MUST-KNOW for Entreprenuers
Companies and Limited Liability Partnership firms floated by private entities should not use the word ‘National’ in their names, the government has said.
The Corporate Affairs Ministry’s latest move comes in the backdrop of instances of private entities using the word ‘National’ in their names, including the case of National Stock Exchange Ltd, which is embroiled in a major payment crisis. The ministry also said words such as ‘Bank,’ ‘Stock Exchange’ and ‘Exchange’ should be used only after getting NOC from the sectoral regulators.
It has been intimated that no company should be allowed to be registered with the word National as part of its title unless it is a government company and the central/state government(s) has a stake in it. A mirco scale unregistered company, if using National as its title, it is subject to be penalized with 500 Thousand Rupees or 6 months imprisonment or both. If NATIONAL is being used in company’s promotional program, or if a company uses ‘National’ term in any of its advertisement shall be liable.
All Registrars of Companies (RoCs) have been asked to follow the directive strictly while registering companies. A circular in this regard has been issued to all stakeholders and regional directors, among others.
Entities wanting to have the word ‘Bank’ in their names must obtain a no-objection certificate from the Reserve Bank of India.
By the same analogy, the word ‘Stock Exchange’ or ‘Exchange’ should be allowed in name of a company only where no-objection certificate’ from Sebi in this regard is produced by the promoters.
RoCs come under the ministry, which implements the Companies Act. In the draft rules for the new Companies Act, the government had proposed that phonetic or spelling variations of existing names or similar-sounding words would not be allowed for new companies. The new rules bar the use of abbreviations and country and state names, except for some government units. Terms such as ‘British India’ and names of ‘enemy’ countries will not be allowed. The government had suggested an indicative list of dos and don’ts to be followed while incorporating a company in the country to ensure that their names reflect the nature of their businesses to the extent possible.
Besides, the ministry had drawn up a list of words and combinations such as Board, Commission, Authority and Rashtrapati that can’t be used without prior approval of the central government. Other words on the list include Undertaking, National, Union, Central, Federal, Republic, President, Small Scale Industries, Khadi and Village Industries Corporation and Development Authority.