Law and You > Corporate Laws > Companies Act, 2013 > Name Clause of Memorandum of Association
According to Section 2(56) of the Companies Act 2013, the “Memorandum” refers to the memorandum of the company as drawn up initially during the formation of the company or as changed periodically to carry out any action as per any other law of the Act. The provisions regarding Memorandum of Association are given under Section 4 of the Companies Act, 2013. It is a public document according to Section 399 of the Companies Act, 2013. Hence, any person who enters into a contract with the company is expected to have knowledge of the MOA. In this article, let us understand the Name Clause of Memorandum of Association.
A Company being a legal entity must have a name of its own to establish its separate identity. The name of the company is a symbol of its independent corporate existence. Under Section 4(1)(a) of the Companies Act, 2013 the first clause in the memorandum of association of the company states the name by which a company is known. The company may adopt any suitable name provided it is not undesirable. Following rules must be followed during the finalization of the name of the company.
In Osborn v. the United States, 6 L Ed 204 case, Johnson J. opined that: “The name of corporation is the symbol of its personal existence”.
How to Choose the Name of Company?
Under Section 4(2)(a) of the Companies Act, 2013 a company may select any name that it prefers but no company shall be registered by a name which is identical or which too nearly resembles the name of an existing company registered under the Act. Where a company is registered by a name so similar to that of another company, that the public is likely to be deceived, the court will grant an injunction restraining it from using that name. The Central Government may consult the Registrar of Trade Marks before declaring a name to be undesirable. It may be noted that if a name remotely resembles with the name of any other company, then such name may be allowed.
Draft Rule 2.5(2)(b)(iv) provides that where the proposed name resembles closely with the popular or abbreviated description of an existing company or limited liability partnership , then it shall generally be treated as undesirable under section 4(2)(b)(ii).
In Society of Motor Manufacturers and Traders Ld. V. Motor Manufacturers and Traders Mutual Insurance C. Ltd, (1925) 1 Ch 675 case, Lawrence J said: “Under the Companies Act, a company by registering its name gains the monopoly of the use of the name since no other company can be registered under a name identical with it or so nearly resembling it as to be calculated to device”. The meaning of the phrase “calculated to device” in this case, means the facts suggests that the corporation adopting it is in some way connected or associated with the existing corporation. The Court held that the names of the two companies clearly indicate that they are in totally different business and the defendant company’s name could not be regarded as one “calculated to device”.
In Archer Structures Ltd v. Griffiths, (2004) 1 BCLC Ch. Div. 201 case, the Court held that a new company could not be incorporated with the name “MRJ Contractors Ltd.”, as this name would be deceptively similar to the name of an existing company “MRJ Constructions Ltd.”
Under Section 4(2)(b) of the Companies Act, 2013 a company may select any name that it prefers the name of the company should not be in such form that its use by the company will constitute an offence under any laws for the time being in force.
In VOV Chemicals Pvt. Ltd v. Union of India (2013) 178 Comp Cases 163 (Del) case, the Court held that the name of the company should not be in such form that its use by the company will constitute an offence under any laws for the time being in force.
Under Section 4(3) of the Companies Act, 2013, previous approval of the Central Government (i.e. Ministry of Corporate Affairs) is required for use of any words or expression (as part of name):
- which is likely to give impression that a company is either connected in any way with or is having patronage of, the Central Government, any State Government or any local authority, corporation or body constituted by the Central Government or any State Government under any law for the time being in force; or
- Which may be prescribed.
Draft Rule 2.5(6) prescribes word or expressions for use of which previous approval is required. The Central Government has power to delegate its power under section 458.
Similarly, in order not to mislead the public a company must not use a name which is prohibited under the Emblems and Names (Prevention of Improper Use) Act of 1950. A company should restrain from using words like “National, Bank, Stock Exchange, King, Queen, Emperor, Government Bodies and names of World Bodies like U.N.O., W.H.O., World Bank etc”.
In Halifax plc. V. Halifax Repossessions Ltd. (2004) 2 BCLC 455 (CA) case, the Court held that the company would have to follow the prescribed statutory procedure of special resolution and approval of the Central Government and then filing the documents with the Registrar. The company cannot simply file the court order regarding the change.
In Kirloskar Proprietary Ltd v. Kirloskar Dimensions (P) Ltd, (1999) 96 Comp Cases 726 (Kant) case, an injunction was not allowed to prevent the use of ancestral name (Kirloskar). The Court held that there is a right to use in a bona fide manner one’s own name or the name of the place or ancestral name.
Reservation of Name for Company:
The first step in the formation of a company, even before necessary documents are submitted to the ROC, is to apply to ROC for the reservation of the name of the company.
