Thursday 26 March 2015
Wednesday 26 March 2014
MCA notifies most of the sections of Comapnies Act, 2013
Ministry of Corporate Affairs has further notified most of the provisions of Companies Act, 2013 with effect from April 1, 2014.
See list of notified sections of Co. Act, 2013 from the link <http://www.mca.gov.in/Ministry/pdf/CompaniesActNotification26March2014.PDF>
Tuesday 19 November 2013
Non-applicability of Companies Act, 2013 for May 2014, CA Examinations
Non-applicability of Companies Act, 2013 for May 2014, CA Examinations
18th November, 2013
Important Announcement
Attention: Intermediate (IPC) and Final Course students
Non-applicability of Companies Act, 2013 for May 2014, Examinations
This is to bring to the notice of students that the Companies Act, 2013 notified in the Official Gazette on 30th August, 2013 (with partial enforcement of only 98 sections of the Companies Act, 2013 from 12th September, 2013) shall not be applicable for May 2014 examinations both at the Intermediate (IPC) and Final levels.
The examinations will be based only on the existing syllabus.
Director, Board of Studies ICAI
Thursday 15 August 2013
Applicability of Companies Bill, 2012 for CA, CS Exam
For CA (IPC)
14th August, 2013
Important Announcement
Attention: Intermediate (IPC) and Final Course students
Attention: Intermediate (IPC) and Final Course students
Non-applicability of Companies Bill, 2012 (to be enacted as the Companies Act, 2013) for May 2014, Examinations
This is to bring to the notice of students that the Companies Bill, 2012 (to be enacted as the Companies Act, 2013) which was passed by the Lok Sabha on 18th December, 2012 and was pending before the Rajya Sabha, has been finally passed on 8th of August, 2013. This Companies Bill will be enacted as the Companies Act, 2013 on receiving the assent of the President of India and notification in the Official Gazette, which will replace the existing statute, the Companies Act, 1956.
Based on the above, it is hereby clarified that the proposed Companies Act, 2013 will not be applicable for the Intermediate (IPC) and Final Examinations to be held in May 2014.
Regarding the applicability for November 2014 Examination, the decision will be taken based on the exact date of enactment of the above Companies Bill into the Act.
Director, Board of Studies
For CS-Executive Programme
ATTENTION STUDENTS!
Clarification about Applicability of the Companies Bill, 2013 for Company Secretaries December, 2013 Examination.
Students appearing in the ‘Company Law’ paper of ‘Executive Programme’) and Company Secretarial Practice paper of the ‘Professional Programme’ respectively may take note of the following changes applicable for December 2013 Examination:
1. Highlights of the Companies Bill, 2012 as passed by the Parliament on 8th August, 2013 will be applicable under the topics Historical Development of Concept of Corporate Law in India/Contemporary Developments.
2. All Circulars, Clarifications/Notifications issued by the Ministry of Corporate Affairs effective six months prior to the date of examination.
Note:
Student may download the highlights from the link http://www.icsi.edu/WebModules/Linksofweeks/Cos%20bill%20highlights.pdf
Thursday 1 August 2013
Lifting the Corporate Veil : The English and Indian Laws
Relevent articles on Lifting the Corporate Veil : The English and Indian Laws from http://www.taxmann.com written by RADHIKA NALLAGUNDLA
[2013] 35 taxmann.com 275 (Article)
Lifting the Corporate Veil : The English and Indian Laws
A Comparative Approach
Introduction
1. Law recognizes a corporation as a separate legal entity. Since Salomon's decision in 1897, the Courts have often been called upon to apply the principle of separate legal personality. In some of the cases, the principle was upheld and in some others it was not. For centuries there was a heated controversy over the applicability of the doctrine of separate legal entity and further, to limit the theory of limited liability, which is often metaphorically termed as "lifting the corporate veil". It is defined by the BLACK'S LAW DICTIONARY 1168 (7th ed. 1999) as "piercing the corporate veil: [t]he judicial act of imposing liability on otherwise immune corporate officers, directors, and shareholders for the corporation's wrongful acts."
