CHOOSING A COMPANY NAME FOR YOUR STARTUP

Last Updated On: March 25, 2019, noon
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When a company is set up, it is considered as separate legal entity. So, it also requires a name for identification & recognition purposes. This name is used while entering into contracts, at the time of suing in adjudicatory proceedings, holding property in its name etc. So, this name should be unique or should not resemble to any existing name. For this purpose, Ministry of corporate affairs issued Companies (Name Availability) Rules, 2011. This Article discusses the provision related to proposing a name for a company in the Companies Act, 2013 & rules issued thereunder. 

Section 4:

The Act provides that the name of public limited company should end with word “limited” and last words of private limited company should be “Private Limited”. It further provides that the name should not resemble with the name of existing company. Also, the name should be such that it should not constitute any offence under any law in force or is undesirable in the opinion of Government.

Further, the name should not use any word or expression which symbolizes any relationship with Government or any local authority unless prior approval regarding the use of word shall be taken from the central government.

Form No. INC1 regarding the application for the availability of name is to be filed along with prescribed fees of Rs. 1,000. Registrar after receiving the application will reserve the name for a period of 60 days.

Companies (Name Availability) Rules, 2011:

These rules prescribe the guidelines which should be followed regarding selecting a name for a company:

Firstly the selected name should not be undesirable. It will be considered as undesirable if it is identical to name of a company already in existences; or a registered trademark under Trade Marks Act, 1999; or S. 3 of the Emblems Act, 1950; or it contains any word offensive to a class of people.

For deciding whether the proposed name is identical to the name of the company already in existence, following should be considered:

- Existence of any plural version of the words of existing name in the proposed name should be avoided.

- Any change made in the existing name in terms of type, letters, spacing & punctuation marks does not make proposed name a unique name.

- Separating or joining the words of existing company should be avoided.

- The use of different tense or number of the words of existing company’s name does not make proposed name unique.

- The use of different phonetic spellings & spelling variations in the existing company’s name does not make a proposed name unique.

- Intentional misspelling of words does not make a proposed company’s name unique.

- Adding internet related designation like .com, .net, .edu etc should be avoided.

- Adding words like new, modern, nav, shri etc. in existing name does not make proposed name unique.

- Adding name of place in existing company’s name does not make a proposed name a unique one.

- Proposed name consisting of different combinations of words of existing company name is not unique.

- Proposed name having translation of name of existing company is not unique.

Further guidelines are provided for applicants & registrar while applying & approving the proposed name. They are as follows:

- It is not mandatory that proposed name should indicate the main object of the company.

- If the business of the company is finance, housing finance, chit fund, leasing, investment, securities or combination thereof, the proposed name should indicate these financial activities.

- The words indicating separate type of business constitution or legal person or any combination thereof like cooperative, sehkari, trust, LLP, partnership, society, proprietor, HUF, firm, Inc., PLC, GmbH, SA, PTE, Sdn, AG etc. should not be mentioned in proposed name.

- Abbreviated name such as ‘BERD limited’ or ‘23K limited’ cannot be given to a new company. However the companies well known in their respective field by abbreviated names are allowed to change their names to abbreviation of their existing name (for Delhi Cloth Mills limited to DCM Limited, Hindustan Machine Tools limited to HMT limited) after following the requirements of provisions of the Companies Act. Further, if the name is only a general one like Cotton Textile Mills Ltd., or Silk Manufacturing Ltd., and not specific like Calcutta Cotton Textiles Mills Limited or Lakshmi Silk Manufacturing Company Limited, the same shall not be allowed.

- Name identical to dissolved firm is not allowed upto expiry of 2 years. Also, name identical to struck off company is not allowed upto expiry of 20 years.

- Proposed name including words such as ‘Insurance’, ‘Bank’, ‘Stock Exchange’, ‘Venture Capital’, ‘Asset Management’, ‘Nidhi’, ‘Mutual fund’ etc. is allowed when the declaration is made by applicant that requirements of the respective regulators like RBI, SEBI etc. are complied with.

- Proposed name including word state is allowed only in respect of a government company. Also, proposed name including only the name of state, country, continent etc. is not allowed.

- In case of subsidiary of foreign company, the original name of holding company with word India or any Indian City is allowed.

To conclude it can be said that the firstly it is the responsibility of the proposed company that the proposed name should not be undesirable in any respect as mentioned above. Further, after application, the role of registrar to see whether the above mentioned guidelines are properly followed by the applicant or not.

 

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