Under Section 4(4) of the Companies Act, 2013 a person may make an application in prescribed form and manner and on payment of the prescribed fee for reserving the name for the proposed company or for changing the name of an existing company. Form No. 2.7 is prescribed under the draft Rules. Such name may be reserved for 60 days from the date of application.
Draft Rule 2.5(3) provides that if any company has changed its activities which are not reflected in its name, it shall change its name in line with its activities within a period of six months from the change of activities after complying with all the provisions as applicable to change of name.
Under Section 4(5)(a) of the Companies Act, 2013 if the company has not been incorporated, the reserved name shall be cancelled and the person making an application under Section 4(4) of the Companies Act, 2013 shall be liable to a penalty which may extend to one lakh rupees.
Under Section 4(5)(b) of the Companies Act, 2013 if the company has been incorporated, the Registrar may, after giving the company an opportunity of being heard either direct the company to change its name within a period of three months, after passing an ordinary resolution; or take action for striking off the name of the company from the register of companies; or make a petition for winding up of the company.
What After Getting Approval of the Name?
The chosen name of the company as it appears in the Memorandum of Association should be exactly the same as the one approved by the Registrar of Companies. A Public Limited Company should end with the word “Limited” and likewise, a Private Limited Company should end with the words “Private Limited”. A non-profit company may be allowed by the Central Government to omit the words “Limited” or “Private Limited” from its name if it fulfils certain conditions.
Section 8 of the Companies Act, 2013 describes companies which are established to promote commerce, art, sports, education, research, social welfare, religion etc. Section 8 companies are similar to Trust and Societies but they have better recognition and legal standing than Trust and Societies.
In Dermatine Co. Ltd. v. Ashworth, (1905) 21 TLR 510 case, when a rubber stamp of a company put on a bill of exchange did not contain the word “Ltd.”, because the rubber stamp was longer than the space available on the bill. The Court held that this was not intentional misdescription of the company’s name and directors would not be personally liable.
In Hendon v. Adelman, 1973 New LJ 637 case, the directors of the company were made liable for stating the company’s name as “L R Agencies Ltd.” on a cheque when the actual name of the company was “L & R Agencies Ltd.”
Under Section 12(3) of the Companies Act, 2013, every company is required to publish its name outside its registered office, and outside every place where it carries on business, to have its name engraved on its seal and to have its name on all business letters, billheads, notices and other official publications of the company. Directors as agents,
The requirements under Section 12(3) of the Companies Act, 2013 are listed below:
- Affix the name and the address of the registered office and also keep it painted on the outside of every office or place where the business is carried out in a conspicuous position in legible letters or languages understood by the people in the locality.
- Have the name on the seal of the company.
- Get the name and address of the registered office and CIN (Corporate Identity Number) with a telephone and fax number, email, website printed on all business letters, billheads, letter papers, and official publications.
- Have the name printed on hundies, exchange bills, promissory notes and other documents.
- If it is a one-person company, the same shall be printed in brackets alongside the name of the registered office. A company will be penalized if the registered office address and CIN are not mentioned on the company letterhead.
The Proviso attached to Section 12(3) lays down that where a company has changed its name or names during the last two years, it shall paint or affix or print, as the case may be, along with its name, the former name or names so changed during the last two years as required under clauses (a) and (c) of the Section.
Change of the Name of the Company:
Under Section 13 (2-3) a company may change its name by passing a special resolution and with the approval of the Central Government signified in writing. The change in name does not affect the rights and obligations of the company. The alteration becomes effective when it is registered with the Registrar of Companies and a new certificate of incorporation with the new name is issued.
Rectification of Name of Company:
In terms of Section 16 of the Companies Act, 2013, a company shall rectify its name in the following scenarios:
- When the existing name or new name, with which registration has been obtained, is identical with or too nearly resembles with the name of any other registered company or
- When the Regional Directors orders rectification of name if it comes to its notice that the existing name is opted in contravention with Rule 8 of Companies (Incorporation) Rules, 2014 and such orders has to be complied within three months of the date of such order
- When the owner of a registered trade mark submits an application to the effect that the name is identical or too nearly resembles to his registered trade mark under the Trade Marks Act, 1999.
Any change in the name of a company shall be subject to the approval of the Central Government in writing but, no such approval will be necessary where the only change in the name of the company is the deletion therefrom, or addition thereto, of the word “Private”, consequent on the conversion of any one class of companies to another class in accordance with the provisions of this Act.
Conclusion:
A Company being a legal entity must have a name of its own to establish its separate identity. The name of the company is a symbol of its independent corporate existence. Under Section 4(1)(a) of the Companies Act, 2013 the first clause in the memorandum of association of the company states the name by which a company is known. Sections 4(2-5) of the Companies Act, 2013 deal with Name Clause of the Memorandum of Association.