The expression "piercing the corporate veil" became well known after Maurice Wormser, a law professor at Fordham University, wrote his key article on the subject. (See Maurice Wormser, Piercing the Veil of Corporate Entity, 12 COLUMN. L. REV. 496 (1912)).
The English Doctrine : A brief history of
2. The history of the English Doctrine can be divided into following three stages:
| '(a) | 1897-1966: This period may be called as the classical veil lifting or the early experimentation period, during which the English Courts experimented with different approaches of the doctrine. The House of Lords decision in Salomon's case dominated in this period. | |
| (b) | 1966-1989: This period started after the second world war and is the interventionist period. The rules of the House of Lords inSalomon's case were changed and the veil lifting was encouraged during this period. In Littlewoods Mail Stores v. IRC [1969], Lord Denning stated as follows:- " the doctrine laid down in Salomon's case has to be watched very carefully. It has often been supposed to cast a veil over the personality of a limited company through which the Courts cannot see. But that is not true. The courts can, and often do, pull off the mask". With wanting of any hypothesis, the spirit of the doctrine in this period can be attributed to the most influential jurist of the twentieth century, Lord Denning. | |
| (c) | 1989-the present: Much of the credit can be given to the Woolfson's case at the beginning of this period. The doctrine of corporate veil lifting began to be disfavoured by the Courts in this period. Lord Keith in Woolfson v. Strathclyde Regional Council, stated that the one situation where a corporate veil could be lifted was whether there were special circumstances indicating that the company was a 'mere façade concealing the true facts'. |
After the high profile cases in 1990s which were decided against the doctrine of corporate veil lifting, it can be said that the veil lifting has become rare under the English Law. The judgment of the Court of Appeal in Adams v. Cape Industries Plc(1990) leaves only following three circumstances when a corporate veil can be lifted: (i) If the Court is interpreting a statute or document and the statute itself is ambiguous, which would allow the Court to treat a group as a single entity, (ii) If special circumstance indicate that it is a mere façade concealing the true facts, the Courts may lift the veil, (iii) The third exception is an application of the agency principle. Parent companies and subsidiaries are unlikely to have express agency agreements. It is even difficult to prove an implied agency. Evidence is required that day-to-day control was being exercised by the parent company over its subsidiaries.
One of the reactions of the Parliament to Salomon's decision was that an offence of fraudulent trading was introduced. This offence was continued in the Companies Act, 1948 which contained both civil and criminal sanctions. Now criminal offence is contained in section 993 of the Companies Act, 2006 while as the civil sanctions are contained in the Insolvency Act, 1986, which operate to lift the corporate veil.
The Indian Law
3. As most of the provisions of the Indian Law were borrowed from the English Law, it more or less resembles the English Law. Salomon'scase has been the authority in the decisions of the doctrine in the Indian company cases.
The Supreme Court in Tata Engineering & Locomotive Co. Ltd. v. State of Bihar (1964) stated: "the corporation in law is equal to a natural person and has a legal entity of its own. The entity of corporation is entirely separate from that of its shareholders; it bears its own names and has seal of its own; its assets are separate and distinct from those of its members; the liability of the members of the shareholders is limited to the capital invested by them; similarly, the creditors of the members have no right to the assets of the corporation." In some of the cases, judicial decisions have no doubt lifted the veil. Gower has summarized it with the observation that in a number of cases the Legislature has rented in many respects, the veil woven by Salomon's case. According to Gower, the Courts have only construed the statutes as "cracking open the corporate shell" when compelled to do so by the clear words of the Statute. Thus, even in India it can be seen that at present the consensus is that cracking open the veil is somewhat cautious and circumspect.
In LIC of India v. Escorts Ltd. [1986], Justice O. Chinnapa Reddy had stressed upon fact that the corporate veil should be lifted where the associated companies are inextricably connected as to be in reality part of one concern. After the Bhopal Gas Leak Disaster case, the lifting of corporate veil has been escalated. Furthermore, in State of UP v. Renusagar Power Company, the Supreme Court lifted the veil and held that Hindalco, the holding company and its subsidiary, Renusagar company should be treated as one concern and that the Power Plant of Renusagar must be treated as the own source of generation of Hindalco and on that basis, Hindalco would be liable to pay the electric duty. After the decision in Renusagar's, case, the doctrine has been considered in several other cases.
