ABSTRACT:
This research paper explores the complex legal challenges of changing a company’s name, a common practice based on strategic decisions, mergers, or market repositioning. The study explores the complexities through an in-depth analysis of relevant laws, recent cases and outcomes. This emphasizes the central role of the charter and the importance of the name clause in creating a corporate identity. The study identifies potential obstacles, such as brand conflicts and regulatory documents, and offers strategic recommendations for a smooth transition. Building on insights from recent evaluations, the study highlights the importance of due diligence processes, shareholder consensus and effective communication. In conclusion, the article provides valuable information for businesses navigating the legal landscape of changing business names.
INTRODUCTION:
Alteration of a company’s name is a common practice in the corporate world and are frequently caused by strategic decisions, mergers, acquisitions, or market repositioning. While such changes are necessary for business growth and adaptation, they are accompanied by complex legal challenges that must be navigated carefully and evaluated critically with the relevant laws and recent cases. This research article delves into the complexities that come with altering the company’s name by examining the legal challenges, repercussions, and outcomes in these situations and analysing five recent judgments.
An important step in the formation of a company is to prepare a document called memorandum of association. Section 2 (56) of Companies Act,2013[1] One of the most crucial provisions of a memorandum is the name clause, which must include the prospective company’s name. Being a legal body, the company needs a name to establish its identity.
MEMORANDUM
“A corporation’s name is a symbol of its unique existence[2].” Any appropriate name may be chosen, however, subject to the following. The name should not be something that the central government deems to be undesirable. A name is typically undesirable if it is identical to, or too closely resembles, the name of another company since there is a high probability that the owner of an existing trademark will object.
Research Problem: The problem of this research paper is the legal challenges in altering the name of the company.
The name should not imply any association with or patronage of the government. If the company has “limited liability,” the last word of the name should be “limited,” and if it is a private corporation, it should be “private limited.” This advises anyone engaging with the company that the members’ liabilities are limited. The central government, on the other hand, may allow a business to delete the word “limited” from its name if it is a charitable company as defined by section 8[3] of the Companies act.
Stages for Altering name:
A firm may change its name by passing a special resolution and obtaining written authorisation from the federal government. Any change in the name of the company will be subject to the provisions of section 4(2) and (3) of the memorandum, which are contained in the requirements of name clause. The central government’s approval is not required if the only change in the name is the deletion or inclusion of the term “private” as a result of the company’s conversion from one class to another in line with the rules of the act.
STAGES TO ALTER COMPANY NAME:
- Meeting of Board of directors:
Send a written notice to all directors at least seven days before the meeting, including the agenda. In urgent instances necessitating the participation of at least one independent director for decision finalization, a shorter notice can be utilized.[4]
- At the Board Meeting, pass resolutions.
Call the Board Meeting to order with a quorum of one-third of the directors or two, whichever is greater. Discuss and propose a new company name. Pass resolutions authorizing the application to the Registrar of Companies for name reservation and securing a no-objection letter for the new name.
- Extraordinary General Meeting (EGM)
Call an EGM to affirm the approval of the members. Send out a notice 21 days in advance, with an explanation[5]. A shorter notice can be given if 95% of the members consent. Adopt a special resolution approving the new name and amending the Memorandum and Articles of Association.
- Submit Form MGT-14.
Within 30 days of the EGM, notify the Registrar by filing Form MGT-14 with the special resolution attached[6].
- Submit Form INC-24.
Submit Form INC-24 to the Registrar for approval of the name change by the Central Government. Attach the minutes of the EGM and any other needed documentation. Ensure fee payment compliance and submit within 30 days of the EGM.
- Await Form INC-25
Upon successful processing, the Registrar will issue Form INC-25, indicating the approved name change.
METHODOLOGY
The research was conducted using the didactic research method. Primary and This article uses secondary sources of information. Primary the data sources used are the Limited Liability Companies Act, 2013 and the Trade Marks Act 2013 1999. Newspaper articles are used as secondary data sources, Avtar Singh Corporate Law Book, Thesis and Working Papers.
