Department’s guidelines for deciding cases for availability of names*
Superseding all previous Circulars and Instructions (Circular Letter No. 10(1)–RS/60,
dated 01-04-1960 and Circular Letter No. 10 / (19)-RS/61, dated 15-03-1962) the
Department of Company Affairs has laid down the following principles for deciding
cases for availability of names:
Guiding instructions for availability of names
The procedure for scrutinizing the availability of names of new companies has
recently been re-examined carefully in this Department, having taken into account
the difficulties experienced by some Registrars in the following the instruction
given to them vide Department’s Letter No 10/(19)-RS/61, dated 15-03-1962. This
letter together with the enclosed set of instructions as revised, consolidates, and
is in supersession of all the previous instruction issued from time to time by this
Department. An illustrative list of names considered to be undesirable within the
meaning of Section 20 of the Companies Act, has also been given herewith. The
guiding instructions for deciding cases of making a name available for registration
are given in Appendix A to this letter. In addition to these, the Registrars of
Companies are requested to note the following general instructions also.
1. As the Registrars have hitherto been doing, they should refer only doubtful
and hard cases where they might find it difficult to take a decision, to the
Research and Statistics Division at the Headquarters.
2. Where consultation with the Regional Director on the spot is possible,
Registrars of Companies would take advice before referring doubtful and hard
cases to the Headquarters.
3. The Registrars of Companies may ask the promoters to suggest a panel of
three to five names quite distinct from each other for consideration.
4. The Registrars should adopt a polite attitude and persuade the Company
promoters to suggest names consistent with the guiding principles. They
should explain the difficulties of the Administration in approving names likely
to create confusion in the minds of the public and harm the interest of the
promoters.
5. In case any of the names proposed by the promoters is not agreed to by the
Registrars as available, it should be open to them to follow up the matter by
subsequent letters or application for the same fee within a reasonable period
which may normally be construed to mean three months from the date of
rejection of the name/names proposed.
6. The Registrars may permit the promoters to use the name of the firm in
brackets after the duly approved names as incorporating or successor to
(name of the firm) in order to fulfill the desire of the promoters to retain the
goodwill of their business in cases where the names of firms seeking
registration under the Companies Act is considered as undesirable within the
meaning of Section 20 of the Companies Act.
7. Registrars should ascertain from the promoters if the proposed name/names
were applied for to any other Registrar of Companies and if so, with what
result. In case there is some difference of opinion between the two Registrars
in making the name available, then the case may be referred to the Board for
advice.
8. The following guidelines were substituted vide amended Rule 4A of the
Companies (Central Governments) General Rules & Forms 1956) Notification
G.S.R 720(E) dated 16th November 2007.
8a.The Registrar shall cause to examine the application as to whether
the changed name or the name with which the proposed company is
to be registered, as the case may be, is undesirable within the
meaning of section 20. In case the name is undesirable, he may reject
the same or ask for resubmission of the application with new names
or calls for further information, ordinarily within three days of
receipt of the application.
8b.The applicants shall be given only upto two opportunities for resubmission
of their proposal against the fee paid in the first instance
for name availability after the original application is filed. In the
event the registrar does not find the proposals so submitted and
resubmitted as fit for approval, he shall reject the application after
the second re-submission. However, the applicant will be at liberty to
file fresh application along with prescribed fee.
8c.The Registrar of Companies informs the company or the promoters of
the company that the changed name or the name with which the
proposed company is to be registered, as the case may be, is not
undesirable, such name shall be available for adoption by the said
company or by the said promoters of the company for a period of
sixty days from the date the name is allowed.
8d.If the name so allowed is not adopted on or before the expiry of the
period of sixty days from the date it is allowed, the applicant may
apply for extension for retention of such name for a further period of
thirty days on payment of fifty per cent of the fee prescribed for the
application at the initial stage. No further extension will be granted
after expiry of ninety days from the date the name is allowed in the
first instance. The name allowed shall lapse after expiry of sixty or
ninety days, as the case may be, from the date it is allowed first.
8e.The name allowed by the Registrar before the date of this
notification comes into force, if not adopted, shall lapse after the
expiry of a period of six months from the date on which the name was
initially allowed or renewed. However, in case the name has not been
renewed earlier, the applicant on or before the date of expiry, may
apply for one time extension of such name for a further period of
thirty days on payment of fifty per cent of the fee prescribed for the
application at the initial stage.