4. Statutory provisions : Of the Indian and the English Law
4.1 Of the Indian Law - The Companies Act, 1956, provides for the circumstances when a veil is to be lifted. These circumstances are as follows:—
4.1.1 When membership is reduced - Under section 45 of the Companies Act, when the number of members of a company is reduced below 7 in case of a public company and below 2 in case of a private company and the company continues to carry on its business for more than 6 months while the number is so reduced, every person who is a member of such company knows this fact is severally liable for the debts of the company contracted during that time.
4.1.2 Improper use of name - Section 147(4) provides that an officer of a company who signs any Bill of Exchange, Hundi, Promissory Note, cheque, wherein the name of the company is not mentioned in the prescribed manner, such officer shall be held personally liable to the holder of such Bill of Exchange, Hundi, Promissory Note or cheque, as the case may be, unless it is duly paid by the company.
4.1.3 Fraudulent conduct - If in the course of winding up of a company, it appears that any business of the company has been carried on with the intent to defraud the creditors of the company or any other person or for any other fraudulent purpose, the persons who were knowingly parties to the carrying on of the business, in the manner aforesaid, shall be personally liable for all or any of the debts or other liabilities of the company, as the Court may direct [section 542].
4.1.4 Failure to refund application money - Section 69(5) of the Act provides that the directors of a company are jointly and severally liable to repay the application money with interest, if the company fails to refund the application money of those applicants who have not been allotted shares within 130 days from the date of issue of the prospectus. However, this does not in any way affect the very existence of the company or indeed its subsequent independent personality and other features.
4.2 Of the English Law
4.2.1 Doing business without trading certificate required under section 761(CA2006) - Section 767(3) of the Companies Act, 2006 provides that a contravention of section 761 does not affect the validity of a transaction entered into by the company, but if a company—
| (a) | enters into a transaction in contravention of that section, and | |
| (b) | fails to comply with its obligations in connection with the transaction within 21 days from being called on to do so, | |
the directors of the company are jointly and severally liable to indemnify any other party to the transaction in respect of any loss or damage suffered by him by reason of the company's failure to comply with its obligations.
Section 767(4) : The directors who are so liable are those who were directors at the time the company entered into the transaction.
4.2.2 Disqualification of the Directors - Under section 15 of Company Directors Disqualification Act, 1986, if a person who has been disqualified from being a director of or involved in the management of a company acts in contravention of his disqualification he will be liable for all those debts of the company which were incurred when he was so acting. The same applies to a person who knowingly acts on the instructions of a disqualified person or an undischarged bankrupt.
4.2.3 Offence of fraudulent trading (s. 993, CA, 2006) -
4.2.3.1 CRIMINAL LIABILITY -
| (i) | If any business of a company is carried on with an intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, every person who is knowingly a party to the carrying on of the business in that manner commits an offence. | |
| (ii) | This applies whether or not the company has been or is in the course of being wound up. |
4.2.4 Fraudulent trading. (S. 213 of the Insolvency Act, 1986) -
4.2.4.1 CIVIL LIABILITY :
| (i) | If in the course of the winding up of a company it appears that any business of the company has been carried on with an intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, the following would be the effect. | |
| (ii) | The Court, on the application of the liquidator, may declare that any persons who were knowingly parties to the carrying on of the business in the manner above-mentioned are to be liable to make such contributions (if any) to the company's assets as the Court thinks proper. |
4.2.5 Wrongful trading (S.214 of the Insolvency Act, 1986) - It is similar to the provisions of section 213. This section operates only in cases of insolvent liquidation and the declaration can be made only against the person who at the time before the commencement of winding up was a director of the company and know or ought to have concluded that there was no reasonable perospect that the company would avoid going into liquidation. In this section "director" includes a shadow director.
