The Hindu Business Line : Draft concept rules propose strict norms for company names

THINKING about incorporating a company? Ensure that the proposed name should not have a phonetic similarity or is a translation of a name of the existing known company.

The Ministry of Company Affairs has stated this in the guidelines for name availability sketched out in Draft Concept Rules for the Concept Paper on the simplified company law.

If the proposed name happens to be the exact Hindi translation of the name of an existing company in English, especially of a company with reputation, then the name would not be available to you, according to the Rules.

In cases where the proposed name is not in consonance with the principal objects of the company as set out in its memorandum of association, then the names would not be considered.

"This does not necessarily mean that every name should be indicative of its objects, but when there is some indication of business in the name, then it should be in conformity with its objects.

"However, unless the application for availability of name is for name change, the principal object of the proposed company in suitable words need to be part of the proposed name," sources said.

For instance if the company's main business is finance, the name should be indicative of that financial activities - chit funds, investments, loans, insurance or banking.

The Rules also stated that the proposed names should not include any words, which are offensive to any section of the people.

Even names, which appear confusing with any political or religious organisation, would be considered as undesirable.

The Rules also suggested that the proposed name should not have a close phonetic resemblance to the name of a company in existence for example: JK Industries Ltd, Jay Kay Industries Ltd.

If the proposed name is vague like DJMO Ltd or TNVR Private Ltd or SSRP Ltd, then the abbreviated names can be considered by the Registrar for change of name.

However, the company should be having a paid-capital of Rs 5 crore and a turnover of minimum Rs 100 crore and should be popularly known with the proposed abbreviated names, it stated.

Further, the company should possess either a trademark or patent registered with the abbreviated name.

If the proposed name includes registered trademark, then unless the promoters have produced the consent of the owner of the trademark, the proposed name would not be considered.

It may not be possible in all cases to check up the proposed name with the trademark, or trademark for which application is pending before the appropriate authority.

However, if the registrars are in the knowledge or some interested party/parties bring to their notice a trade mark, which is included in the proposed name, then it should not be allowed unless a no-objection certificate is obtained from the party who has registered the trade mark in its own name or has made an application for registration of trade mark, the Rules stipulates.

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