9. It is necessary that the “keyword” of proposed name/names are checked
separately with the names of the existing companies beginning with those
“keywords” so as to avoid any possibility of allowing a name with a little
rearrangement of the same words of the existing company which may be
said to be closely resembling each other.
It may be further added that although it is not possible to lay down hard and
fast rules for determining whether a particular name or any two names too
nearly resemble each other, each case, however, will be decided on its merits.
As already emphasized in the earlier circular letter of this Department on the
subject dated 15th March 1962 that the various criteria set out in the guiding
principles at Appendix “A” are not exhaustive but only illustrative of what is
considered to be undesirable names under Section 20 of the Companies Act and
that, by the very nature of the subject all possible cases could not be covered.
It is therefore, suggested that where the Registrars find that certain proposed
names could not be referred to the Research and Statistics Division at the
Headquarters after availing of the help of the Regional Director if available on
the spot.
Guiding instructions for deciding cases of making
a name available for registration
Departments’ guiding principles
The Department has evolved the following guiding principles for deciding
availability of names:
A name which falls within the categories mentioned below will not generally be
made available:
1. If it is not in consonance with the principal objects of the company as set
out in its memorandum of association. This does not necessarily mean that
every name should be indicative of its objects. Bu when there is some
indication of business in the name then it should be in conformity with its
objects.
2. If the Company / Companies main business is finance unless the name is
indicative of that particular financial activities. Viz. Chit Funds /
Investments / Loan, etc.
3. If it includes any word or words which are offensive to any section of the
people.
4. If the proposed name is the exact Hindi translation of the name of an
existing company in English especially an existing company with a
reputation.
5. If the proposed name has a close phonetic resemblance to the name of the
company in existence for example, J.K Industries Ltd., Jay Kay Industries
Limited.
6. If the name is only a general one like Cotton Textile Mills Ltd., or Silk
Manufacturing Ltd., and not specific like Calcutta Cotton Textiles Mills
Limited or Lakshmi Silk Manufacturing Company Limited.
7. If it includes, the word “Co-operative”, Sahakari or the equivalent of word
“Co-operative” in the regional languages of the country.
8. If it attracts the provisions of the Emblems and Names (Prevention of
Improper Use) Act, 1950 as amended from time to time, i.e. use of improper
names prohibited under this Act.
Department of Company Affairs Circulars
General Circular No: 24 of 2001, dated 21-11-2001
Instruction No. 8 of the Guiding instructions circulated, vide this
Department’s Letter No. 10(1)-RS/65, dated 27th November 1965 provides
that a name in the category mentioned below will not generally be made
available:
1. “If it attracts the provisions of the Emblems and Names (Prevention of
Improper Use) Act, 1950 as amended from time to time. i.e. use of
improper names, prohibited under this Act.”
2. It is observed from a communication received from the Department of
Consumer Affairs that the above said instructions are not being followed
scrupulously.
3. The ROCs are advised to take into account the provisions of the above
said Emblems and Names Act while making names available to companies
under the Companies Act, 1956. All the ROCs are requested to adhere to
the above instructions for strict compliance.
9. If it connotes Government’s participation or patronage unless circumstances
justify it. E.g., a name may be deemed undesirable in certain context if it
includes any of the words such as National, Union, Central, Federal,
Republic, President, Rashtrapathi, Small-Scale Industries, Cottage Industries
and Financial Corporation etc.
10. If the proposed name contains the words “British India”
11. If the proposed name implies association or connection with Embassy or
Consulate which suggests connection with local authorities such as
Municipal, Panchayat, Delhi Development Authority or any other body
connected with the Union or the State Government.
12. If the proposed name is vague like D.J.M.O Limited or T.N.V.R Private
Limited or S.S.R.P Limited.
13. If a proposed name implies association or connection with or patronage of a
national hero or any person held in high esteem or important personages
who are occupying important positions in Government so long as they
continue to hold such positions.
