RESERVATION OF NAME

When a promoter decides to form a company; first legal step is reservation of a name for the company.

We have discussed recently, the name of the company should not constitute an offence under any law for the time being in force or is undesirable in the opinion of the Central Government.

As we discussed earlier, on application made by a person, the Registrar may reserve the name for a period of sixty days from the date of the application. If it is found that name was applied by furnishing wrong or incorrect information, then the reserved name shall be canceled and fine may be imposed. If the company has been incorporated with such name, the Registrar may, after giving the company an opportunity of being heard— (i) either direct the company to change its name within a period of three months, after passing an ordinary resolution; (ii) take action for striking off the name of the company from the register of companies; or (iii) make a petition for winding up of the company.

According to Rule 8 and 9 of the Companies (Incorporation) Rules 2014, an application for reservation of name under Section 4(4) shall be made on Form INC – 1. The application shall be made by a person who preferably has a Director Identification Number. If not, the applicant must have a Permanent Account Number.  The applicant must have a digital signature.

I have already discussed about preparation before incorporation documentation in an earlier post here. Details of class or category of proposed company must be decided beforehand. Details of promoters, proposed subscribers and proposed directors must be kept ready. This is prudent to keep ready DIN of all these persons. Details of possible place of registered office must also be decided. Object of proposed company have been reduced into writing and agreed by all promoters. 

Particulars of the proposed directors are also required to be entered. This is a case for compulsory Director Identification Number. There is a different requirement for minimum number of directors in different classes of companies:

(a)  One Person Company: One Director;

(b)Private Company: Two Director;

(c)  Public Company: three director; or

(d)  Producer Company: five Directors;

Once, the Applicant entered the correct DIN and click Pre – fill button, the software shall pick and fill all details from the MCA Server.

Promoter must identify up to six names in order of their priority with the help of a professional. Applicant shall note significance of each key or coined word in the proposed name. In case these words are of a vernacular language, name of language must be disclosed.

I have no idea of significance of such requirement of explanation of significance of these words. Companies must be given greater freedom to choose their names as long as they ensure themselves their name is not undesirable under law. A company shall never go for a world which may cause any legal, social religious or other hurdle. Further, even a name approved here may cause hurdle elsewhere. Like Hitler may be accepted in India but not in Germany.

According to the Rules and Form INC – 1, Company must disclose any resemblance with any class of Trade Marks rules, 2002.

Where the proposed name is based on a registered trademark of subject matter of an application pending for registration under the Trademark, particular of trademark or of the application shall be furnished.

This requirement is also very disappointing. A single trademark may be registered by different users in different classed of the Trademark Rules, 2002. Trade mark “VIP” is one of famous Indian example. But it seems any person other a trademark user may have to face hardship to register a name of a company even if its activities are related to any other class. What if the company changes its activities afterward?

In case the name is similar to any existing company or to the foreign holding company, Applicant need to specify name of the company and also attach copy of the No Objection Certificate by way of Board resolution.

Where the proposed name includes the word such as Insurance, Bank, Stock Exchange, Venture Capital, Asset Management, Nidhi, or Mutual Fund etc; in – principle approval from sector regulator is required. In case, proposed name includes words “Electoral Trust”, an affidavit under Rules 8(2)(b)(iv) of the Companies (incorporation) Rules 2014 shall be attached.

In case, any name required Central Government approval, same application in Form INC – 1 shall be treated as an application before Central Government subject to selection of correct option given in the form.

Note: at the time of writing this post, there is no pre –certification requirement for the form neither any place for signature for pre-certification by professional. Most interestingly, at the bottom of the Form INC – 1, there is a note in bold letters, “This e- Form has been approved by the Registrar of Companies through electronic mode and on the basis of statement of correctness given by the applicant and certification given by the practicing professional, in terms of the Name Availability Guidelines.” [No copy in Official Gazette found as on 14th April 2014]

Form INC 1 as on March 30 2014

Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.