LITERATURE REVIEW:
- It is a fully owned auxiliary of an outside organization, as its name suggests. Molson Coors India Private Limited could be a good example. In any case, inclusion of any term, not only “India,” is not that simple, and consideration of the word “India” necessitates extra caution. It is determined by the organization’s current status[7].
- Section 4 of the Companies Act 2013[8] read with Rule 8 governs the legal name of an organization. The limitation associated with the insertion of the word “India” has been removed under current law, with effect from April 1, 2014[9].
- India can be included in the name of any organisation, but it is a little too much to be an administration organisation. Coca-Cola India Limited is an excellent example. Coca Cola India Private Limited is not supported by the Indian government or any Indian citizen.[10]
- Any Indian topic or component may also be used in the name of an organization with the word “India” in it[11]. As previously stated, there are no restrictions for such incorporation. Candidate should be asked what the word India means in the service’s proposed name[12].
- When a consolidated organization proposes changing its name, the members of the organization should follow the procedure outlined in the Companies Act of 2013 and the Companies (Incorporation) Rules of 2014[13]. It follows a methodical process to change an organization’s name. Following the protocol will ensure a smooth transition from the recently suggested name to the existing name with no major issues. The new name may include the addition of new words or the removal of others. The recently proposed name should not be included in the category of “bothersome names,” which is elaborately defined in Rule 8 of the Companies (Incorporation) Rules, 2014[14].
CASE ANALYSIS
The defendant’s firm name should not have been registered in the case of Society of Motor Manufacturers and Traders Ltd. v. Motor Manufacturers and Traders Mutual Insurance Co., Ltd[15]. Due to the court ruled that “Anyone who thought about the issues in detail would realize that the business was an insurance provider. Thus, Justice Lawrence ruled that the defendant company is responsible for maintaining its operations halted until it just changes its name
According to the court’s ruling in the case of vov cosmetics (P) ltd v. Union of India[16], “A company is registered by a name which is identical with or too nearly resembles the name by which a company in existence has been previously registered, the central Government is bound to direct such subsequently registered company to change its name in the manner provided in section 22(1)[17].” They argued that the federal government would then be forced to order the name to be altered. Later, the company was ordered to alter its name for the simple reason that the two names are the same[18].
In the case of Kali Aerated Water Works, Tiruchirappalli v. Rashid and others[19], the plaintiffs were producing and marketing numerous varieties of aerated waters in Tiruchirapalli under the term “kali mark.” The defendants who showed up before former plaintiff firm employees founded a company called and dressed in the manner of “Sri new Kali brand soda factory” and were creating and selling aerated wages under “Sri new kali mark” is its commercial name. The court ruled that even though are strictly comparable but not identical, hence the use of the business name was not allowed.
The appellants in Heinz Italia & others v. Dabur India ltd[20]. were the owners of the registered trade mark “GluconD.” The defendant then introduced a comparable product under the brand name “Glucose -D[21].” As a result, the court determined that both “Glucon-D” and “GlucoseD” are items containing glucose, and that there is a notable phonetic similarity between these phrases that could deceive the customer. As a result, the mark “Glucose-D” cannot be used for future production.
SUGGESTION AND CONCLUSION:
To summaries, changing a company’s name entails several legal issues that must be carefully considered and planned for. A corporation can minimize any legal concerns and seamlessly transition to its new brand by receiving legal counsel, obtaining appropriate approvals, and effectively communicating the change. Some of the suggestion that can be taken to make a hassle-free task in altering the name of a company are: ensuring that it does not infringe upon existing trademark. Domain Name Acquisition[22]: In the digital age, securing a corresponding domain name is crucial. Verify the availability of the desired domain name and register it promptly to prevent any future complications.
