Unease of Name Approval

Before being launched a pilot project on 26^th January 2016, central registration of companies was under consideration since long. However, The Central Government under the able leadership of Prime Minister Narendra Modi launched it silently and suddenly as a pilot project for the setting of Central Registry for Companies in India. Presently, central registry looks after only two functions: (a) Name Approval and (b) Company Incorporation.

Central Registry aims to serve a single window for compliances, reduce the requirement of personal visits and therefore corruption, and to upgrade the position of India in ease of doing business index. It was also told that central registry shall reduce workforce requirement in registration function and free it for enforcement function.

However, opponents saw this attempt to reduce decentralisation; increase touts activities in corruption, increase cost, reduce chances to explain a name directly to the relevant officer, and overburdened staff at the central registration office. Unfortunately, in last 22 months of implementation of this pilot project, most apprehensions of opponents seem to be true.

In earlier decentralised regime, practising company secretaries files an application with the MCA21 system, which automatically directed to the jurisdictional registrar of companies. Their system assigns it to a particular officer as per their own algorithm. The officer supposes to do a search from the names of existing companies, the name reserved for companies to be incorporated soon, and registered trademarks. When name pass this name was available for further consideration like under the Companies Act, 1956 or the Companies Act, 2013 and the Emblem and Names (Prevention of Improper Use) Act, 1950. Wherever a doubt or need explanation required, the applicant was available for discussion. Here comes the alleged corruption, which was claimed to be minimal by most company secretaries practising with jurisdictional Registrar of Companies.

Now, the Centralised Registry process name available application filed with the MCA21 system. The workflow is still same at registrar office sans chance of an official visit by the applicant. Interesting things come here. It blames that present system stopped only official interaction but not hidden one. Such hidden interaction, if really happen, have increased the hidden cost of corruption. Additionally, applicant sitting in another city may not have a chance of such unofficial interaction. They are now forced to hire touts in Delhi NCR. The cost of hiring a tout in Delhi is now an additional burden to the cost of corruption if it still exists.

The cost of touts and corruption is usually a well-accepted business norm in most countries. This is usually not a problem for business houses. Their prime concern is speed and ease of doing business.

Allegedly, the most applications filed before central registry face at least one resubmission. Most company secretaries off the record claim a pattern in the selection of ground of rejection. Mostly similarity with a registered trademark or renowned trademark, or name an existing company raised if not a technical ground. Recently there was a strange claim from few applicants. There is an alleged pattern of approving a name lower in rank among option applied by the applicants. Interestingly, officials do not raise all their objections at once, which may be possible due to oversight at the first time or maybe a sinister way to hold the application for the second resubmission. This second-time objection creates panic at end of applicant and most of the time seen as an invite to an unofficial meeting.

Unfortunately, these complainants do not the official complaint against such practices and silently welcome corruption and therefore harms governments attempt to reduce corruption from its system.

What I see is lack of opportunity for official interaction between applicant and the central registry is a problem. The present system has only one way of official interaction between central registry and applicant. I suggest, an option of official online chat between designated officer at central registry and applicant. This may facilitate both central registry and applicant to explain their viewpoints to each other.

P.S. Reader may give their suggestion in comment box which will not be published without their wishes.