What are the reasons for Company Name Rejection?

Introduction

Choosing a company name is a crucial step when registering a Private Limited Company. During the name approval process conducted by the Ministry of Corporate Affairs, applicants are required to submit two options for the company name in order of preference. The Registrar of Companies (ROC) will accept one of the two options. The recently introduced SPICe+ incorporation process combines the steps of obtaining a Director Identification Number (DIN), getting name approval, and incorporating the company into a single process.

If a company name matches any LLP name, Trademark Name, or existing company name, the applicant needs to resubmit the company name approval form. This article will discuss the reasons for the rejection of company names. To assist you in generating unique business name ideas for your company, let’s first take a brief look at "How to Form a Company Name."

Forming a Company Name

When selecting a name for a company, whether it’s a Private Limited Company, One Person Company, LLP (Limited Liability Partnership), or any other type of company, it’s essential to consider three key elements:

1. Prefix: The prefix used in the company name usually represents the company’s name or its brand identity.
2. Object: The object specified in the company name signifies the primary activity or business purpose of the company.
3. Constitution: The constitution refers to the specific type of company, such as OPC (One Person Company), Private Limited Company, or Limited Liability Partnership.

All three elements play a crucial role in forming an appropriate and meaningful company name.

Types of Company Registration in India

1. Private Limited Company: A Private Limited Company in India provides its shareholders with limited liability and legal protection, positioning it between a partnership firm and a publicly owned company. The company can be registered with a minimum of two individuals, and it allows for the same person to hold roles as both a director and shareholder.
2. Public Limited Company: A Public Limited Company in India is a group of members who come together voluntarily and have a distinct legal existence. The members of such a company have limited liability. A Public Limited Company can be either listed or unlisted on the Stock Exchange. It has the advantage of raising funds through various sources like bank loans, the general public, and institutional investors.
3. Limited Liability Partnership: A Public Limited Company in India is a group of members who come together voluntarily and have a distinct legal existence. The members of such a company have limited liability. A Public Limited Company can be either listed or unlisted on the Stock Exchange. It has the advantage of raising funds through various sources like bank loans, the general public, and institutional investors.

Reasons for Company Name Rejection

During the company registration process, there are several common reasons for the rejection of a company name. These include:

1. Conflict with primary objectives

If the suggested name conflicts with the primary objectives stated in the application for company incorporation, it may be rejected. For instance, if a company named "ABC Private Limited" intends to provide business consulting services, the name might be rejected due to its inconsistency with the company’s intended activities.

2. Names include udyog, manufacturing, etc.

The Ministry of Corporate Affairs (MCA) allows the inclusion of terms such as "industry," "udyog," "enterprises," "products," "business," or "manufacturing" in a company’s name only if the company is involved in or plans to engage in multiple commercial activities. Using these keywords in names that are specific to a single industry is not permitted. It is important to note that simply intending to engage in various activities does not automatically qualify a company to use the terms industry, udyog, enterprise, products, business, or manufacturing. The MCA may require a proven track record of success as well.

3. Unfavorable adjectives

The Ministry of Corporate Affairs (MCA) considers the inclusion of terms like national, central, union, and federal in company names as undesirable. Consequently, the MCA will reject names that contain these terms.

4. General Name

Reservations for names in company registration are only allowed for distinctive objects. This also applies to the reservation of company names. If the approving authority deems a name too general, it will be rejected. For example, names like "Cement Private Limited" or "Successful Private Limited" are considered highly generic and lack any unique or distinguishing qualities.

5. The name indicates the relationship with the National Leader or Government

If a proposed business name indicates a connection with or approval from a National Leader or the government, it will be rejected by the MCA (Ministry of Corporate Affairs).

6. Same name or somewhat similar

If the proposed name is the same as or closely resembles the name of an existing company, it may cause confusion among the public. The Companies Act, 2013, prohibits the registration of two firms or companies with similar names or trademarks. If the proposed name sounds too similar to an already-used name, it will be rejected. It is important to consider that the authorities responsible for approval also take into account names that have similar pronunciations, ensuring that the company name does not sound familiar or create confusion among people.

7. Company Name is missing a prefix

In company names, it is customary for the business or brand name to serve as the prefix. It is essential for a name to have an appropriate prefix in order to be approved. If the prefix resembles existing trademarks or company names, or if it is deemed inappropriate, the Ministry of Corporate Affairs may reject the name.

Summary

It is of utmost importance to choose a distinctive business name that can be approved by the ministry to avoid the inconvenience of having to reapply for a name. The provided information will help you select a company name that will not be rejected by the Ministry of Corporate Affairs (MCA).