Company Name Significance & Regulatory Role under Companies Act

CS Rashmi H

Significance of a Company’s Name and the Regulatory Role of the Central Government under the Companies Act, 2013

The name of a company is its primary identity and serves as a vital tool in establishing its brand presence. Companies often use creative and distinctive names to attract customers as their prime marketing strategy. Just as individual is given name for identification, the name of a company allows recognition of a legal, artificial person. A well-thought-out company name is crucial, especially in the early stages of business, as it plays a significant role in capturing customer attention.

The selection of a company name must be done carefully, ensuring that it does not fall under the category of undesirable names, i.e., names that are identical to or too similar to existing company name(s) or registered trademark(s). The chosen name should be unique and distinctive, particularly within the same industry, to avoid confusion among consumers. Duplication can dilute the brand’s goodwill and lead to misidentification in the market.

In India, there is no specific statute governing the naming conventions for sole proprietorships or partnership firms. However, individuals or firms seeking protection of their trade name can register a trademark to initiate a legal action in case of trademark infringement.

Legal Provisions for Rectification of name of Company under the Companies Act, 2013 (“The Act”)

Section 16(1)(a) – Power of the Central Government

As per Clause (a) of Subsection (1) of Section 16 of the Act, the Central Government (Powers are delegated to Regional Director) is empowered to direct a company to change its name if it is identical to or closely resembles the name of an existing company or LLP. Once such a direction is issued, the company must comply with the order of the Central Government within three months from the date of the order and must change its name.

Previously, under Section 22(1)(b) of the Companies Act, 1956, the Central Government could issue a similar directive to change the name on the grounds that name of the company resembled the name of an existing company, or upon receipt of an application from the proprietor of a registered trademark within 12 months of the company’s initial registration, registration with a new name, or from the commencement of the Companies Act, 1956, the company was required to pass an ordinary resolution and change its name within 3 months, subject to approval from the Central Government.

Section 16(1)(b) – Application by Trademark Proprietor

Clause (b) of Subsection (1) allows a registered trademark proprietor to apply to the Central Government if a company’s name is identical or deceptively similar to the registered trademark. Such application must be made within three years from the company’s incorporation or name change under this Act or under previous Company law. The Central Government, may then direct the company to change its name within three months.

It is noteworthy that the Central Government retains the power to pass a rectification order at any time during the company’s existence, while a registered trademark proprietor must act within 3 years of incorporation or registration or change of name of the new company.

Judicial Precedent on rectification of name:

Coolulu Sports Private Limited vs Union of India on 5 April, 2023, Karnataka High Court

• Petitioner: Coolulu Sports Private Limited
• Respondent 1: Union of India, Ministry of Corporate Affairs
• Respondent 2: Regional Director, South-East Region, Ministry of Corporate Affairs, Hyderabad
• Respondent 3: Lulu International Shopping Malls Private Limited
• Respondent 4: Registrar of Companies, Karnataka

The petitioner in this case claims to be established with the aim of fostering athletic inclinations in both children and adults, to give sport enthusiasts an opportunity to compete and get recognized. The petitioner was incorporated on 13-04-2018 in the name and style of ‘Coolulu’. It is claimed that prior to the petitioner getting incorporated the brand and logo with the stamp and all other things were checked and then the name was incorporated.

The 3rd respondent filed a complaint with the Competent Authority, claiming that the petitioner’s company name was too similar to its own. Based on this complaint, the 2nd respondent (Regional Director) issued a show cause notice to the petitioner under Section 16 of the Act. The petitioner submitted its objections. However, after reviewing the materials, the 2nd respondent passed an order on 30th March 2022, under Section 16(1)(b), directing the petitioner to remove the word ‘Lulu’ from its name and change the company name within 3 months. If the petitioner failed to do so, Rule 33A of the Companies (Incorporation) Fifth Amendment Rules, 2021 would be applied to enforce the name change.

The petitioner’s counsel argued that there is a clear difference between the names ‘Lulu’ and ‘Coolulu’ and that the order to remove ‘Lulu’ from the petitioner’s name lacked proper reasoning and failure to consider the relevant legal provisions. Despite submitting several documents to prove that the names are not similar, the 2nd respondent ignored these objections and relied only on the 3rd respondent’s application. In response, the 3rd respondent’s senior counsel argued that ‘Lulu’ is a globally well-known brand, and under Section 16 of the Companies Act, a name that is too similar to a famous trademark cannot be allowed.

The High Court found that the Regional Director (2nd respondent) did not properly interpret Section 16 of the Companies Act or the relevance of the Trade Marks Act. The order lacked proper reasoning or analysis of the objections raised by both the parties.