14. If it resembles closely the popular or abbreviated descriptions of important
companies like TISCO (Tata Iron and Steel Company Limited), HMT
(Hindustan Machine Tools), ICI (Imperial Chemical Industries), TEXMACO
(Textile Machinery Corporation), WIMCO (Western India Match Company)
etc. In some cases, the first word or first few words may be the key words
and care should be taken that they are not exploited. Such words should not
be allowed even though they have not been registered as trademarks.
a. Where the existing companies are stated and found to be well known
in their respective fields by their abbreviated names, these
companies may be allowed to change their names, by way of
abbreviation with the prior approval of the Regional Director
concerned.
Department’s Circular, dated 31-03-1993
The abbreviated name will be considered only in the case of change of name
under section 21 of the Companies Act, 1956, with the prior approval of the
Regional Director concerned and should not be allowed for adoption by new
companies. [Circular No. 4/93: F. No. 3/14/93-CL V, dated 31-03-1993]
Press Note, dated 05-05-1993
As per existing guidelines, the companies well known in their respective
field by abbreviated names are allowed to change their names by way of
abbreviation (e.g. ABC Limited) with the approval of Department of
Company Affairs after following the requirement of Section 21 of the
Companies Act, 1956. It has now been decided that any such change of
name will require only the prior approval of Regional Director concerned.
The company will, however, continue to make applications in Form 1A for
availability changed names to the concerned Registrar of Companies. It may
be noted that the abbreviated name will not be allowed for adoption by a
new company proposed to be incorporated under the Act [No 3/14/93-CL V:
Press Note No. 1/93, dated 05-05-1993]. The power of Central Government
is now vested with the Registrar.
Department’s Circular, dated 16-02-1995
Presently, there is a restriction on use of abbreviated names (like ITC
Limited) in case of existing companies requiring approval of the Regional
Director concerned. No such approval of Regional Director will now be
necessary and ROCs may take a final decision on such applications in the
light of existing guidelines. (Para iii) [Circular No. 1/95 F. No. 14/6/94-CL V,
dated 16-02-1995]
15. If it is different from the name/names of the existing company/companies
only to the extent of having the name of a place within brackets before the
word limited; for example, Indian Press Limited. To this rule, however,
frequent exceptions are made in the case of the subsidiary and in the case
of a company carrying on local business and in other cases on their merits.
As for an example, “Corner Garage (Delhi) Private Limited” may be allowed
notwithstanding that there is an existing company “Corner Garage Private
Limited” at Calcutta. So would be “Regent Cinema Limited” at Madres, if
there is a company by the name Regent Cinema (Delhi) Limited. These
names may also be allowed if they are in the same group of management.
16. If the proposed name includes common words like “Popular, General,
Janta”, if they are in the same State doing the same business. But in case of
companies in different business in the same State and in all cases when the
registered office of the company is in different States, the name might be
allowed. For instance, if there is “Popular Drug House Private Limited”
existing, another company by the name of “Popular Plastics Private
Limited” should not be objected to.
17. If it includes a name of registered trade-mark unless the consent of the
owner of the trade-mark has been produced by the promoters. It may not be
possible in all cases to check up the proposed name with the trade mark.
However, if the Registrars are in the knowledge or some interested party /
parties bring to their notice a trade mark which is included in the proposed
name then it should not be allowed unless a no-objection certificate is
obtained from the party who has registered the trade mark in its own name.
[Note: Section 20(2)/(3) has been amended by the Trade Marks Act, 1999.
The amended section now provides statutory protection of trade marks in
the matter of availability of name]
18. If a name is identical with or too nearly resembles, the name of which a
company in existence has been previously registered. A few illustrations of
closely resembling names are given below for guidance. The names as
proposed in column 1 should not (normally) be made available in view of the
companies in existence as shown in column 2. However, if a proposed
company is to be under the same management or in the same group and like
to have a closely resembling name to the existing companies under the same
management or group with a view to have advantage of the goodwill
attached to the management or group name such a name may be allowed.
Even in the case of unregistered companies or firms who have built up a
reputation over a considerable period, the principle (that if a name is
identical with or too closely resembles the name by which a company has
been previously registered and is in existence, it should not be allowed)
should be observed as far as practicable. In view of the difficulty in
checking up whether a proposed name is identical with or too nearly
resembles the name of an unregistered company or a firm of repute, it
should at least be ensured that a proposed name is not allowed if it is
identical with or too nearly resembles the name of a firm within the
knowledge of the Registrar. The cases of foreign companies of repute should
also be similarly treated even if there are no branches of such companies in
India.
