Page 151 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Corporate Legal Framework

Notes printed, divided into paragraphs, numbered consecutively and signed by at least seven persons
(two in the case of a private company) in the presence of at least one witness, who will attest
the signature. Each of the members must take at least one share and write opposite his name
the number of shares he takes. Section 13 requires the memorandum of a limited company to
contain: (i) the name of the company, with ‘limited’ as the last word of the name in the case of a
public company and ‘private limited’ as the last words in the case of a private company; (ii) the
name of the State, in which the registered officer of the company is to be situated; (iii) the objects

of the company, stating separately ‘Main objects’ and ‘other objects’; (iv) the declaration that the
liability of the members is limited; and (v) the amount of the authorised share capital, divided

into shares of fixed amounts. These contents of the memorandum are called compulsory clauses
and are explained below.
The name clause. The promoters are free to choose any suitable name for the company
provided:

(a) The last word in the name of the company, if limited by shares or guarantee is ‘limited’

unless the company is registered under s.25 as an ‘association not for profit’ [s.13(1) (a) &
s.25].
(b) In the opinion of the Central Government, the name chosen is not undesirable [s.20(1)].

The Department of Company Affairs has issued guidelines for deciding availability of names.
However these are not exhaustive but only illustrative of what is considered an undesirable
name under s.20.
Too similar name. In case of too similar names, the resemblance between the two names must
be such as to be calculated to deceive. A name shall be said to be calculated to deceive where it
suggests some connection or association with the existing company.

Example:
(i) In Society of Motor Manufacturers and Traders Ltd. v. Motor Manufacturers and Traders Mutual
Assurance Ltd. (1925) 1 Ch. 675, the plaintiff company brought an action to restrain the
defendant company to use the said name. But, Lawrence, J., held “any one who took the
trouble to think about the matter, would see the defendant company was an insurance
company and that the plaintiff society was a trade protection society and I do not think
that the defendant company is liable to have its business stopped unless it changes its name
simply because a thoughtless person might unwarrantedly jump to the conclusion that it is
connected with the plaintiff society.”
(ii) In Asiatic Govt. Security Life Insurance Co. Ltd. v. New Asiatic Insurance Co. Ltd. (1939) 9 Comp.
Cas. 208, the court held the two names were not too identical and therefore did not restrain
from using their name.
(iii) In Ervind v. Buttercup Margarine Co. Ltd. (1917), the plaintiff who carried on business
under the name of the Buttercup Dairy Co. succeeded in obtaining an injunction against
the defendant on the ground that the public might think that the two businesses were
connected, since the word ‘buttercup’ was an unnecessary and fancy one.

(iv) In Executive Board of the Methodist Church in India v. Union of India (1985) 57 Comp. Cas.
443 (Bom), the Methodist Church in India sought registration of a company in the name
of ‘Methodist Church in India Trust Association’. There was already existing a company
bearing the name Methodist Church in Northern India Trust Association (P) Ltd.’ in
Calcutta. The former secretary of the later’s association informed the Registrar that the
said company had not functioned since 1970; that no annual reports or minutes had been

filed with the Registrar since 1970; and that some directors had died and some had left.
The question was whether in these circumstances the Calcutta company was a bar to the
registration of the new company.

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