Allotment of New Name to Existing Company under Companies Act, 2013

The name of the company is an identity it is recognised with. The Companies Act, 2013 allows the companies to change their name in certain circumstances. But what if the name of the company is changed compulsorily by government itself. Yes, this is our topic of discussion today that what will happen in case of Allotment of New Name to Existing Company under Companies Act, 2013.

Legal Provisions for Name of a Company

The name of the company is mentioned under Name Clause of Memorandum of Association of the Company. The name of a private company should contain the word “Private Limited” and those of Public Limited Company should contain words “Limited”. The name of company should not be similar to any other company and should not contain anything that is prohibited in law.

The company should send the application for Name to the ROC with applicable fees. ROC will reserve the name and meanwhile verify the application. And if the application is found correct then the ROC will allot name and mentionit in the Certificate of Incorporation.

Rectification in the name of the company

In following cases the company will be asked to change its name-

• Where Central Government feels that the name of the company resembles or is identical to an existing company. In this case company has to change its name within 3 months of the order. The company should pass an ordinary resolution for the change.
• In case of a complaint from a registered trademark proprietor that a company is having a name similar to its name or resembles its name. The Central Government may direct the company to change its name. The company has to change the name within 3 months of the order. The company should pass an ordinary resolution for the change.
• The company should inform ROC after change in the name of the company within 15 days. ROC will make necessary changes in the certificate of incorporation and memorandum.

The new amendment enters the picture from here. If the company fails to follow this order than Central Government will allot a new name to the company. Now, let us discuss amendment notification dated 22.07.2021.

Allotment of New Name to an Existing Company

The above discussed provisions were amended as per Companies Act Amendment Rules,2020. Now, to implement above provisions, MCA released two notifications on 22.07.2021.

First Notification- 

If the company is asked to change its name as per above provisions and the company fails to do so within a period of three months then the name of the company will be changed-

The new name of the company will contain 

• Letters “ORDNC” (Order of Regional Director Not Complied”
• The Year of Passing the direction
• The Serial number and existing Corporate Identity Number (CIN) of the company.

Registrar will update company’s name in Register of Companies. Also ROC will issue a fresh certificate of incorporation in Form INC-11C. The Registrar will also issue a signed certificate by the authorised officer. The certificate will state that the name is changed under whose jurisdiction and authority.

It may be noted that in case company has submitted a name change application (INC-24) before end of three months and it is pending for disposal then these provisions will not be applicable.

Second Notification

This notification stated that 1st September, 2021 will be the date to implement the new provisions. These provisions regarding allotment of new name to an existing company were introduced by Companies Act Amendment Rules, 2020.

Effect of the amendment by Central Government

• As per the amendment notification, a company should change its name everywhere it is printed. This means on all the printed boards, letter heads etc., the name of the company will be changed. This implies that company has to write “Order of Regional Director not complied (under Section 16 of the Companies Act, 2013)” along with its name at all places.
• The effective date is 01.09.2021 and notification date is 22.07.2021. This means that Registrar has given almost one month to the companies to comply with issued orders.
• The companies those who have not changed the name and whose order completes 3 months on 01.09.2021. The name change process for such companies will be initiated.

Aftermath of allotment of a new name to an existing company

AS per earlier provisions a company that fails to comply with order of changing name was supposed to pay prescribed fine. For large companies, paying fine was not that a big deal. 

The compliance was delayed as changing name is a big task for any company. The name change has various implications. It has to be changed on all the places where it is displayed. Stakeholders have to be made aware of the name. All the letter heads, bill books etc. have to be printed fresh. The name should be updated with all other legal authorities.

This type of punishment is worst then paying fees. As in this case an identity of the company will be at stake. All stakeholders will get to know that company has failed to follow the order. This may further tarnish image of the company.

However, there is relief as in case company subsequently changes its name by alteration of memorandum and following prescribed procedures. Then the company need not show the statement.

Conclusion

From the above discussion we can conclude that allotment of new name to existing company is a very bold move by central government. It is a way to say that nobody can take the orders of the authority lightly. The consequence of not following the order of Central Government is made very severe. At the same time all the companies who have been issued such orders. They are given almost one month to act upon those orders.