Proposed Name Existing Company too nearly
resembling name
Hindustan Motor and General Finance Company Hindustan Motor Limited
The National Steel Mfg. Co. Private Limited National Steel Works
Trade Corporation of India Limited State Trading Corporation of India Limited
Viswakaram Engineering Works Private Limited Viswakaram Engineer (India) Private Limited
General Industrial Financing & Trading Co. Ltd. General Financial & Trading Corporation
India Land & Finance Limited Northern India Land & Finance Limited
United News of India Limited United Newspaper Limited
Hindustan Chemicals and Fertilizer Limited Hindustan Fertilizers Limited
19. If it is identical with or too nearly resembles the name of a company in
liquidation, since the name of a company in liquidation is borne on the
register till it is finally dissolved. A name which is identical with or too
closely resembles the name of a company dissolved as a result of liquidation
proceeding should also not be allowed for a period of 2 years from the date
of such dissolution since the dissolution of the company could be declared
void within the period aforesaid by an order of the Court under section 559
of the Act.
Further, as a company which is dissolved in pursuance of action under
section 560 of the Act can be revived by an order of the court before the
expiry of 20 years from the publication in the Official Gazette of the
company being so stuck off, it is considered desirable to stop or
conditionally allow the registration of a proposed name which is identical
with or too nearly resembles the name of such dissolved company for a
period indicated below. Since the period of 20 years as prescribed under the
law is considered an unduly long period, the registration of a proposed name
which is identical with or too nearly resembles the name of the company
dissolved in pursuance of section 560 should not be allowed for a period of
first five years only. During the next five years such a proposed name may
be allowed subject to the condition that in the event of the dissolved
company being restored to life by an order of the Court the new company
would have to change its name. After a lapse of ten years, name identical
with or too nearly resembling those of the dissolved companies may be
allowed without any such condition.
20. If it is different from the name of an existing company merely by the
addition of words like New Modern, Nay etc. Names such as New Bata Shoe
Company, New Bharat Electronic etc should not be allowed. Different
combination of the same words also requires careful consideration. If there
is a company in existence by the name of “Builders and Contractors
Limited” the name “Contractors and Builders Limited” should not ordinarily
be allowed.
21. If it includes words like “Bank”, “Banking”, “Investment”, “Insurance” and
“Trust”. These words may, however, be allowed in cases where the
circumstance justify it. In cases of banking companies the Reserve Bank of
India should be consulted and its advice should be taken before a name is
allowed for registration. The purpose of such consultation is to prevent
small banking companies from misleading the general public by adopting the
names of some well established and leading banks functioning elsewhere
than in India. In case of differences of opinion with the Reserve Bank of
India the matter should be referred to the Board for advice.
22. If the name includes the word “Industries” or “Business” unless the name is
indicative of the business of the proposed company for otherwise it serves
as a lever for the company to diversify its activities.
23. If it includes proper name which is not a name or surname of a director –
such names should not be allowed except for valid reasons. For example, for
sentimental reasons, sometimes, the name of the relatives such as wife, son
or daughter of the director may have to be allowed provided one other word
suggested makes the name quite distinguishable.
24. If it is intended or likely to produce a misleading impression regarding the
scope or scale of its activities which would be beyond the resources at its
disposal. For example, names like Water Development Corporation of India
(Private) Limited, Telefilm of India (Private) Limited, All India Sales
Organization Limited, Inter Continental Import and Export Company
Limited, etc. should not be allowed. When the authorized capital is to be
only a few lakh and the area of operation limited to a State, words like
“International”, “Hindustan”, “India”, “Bharat”, “New India” etc., included
in the proposed name need not stand the same test as Hindustan, India etc.
(as they do not give the same sense). Similarly the words, Bharat, India etc.
If stated in the bracket before the words limited or private limited need not
stand the same test as the words India, etc., put at the beginning of the
name. Also the word “India” or “Bharat” in brackets before the words
limited or private limited does not necessarily mean that the company is an
Indian Branch of some foreign company, such as “Marsdon Electricals (India)
Private Limited”.
25. If the proposed name includes the word “State” along with the name of the
State such as Kerala State Company Limited should not be allowed as it
would give an impression of the Kerala State Government participating in
the share capital of the proposed company. However, if the name of a State
only is included without the addition of the word “State” in the proposed
name then it may be allowed as it is not likely to give the impression that
the company has the State Government’s interest in it.