Contractual Obligations: Review all existing contracts, agreements, and licenses your company is party to. Ensure that the name change does not violate any contractual provisions, and seek legal advice if modifications are required. Regulatory Notifications: Depending on your jurisdiction, you may need to notify various governmental bodies about the name change. Obtain the necessary permits, licenses, and approvals before proceeding. Shareholder and Stakeholder Consent[23]: If your company has shareholders, partners, or stakeholders, their consent may be required for a name change, especially if it involves altering the company’s legal structure. Consult with legal experts to understand the extent of their involvement and necessary approvals.
[1] Companies Act, 2013 § 2 (56), Acts of Parliament, 2013 (India)
[2] Johnson J in Osborn v. United States, 6 L Ed 204, The Wisdom of The Supreme Court (1962) 79
[3] Companies Act, 2013 § 8, Acts of Parliament, 2013 (India)
[4] James Carson.et.al, name changes and future growth, journal of insurance issues, vol.39, issue.1, pp.1-3,2016.
[5] Howe, John S. “A Rose By Any Other Name? A Note on Corporate Name Changes.” The Financial Review 17.4 (1982): 271-78. Print.
[6] Karpoff, Jonathan M., and Graeme Rankine. “In Search of a Signalling Effect: The Wealth Effects of Corporate Name Changes.” Journal of Banking & Finance 18.6 (1994): 1027-045. Print.
[7] Liu Michael, the valuation of effect of corporate name changes, European journal of management, pp.45-51,2009
[8] Companies Act, 2013 § 4, Acts of Parliament, 2013 (India)
[9] Mase, Bryan. “The Impact of Name Changes on Company Value.” Managerial Finance 35.4 (2009): 316-24. Print
[10] Rotfeld, Herbert Jack. “Function and Problems of Brand Name Pharmaceuticals.” Journal of Product & Brand Management 18.4 (2009): 240-41. Print.
[11] S. Sozhiya &M. Kannappan, A Research on Naming a Company and Changing the Name-Legal Issues and Analysis of Case Laws, Volume 119 No. 17 2018, 969-982
[12] Paul sergius Koku, corporate name changes signalling in services industry, journal of services marketing, vol.11, issue.6, pp.392- 408,1997.
[13] Lin, Hsiao-Mei, Robert (Chi-Wing) Fok, Shih-An Yang, and Yuanchen Chang. “The Wealth Effects of Oil-related Name Changes on Stock Prices: Evidence from the U.S. and Canadian Stock Markets.” Journal of International Financial Markets, Institutions and Money 40 (2016): 26-45. Print.
[14] Karbhari.et.al, shareholder wealth effects and corporate name changes, SSRN journal, pp.26-31,2004.
[15] Society of Motor Manufacturers and Traders Ltd. v. Motor Manufacturers and Traders Mutual Insurance Co., Ltd [1925] 1 Ch 675:133 LT 330
[16] VOV Cosmetics Private Limited & Others v/s Union of India, through Government Pleader & Others Writ Petition No. 2519 of 2012
[17] Companies Act, 2013 § 13, Acts of Parliament, 2013 (India)
[18] Farooq, Omar, and Youssef Chetioui. “Corporate Governance and Stock Price Performance of Firms during the Crisis: Evidence from the MENA Region.” International Journal of Business Governance and Ethics 7.4 (2012): 331. Print.
[19] Kali Aerated Water Works, Tiruchirappalli v. Rashid and others AIR 1989 Mad 9
[20]Heinz Italia & others v. Dabur India ltd Appeal (civil) 2756 of 2007
[21] Andrikopoules, the long-term market performance of UK companies following corporate name changes, SSRN journal,2007
[22] David mutua mathuva.et.al, impact of name change on financial performance, Management research review journal, vol.39, issue.10, p.1265, 1998.
[23] Sami Kashmiri and vijay, the name’s the game…, the journal of business research, vol.68, issue.2, pp.281-290,2015.
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