Name is one of the most important aspects of the Companies existence, it is the first thing which any outsider see while dealing with the company. So it not only signifies the identity of the business per se but also creates the perception about the company in the eyes of outsiders.
In today’s world, the name of the company become much more important since the company’s value is based on the Brand power or Brand value it has.
So while deciding the name of the Company we must consider all this, however, there might be the case where the company wants to change its existing name due to several factors, such as take-over of the company and the new management wants to change the name of the company to bring it in line with the name of the other companies under the same management. The other reasons include merger etc., and one of the recent examples is IDFC Fist Bank, which changed its name from IDFC Bank after the merger with the NBFC, Capital First.
In this write-up, I am going to discuss the general procedure for the name change and try to analyse the section applicable in such a name change.
To alter the name of the Company we have to alter the Memorandum of Association of the Company along with the Article of Association and other statutory and non-statutory publication of the company.
In the process of the name change of the company following sections of the Companies Act, 2013, along with Rules made thereunder will be applicable. Section 13, Section 4, Section 14, Section 12, Section 117, Section 450, Section 447 and Section 448. Along with these section following rules are also applicable, Rule 8, 8A, 8B, 9, and 29.
The Legal Aspect of Name Change
For the alteration of the “Name”, sub-sections (1), (2) and (3) of Section 13 are applicable. For easy reference, I am reproducing the Section below.
13. Alteration of Memorandum
(1) Save as provided in section 61, a company may, by a special resolution and after complying with the procedure specified in this section, alter the provisions of its memorandum.
(2) Any change in the name of a company shall be subject to the provisions of sub-sections (2) and (3) of section 4 and shall not have effect except with the approval of the Central Government in writing:
Provided that no such approval shall 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.
(3) When any change in the name of a company is made under sub-section (2), 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 and the change in the name shall be complete and effective only on the issue of such a certificate.
To alter its name clause section 13 along with subsection (1), (2) and (3) are applicable. Subsection (1) provides that Company need to pass Special Resolution to alter the provisions of the Memorandum of Association and comply with other conditions specified in this section.
In case of the name change, other conditions are specified under subsection (2), which laid down that any name change will be subject to compliance of Section 4 subsection (2) and (3) and further such change will be effective only after approval from the Central Government and Central Government has delegated its power to Regional Director to approve the name change.
Subsection (2) to Section 13 in its proviso further provides that approval of Central Government (Regional Director) is not required in case change in name is only addition or deletion of word “Private” from the name due to conversion of the company from one class to another, that is the conversion of private company into a public company or visa-versa or conversion of private limited company to section 8 company.
Subsection (3) to Section 13 is also applicable; however, it explicates the procedure to be followed by the Registrar of the company that is a new name to entered in the Register of Company and a new certificate to be issued with the new name.
As Section 13(2) provides that Section 4(2) and (3) are applicable so we have to understand these section too. I am further reproducing these provisions for easy reference.
(2) The name stated in the memorandum shall not—
(a) be identical with or resemble too nearly to the name of an existing company registered under this Act or any previous company law; or
(b) be such that its use by the company—
(i) will constitute an offence under any law for the time being in force; or
(ii) is undesirable in the opinion of the Central Government.
(3) Without prejudice to the provisions of sub-section (2), a company shall not be registered with a name which contains—
(a) any word or expression which is likely to give the impression that the company is in any way connected with, or having the 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
(b) such word or expression, as may be prescribed, unless the previous approval of the Central Government has been obtained for the use of any such word or expression.
Further, before moving forward with the name reservation it is important to understand the certain conditions if not fulfilled, the company will not be allowed to change its name. Rule 29 of the Company (Incorporation) Rule, 2014 provides the condition subject to which name change will not be allowed.
1. if Company has not filed an Annual Return or Financial Statement due for filing with the RoC.
2. Company which has failed to pay or repay the matured deposit or debenture or interest thereon.
However, once the default is made good such restriction will not be applicable.
Section 4 (2) and (3) provides the pre-conditions that “a name applied” for the reservation must satisfy to get approved, and in case such conditions are not met then such name will not be reserved.
Further, Rule 8, 8A, and 8B of the Companies (Incorporation) Rule, 2014 provides the different conditions that must be followed while reserving the name of the company. Rule 8 provide the conditions to be followed to examine whether the name applied, resemble too nearly with the existing name of any other companies, and if so, such a name will not be reserved.
