thereof shall not be used in the name of a company in English or any of the languages depicting the same meaning unless the previous approval of the Central Government has been obtained for the use of any such word or expression;
- Small Scale Industries;
- Khadi and Village Industries Corporation;
- Financial, forest, Corporation and the like;
- Development Authority;
- Prime Minister or Chief Minister;
- Forest corporation;
- Development Scheme;
- Statute or Statutory;
- Court or Judiciary;
- the use of word Scheme with the name of Government (s) , State , India, Bharat or any government authority or in any manner resembling with the schemes launched by Central, state or local Governments and authorities; and
- For the Companies under Section 8 of the Act, the name shall include the words
- Electoral trust and the like etc.
- Every company incorporated as a “Nidhi” shall have the last word ‘Nidhi Limited’ as part of its name.
Yes, its true that this post is a very lengthy document, however, it is important to include all the legal restrictions which a startup must consider while selecting a name of the company. SETINDIABIZ Provides complimentary service on the name search, you can take benefit of the same without any charges so that the feasibility of the name availability from the registrar of companies is known well in advance. send your email for name availability search at Raise a Ticket for Name Review of Your Company. Please include the proposed name as well as the object to be pursued while writing an email to us, the same shall be converted as a service ticket and the specialist company secretary or corporate lawyers shall attend to that on priority. Read more on Company Registration at https://www.setindiabiz.com/company-registration.html
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