4.2.6 Restriction on re-use of company's names: - (Section 216 of the Insolvency Act, 1986) :
| (i) | This section applies to a person where a company ("the liquidating company") has gone into liquidation on or after the appointed day and he was a director or shadow director of the company at any time in the period of 12 months ending with the day before it went into liquidation. | |
| (ii) | For the purposes of this section, a name is a prohibited name in relation to such a person, if— |
| (a) | it is a name by which the liquidating company was known at any time in that period of 12 months, or | |
| (b) | it is a name which is so similar to a name falling within paragraph (a) as to suggest an association with that company. | |
| (iii) | Except with leave of the Court or in such circumstances as may be prescribed, a person to whom this section applies shall not at any time in the period of 5 years beginning with the day on which the liquidating company went into liquidation— |
| (a) | be a director of any other company that is known by a prohibited name, or | |
| (b) | in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of any such company, or | |
| (c) | in any way, whether directly or indirectly, be concerned or take part in the carrying on of a business carried on (otherwise than by a company) under a prohibited name. |
| (iv) | If a person acts in contravention of this section, he is liable to imprisonment or a fine, or both. |
Current scenario
5. In Volume 32A of Words and Phrases (West Publishing Company - third reprint, 1989 p.84) the term "piercing the corporate veil" is described as, "the Court's unwillingness to permit corporate presence and action to divert judicial course of applying law to ascertain facts". When this principle is invoked, it is permissible to show that the individual hiding behind the corporation is liable to discharge the obligations ignoring the concept of corporation as a separate entity. Generally, an incorporated company is liable as a juristic person. It is different from its shareholders and Board of Directors of Company. The acts of malfeasance and misfeasance and acts of misdemeanor by the shareholders and directors of a corporation (company), do not always bind the company as such. However, so as to apply law to ascertained facts, judicial process can ignore juristic personality of the company and haul up the directors and in certain cases even shareholders to discharge the legal obligations. When the corporate veil is lifted/pierced, it only means that the Court is assuming that the corporate entity of a concern is a sham to perpetuate the fraud, to avoid liability, to avoid effect of statute and to avoid obligations under a contract.
In Skipper Construction Company (Private) Limited (supra), the Supreme Court referred to the principle of lifting corporate veil. After referring to Palmer's Company Law as well as Modern Company Law by Gower, it was observed as under:—
The concept of corporate entity was evolved to encourage and promote trade and commerce but not to commit illegalities or to defraud people. The corporate veil indisputably can be pierced when the corporate personality is found to be opposed to justice, convenience and interest of the revenue or workman or against public interest.
In Trustor AB v. Smallbone (No. 2) (2001), the Vice-Chancellor concluded:
"Companies are often involved in improprieties. Indeed there was some suggestion to that effect in Saloman v. Saloman & Co. Ltd.[1897] AC 22. But it would make undue in roads into the principle of Saloman v. Saloman if an impropriety not linked to the use of the company structure to avoid or to conceal the liability of it if the company was used as a device or facade to conceal the true facts, thereby avoiding or concealing any liability of those individuals."
Just as in the case of Jones v. Lipman [1962] the corporation must be the device through which the impropriety is conducted, impropriety alone will not suffice.
Conclusion
6. The categorization offered by Ottolenghi (1990) describes as to when the Courts had lifted the veil in the past. But the future of doctrine is still ambiguous as to how the Courts determine the question in a certain situation? Yet one can say that the Courts shall lift the veil sometimes and refuse to do so in the other cases. It can be said that the corporate veil lifting is being considered on very rare occasions by the English Courts while the Indian doctrine is still in its transitory phase. The Indian Courts ordinarily appreciate the facts of each case and decide it on the merits.
