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How to choose name for Private Limited Company and its governing rules

How to choose name for Private Limited Company

Company Registration is the overriding and most important step for any business organization. In order to protect your business and secure its rights, company registration is very essential. It shields the business from personal liability and protects from other risks and losses and at the same time provides more customer attraction, promotes greater capital contribution and greater stability and increases the company’s perspective to expand and grow.

Choosing a company’s name is a cautious step in the company registration process. It is very crucial to choose your business structure and its name as it indirectly affects your business. Thus, before going for company registration, you should have clarity on the kind of business you are into, the name, your goals and objectives since each of these has its own implications.

The name of a company is something that needs to be unique, desirable and one of its kind to make it stand out from the rest. Hence, there are specific guidelines for choosing a name for a Private Limited Company. In this article we’ll talk about the basic rules about the naming of the firm one should keep in mind while applying for offline or online company registration.

First of all, let’s get to know some basic things about private limited companies. Private Limited Company in India lies somewhere between a partnership firm and a widely owned public company. It can be registered with a minimum of two people. A person can be both a director and shareholder in a Private Limited Company. It offers limited liability or legal protection to its shareholders. The liability of the members of a Private Limited Company is limited to the number of shares held by them. The Company can start its business after getting the certificate of incorporation which can be incorporated within 15 working days.

 

Guidelines for the availability of name

  • The applicants and Registrar of Companies are advised to comply with the following guidelines while applying or approving the proposed name while company registration:
  •  A company name need not be a brand name but it is a name that is the base of the brands that the firm manufactures. 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 (MoA) while company registration
  •  If the Company’s main business is finance, housing finance, chit fund, leasing, investments, securities or a combination thereof, such name shall not be allowed unless the name is indicative of such related financial activities, like Chit Fund/ Investment/ Loan, etc.
  •  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. Example- co-operative, sehkari, trust, LLP, partnership, society, proprietor, HUF, firm, Inc., PLC, GmbH, SA, PTE, Sdn, AG etc.
  •  Abbreviated names such as ‘XYZ limited’ or ‘23K limited’ cannot be given to a new company. However, in case the company is well known in their respective field by abbreviated name, then they are allowed to change their names to abbreviations of their existing name after following the requirement of Section 21 of the Companies Act, 1956.
  • 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 u/s 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 u/s 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.
  • 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.
  • 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 contains only the name of a continent, country, state, city such as Eurape limited, Germany Limited, Delhi Limited, Mysore Limited,  shall not be allowed.
  • If a foreign company is incorporating its subsidiary company, then the original name of the holding company as it is maybe allowed with the addition of the word India or name of any Indian state or city..
  • 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.
  • A proposed name for a company should not be identical to that of an existing company or limited liability partnership name.
  • It should not be undesirable & offensive which Violates the Emblems and Name Act or Trademark or Includes offensive words.
  • The name should not include the use of the word “British India” as it is not approved by MCA.
  • The names that imply patronage are not allowed as well. It should also not be Generic.
  • The name should not be associated with the Embassy or consulate or foreign government.

 Format

A preferred format as per the MCA to name the company is – Unique Component + Descriptive name + Private Limited. In this, the unique component needs to be creative, imaginative, and distinct in nature, while the descriptive name defines your business in brief and gives perks of your work/business.

After you choose the name, MCA will ask to describe the significance and the main objective behind that name in one or two sentences.

 


 


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