Amendment in Incorporation Rules - MMJC

Section 4 of the Companies (Amendment) Act, 2020 is made effective from 1st September, 2021 vide MCA notification dated 22nd July, 2021. The said amendment is related to providing of new name to a Company by the Central Government, in case the Company is in non-compliance with the provisions of Section 16(1) i.e., name is too identical or nearly resembles the name by which any other company is already in existence etc.

Connected to above amendment, the MCA also issued the Companie (Incorporation) Fifth Amendment Rules, 2021 dated 22nd July, 2021 to insert a new rule 33A relating to the allotment of a new name to already incorporated company under section 16(3) of the Companies Act, 2013 which shall also come into effect from 1st September, 2021.

Under Section 16(1), if Central Government issues a direction to a company to change its name, the company was obliged to change its name within 3 months. In case a company failed to change its name within a period of 3 months from the date of issue of such direction, a fine was prescribed for such default. Post this amendment, instead of fine, the below mentioned procedure shall be adopted by the Central Government for this default of not changing name within 3 months of receipt of directions.

As per the new inserted rule, then following will be course of action:

• The letters “ORDNC” (which is an abbreviation of the words “Order of Regional Director Not Complied”), the year of passing of the direction, the serial number and the existing Corporate Identity Number (CIN) of the company shall become the new name of the company without any further act or deed by the company

• Registrar shall accordingly make entry of the new name in the register of companies and issue a fresh certificate of incorporation in Form No.INC-11C.

• A company whose name has been changed as above shall at once make necessary compliance with the provisions of section 12 of the Companies Act, 2013

• The statement, “Order of Regional Director Not Complied (under section 16 of the Companies Act, 2013)” shall be mentioned in brackets below the name of company, wherever its name is printed, affixed or engraved.

• No such statement is required to be mentioned in case the company subsequently changes its name in accordance with the provisions of section 13 of the Companies Act, 2013.

The above provisions shall not be applicable in case of companies which have already initiated the process of change of name and filed the relevant forms with MCA and e-form INC-24 (Application for approval of Central Government for change of name) filed by the company is pending for disposal as on the date of expiry of three months from the date of issue of direction by Central Government for change of name and the said form. In case the said e-form is subsequently rejected, then the above mentioned process shall be initiated by the Central Government.

This amendment is to ensure that the MCA system automatically initiates the change of name of such companies after waiting for 3 months from the date of issue of directions, instead of waiting infinitely for such companies to initiate the process of change of name and keep accumulating fine till the date of compliance by the companies.