References
| (1) | Salomon v. Salomon & Co. Ltd. [1897] A.C. 22. | |
| (2) | Maurice Wormser, Piercing the Veil of Corporate Entity, 12 COLUMN. L. REV. 496 (1912) | |
| (3) | Littlewoods Mail Order Stores Ltd. v. IRC [1969] 1 W.L.R. 1241, 1254 | |
| (4) | Robert B. Thompson, Piercing the Corporate Veil: Is the Common Law the Problem? 37 CONN. L. REV. 619, 622 (2005). | |
| (5) | Adams v. Cape Industries Plc [1990] Ch. 433 (CA (Civ Div) | |
| (6) | Life Insurance Corporation of India v. Escorts Ltd. AIR 1986 SC 1370 | |
| (7) | State of UP v. Renusagar Power Co. (AIR 1988 SC 1737) | |
| (8) | (See CIT v. Sri Meenakshi Mills Ltd., Workmen v. Associated Rubber Industry Ltd., New Horizons Ltd. v. Union of India, State of U.P. v. Renusagar Power Co., Hussainbhai v. Alath Factory Thezhilali Union and Secy., H.S.E.B. v. Suresh) | |
| (9) | Delhi Development Authority v. Skipper Construction Co. (P.) Ltd. [1997] 89 Comp. Cas. 362 (SC) | |
| (10) | New Horizons Ltd. v. Union of India [1998] 15 SCL 148 (SC) | |
| (11) | Ottolenghi (1990): 'From peeping behind the corporate veil to Ignoring it completely' [1990] MLR 338 http://onlinelibrary.wiley.com/doi/10.1111/j.1468-2230.1990.tb01816.x/pdf | |
| (12) | Piercing the Corporate Veil among affiliated Companies in the European Community and in the U.S. : A Comparative Analysis of U.S., German, and U.K. Veil-piercing approaches American Business Law Journal Volume 36, Issue 1, Pages 73–149, Fall 1998 | |
| (13) | Company Law by Alan Dignam &John Lowry 5th edition; Oxford publications UK | |
| (14) | Woolfson v. Strathclyde Regional Council [1978] UKHL 5: Lord Keith upheld the decision of the Scottish Court of Appeal, refusing to follow and doubting DHN v. Tower Hamlets BC | |
| (15) | DHN Food Distributors Ltd. v. Tower Hamlets London Borough Council (1976) 1 WLR 852 | |
| (16) | Company Law by Avtar Singh: 15th edition | |
| (17) | Gallagher and Zeighler 'Lifting the Corporate veil in Pursuit of Justice' [1990] JBL 292 | |
| (18) | Moore 'A temple built on faulty foundations' [2006] JBL 180 | |
| (19) | Davies Gower and Davies' Principles of modern company law, 8th edition Ch: 8 & 9 |
Thursday 11 July 2013
Companies (Name Availability) Rules, 2011
Companies
(Name Availability) Rules, 2011
In exercise of the power conferred by
clause (a) of sub-section (1) of section 642 read with sections 20 and 21 of
the Companies Act, 1956 (1 of 1956), the Central Government hereby makes the
following rules:
1(i) These
Rules may be called “Companies (Name Availability) Rules, 2011”;
(ii)
It shall come into force on such date as the Central Government
may, by notification in the Official Gazette, appoint.
2. As per provisions contained in Section
20 of the Companies Act, 1956, no company is to be registered with undesirable
name. A proposed name is considered to be undesirable if it is identical with
or too nearly resembling with:
(i)
Name
of a company in existence; or
(ii)
A registered trade-mark or a trade mark which is subject of an
application for registration, of any other person under the Trade Marks Act,
1999.
3. After notification of these Rules,
while applying for a name in the prescribed e-form-1A, using Digital Signature
Certificate (DSC), the applicant shall be required to furnish a declaration to
the effect that:
(i)
he has used the search facilities available on the portal of
the Ministry of Corporate Affairs (MCA) i.e., www.mca.gov.in/MCA21 for checking the
resemblance of the proposed name(s) with the companies and Limited Liability
Partnerships (LLPs) already registered or the names already approved.
(ii) the proposed name(s) is/are not infringing
the registered trademarks or a trademark which is subject of an application for
registration, of any other person under the Trade Marks Act, 1999;
(iii)
the proposed name(s) is/are not in violation of the provisions
of Emblems and Names (Prevention of Improper Use) Act, 1950 as amended from
time to time;
(iv)
The proposed name is not offensive to any section of people,
e.g., proposed name does not contain profanity or words or phrases that are
generally considered a slur against an ethnic group, religion, gender or
heredity;
(v) he has gone through all the prescribed
guidelines, given in these Rules, understood the meaning thereof and the
proposed name(s) is/are in conformity thereof;
(vi)
he undertakes to be fully responsible for the consequences, in
case the name is subsequently found to be in contravention of the prescribed
guidelines.
4.
