The name of a company is a huge part of its identity. It is one of the few characteristics that form the unique identity of the company and sets the base for recognition in the market. This is why it is necessary to stay updated on the “Company Name” norms in India.
In this article, you will get a detailed analysis of the new “company name” norms that will be effective from 1st of September 2021.
1. Existing Provisions related to Name (Section 16 of the Companies Act, 2013)
Section 16 of the Companies Act relates to the rectification of a company name in various circumstances. Even the Central Government has the power to directly change the Company’s name.
1.1 Situations when Rectification of Name required
According to Section 16 (1) of the Companies Act, if a company obtains new registration or amends its name, then in the following situations the company will be required to change its name:
- If Central Government is of the opinion that the name of the company is identical or too nearly resembles the name of an existing company (registered under new or old company law);
- If a registered proprietor of a trade mark makes an application to the Central government that that a company name is identical with or too nearly resembles to a registered trademark of such proprietor under the Trade Marks Act, 1999.
1.2 Action to be taken by the Company
- Upon receipt of directions from the Central Government, the Company shall change its name or adopt a new name within 3 Months or 6 months from date of receiving such direction.
- Name can be changed after passing an ordinary resolution.
- As per Section 16(2) of the Companies Act, where a company changes its name or obtains a new name under Section 16 (1) of the Companies Act, the company must give a notice of such change to the Registrar of Company within 15 days from the date of such change.
- Furthermore, information to the RoC must be given along with the order of the Central Government who will then carry out necessary changes in the certificate of incorporation and memorandum.
1.3 Consequences of Non-Compliance
- According to Section 16 (3) of the Act, if a company fails to comply with any direction of the Central Government then the Company shall be punishable with fine of INR 1,000 for every day during which default continues.
- Further, every officer in default shall be punishable with fine which shall not be less than INR 5,000 but which may extend upto INR 1,00,000.
2 The New Norms On Company Names
Ministry of Law and Justice has notified amendments in Section 16 of Companies Act by the Companies (Amendment) Act, 2020. Rules subordinate to Amended Provisions were notified by the Ministry of Corporate Affairs on July 22, 2021 through The Companies (Incorporation) Fifth Amendment Rules, 2021 (“Amendment”) revising the Companies (Incorporation) Rules, 2014. (“Rules”).
List of amendments related to Company’s Name provisions is given below:
2.1 Action to be taken post receipt of Direction from Central Government:
- As per Amended Section 16(3) of Companies Act, 2013, if a company fails to change its name as per directions issued by Central Government then Central Government shall allot a new a name to the company.
- The Name shall be allotted in the manner prescribed under new Rule 33A(Allotment of a new name to an existing company under Section 16(3) of the Act).
- The Registrar of company shall enter the new name in the Register of Companies in place of the old name and shall issue a fresh certificate of incorporation with the new name.
2.2 Allotment of new Name by Central Government
- As per newly inserted Rule 33A, in case a company fails to change its name in accordance with the direction issued by Central Government within a period of 3 months then the letters ‘ORDNC’ (Order of Regional Director Not Complied), the year of passing of the direction, the serial number and the existing Corporate Identity Number of the company shall become the new name of the company.
For E.g. If an existing Company with Name-ABC Private Limited (CIN: U11111UP1111PTC111111) Company fails to a company with Directors of Central Government issued in 2021 vide S.No. 123456, then, the new name of the company shall be “ORDNC2021123456U11111UP1111PTC111111”
- However, provisions of Rule 33A shall not apply if the company has filed e-form INC-24– Application for approval of Central Government for change of name. However, such form is outstanding for disposal at the time of expiry of 3 months unless the e-form is later rejected.
- The Registrar of Companies will enter the new name in the company’s register of names and issue a new certificate of incorporation in Form No. INC-11C.
- According to Rule 33A, a company whose name has been changed under sub-rule (1) must immediately comply with the provisions of Section 12 of the Companies Act. The statement “Order of Regional Director Not Complied (under Section 16 of the Companies Act, 2013)” must be printed, affixed, or engraved below the company’s name wherever it is printed, affixed, or engraved.
- However, if the company later changes its name in conformity with the provisions of Section 13 (Alteration of Memorandum) of the Companies Act, no such notification is required.
- The Amendment will take effect from September 1, 2021.
1. What is Rule 33A?
Rule 33A of the Companies Act, 2013 talks about allotment of a new name to an existing company under Section 16(3) of the Act. It is the newly added rule that brings about the new “company name” norms.
2. What is the time period of changing the name of the company?
The time period mentioned under Section 16(1) of the Act is 3 months from the date of issue of direction by the Central Government.
3. What shall become the new name of the company in case of inability to comply with the rules?
In case of inability to comply with the set rules within the specified time period of three months from the date of issue of such direction, the new name of the company shall be letters ‘ORDNC’ (Order of Regional Director Not Complied), the year of passing of the direction, the serial number and the existing Corporate Identity Number.