26. If the proposed name includes the word “Corporation” unless the company
could be recorded as a big sized company. However, the word “Corporation”
and “Company” may be regarded as closely resembling for purposes of
allowing a new name. For example, a company by the name of Rajasthan
Finance Company should be regarded as undesirable within the meaning of
section 20 of the Act as another company by name “Rajasthan Finance
Corporation” already exists.
27. If the proposed name includes words like French, British, German, etc.,
unless the promoters satisfy that there is some form of collaboration and
connection with the foreigners of that particular company or place the
name of which is incorporated in the name. Thus, the name “German Tool
Manufacturing Company Limited” should not be allowed unless the company
has some connection with Germany.
28.Even where except for the first word all the other words of the proposed
name are similar to those of an existing company, the first word should be
considered to be sufficient to distinguish it from the name of the existing
company. For example, “Oriental…. Limited”. [Circular Letter No. 10(1)-
RS/65, dated 27-11-2965. See also Circular No. 10(19)-RS/61, dated 05-05-
1962]
The word “Hindustan” should be kept reserved only for public sector
companies. It may, however, be allowed to be used in the names of the
private sector companies in a large way of business. Similarly the word
“Corporation” may be allowed in the name of the company in case the
authorized capital is more than Rs. 5 crores. [Circular No. 16/74 – F.No.
27/9/74-CL-III dated 27.08.1974]
Further Guidelines for availability of names
Departmental Circular dated 13-05-1999
As ROCs are aware this Department has issued exhaustive guidelines on
avoiding undesirable names for companies as mentioned in section 20 of the
Companies Act, 1956 through Circular No. 10(19)-RS/61 dated 05-05-1962.
Further guidelines were also issued through Circular No. 2/90 (No 1/1/90-
CL-V-27/1/89-CL-III) dated 05-01-1990.
2. In recent times this Department had received a few references which
needed further clarification. The following guidelines / clarifications are
accordingly issued.
3. Names starting with small letters / having small letters / alphabets
3.1 In the past the name search for allowing names for companies used to
be a manual search based on list of names already in existence on a
particular date, names made available by different ROCs (which used to
be circulated periodically) etc. The name search is no longer manual. It
has become a computerized operation in all RoC offices. In view of this
some of the old constraints (like alphabetical listing) which could be a
restrictive factor in manual system do not exist under the present
computerized system.
3.2 ROCs may therefore now allow names starting with small alphabets (like
i2 Technologies Ltd., etc) as such names are being increasingly used by
many companies in other countries. It should however be ensured that
the name starting with small alphabets does not have phonetic or visual
resemblance to the name of a company in existence.
4. Change of name by companies on Computer Software Business
4.1 In recent times it appears that quite a few companies whose principal
object was not computer software and who had actually involved in
financing activities have changed their names to indicate as if they were
in the business of computer software. For this purpose they have
included words like – “Infosys; Software; Systems; Infosystem;
Computers; Cyber; Cyberspace etc” in their names.
4.2 In order that investors are not misled by the strategy adopted by a few
companies ROCs are hereby advised that in future they should allow
change of name to companies to reflect the business of software only if
a substantial portion of their income (as reflected from their audited
accounts or accounts certified by a Chartered Accountant) is derived
from software business. If this is not proved then such change of name
should not be allowed.
5. Companies in Insurance Sector
5.1 It may be recalled that in Guideline No. 21 (printed above) you have
been advised not to allow the word “Bank”, “Banking”, ”Investment”,
”Insurance” and “Trust” unless circumstances justify it. The activities of
the Insurance Sector are being regulated by the Insurance Regulatory
Authority.
5.2 In view of this, in partial modification of the above mentioned
Guideline, it is hereby clarified that ROCs may allow companies to be
registered by them with the word “Insurance” or “Risk Corporation” as
part of the name only after consulting the Reserve Bank of India and
Insurance Regulatory and Development Authority.
