MCA Amends Rules for Companies Name Approval
The much-awaited amendment of Rules regarding Company Name Approval has been released by the Ministry of Corporate Affairs.
The regulations regarding the Undesirable Names for the newly established company are given in rule 8 of the Companies (Incorporation) Rules, 2014. The Ministry of Corporate Affairs has recently amended these rules.
In this regard,
- Some new regulations have been drafted by MCA with respect to resemblance with an existing company name.
- Some existing regulations in this respect have been now excluded.
- Besides, some new categories of undesirable names of a company have been now added.
- However, these amendments shall be brought into effect upon their publication in the Official Gazette of India. These rules shall be referred to as the Companies (Incorporation) 5th Amendment Rules, 2019.
MCA has also released a detailed notification in this regard.
Now let’s take a look at the recently introduced in the company name rules.
1. What are the changes in rules for resemblance with existing company name?
For determining whether a proposed company name is resembling with an existing company name, some additional cases have been added, that shall be disregarded:-
- If there a use of the definite or indefinite article (a, an, the) in one or both names.
- RPM Ltd is same as A RPM Ltd or The RPM Ltd.
- However, Vil solutions Ltd. is not the same as Anvil solutions Ltd.
- If there is a slight difference in the spelling in the 2 names.
- Disc Music Ltd is same as Disk Music Ltd but not Disco Music Ltd.
- In case the name of a place is added to an existing name that originally does not include any name of any place.
- ABC tech Ltd. is the same as ABC tech India Ltd. or ABC India tech Ltd.
- However, ABC tech India Ltd. is not the same as ABC tech Delhi Ltd.
- If there’s any addition, deletion, or modification of numbers or any expression denoting numbers in an existing name, unless the number itself represents any brand:
- Wave Infra Ltd. is same as Wave 1 Infra Ltd. or Wave One Infra Ltd.
- However, Wave Infra Ltd. is not the same as WaveOne Infra Ltd. if WaveOne itself represents a brand name.
2. Which new categories of undesirable names have been added?
Following new categories of undesirable names have been added by MCA. Such names shall not be allowed while company incorporation:
- If a company's name indicates any activities relating to financing, leasing, chit-fund, investment, securities etc., though the company's business activity is not related to any of such activities.
The name “ABC Finance Ltd.” shall not be allowed unless the company is not dealing in any activity related to Finance.
- Any descriptive name, wherein the name contains any commonly used words that describe any business activity.
Also, refer to the list of undesirable names.
3. Which are commonly used words in a company name?
The term "commonly used words" in this context, refers to those generic expressions that describe a company’s trade.
Below are some important points to be considered while company incorporation with regard to "commonly used words":
- Whether a Company name is descriptive is determined, irrespective of the objects of the proposed company.
- However, the name shall not be considered as descriptive if commonly used words are used additionally with other words in the name.
4. How to detect commonly used words in a company name?
Here are some illustrations that will explain the use of commonly used words:
- The names Food Processors Pvt. Ltd. or Processors Food Ltd. are descriptive, as they denote a business activity which can also be carried out by other companies.
- The names Digital World Ltd., Travel Plus Ltd., IT Hub Ltd or Republic of Chicken Ltd are not descriptive, as these names do not consist of any commonly used words.
- The name Water treatment plant Ltd. is a descriptive name, even if the object of the company is not related to water treatment. This is because it contains commonly used words and objects of the proposed company are not relevant when determining whether a name is descriptive.
- A name Computer Care Services Pvt. Ltd. is not descriptive as it contains other words apart from commonly used words.
5. Why is Company name search important?
While incorporating a company, many people face huge delays during the process of company name approval. This is because many of them are unaware of the Undesirable Names for a newly incorporated company, as set by the Ministry of Corporate Affairs of India.
Hence, during the process of company incorporation, it is very important to search Company name on the MCA portal.
If you need any sort of guidance regarding Company name approval or the process of company formation, you can feel free to contact our business advisor at 8881-069-069.
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