The High Court further observed that when an order affects the legal rights of parties, such as the right to use a company’s name, it must be supported by clear reasoning and demonstrate proper application of mind. A mere similarity in names cannot, by itself, justify a direction to change the company’s name unless it is shown how such similarity leads to confusion or infringes legal rights of the respondents. The Regional Director failed to consider the detailed objections raised by the petitioner and passed the order without application of mind. The Court held that an order without reasons is legally considered an “unreasonable order” and therefore cannot be sustained. As a result, the High Court set directed the Regional Director to reconsider the case and issue a reasoned order after properly evaluating the submissions of both parties.

Incorporation Rules: Rule 33A of Companies (Incorporation) Rules, 2014

Sub Rule (1) of Rule 33A of Companies (Incorporation) Rules, 2014- Consequences of failure to comply with the order of Central Government.

As per Sub Rule(1) of Rule 33A of Companies (Incorporation) Rules, 2014, if a company fails to change its name or new name, as the case may be, in accordance with the direction issued under sub-section (1) of section 16 of the Act within a period of three months from the date of issue of such direction, then the name of CIN will be replaced with the letters “ORDNC” (which is an abbreviation of the words “Order of Regional Director Not Complied”), the year of passing of the direction, the serial number and the existing Corporate Identity Number (CIN) of the company shall become the new name of the company without any further act or deed by the company, and the Registrar shall enter the new name in Registrar of Companies and issue a fresh certificate of incorporation in Form No. INC 11 C.

Sub Rule (2) of Rule 33A of Companies (Incorporation) Rules, 2014- Disclosure of CIN, Order of Regional Director Not Complied (ORDNC), and Year of Non-Compliance with the order of Regional Director.

As per Rule (2) of Rule 33A of Companies (Incorporation) Rules, 2014, A company whose name has been changed under sub-rule (1) shall at once make necessary compliance with the provisions of section 12 of the Act and the statement, by mentioning “Order of Regional Director Not Complied (under section 16 of the Companies Act, 2013)” in brackets below the name of company, wherever its name is printed, affixed or engraved. However, no such statement shall be required to be mentioned in case the company subsequently changes its name according to Section 13 of the act.

The illustrative list of companies which did not change the name within 3 months of order by the Regional Director and whose name is changed automatically are illustrated for the reader’s reference.

Remedies for Trademark Infringement

If a registered trademark is infringed due to unauthorized use in a company name, the proprietor of the trademark can enforce the following remedies:

1. Legal Notice: The trademark proprietor can issue a notice to the infringing party, requesting name change and claim the profits wrongfully earned using the registered trademark. The notice should establish the resemblance and potential for consumer confusion against the existing brand.

2. Civil Suit:

a) File a suit for infringement of the registered trademark.

b) Initiate a passing off action for unregistered marks when a party misrepresents goods or services as those of the original brand.

c) Courts may grant an injunction, restraining further use of the infringing mark, and may direct the delivery of infringing goods, logos, and labels.

Central Government approval for usage of certain words and expression in the name of the Company

As per sub-section (3) of Section 4 of the Companies Act, 2013, a company is prohibited from using a name or a combination of names that:

a) Includes any Word or Expression which may give the impression that the company is in any way associated with or enjoys the patronage of the Central Government, any State Government, or any local authority, corporation, or body constituted under any law currently in force by the Central or State Government.

b) Contains any of the following words either in English or any other language conveying a similar meaning, unless prior approval is obtained from the Central Government:

• Board
• Commission
• Authority
• Undertaking
• National
• Union
• Central
• Federal
• Republic
• President
• Rashtrapati
• Small Scale Industries
• Khadi and Village Industries Corporation
• Financial Corporation or similar entities
• Municipal
• Panchayat
• Development Authority
• Prime Minister or Chief Minister
• Minister
• Nation
• Forest Corporation
• Development Scheme
• Statute or Statutory
• Court or Judiciary
• Governor
• Any use of the word “Scheme” in conjunction with the terms Government(s), State, India, Bharat, or any governmental authority, or any wording that resembles schemes launched by Central, State, or local governments
• Bureau

To use any of the above-mentioned words in a company name, prior approval from the Central Government is mandatory. An online application for such approval can be made in the Ministry of Corporate Affairs (MCA) website.

Conclusion: In today’s competitive business environment, a company’s name is a critical asset that shapes public perception, builds consumer trust, and supports long-term brand equity. Popular names like Apple, Nyka, Canva, Reliance, Amazon, Google, and Zomato are instantly recognizable and carry significant goodwill due to their distinctiveness and consistent brand value.

Selecting a unique and desirable name helps a company stand out in the market while avoiding disputes over Intellectual Property Rights. Entrepreneurs and promoters must ensure that the chosen name does not infringe on existing trademarks or closely resemble another company’s name, especially in the same sector while choosing name of their Company or LLP. Failure to take care in this regard not only attracts legal action but may also result in mandatory name changes, as illustrated under Section 16 of the Companies Act, 2013 and Rule 33A of the Companies (Incorporation) Rules, 2014 and creates damage to the reputation of the Company.