Department’s Clarification, dated 30-06-2000
Attention is invited to this Department’s Circular No. 6 of 1999
(5/35/98-CL-V) dated 13th May 1999, in regard to allow ability of
names for entrepreneurs seeking to promote companies for providing
insurance services, in terms of the above circular, such names were
being given only after consulting the Insurance Regulatory
Development Authority Act, 1999, with effect from 19th April 2000 the
Department has received a reference from the Insurance Regulatory
Authority advising that the embargo on registration of names by new
companies could be lifted. In view of this all ROCs are advised that
they may allow names with the word insurance / assurance or Risk
Corporation as part of the name without any need to consult the
Insurance Regulatory Authority. It is hereby clarified that such names
can be allowed only to new companies and not for change of name as
existing companies are not allowed to carry on any insurance activity.
[Circular No. 5, Dated 30-06-2000]
Department’s circular dated 25-04-2003
In partial modification of General Circular No. 5/2000 dated 30th June
2000 it is hereby further clarified that since the Insurance Regulatory
and Development Authority has been notified (Insurance Regulations,
2002 permitting private sector companies to carry on the insurance
business, the Registrar of Companies may permit change of name of
existing companies on their changing the objects to undertake the
business of insurance brokers also. [Circular No. 19/2003, dated 25-
04-2003, F. No. 5/6/2003-CL-V]
6. Use of Generic Names
6.1 Guideline No. 5 relates to inadvisability of allowing companies to have
only generic names without any other proper noun preceding /
succeeding it. Under this category would come the word “Y2K” (i.e.
Year 2000)
6.2 It may kindly be noted that this is a generic one and cannot be allowed
for any company as a “Stand Alone” name [Issued by DCA, vide No.
5/35/98-CL-V: General Circular No. 6/99, dated 13-05-1999]
Use of Name of “Chamber of Commerce” in UK – In England the Company
and Business Names (Chamber of Commerce, etc) Act 1999 restricts the use
of the name chamber of commerce by companies.
Guidelines as to use of Key words
“With a view to maintain uniformity, the following guidelines may be
followed in the use of keywords, as part of name, while making available
the proposed names under section 20 and 21 of the Companies Act, 1956
# Key Words Required
Authorized Capital
1 Corporation Rs. 5 Crore
2
International, Globe, Universal, Continental, Inter
Continental, Asiatic, Asia being the first word of the
name
Rs. 1 Crore
3
If any of the words at (2) above is used within the name
(with or without brackets)
Rs. 50 Lakh
4 Hindustan, India, Bharat being first word of the name Rs. 50 Lakh
5
If any of the words at (4) above is used within the name
(with or without brackets)
Rs. 5 Lakh
6 Industries / Udyog Rs. 1 Crore
7 Enterprises, Products, Business, Manufacturing Rs. 10 Lakh
2. These names with key words at Serial Nos. (6) And (7) may be considered
when the company proposes to deal in various business activities or the
company is already carrying on various business activities (in the case of
change of name). F. No. 27/1/87-CL-III dated 13-03-1989: (1989) 65 com
cases 536 (St.)
No objection from applicants who do not sign memorandum & articles
I. Department’s Circular
“As per Application Form for availability of names (Form No. 1A) prescribed
under rule 4A of the Companies (Central Governments) General Rules and
Forms, 1956, the promoters are, inter alia, required to give the names and
addresses of the prospective directors or promoter, as also the name and
address of the person(s) applying for availability of name. You are requested
to advise your constituents to ensure that the application form is filled up in
all respects and application is made by one or more amongst the promoters.
The Registrars of Companies have been advised to ensure at the time of
registration of a new company that the subscribers to the memorandum and
the articles of association tally with the list of promoters / first director
stated in the application for availability of name and in case, one or more of
the promoters are not interested to participate in the promotion of a new
company at a later state. “No objection letter” from such promoter(s) is
made available to the Registrar, while submitting the documents for
registration. The Registrars of Companies are also being advised to dispose
of applications for availability of name ordinarily within 14 days of the
receipt of application and to correspond with the applicant promoter(s), in
this behalf” No. 27/1/89-CL-III dated 17-02-1989: (1989) 65 Com Cases 575
(St.)
