Section 16 Of Companies Act 2013: Rectification Of The Name Of A Company

Section 16 of the Companies Act, 2013 talks about the Rectification of the name of a Company. If, through inadvertence or otherwise, a company on its first registration or on its registration by a new name, is registered by a name which, —

(a) in the opinion of the Central Government, is identical with or too nearly resembles the name by which a company in existence had been previously registered, whether under this Act or any previous company law, it may direct the company to change its name and the company shall change its name or new name, as the case may be, within a period of three months from the issue of such direction, after adopting an ordinary resolution for the purpose;

(b) on an application by a registered proprietor of a trademark that the name is identical with or too nearly resembles a registered trademark of such proprietor under the Trade Marks Act, 1999, made to the Central Government within three years of incorporation or registration or change of name of the company, whether under this Act or any previous company law, in the opinion of the Central Government, is identical with or too nearly resembles an existing trade mark, it may direct the company to change its name and the company shall change its name or new name, as the case may be, within a period of six months from the issue of such direction, after adopting an ordinary resolution for the purpose.

What comes to your mind when you think of any company?

Yes, it’s the name of the Company. It is of the foremost impression when we hear it for the very first time. When an entrepreneur has an intention to register a new company, the initial step is to decide the name of his company. Choosing the name of a company is no easy task as it seems to be.

Numerous do’s and don’ts under the Companies Act, 2013 are specified for choosing the name of a company which can, in turn, be challenging for an entrepreneur to have the name of his choice.

It may happen that the name which the entrepreneur decides for his company is already registered by some other entrepreneur so in such case, he won’t be able to apply for the same name. It will be rejected by the CRC, Delhi (Ministry of Corporate Affairs).

Many times, after registration of a Company or during incorporation, the concerned Registrar of Company (ROC) may order to rectify the name if it comes to notice that the existing name is opted in contravention with Rule 8 of Companies (Incorporation) Rules, 2014. Section 16 deals with Rectification in name of the Company under the Companies Act, 2013.

Do ’s and Don’ts under Rule 8 for choosing the name of a Company

Rule 8 deals with choosing the name of a company. Few do’s and don’ts are mentioned below-

1. Resembling name too nearly with the name of existing Company

2. Use of hostnames like www or any domain name like .net or. Org etc

3. Using the name of any city or place in the existing name of any other company

4. Undesirable names under section 3 of the Emblems and Names (Prevention and Improper Use) Act, 1950 (12 of 1950)

5. If the company deals with financing, leasing, chit fund, investments, securities, or a combination thereof and the name of the company does not indicate its activities then it will not be allowed, etc.

Rule 8 of Companies (Incorporation) Rules, 2014 contains in detail the above explanation.

Can the Registrar of companies order for rectification of the name of a Company?

Yes. Registrar of Companies has the authority to order for rectification of the name of a company. If a company is registered and it is found that the name opted is inappropriate or nearly resembling or identical to the name of existing companies/ LLPs or Trademarks registered under the Indian Trade Marks Act, 1999, then the concerned Registrar of Company may on representation from other parties, order for rectification of name to such company if it is satisfied in all terms that the said name needs to be rectified.

Directions on Suo Moto by the Central Government for order of Rectification of name of the Company

There are a few conditions whereby the Central Government may issue suo moto directions to the company for rectification of the name of the Company. This order can be issued anytime-either-

1. Before Registration of the company or

2. After Registration of the company or

3. Any time during its existence

Please take a note of the conditions mentioned below

The name approved is found identical or it nearly resembles

1. Name of the already existing company; or

2. Name of already existing LLP; or

3. Trademarks registered under Trademarks Act, 1999.

Can the proprietor of a registered trademark make an application to the Central Government for rectification of the name of another company?

As the Government has authority to suo moto issue an order in case of rectification of Company, likewise a proprietor of registered trade mark can also make a representation to the government on the grounds that the name of another company is identical with or too nearly resembles to a registered trade mark of such proprietor under the Trade Marks Act, 1999 as under-

1. for change of name within a period of 3 years from the date of registration of Private Limited Company

2. 3 years from the change of Company name.

Approval/ Rejection of Application made by the entrepreneur

The Central Government on receipt of application from the entrepreneur, if gets satisfied that the documents submitted are as per the requirement under sec 16 of Companies Act, 2013, and agrees that the name of another company is too nearly resembling or identical it may approve the application and simultaneously order the company to rectify the name of the company but before that, the government should give at least once an opportunity of being heard to another company.

Similarly, if the Central Government does not find grounds for the application to be worth and true, then it may directly reject the form after giving an opportunity of being heard.

10 Steps Procedure for Rectification of Name of a Company

Once an order is received from the central government then the company should take steps for rectification of name of the company on priority. Following procedure need to be followed by the company-

Step 1: Decide another name for the company

Step 2: Check on www.mca.gov.in whether the decided name is available or not

Step 3: Conduct a Board Meeting and pass the necessary resolution for a change in name of the company

Step 4: Apply online in e-Form RUN for name reservation

Step 5: The name will be approved by the Ministry of Corporate Affairs

Step 6: Issue the name approval letter, valid for 21 days from the date of approval.

Step 7: Hold an Extra-Ordinary General meeting of the members of the Company for rectification in name of the Company

Step 8: File form MGT-14 after according consent of members

Attachment:

1. Name approval letter

2. Copy of Board Resolution

3. Copy of EOGM resolution

4. Altered copy of a memorandum of association of the company

5. Altered copy of Articles of association of the company

Step 9: Make an application to the central government in form RD-1

Attachment:

1. Name approval letter

2. Copy of Board Resolution

3. Copy of EOGM resolution

4. Altered copy of a memorandum of association of the company

5. Altered copy of Articles of association of the company

6. Copy of Registered Trademark Certificate if any

Step 10: Approval by concerned Regional Director and intimation mail sent to the Company

Penalty

It is an utmost recommendation to all companies to have timely compliance under the Companies Act, 2013 to avoid heavy penalties for the same.

In case of rectification of the name of the company, if there is contravention in compliance with Section 16 of the Companies Act, 2013 then the company shall be punished with fines up to Rs 1,000 for each day of default. The officers in default of the company shall be liable for a fine of the amount being not less than Rupees Five Thousand but which may extend to Rupees One Lakh.