COMPANIES (INCORPORATION) FIFTH AMENDMENT RULES, 2019

Ministry of Corporate Affairs (MCA) recently released a notification introducing rules and amending Companies (Incorporation) Fifth Amendment Rules 2019 which will come into effect from 10th May, 2019. In the process of Incorporation of a new company, a unique name of the company must be reserved with the Ministry of Corporate Affairs (MCA), as one of the Companies Incorporation Rules. Rule 8 of Companies Incorporation Rules 2014 provides name approval/availability guidelines as per Companies Act 2013 while selecting the names for a company.

SUMMARY
The MCA has elaborated a no. of illustrations this rule while determining the name of the company and Companies (Incorporation) Fifth Amendment Rules 2019 has divided the rule into two parts:
• Rule 8
• Rule 8A
• Rule 8B

AIM OF THE AMENDMENT:

The main aim of the Companies Incorporation Rules, 2019 is transparency while determining the name of the company under the Companies Act, 2013. There are illustrations given on the singular and plural form of words in one or both names or type and cases of letters, spacing between letters, punctuation marks and special characters used in one or both names.

HIGHLIGHTS OF THE AMENDMENT (RULE 8):

SUB RULE 1:  A name applied for shall be deemed to resemble too nearly with the name of an existing company, if, and only if, after comparing the name applied for with the name of a current company by disregarding the matters set out in sub-rule (2), the names are same.

SUB RULE 2:  The following matters are to be disregarded while comparing the names under sub-rule (1):

• The words like Private, Pvt, Pvt., (P), OPC Pvt. Ltd. IFSC Limited, IFSC Pvt. Limited, Producer Limited, Unlimited, Ltd, Ltd., LLP, Limited Liability Partnership, company, and company, & co, & co., co., co, corporation, corp, corpn, corp or group.
• The plural or singular form of words in one or both names, eg. ) Green Technology Ltd. is same as Greens Technologies Ltd. and Greens Technologies Ltd.
• The type and case of letters, the spacing between letters, punctuation marks and special characters used in one or both names, eg. ABC Ltd. is same as A.B.C. Ltd. and A B C Ltd.
• The uses of tenses in one or both names, eg. Ascend Solutions Ltd. is same as Ascended Solutions Ltd. and Ascending Solutions Ltd.
• The use of different phonetic spellings including use of misspelt words of an expression, eg. Bee Kay Ltd is same as BK Ltd, Be Kay Ltd., B Kay Ltd., Bee K Ltd., B.K. Ltd. and Beee Kay Ltd.
• The use of host name such as `www’ or a domain extension such as ‘net’, ‘org’ ‘dot’ or ‘com’ in one or both names, eg. (i) Ultra Solutions Ltd. is same as Ultrasolutions.com Ltd. (ii) Supreme Ultra Solutions Ltd. is not the same as Ultrasolutions.com Ltd.
• The order of words in the names, eg. (i) Ravi Builders and Contractors Ltd. is same as Ravi Contractors and Builders Ltd. (ii) Ravi Builders and Contractors Limited is not the same as Ravi Shankar Builders and Contractors Limited.
• The use of the definite or indefinite articles in one or both names, eg. (i) Congenial Tours Ltd. is same as A Congenial Tours Ltd. and The Congenial Tours Ltd.
• A slight variation in the spelling of the two names including a grammatical variety thereof, eg. (i) Color Technologies Ltd. is same as Colour Technologies Ltd. (ii) Disc Solutions Ltd. is same as Disk Solutions Ltd. but it is not same as Disco Solutions
• A complete translation or transliteration, and not part thereof, of an existing name, in Hindi or in English, eg. (i) National Electricity Corporation Ltd. is same as Rashtriya Vidyut Nigam Ltd. (ii) Hike Construction Ltd. is not the same as Hike Nirman Ltd.
• An addition of the name of a place to a current name, which does not contain the name of any place, eg. (i) If Salvage Technologies Ltd. is an existing name, it is same as Salvage Technologies Delhi Ltd and Salvage Delhi Technologies Ltd. (ii) Retro Pharmaceuticals Ranchi Ltd. is not the same as Retro Pharmaceuticals Chennai Ltd.
• An addition, deletion, or modification of numerals or expressions denoting numerals in an existing name, unless the numeral represents any brand, eg. Thunder Services Ltd is same as Thunder 11 Services Ltd and One Thunder Services Ltd.

Provided that clauses (f) to (h) and clauses (k) and (1) shall not be disregarded while comparing the names, lf a no objection by way of a Board resolution has been provided by an existing company.

