While you are in a process to start a new venture or a business, did you know that the name plays an important role? Perhaps it is the most difficult thing that will decide on starting your business. Name has a tremendous impact on the customers and the investors of the company. Selecting the right name for your company speaks volumes about your business. Naming a company in India is governed by the Ministry of Corporate Affairs which has laid some regulations.
This blog explains the various rules and the guidelines set by the Ministry of Corporate Affairs (MCA) with respect to company name approval.
- Section 20 of the Companies Act, 1956, states no company is to be registered with an undesirable name. The name proposed is considered to be unwanted if it is identical or almost resembling the name of an existing company.
- When applying for a name in the prescribed e-form-1A the applicant is required to furnish a declaration. The declaration states that an applicant has used the search options available in the MCA portal for checking the resemblance of the proposed names.
- The name proposed should not breach the registered trademarks of any other persons under the Trade Marks Act, 1999.
- The proposed names should not violate the provisions of Emblems and Names (Prevention of Improper Use) Act, 1950.
- The name suggested for approval should not be offensive or hurt the sentiments of any group, religion, caste or gender.
- If the proposed name contains more than one word, then an applicant has to go through the search facilities available on the MCA portal. Further a professional will certify that the proposed name is not an undesirable name. This is in conformity with Companies Rules, 2011 (name availability) and guidelines made therein.
- The name will be available online in the system to the applicant. However, the facility for application for change of name of existing companies is not available.
- In case if the name has been found later which should not be allowed under Section 20 of the Companies Act, the professional shall be liable for penal action.
- The proposed name for the company will be undertaken by the back-end team from ROC. Meanwhile, the availability and non-availability of the name will be intimated to the applicant.
- The name of the company is liable to be withdrawn any time prior to the registration of the company if found it has violated the rules.
- If the name is available to the applicant it shall be reserved for 60 days in case of LLP from the date of approval and 20 days in case of private limited company.
The following terms will disregard in determining whether a proposed name is similar to another or not.
- The words Private, Pvt, Pvt., (P), Limited, Ltd, Ltd., LLP;
- The words appearing at the end of the names – company, co, and Co, corporation, corp, corpn;
- Any words in the name appearing in the plural version.
- The type and ‘case of letters’, spacing, and punctuation marks.
- Use of different spellings does not distinguish one name from another. For example; if the name J.K. Industries Limited already exists, then in such situation one cannot have a name like J and K Industries, Jay Kay Industries, or J n K Industries etc which are not allowed.
- Words that are misspelled or misspelled intentionally do not conflict with the similar properly spelled words.
- The addition of an internet-related term such as .com, .net, .edu, .gov, .org, and .in does not make a name distinguishable from another.
- The addition of words like New, Modern, Nav, Shri, Sri, Shree, Om, Jai etc does not make a name distinguishable from an existing name like New Bata Shoe Company, Jai Bharat Electronic Company and so on. Similarly, if it is different from the name of an existing company only to the extent of adding the name of the place, the same shall not be allowed. For example; if ‘Unique Marbles Limited’ already exists then one cannot propose the name as ‘Unique Marbles Bangalore Limited’.
However, such names may be allowed only when an existing company has no objection by way of Board resolution is submitted or produced.
- One cannot have the name of the company with an exact Hindi translation. For example; if there exists a company with name ‘Hindustan Ispat Udyog Limited’ then one cannot have its translated version like ‘Hindustan Steel Industries Limited’.
- A company cannot run the business unless its name and its nature of business are one and the same. For example; if the company is into housing finance business, then it should have the word ‘Housing Finance’ in it like ‘LIC Housing Finance, ‘GIC Housing Finance’. If the company nature of the activity is into leasing, then it should have the name ‘leasing’ like ‘First Leasing Company India Limited’ and so on.
- New companies cannot have its name by abbreviation or by numbers. For example; ‘XYZ Limited’, ‘32K Limited’ etc. However, companies of high repute are allowed to change their names to abbreviation. For example; Hindustan Machine Tools Limited to HMT Limited, Indian Tobacco Company Limited to ITC Limited, Bharat Electronics Limited to BEL and so on. This is as per the requirement of Section 21 of the Companies Act, 1956.
- One cannot select words like Bank, Mutual Fund, Venture Capital, Insurance, and Asset Management for name approval. It has to get approval from the regulatory authority such as RBI, IRDA, SEBI, FEMA, MCA etc. Without their prior approval, an applicant cannot propose for name approval.
- If the proposed name has the word ‘State’, the same shall be allowed only in case the company is a government undertaking. Also, if the name proposed contains the name of any country, state, a city like Asia Pacific Limited, Haryana Limited then in such cases the name approval will be withheld.
- If a foreign company is registering its subsidiary company in India, then the original name of the holding company may be allowed with the addition of word India in it. For example; Nestle is a foreign-based company and in India, it is better known as ‘Nestle India Limited’, ‘Cadbury India Limited’ and so on.
Hope after going through the entire blog you must have got an idea as to how to go about for a company name approval, what are the pros and the cons, procedures etc.