India: New Norms On Company Names To Take Effect From September 1, 2021

On July 22, 2021, the Ministry of Corporate Affairs notified the Companies (Incorporation) Fifth Amendment Rules, 2021 ("Amendment"), thereby amending the Companies (Incorporation) Rules, 2014 ("Rules"). The Amendment, has inserted a new Rule 33A (Allotment of a new name to the existing company under Section 16(3) of the Act) after Rule 33 under the Rules.

Understanding Section 16 of the Companies Act, 2013 ("Companies Act").

Section 16 of the Companies Act relates to rectification of a company name subject to various conditions, including the Central Government's power to direct changing a company name. According to Section 16 (1) of the Companies Act, 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 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 the Companies Act or any previous company law, it may direct the company to change its name. The company shall in such a case, change its name or new name, as the case may be, within a period of 3 (three) months from the issue of such direction, after adopting an ordinary resolution for the purpose. In addition, if, through inadvertence or otherwise, a company on its first registration or on its registration by a new name, on an application by a registered proprietor of a trade mark that a company name is identical with or too nearly resembles to a registered trade mark of such proprietor under the Trade Marks Act, 1999, made to the Central Government within 3 (three) years of incorporation or registration or change of name of the company, whether under the Companies Act or any previous company law, in the opinion of the Central Government, is identical with or too nearly resembles to an existing trade mark, the Central Government 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 3 (three) months from the issue of such direction, after adopting an ordinary resolution for the purpose.

Furthermore, Section 16 (2) of the Companies Act requires that where a company changes its name or obtains a new name under Section 16 (1) of the Companies Act, it shall, within a period of 15 (fifteen) days from the date of such change, give a notice regarding the change to the Registrar along with the order of the Central Government who will then carry out necessary changes in the certificate of incorporation and memorandum.

As per Section 16 (3) of the Companies Act, if a company is in default in complying with any direction given under Section 16 (1) of the Companies Act, the Central Government shall allot a new name to the company in such manner as may be prescribed and the Registrar shall enter the new name in the register of companies in place of the old name and issue a fresh certificate of incorporation with the new name, which the company shall use thereafter. However, this shall not prevent a company from subsequently changing its name in accordance with the provisions of Section 13 of the Companies Act.

New Norms on Company Names.

In pursuance of Section 16 (1) and (3) and Section 469 (1) and (2) of the Companies Act, the Ministry of Corporate Affairs has now vide, the Amendment, added Rule 33A under the Rules, as per which, in case a company fails to change its name or new name, as the case may be, in accordance with the direction issued under Section 16 (1) of the Companies Act within a period of 3 (three) months from the date of issue of such direction, the letters 'ORDNC' (Order of Regional Director Not Complied), the year of passing of the direction, the serial number and the existing Corporate Identity Number of the company shall become the new name of the company without any further act or deed by the company.

Furthermore, the Registrar of Companies will accordingly make the entry of the new name in the register of companies and issue a fresh certificate of incorporation in Form No. INC-11C. A proviso has been added to the abovementioned rule saying that nothing contained above shall apply in case e-form INC-24 filed by the company is pending for disposal at the expiry of 3 (three) months from the date of issue of direction by the Regional Director, unless the said e-form is subsequently rejected.

As per sub-rule 2 of the Rule 33A, a company whose name has been changed under sub-rule (1) shall at once make necessary compliance with the provision of Section 12 of the Companies Act and the statement, "Order of Regional Director Not Complied (under Section 16 of the Companies Act, 2013)" shall be mentioned in brackets below the name of the company, wherever its name is printed, affixed, or engraved. However, no such statement shall be mentioned in case the company subsequently changes the name in accordance with provisions of Section 13 (Alteration of Memorandum) of the Companies Act.

Form No. INC - 11C has also been introduced by virtue of the Amendment. The MCA has notified September 1, 2021 as the effective date of the Amendment.

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