Rule 8A provides the conditions subject to which name will be considered undesirable. For example, if a name applied for reservation found similar to any existing name as per Rule 8 then such proposed name will be considered undesirable, other conditions are if such proposed name is offensive to any section of society or such name is prohibited under Section 3 of the Emblems and Name (Prevention and Improper Use) Act, 1950.
Rule 8B, provides that there is a certain word that can be used only after obtaining prior approval from Central Government. This includes word such as Federal, Republic, Governor, etc. For easy reference, I am reproducing these rules below.
Further Section 4 subsection (4) and (5) along with Rule 9 of the Companies (Incorporation) Rule, 2014 provides for the procedure for reserving the name for purpose of the name change and the period for which such name is reserved.
For the reservation of name for the change of the name of the existing company, we have to apply through an integrated Reserve Unique Name (RUN) system. The name is reserved for 60 days. All the procedural part needs to be done within 60 days of reservation of name.
Procedure for Name Change
Once the company decides to change its name, it will call the Board Meeting after giving the due notice of 7 days or it can also call it at shorter notice subject to compliance with the applicable provisions of Section 173.
In the board meeting, the board will pass the resolution approving the name change subject to the availability of the name and approval of the shareholders and Central Government (Regional Director). Further, whether such name change is due to a change in business activity or not need to be explicitly mentioned in the resolution and one director will be authorized to apply for the reservation of the name.
Once the Board approves the proposed name, the Director authorized to act on behalf of the Board will file an application through the MCA Reserve Unique Name (RUN) system along with a certified true copy of the resolution approving the name change.
Once MCA (CRC) reserve the name and the company receive intimation in this regard the company will call a board meeting to call an extraordinary general meeting to pass a Special Resolution to change the name by altering the Name Clause of the Memorandum of Association, further, Article of Association will also be altered, as per Section 14, and shareholders shall also authorize the change in name in the official publication such as letterhead, bill etc. will also be altered.
General Meeting (GM) will be called by giving clear 21 days’ notice or by giving shorter notice as per Section 101. In GM shareholders will approve the name change of the Company subject to the approval of the Central Government (Regional Director). Further, the resolution will also approve as Alteration of Memorandum of Association, Article of Association, etc.
After GM, the Company will first file the MGT-14 for the Alternation of Memorandum of Association and Alteration of the Article of Association under Section 117. Once the MGT-14 is filed and SRN is generated the Company will fill and file INC-24 under Rule 29 of the Companies (Incorporation) Rule, 2014. It is important to note that the first MGT-14 will be filed since INC-24 asks for the SRN Number of the MGT-14.
Once all the procedure are completed after the filing of the forms and central government approve the name change the company has to comply the Section 12 subsection (3) clause (d), and for the immediate succeeding two years, company along with its new name also mention its old name.
Documents to be attached with the MGT-14 and INC-24:
1. Notice of the calling GM for the name change.
2. Consent for the Shorter notice, if applicable.
3. Certified true copy of the Resolutions passed at the GM
4. Copy of Altered Memorandum and Article of Association.
Penalties in Case of Any Commission or Omission Under the Entire Process
The entire process of name change involves the following sections, section 4, section 12, section 13, and section 14.
|DEFAULT UNDER SECTION
|Section 4: If the name is reserved by furnishing wrong information.
|Registrar after giving reasonable opportunity of being heard to company:
1. Either direct the company to change the name of the company within the period of three months after passing the Ordinary Resolution.
2. Strike-off the Company from the Register of Companies, or
3. Make an application for the winding-up of the company.
|Section 12: If the company does not indicate the old name with the new name for the two years from the name change.
|Subsection 8 provides that in case of default in complying with the provision of the section, the company and every officer in default shall be liable to pay the penalty of 1,000 Rupees each day and with the maximum amount of Rs. 2,00,000.
|The default under Section 13
|Section 13 does not specify any specific penalty, hence, a general penalty of Section 450 will be applicable and penalty 10,000 Rupees for default and in case of continues default 1,000 Rupees per day, subject to a maximum of Rupees 2,00,000 Rupees for the company and 50,000 Rupees for every officer in default.
|A default under Section 14
|Section 13 does not specify any specific penalty, hence, a general penalty of Section 450 will be applicable and the penalty 10,000 Rupees for default and in case of continues default 1,000 Rupees per day, subject to a maximum of Rupees 2,00,000 Rupees for the company and 50,000 Rupees for every officer in default.