The Ministry of Corporate Affairs (MCA) emptied its notification dated 22sd July 2021, appointed 1st September 2021 as the date on which the provisions of Article 4 of the Companies (Amendment) Law 2020 (“Amending law”) will come into force.
See article 4 of the amending law, the provisions of clause (b) of subsection (1) of article 16 of the Companies Act 2013 (“Main act”) entered into force. Article 16 of the Main Law deals with the provisions relating to the rectification of the name of a company if it has been registered under a name identical or closely resembling the name of another company or a registered trademark. The powers under this section 16 have been delegated to the adjudicative Regional Director (RD), under the MCA, where the RD can take suo-moto action or a request for rectification can be filed by a registered trademark owner on the basis of the instructions for changing the similar name will be issued by the DR.
Here are the changes to the provisions of Article 16 of the Main Law and Article 4 of the Amending Law:
a) The time limit within which a company against which an action for rectification of company name has been successfully brought by a registered trademark owner has been reduced from six months to three months; and,
(b) The other subsection (3) of Article 16 of the main law has been replaced, under which it is now stated that in the event that said company does not comply with the instructions of the RD to change its corporate name in accordance with a rectification action under section 16, then the RD will assign a new name as prescribed and the relevant company registrar (ROC) will issue a new certificate of incorporation based on the new name instead of the old name as indicated by the RD. In addition, the conditional clause stipulates that said company may subsequently change its name from that name in accordance with the provisions of Article 13 of the main law.
The ârectification of the name of the companyâ provisions under Article 16 (3), earlier, only stated that if such a company does not change its name in accordance with the instructions of the RD, such a company and its Defaulting officer would then be liable to a fine as prescribed under it. However, the said penal provision was not strictly enforced and, therefore, it did not provide for any effective resolution mechanism for the owners of registered trademarks or other companies with similar names, when those companies did not comply with the instruction from DR. It is this mischief that the MCA has now sought to remedy through the aforementioned changes.
In order to implement the procedural aspects related to the aforementioned amended provisions of Article 16 (3) of the Main Law, the MCA also, by a notification dated 22sd July 2021, introduced Rule 33A under the Fifth Amendment (Incorporation) Rules, 2021, through an amendment to these.
Effect of the introduction of Rule 33A under the Fifth Amendment (Incorporation) Rules, 2021 (the âAmended Rulesâ):
In accordance with the new Rule 33A of the amended Rules, with effect from 01st September 2021, if a Company does not comply with DR guidelines within three months [hereinafter ânon-compliant companyâ] issued under Article 16 of the main law, the name of the non-compliant company will automatically be transformed into a alphanumeric name as follows :
ORDNC * -Year of passage of the Direction-Serial number-CIN of the non-compliant Company.
* The term “ORDNC” designates the Order of Regional Director not respected.
Consequently, the ROC is mandated to proceed with the registration of the new name in the Companies Register and to issue a new certificate of incorporation as mentioned above with the prefix ORDNC.
Once the name has been changed by the ROC on instructions issued by the DR, the non-compliant company must change its name to the new alphanumeric name in the name board at head office, its common seal, business letters, in – invoice heads, notices, publications, quilts, promissory notes, bill of exchange, website, etc. In addition to this, wherever the name of the Company appears, the statement “Order of the regional director not respected (under section 16 of the Companies Act 2013)Must be mentioned in brackets under the alphanumeric name.
Factors to consider before choosing / changing the name of the Company:
Business promoters should exercise caution before choosing a business name related to their business.
The following factors, among others, may be taken into consideration before choosing the name of the company. In accordance with the provisions of the Companies Act 2013, the name of the company must not:
(a) be identical to the name of an existing registered company; Where
(b) looks too similar to the name of an existing registered company; Where
(c) be such that its use by the company will violate any applicable law; Where
(d) be such that its use by the company is undesirable in the opinion of the Republic of the Congo.
In addition, certain words or expressions such as Authority, National, Union, Central, Federal, Nation, Court, etc., on behalf of a company may only be used with the prior approval of the RoC.
The aforementioned changes were put into effect with the intention of discouraging these companies from evading the instructions of the RA issued under section 16 and, therefore, from taking the necessary procedural steps to change their name in the stipulated period of “three months”. It is relevant to note that the name of a company plays a very important role in the branding of its products and services in the market in which it operates and that any name change can also potentially have an impact on its activities. . Consequently, if a company does not comply with the directives of the RD under section 16, as a result of which its name is changed in a manner which indicates that it does not comply with the orders of a regulatory body, its image and credibility suffered a serious setback. , which may also affect its business prospects.