8A: UNDESIRABLE NAMES:  

• It is prohibited under the provisions of section 3 of the Emblems and Names (Prevention and Improper Use) Act, 1950 (12 of 1950), unless a previous permission has been obtained under that Act;

• It is an undesirable name if it includes any word or words which are offensive to any section of the people.
• If the proposed name is identical with or too nearly resembles the name of a limited liability partnership.
• If the company’s main business is financing, leasing, chit fund, investments, securities or combination thereof, but the proposed name is not indicative of such related financial activities. i.e. Chit Fund or Investment or Loan, etc.
• If the company’s name is indicative of activities financing, leasing, chit fund, investments, securities or combination thereof, but the company’s main business is not related to such activities.
• If it resembles closely the any popular or abbreviated description of an existing company or limited liability partnership.
• If the proposed name is identical with or too nearly resembles the name of a company or limited liability partnership which is incorporated outside India and reserved by such company or limited liability partnership with the Registrar: Provided that if a foreign company is incorporating its subsidiary company in India, then the original name of the holding company as it is may be allowed with the addition of word India or name of any Indian State or city.
• If the proposed name contains the words ‘British India’.
• If the proposed name implies association or connection with an embassy or consulate of a foreign government.
• If the proposed name includes or implies association or connection with or patronage of a national hero or any person held in high esteem or important personages who occupied or are occupying important positions in the Government.
• If the proposed name include words such as ‘Insurance’, ‘Bank’, ‘Stock Exchange’, Venture Capital’, ‘Asset Management’. ‘Nidhi’, ‘Mutual Fund’, etc., unless a declaration is submitted by the applicant that the requirements mandated by the respective regulator, such as IRDA, RBI,SEBI, MCA, etc. have been complied with by the applicant.
• If the proposed name includes the word “State”, in case the company is not a Government company.
• If the proposed name is containing only the name of a continent, country, State, city such as Asia limited, Germany Limited, Haryana Limited or Mysore Limited.
• The Use of descriptive names, where the name merely consists of commonly used words to describe an activity:

(A) The term “commonly used words” refers to use of generic expressions which may be used by any other company to describe its trade;

(B) While determining whether the proposed company or the not be relevant.

(C) The name shall not be deemed to be descriptive where “commonly used words” are used in addition to other words in the name.

Let us now look at some illustrations for a better understanding:

• The names Silk Manufacturers private Limited and Manufacturers Silk Ltd. are descriptive names as they merely describe an activity which may also be carried out by any other company and the order of the words is not relevant while determining a descriptive name.
• The names Computer World Ltd., Food Star Ltd., Tour Hub Ltd or House of Chocolate Ltd are not descriptive as the names do not merely consist of commonly used words.
• The names Technical Vista Ltd or Vista Technical are not descriptive as the names do not merely consist of commonly used words and the order of the words and the order of the words is not relevant while determining whether a name is descriptive.
• The name Drinking Water plant Ltd. is a descriptive name, even if the object of the company is not related to making drinking water plant as it consists of commonly used words and objects of the proposed company is not relevant while determining whether a name is descriptive.
• The name Silk Wise Manufacturers private Limited is not descriptive as it contains words other than commonly used words.
• The proposed name includes name of any foreign country or any city in a foreign country, the same shall be allowed if the applicant produces any proof of significance of business relations with such foreign country like memorandum of understanding with a company of such country.

Provided that the name combining the name of a foreign country with the use of India like India Japan or Japan India shall be allowed if, there is a government to government participation or patronage and no company shall be incorporated using the name of an enemy country.

• The proposed name of a section 8 company under the Act does not include the words Foundation, Forum, Association, Federation, Chambers, Confederation, Council, Electoral Trust etc.
• The proposed name of a Nidhi company under the Act does not have the last words “Nidhi Limited” as a part of its name.
• The proposed name has been released from the register of companies upon change of name of a company and three years have not elapsed since the date of change unless a specific direction has been received from the competent authority in the course of compromise, arrangement or amalgamation.

8B: WORD OR EXPRESSION WHICH CAN BE USED ONLY AFTER OBTAINING APPROVAL OF CENTRAL GOVERNMENT.

The following words and combinations thereof shall not be used in the name of a company in English or any of the languages depicting the same meaning unless the previous approval of the Central Government has been obtained for the use of any such word or expression:-

1.  Board;
2.  Commission;
3.  Authority;
4.  Undertaking;
5.  National;
6.  Union;
7.  Central;
8.  Federal;
9.  Republic;
10.  President;
11.  Rashtrapati;
12.  Small Scale Industries;
13.  Khadi and Village Industries Corporation;
14.  Financial Corporation and the like;
15.  Municipal;
16.  Panchayat;
17.  Development Authority;
18.  Prime Minister or Chief Minister;
19.  Minister;
20.  Nation;
21.  Forest corporation;
22.  Development Scheme;
23.  Statute or Statutory;
24.  Court or Judiciary;
25.  Governor;
26.  the use of word Scheme with the name of Government(s), State, India, Bharat or any Government authority or in any manner resembling with the schemes launched by Central, State or local Governments and authorities; and
27. Bureau.

Further details related to Companies (Incorporation) Fifth Amendment  Rules, 2019 can be referred by clicking the given link