II. Department’s Circular
“I am directed to refer to this Department’s Circular No. 27/1/89-CL-III
dated 17th February 1989 [Printed above] on the above subject, wherein you
were requested to advise your constituents to ensure that the application
form is signed by one or more amongst the promoters and in case one or
more of the promoters are thereafter no more interested in participating in
the promotion of the new company, a no objection letter from such
promoter is made available to the Registrar of Companies at the time of
registration of the new company. Instances came to the notice of the
Department that some promoters are pre-empting the names, which is not a
healthy practice. It has, accordingly, been decided that, in future,
Registrars of Companies should register the company only in cases where
the promoters, as per availability of name and application, are also the
subscribers to the memorandum and articles of association of the proposed
company at the time of its registration. In case of any change in the name(s)
amongst the subscribers the changed subscribers are advised to make fresh
application for the availability of name. The Registrar may, as per existing
procedure, allow the same name, if otherwise available, after three months
from the date when the name was allowed to the original promoter(s)”.
Circular No. 1 of 1990 dated 5th January 1990; (1990) 67 Com Cases 230 (St.)
III. Department’s Circular dated 16-02-1995
The Department vide Circular No. 27/1/89/CL-III dated 17-02-1989 [Printed
above] advised the ROCs to ensure that at the time of registration of a new
company, the subscribers to the Memorandum of Association should tally
with the list of promoters / first directors stated in the application for
availability of name and in case one or more of the promoters are not
interested in participation in the promotion of a new company at a later
stage, a “no objection” letter from such promoter(s) is made available to
RoC. This circular was amended on 05-01-1990 (No. 1/90) [Printed above] to
the effect that ROCs should register the company only in case where the
promoters as per the availability of name application are also subscribers to
the Memorandum. On reconsideration it has now been decided, in partial
modification of the above circular, that so long as there is at least one
promoter common both in name availability application and the subscription
clause of Memorandum & Articles of Association, and others have no
objection, the company may be registered. (Para ii) [Circular No. 1/95, F.
No. 14/6/94-CL-V dated 16-02-1995].
Incorporation of Stock Exchanges, advance approval of name by SEBI
I am directed to draw your attention to this Department’s Circulars No.
27/22/85-CL-III dated 13-01-1986 and 23-03-1993 on the above subject and to
enclose a copy of letter, dated 18-03-1996 [Printed below] received from the
Chairman, SEBI in this regard. You are requested to ensure that under no
circumstance a company is registered with the words “Stock Exchange” as part
of its name without obtaining in principle approval / no objection of Securities
and Exchange Board of India. It may kindly be noted that non-compliance with
these instruction will be viewed very seriously.
Copy of SEBI’s letter, dated 18-03-1996
It has come to our notice that certain companies calling themselves Stock
Exchanges are enrolling members and collecting substantial deposits from
them. The companies who have not obtained permission to operate as a stock
exchange under section 19 of Securities Contracts (Regulation) Act, 1956 or
have not been granted recognition by Central Government / SEBI under section
4 of the above Act are collecting such deposits in violation of the provisions of
the said Act. Section 19(1) of Securities Contracts (Regulation) Act, 1956
prohibits organizing or assisting in organizing any stock exchange without the
permission of the Central Government / SEBI.
In this regard, we request you not to allow such names to new companies which
have the words “Stock Exchange” in them unless they have been given in
principle approval of “No objection” from SEBI. This would ensure that the
investors are not misled by such names into dealing with members of
unrecognized stock exchanges [Circular No. 3/96, vide No. 3/4/96-CL-V dated
12-04-1996]
Incorporation of Venture Capital Companies
Department’s Circular
As per guidelines issued by the Ministry of Finance, Department of Economic
Affairs vide press release No: S 11(86)-CCI/11/87, dated 25-11-1988, only such
venture capital companies which abide by these guidelines shall take advantage
of tax benefits. As per guidelines, approval would be given for establishment of
venture capital companies / funds by the Department of Economic Affairs or
such authority as many be nominated by the Government. It is possible that
some promoters may float a company and call it a Venture Capital Company but
may not avail of the tax benefits available to such companies and in such a
situation, a common investor would not be able to distinguish between
approved venture companies which are within the discipline of the guidelines
and eligible for tax benefits from those who call themselves Venture Capital
Companies, but prefer to remain outside the guidelines and forego tax benefits.
To avoid such eventuality, it has been decided that the words “Venture Capital
/ Venture Capital Company / Venture Capital Finance Company” or such similar
name as part of the proposed name of a company be only allowed when the
company or the promoters have obtained approval from the Department of
Economics Affairs or such authority as may be nominated by the Government on
this behalf”. Circular No. 13/90 dated 27-08-1990.