Where, the proposed name is containing more than one word,
there will be an option in the e-form 1A for certification by the practicing
Chartered Accountants, Company Secretaries and Cost Accountants, who will
certify that he has used the search facilities available on the portal of the
Ministry of Corporate Affairs (MCA) i.e., www.mca.gov.in/MCA21
for checking the resemblance of the proposed name(s) with the companies and
Limited Liability Partnerships (LLPs) already registered or the names already
approved and the search report is attached with the application form. The
professional will also certify that the proposed name is not an undesirable
name under the provisions of section 20 of the Companies Act, 1956 and also is
in conformity with Companies (Name Availability) Rules, 2011 and Guidelines
made therein.
5(i). Where e-form 1A has been certified
by the professional in the manner stated at ‘4’ above, the name will be made
available by the system online to the applicant without backend processing by
the Registrar of Companies (ROC). This facility is not available for
applications for change of name of existing companies.
(ii)
Where a name has been made available online on the basis of
certification of practicing professional in the manner stated above, if it is
found later on that the name ought not to have been allowed under provisions of
section 20 of the Companies Act read with these Rules, the professional shall
also be liable for penal action under provisions of the Companies Act, 1956 in
addition to the penal action under Regulations of respective professional
Institutes.
(iii)
Where e-form 1A has not been certified by the professional, the
proposed name will be processed at the back end office of ROC and availability
or non availability of name will be communicated to the applicant.
6.
The name if made available, is liable to be withdrawn anytime
before registration of the company, if it is found later on that the name ought
not to have been allowed. However, ROC will pass an specific order giving
reasons for withdrawal of name, with an opportunity to the applicant of being heard,
before withdrawal of such name.
7.
The name if made available to the applicant, shall be reserved
for sixty days from the date of approval and further extension of thirty days
with revalidation application and fees. If, the proposed company has not been
incorporated within such period, the name shall be lapsed and will be available
for other applicants.
8.
Even after incorporation of the company, the Central Government
has the power to direct the company to change the name under section 22 of the
Companies Act, 1956, if it comes to his notice or is brought to his notice
through an application that the name too nearly resembles that of another
existing company or a registered trademark.
9. In
determining whether a proposed name is identical with another, the following
shall be disregarded:
(i)
The words Private, Pvt, Pvt., (P), Limited, Ltd, Ltd., LLP,
Limited Liability Partnership;
(ii)
The words appearing at the end of the names – company, and
company, co., co, corporation, corp, corpn, corp.;
(iii) The plural version of any of the words
appearing in the name;
(iv)
The type and case of letters, spacing between letters and
punctuation marks;
(v)
Joining words together or separating the words does not make a
name distinguishable from a name that uses the similar, separated or joined
words;
(vi)
The use of a different tense or number of the same word does
not distinguish one name from another;
(vii)
Using different phonetic spellings or spelling variations does
not distinguish one name from another. For example, J.K. Industries limited is
existing then J and K Industries or Jay Kay Industries or J n K Industries or J
& K Industries will not be allowed. Similarly if a name contains numeric
character like 3, resemblance shall be checked with ‘Three’ also;
(viii) Misspelled words, whether intentionally
misspelled or not, do not conflict with the similar, properly spelled words;
(ix)
The
addition of an internet related designation, such as .COM,
.NET,
.EDU, .GOV, .ORG, .IN does not make a name distinguishable from another, even
where (.) is written as ‘dot’;
(x)
The addition of words like New, Modern, Nav, Shri, Sri, Shree,
Sree, Om, Jai, Sai, The, etc. does not make a name distinguishable from an
existing name such as New Bata Shoe Company, Nav Bharat Electronic etc.
Similarly, if it is different from the name of the existing company only to the
extent of adding the name of the place, the same shall not be allowed. For
example, ‘Unique Marbles Delhi Limited’ can not be allowed if ‘Unique Marbles
Limited’ is already existing;
Such
names may be allowed only if no objection from the existing company by way of
Board resolution is produced/ submitted;
(xi)
Different combination of the same words does not make a name
distinguishable from an existing name, e.g., if there is a company in existence
by the name of “Builders and Contractors Limited”, the name “Contractors and
Builders Limited” should not be allowed;
(xii) If the proposed name is an exact Hindi
translation of the name of an existing company in English especially an
existing company with a reputation, e.g., Hindustan Steel Industries Ltd. will
not be allowed if there exists a company with name ‘Hindustan Ispat Udyog
Limited’;
10.
