The amended rules on company incorporation have been notified specifying how a company shall be permitted to be named. What’s more, the Ministry of Corporate Affairs has provided illustrative examples for the sake of added clarity.
Recently, the Companies (Incorporation) Fifth Amendment Rules, 2019 (“Amended Rules”) have been promulgated so as to amend the Companies (Incorporation) Rules,2014 (“Old Rules”). While the Old Rules contained a provision (Rule 8) detailing the kinds of names that shall be deemed to be improper or undesirable, there was ambiguity on a few respects. The Amended Rules have been envisaged to address these ambiguities especially by providing illustrations alongside each provision.
While a lot of standard benchmarks that shall render the name of a company impermissible are replicated in the Amended Rules, a few added provisions may be noted. For instance, it has been specifically provided that if the name of a newly incorporated company contains special characters, (such as $,&,*,!) but for these special characters, the name is similar to that of an existing company, such a name shall not be allowed. Another new addition that shall be disregarded when distinguishing the names of two companies is the use of the internet host name “www”. This means that, for example the name Ultra Solutions Ltd. is same as www.Ultrasolutions.com Ltd.
Among prohibition of names violative statutes, the Amended Rules retain the mandate under the Old Rules. For instance, it has been provided that the name of the company shall be considered undesirable if it attracts the provisions of section 3 of the Emblems and Names (Prevention and Improper Use) Act, 1950 (“Emblems Act”).
As regards names of new companies merely adding the name of a place to the name of an existing company, the Old Rules provided room for such names to be permissible on the condition of a no objection from the existing company by way of Board resolution is submitted. However, the Amended Rules provide that such names adding only the name of a geographical place to the name of an existing company shall in no circumstance be permitted.
Further, some of the directions around naming a company that found place in the Old Rules have not been included in the Amended Rules. Below are the additional factors that rendered a name undesirable as per the Old Rules–
- Name of a company being contrary with the principal objects of the company as set out in the memorandum of association;
- Abbreviated form of the name of promoters.
- Change in the company’s activities not being reflected in its name
- Name of a person other than the name(s) of the promoters or their close blood relatives in the name of a company
These factors, subject to conditions and no objection letters, as applicable, no longer are indicative of the name of a company being improper.
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