Vide notification issued by Ministry of Corporate Affairs on 14th July, 2011, the procedure for name availability of Companies has been liberalised. Earlier Companies used to file form 1A for ascertaining name availability of Companies and the approval of said form was done on a case to case basis by the Registrar of Companies. The same procedure was followed in case of change of name by the Companies.
However, the MCA has vide its notification referred to above, cast the responsibility of the approval powers of Name of the Company with the Practicing Professionals.
Proviso to clause 3 of the notification provides that:-
“Provided further that when the application of the name for new company is certified by a practicing Chartered Accountant, Company Secretary or Cost Accountant, the form shall be processed and examined electronically under MCA 21 System and the name will be approved online.”
This is in continuation of the efforts of MCA to liberalize and simplify the procedures by casting greater responsibility on practicing professionals.
Also, erstwhile, the name availability guidelines used to be a law of circulars i.e. various department circulars since 1960 were referred, which was collectively being referred to as “Name Availability Guidelines”.
However, MCA has recently issued General Circular No. 45/2011; GOI; MCA; Dated the 8th July, 2011 which form the Name Availability Guidelines, 2011 and supercedes all prior circulars.
The guidelines will assist the practicing professionals to certify Form 1A after assessing the name availability as per the guidelines.
It now remains to be seen how this straight through processing (STP) mode for name availability turns out for the industry.
- For the Companies: It is good as it speeds up the process and cuts red tape
- For the MCA: It is good as it reduces the work load and makes things faster
- For the Practicing Professionals: It is good as it creates practice opportunities
However, the responsibility on the professionals is enormous. Given the subjective nature of the issue, one view may be different from the other. If a professional certifies a name as “Available” as per his professional wisdom, will the government be at a liberty to challenge him in future on the pretext that it violates certain guidelines.
What will be the fate of a company if its name is found undesirable by the government after a few years. What, if the Company has already applied for / obtained trademarks in the name. What will be the repercussions on the Practising professional for misconduct or otherwise? What, if the Practicing professional certifies a name which is clearly violative of the guidelines … just for a few extra bucks or under client pressure or competition pressure?
Is so much liberalisation good for us?