Guidelines for availability of name
In supercession of all the previous
circulars and instructions regarding name availability, the applicants and
Registrar of Companies are also advised to adhere following guidelines while
applying or approving the proposed name:
(i)
It is not necessary that the proposed name should be indicative
of the main object. However, in case the proposed name is indicative of any
activity, the same will be appropriately reflected in the main object clause of
the Memorandum of Association;
(ii)
If the Company’s main business is finance, housing finance,
chit fund, leasing, investments, securities or combination thereof, such name
shall not be allowed unless the name is indicative of such related financial
activities, viz., Chit Fund/ Investment/ Loan, etc.;
(iii)
If it includes the words indicative of a separate type of
business constitution or legal person or any connotation thereof, the same
shall not be allowed. For eg: co-operative, sehkari, trust, LLP, partnership,
society, proprietor, HUF, firm, Inc., PLC, GmbH, SA, PTE, Sdn, AG etc.;
(iv)
Abbreviated name such as ‘ABC limited’ or ‘23K limited’ cannot
be given to a new company. However the companies well known in their respective
field by abbreviated names are allowed to change their names to abbreviation of
their existing name (for Delhi Cloth Mills limited to DCM Limited, Hindustan
Machine Tools limited to HMT limited) after following the requirement of
Section 21 of the Companies Act, 1956;
(v)
If the proposed name is identical to the name of a company
dissolved as a result of liquidation proceeding should 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. Moreover, if the proposed name is
identical with the name of a company which is struck off in pursuance of action
under section 560 of the Act, then the same shall not be allowed before the
expiry of 20 years from the publication in the Official Gazette being so struck
off since the company can be restored anytime within such period by the
competent authority;
(vi)
If the proposed names include words such as ‘Insurance’,
‘Bank’, ‘Stock Exchange’, ‘Venture Capital’, ‘Asset Management’, ‘Nidhi’,
‘Mutual fund’ etc., the name may be allowed with a declaration by the applicant
that the requirements mandated by the respective regulator, such as IRDA, RBI,
SEBI, MCA etc. have been complied with by the applicant;
(vii) If the proposed name includes the word
“State”, the same shall be allowed only in case the company is a government
company. Also, if the proposed name is containing only the name of a continent,
country, state, city such as Asia limited, Germany Limited, Haryana Limited,
Mysore Limited, the same shall not be allowed;
(viii)
If a foreign company is incorporating its subsidiary company,
then the original name of the holding company as it is may be allowed with the
addition of word India or name of any Indian state or city, if otherwise
available;
(ix)
Change of name shall not be allowed to a company which is
defaulting in filing its due Annual Returns or Balance Sheets or which has
defaulted in repayment of matured deposits and debentures and/or interest
thereon;
(x)
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:
S.No
|
Key Words
|
Required
|
||
authorized
|
||||
capital (in Rs.)
|
||||
1
|
Corporation, corp, corpn, corp.
|
25 crore
|
||
2
|
international,
|
Globe, Global,
World,
|
5 crore
|
|
Overseas,
Universe, Universal,
|
Continent,
|
|||
Continental,
InterContinental, Asiatic, Asia,
|
||||
Asian
being the first word of the name
|
||||
3
|
If any of the words at (2) above is used
|
2 crore
|
||
within
the name (with or without brackets)
|
||||
4
|
Hindustan, India, Indo,
Indian, Bharat,
|
2 crore
|
||
Bharatvarsh,
Bhartiya or any
other
|
||||
country’s name
being first word
of the
|
||||
name
|
||||
5
|
If any of the words at (4) above is used
|
25 lakh
|
||
within
the name (with or without brackets)
|
||||
6
|
Industries/ Udyog
|
5 crore
|
||
7
|
Enterprises,
|
Products,
|
Business,
|
50 lakh
|
Manufacturing,
Venture.
Regards, Arti Sharma CS Student |
||||
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