When the promoters of a company wishing to incorporate a company or the directors wishing to change the name of its existing company, they have to comply with the Rules framed under the Companies Act for the adoption of the name of the Company. No company can adopt the name that is not as per the specified criteria mentioned in the Companies Incorporation Rules, 2014. However, the Companies Act provides with the preventive provisions under section 16.
When the name of the Company has been registered inadvertently which resembles or is too nearly similar to the Company name, the Central Govt. has the power to take the suo moto actions through the Regional Director to order such company to rectify/change the name within three months of time as per the criteria and provisions of the Companies Act. Moreover, as per section 16(1)(b), when any company has adopted a name that too nearly resembles or is identical with the Trademark of a registered proprietor under the Trademark Act, 1999, such proprietor may apply to Central Govt. i.e. Regional Director for the rectification of the name of the Company within three years of such adoption. The Regional Director upon receiving such application may pass an order to rectify the name of the Company within three months.
As per the Companies Amendment Act, 2020, section 16(3) has been substituted that gives wide powers to the Central Govt. for non compliance of the order passed by the Regional Director to change the name of the Company. So far, the in case of the noncompliance of the order, the company was imposed with the prescribed penalty as per the earlier section 16 (3). However, as per the substituted section 16(3), the Central Government shall allot a new name to the company in the prescribed manner and give its effect accordingly.
The effect of the same has been given through Companies (Incorporation) Fifth Amendment Rule, 2021. As per Rule 33A, when the company fails to comply with the order within a period of three months from the issue of such direction, the letter “ORDNC” (Which is an abbreviation of the word “Order of Regional Director Not Complied”), the year of passing of the direction, the serial number and the existing Corporate Identity Number shall become the name of the company and the Registrar shall give necessary effect of the same as per the said rules.
It is noteworthy that this amendment shall come into force from the 1st September, 2021.
In a nutshell, it is a commendable amendment by the Ministry of the Corporate Affairs to compel the company to change its name as per the directions of the Regional Director. This amendment is indeed an austere action against the company who does not comply with the provisions for adoption of the name of the Company of the Companies Act, 2013.
Source-
G.S.R. 503(E) - Companies (Incorporation) Fifth Amendment Rules, 2021
Companies (Amendment) Act, 2020 no. 29 of 2020
S. O. 2904(E) dated 22.07.2021 in Companies Amendment Act, 2020 no. 29 of 2020
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Contributed By : Alpa Rawal (Practicing Company Secretary)
[Email : info@hkacharya.com]
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