Incorporation of Asset Management Companies (AMCs) other intermediaries
Guidelines for registration of AMCs
Department’s Circular I
The following guidelines are issued in respect of registration of Asset
Management Companies (AMCs) in consultation with the Securities and
Exchange Board of India:
(a) Approval of AMC by SEBI: As per guidelines, AMC shall be authorised for
business by SEBI on the basis of certain criteria and the memorandum and
articles of association of the AMC would have to be approved by SEBI.
Accordingly, you are advised not to register any company under the
Companies Act 1956, without the memorandum and articles of association
being approved by SEBI.
(b) Authorized Capital of AMC: The primary objective of setting up of an AMC
is to manage the assets of the mutual funds and other activities which it can
carry out, such as, financial services consultancy which do not conflict with
the fund management activity and are only secondary and incidental. That
being so, it may not be practical to expect a company to be set up with a
paid-up capital of Rs. 5 crores to carry on only incidental activities, without
any assurance of its receiving an approval from SEBI to act also as an Asset
Management Company for a mutual fund. You should, therefore, not have
any objection in registering an AMC is the authorized capital of such a
company is approved by SEBI.
3. A copy of these guidelines may also be placed on the notice board of your
office for general information. (Department’s Circular No. 4/92; F. No.
3/14/92-CL-V dated 02-09-1992, addressed to Registrar of Companies)
Department’s Circular II
“Some Registrars are insisting upon the promoters proposing to carry
on the activity as merchant bankers, registrars to an issue,
investment advisers, portfolio managers, etc to obtain prior approval
of SEBI before making available the proposed name or incorporation
of a company. In this connection, it may be pointed out that under
section 12 of the SEBI Act, 1992 the intermediaries associated with
securities market are required to seek registration by making an
application to SEBI, as per regulation made there under, which inter
alia require the applicant to state the date and place of registration,
details of directors, as also to furnish Memorandum and Articles of
Association, if the applicant is a company. However in terms of
Regulation 18(2) of the SEBI (Mutual Fund) Regulations, 1993, Asset
Management Companies (AMCs) are required to submit to SEBI their
respective Memoranda and Articles of Association for approval.
Therefore, unlike the Memoranda and Articles of Association of other
intermediaries, it would be in the interest of concerned AMC’s to get
their Memoranda and Articles of Association cleared by SEBI before
the same are presented to the concerned Registrar of Companies for
registration. In view of the above, you are requested not to insist
upon seeking prior approval of SEBI for registration of intermediaries
like merchant bankers, Registrar to an issue, investment adviser,
portfolio manager etc. However, this Department’s Circular No. 4/92
(No. 3/14/92-CL-V) dated 02-09-1992 will continue to be in force and
you may register an AMC only after its draft Memorandum and
Articles of Association is cleared by SEBI” (Department’s Circular No.
5/94; f. No. 3/14/92-CL-V dated 15-04-1994, addressed to Registrars
of Companies)
User of the words “NIDHIS” or “Mutual Funds” as part name
The Registrars of Companies (ROCs) have been directed by the
Department of Company Affairs (DCA) not to allow registration of
names with words “mutual funds” forming part of some Non-Banking
Financial Companies (NBFCs / NIDHIS under Section 20 of the
Companies Act, 1956) unless such companies are going to be
incorporated actually as mutual funds. ROCs have been informed that
companies declared as NIDHIS and mutual benefits societies under
section 620A of the Companies Act are not mutual funds. Therefore,
names with words “mutual funds” forming part thereof shall also not
be allowed to companies proposed to be incorporated as “NIDHI” or
“mutual benefit societies”. It has come to the notice of the DCA that
some NBFCs or NIDHIS have been registered with words “mutual
funds” forming part of their names, although they are not actually
mutual funds. This is likely to create confusion in the minds of
investors. In case where NBFCs or NIDHIS have already been asked to
get their names changed under section 21 of the Companies Act, 1956
within a reasonable time of six months failing which report would be
sent to the DCA for initiating action for withdrawal of notification
issued in their favour under section 620A of the companies Act. [PIB
Press Release New Delhi dated 14th February 2000]
LEGAL UPDATES