Guidelines on avoiding undesirable name for companies in terms of section 20 - Companies Law - CIRCULAR NO. 6/99

CIRCULAR NO. 6/99 [F.NO. 5/35/98-CL-V], DATED 13-5-1999, ISSUED BY THE DEPARTMENT OF COMPANY AFFAIRS Subject:- Guidelines on avoiding undesirable name for companies in terms of section 20 As Registrars of Companies ('ROCs') are aware, this Department has issued exhaustive guidelines on avoiding undesirable names for companies as mentioned in section 20 of the Companies Act, 1956 through Circular No. 10(19)-RS/61 dated 5th May, 1962. Further guidelines were also issued through Circular No. 2/90 (No. 1/1/90-CL-V27/1 /89-CL-III) dated 5th January, 1990. 2. In recent times, the Department had received a few references which needed further clarification. The following guidelines/clarifications are accordingly issued. 3. Names starting with small letters having small letter 3.1 In the past the name-search for allowing names for companies used to be a manual search based on list of names already in existence on a particular date, names made available by different ROCs (which used to be circulated periodically), etc. The name search is no longer manual. It has become a computerised operation in all ROC offices. In view of this, some of the old constraints (like alphabetical listing) which could be a restrictive factor in the manual system do not exist under the present computerised system. 3.2 ROCs may, therefore, now allow names starting with small alphabets (like i2 Technologies ... Ltd., etc.) as such names are being increasingly used by many companies in other countries. It should, however, be ensured that the names starting with small alphabets does not have phonetic or visual resemblance to the name of a company in existence. 4. Change of name by companies 4.1 In recent times it appears that quite a few companies whose principal object was not computer software and who had actually been involved in financing activities have changed their names to indicate as if they were in the business of computer software. For this purpose they have included words like - "infosys : Software ; Systems ; Infosystem ; Computers ; Cyber ; Cyberspace, etc." in their names. 4.2 In order that investors are not misled by the strategy adopted by a few companies, ROCs are hereby advised that in future they should allow change of name to companies to reflect the business of software only if a substantial portion of their income (as reflected from their audited accounts or accounts certified by a chartered accountant) is derived from software business. If this is not proved, then such change of name should not be allowed. 5. Companies in insurance sector 5.1 It may be recalled that in Guideline No. 21 you have been advised not to allow the word 'bank', 'banking', 'investment', 'insurance', and 'trust' unless circumstances justify it. As you may be aware, the insurance sector is likely to be opened for entry by private sector. The activities of the insurance sector would be regulated by the insurance Regulatory Authority which has already been set up. 5.2 In view of this, in partial modification of the abovementioned guide line, it is hereby clarified that ROCs may allow companies to be registered by them with the word 'insurance' or 'risk corporation' as part of the name only after consulting the Reserve Bank of India and Insurance Regulatory Authority (Jeevan Bharti Building, Tower 1, Connaught Circus, New Delhi-110 001), as the case may be. 6. Use of generic names 6.1 Guideline No. 5 relates to inadvisability of allowing companies to have only generic names without any other proper noun preceding/succeeding it under this category would come the word 'Y2K' (i.e., year 2000). 6.2 It may kindly be noted that this is a generic one and cannot be allowed for any company as a 'stated alone' name.