Company incorporation in India can first and most importantly start with the reservation of a name. The name of a company signifies its identity, brand name and legal entity. To ensure that a company name is unique and not abused, the Ministry of Corporate Affairs (MCA) has stipulated rules and procedures to be followed when reserving a company name.
This blog discusses the process of registering a company name in India, the various regulations, the criteria required to apply, the procedure, the most common reasons why a company name is rejected, and also helpful tips on how to have the name approved.
Introduction
The decision of an appropriate name for the company is not just an artistic endeavour. It is a legal aspect that dictates the name by which your business will be known by the regulators, customers and other stakeholders. The wrong or non-conforming name may slow down incorporation or cause rejection by the authorities.
In India, the reservation of a company name is an act of the Companies Act, 2013 and managed by the Ministry of Corporate Affairs via its online portal. It is better to understand the process and legal provisions so that the entrepreneurs do not face unnecessary delays and complications.
What is Reservation of Company Name?
Reservation of a company name is the registration of a proposed name of a company with the Registrar of Companies (ROC) before incorporation. Upon approval, the name is temporarily reserved for the applicant, and it cannot be used by any other party within the validity period.
This approval guarantees that the name proposed is original, legal and that it adheres to naming regulations that have been raised by MCA.
Legal Procedure of Company Name Reservation
Section 4 of the Companies Act, 2013 and the Companies (Incorporation) Rules, 2014 control the reservation of the company names in India. Such policies establish the kind of valid name and give the Registrar the power to accept or reject names.
MCA has offered a reservation of names online via the official portal, thus making the process transparent and efficient.
Who is Eligible to make A Company Name Reservation?
Name reservation can be applied for by any person who wishes to incorporate a company. This involves promoters, directors, professionals or authorised representatives.
In case of a private limited company, a public limited company, a One Person Company (OPC) and a Section 8 Company, name reservation is admissible, subject to further terms and conditions.
Rough Checks Prior to Applying
A comprehensive company name search should be done before one applies for name reservation. The name that is suggested must not be the same or so similar to the name of an already established company, LLP, or registered trademark.
The MCA portal gives an option of a free name search to check availability. Also, the search for trademarks must be carried out in order to prevent legal conflicts in the future.
Company Name Choice Rules
The company name suggested should not be contrary to the MCA naming rules. It is not to be deceptive, obscene or against the law. The name should be related to the type of business and should not make it appear that they are affiliated with the government unless special permission is taken.
Some names like the word Bank, insurance, Stock exchange or National will have to be pre-registered with the authorities. It is easy to be rejected because of failure to adhere to these rules.
Reservation of Name of a Company in India
MCA has made it difficult to name a reservation by filing online. Applicants have the option to book a name of a company with the help of such services as RUN (Reserve Unique Name) or the SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) form.
RUN service is entirely used in standalone name reservation, whereas SPICe+ enables name reservation and incorporation of the company.
How to Book a Name of a Company?
The process would start with logging into the MCA portal with a registered account. Once the right service is chosen, the applicant is required to put the proposed company name and give a short description of the main objects of the company.
In addition to the proposed name, supporting documents might be requested in case the name has some restricted words or some reference to trademarks or existing companies. The Registrar of Companies reviews the application after it has been submitted.
In case the name does not break any of the rules, it is registered and held. The Registrar has the right to resubmit or reject the application in case of defects and provide reasons.
Validity of Company Name Reservation
After approval, the name of the company is put in reserve on a limited basis. In the process, the applicant has to undergo the incorporation process.
In case incorporation is not done within the validity period, the name reservation lapses, and a new application has to be made.
Reasons for Name Rejection
Applications that are most often declined as a result of similarity to the existing company names or a trademark. The other similar cause is generic or vague names that fail to indicate the nature of business activity.
Abuse of inappropriate words without permission, spelling mistakes in the name of something, and false information will also be common reasons for rejection.
This knowledge of the problems will aid in increasing the chances of approval.
Tips for Successful Name Approval
Whenever possible, it is better to choose several alternative names so as to enhance approval. The description of the business object is also important to give the Registrar an idea of the relevance of the proposed name.
One should also avoid using fashionable or vague words that might be dominant. An original and memorable name will be more acceptable.
Importance of Name Reservation
Name reservation provides legal protection and brand assurances at the first level of business establishment. It eliminates duplication and confusion in the corporate registry.
An apt name that is approved also aids in branding, marketing, and developing long-term credibility.
Distinction between Name Reservation and Trademark Registration
Company name reservation does not protect the trademark, but gives the company the right to incorporate. Registration of trademarks is another procedure that secures brand identity through the intellectual property law.
Companies are advised to seek registration of trademarks once they have incorporated the company to protect the brand.
Conclusion
Registering a business name is a prerequisite for the establishment of a business in India. Risk of rejection may be greatly minimized by having a clear understanding of legal guidelines, putting in place proper name search and correct filing. The process has become more transparent with the online systems of the MCA. The selection of a submissive and unique name will allow the entrepreneur to prepare for an easy incorporation and build a brand reputation.
