Common Reasons for Company Name Rejection

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Common Reasons for Company Name Rejection

During the company incorporation process, the applicant is required to provide his name preferences for the proposed company. Approval of the name submitted by the applicant is not mandatory. There are some grounds on which the applied trademark can be rejected by the ministry of corporate affairs.

Giving a right name to the company is as important as naming a child.  Just like a natural person, the name of the company is also the unique identity that distinguishes it from other companies. On 26 January 2018 a novel company name approval form known reserve unique name (RUN) was introduced.  After its introduction, the applicant can seek approval of the proposed name well in advance. In the initial stage of introduction, only one name preference could be filed with RUN. However, now the applicant is empowered to provide two name preferences. Out of the two names provided the ministry will approve anyone name in case it is satisfied with the name filed. In case it is not satisfied with both the names filed the applicant will be asked for resubmission and if in resubmission also the applicant is unable to satisfy the office he will be required to submit a fresh form.

Another way of seeking name approval is through the SPICE incorporation. Through SPICE incorporation the whole process of obtaining DIN, name approval and incorporation is integrated into one step. One of the major drawbacks of applying for name approval through this form is that only one name preference can be provided with this form. If the ministry is not satisfied with the name applied it will ask for the resubmission of the whole form.

In order to avoid the hassles of reapplying for the name, it is important for you a chose a name that is unique and capable of being approved by the ministry. With this blog, we will take a look at the common reasons for the rejection of a company.

The name proposed is inconsistent with the activities described in the main objects

If the name proposed is not in line with the main objects mentioned in the company incorporation application the proposed name will be rejected by the ministry. For instance, the name of the company is “XYZ manufacturing private limited” with the main objects as per application is “Providing business consultancy services”. This will be rejected on the grounds that there is a complete inconsistency in name and objects.

The proposed name is identical or similar to the name of the existing company

Two similar names can often be used to deceive the public at large. As per the rules of Companies act 2013, no two companies and company can be registered with identical names and trademark.  If the proposed name is similar to any existing name it will be rejected. Also, one important point to be noted here is that the names with a similar pronunciation like BAN and BAAN will be considered similar by approving authorities.

The proposed name is too general

Reservation is only granted to unique things. Similar is the case with name reservation. If the approving authority finds that the name applied is too general it will reject the same. For instance- Successful private limited or cement private limited both of these names are very general and does not possess any unique character or identity.

Name comprises of keywords like Industry/Udyog, enterprise, products, business, and manufacturing

Ministry has created the criteria for approving the names containing these words.  A company is allowed to use Industry/Udyog, enterprise, products, business and manufacturing only if it is already dealing in multiple businesses or it proposes to deal in multiple activities. Thus, the company undertaking only a particular trade is not empowered to use this name. Also, the startups with no track record of multiple activities won’t be allowed for choosing these keywords.

Proposed name comprises of undesirable words like national, central, union and federal etc. 

Use of words like national, central, union and federal etc in the names of the company or is considered undesirable by the ministry.  Thus, the ministry of corporate affairs will reject the names consisting of these words.

The proposed name indicates the partnership or the patronage of any National Leader or of Government

If the proposed name is pointing towards a partnership or the patronage of the company with any national leader or the government unless supported by any strong evidence it will be rejected by the ministry. For instance- The Delhi city hospitals private limited will be rejected by the ministry on this ground only.

The proposed name consists of keywords like International, Hindustan, India, Bharat, Continental, Asiatic, Corporation

The use of words like International, Hindustan, India, Bharat, Continental, Asiatic, Corporation will only be allowed only when the scope and scale of the business justify the use of these words. Thus, the ministry will reject the names with these words if the scale or scope of activity is considered as small.

The proposed name does not consist of a suitable prefix

The prefix in the company name is usually the name of the company or its brand. In order to get name approval, it is important that it consists of the suitable prefix. If prefix used is similar to an existing trademark or Company name or it is unsuitable a rejection may be received by the ministry of corporate affairs.

If you will choose a name after taking care of all these points there are bright chances that the name chosen by you will be approved in one short. However, seeking professional guidance in this regard is highly advisable for avoiding any rejection by the ministry of corporate affairs.

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