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30 Jan 2018

The New System Of Reserving “Name” For A New Company Though Simplified Has Limitations

 

The New System Of Reserving “Name” For A New Company Though Simplified Has Limitations

On the occasion of 69th Republic Day, as part of the initiative of ease of doing business in India, the Ministry Corporate Affairs (MCA) on January 26, 2018 has introduced “RUN (Reserve Unique Name)” web service, for reservation of the name of the Company to be incorporated.

Before the introduction of “RUN” web-form, application for reservation of name was to be made in Form INC-1 with 6 choices of name. Further, to apply for reservation of company name, a minimum of 2 Director Identification Number (DIN) and 1 Digital Signature Certificate (DSC) were required.

The “RUN” web-form to be submitted requires very limited information mainly to the type of entity, proposed name and Objectives of the Proposed Company. Application can be filed even before obtaining the DSC & DIN. Further, No Objection Certificates(NOCs) is required only when a name which requires the approval of a Sectoral Regulator. On account of the above, company name is expected to be reserved easily and quickly.

However, there is a down side to the new system over the earlier one. Only one choice of the name can be provided at a time. The name applied for, will either be approved or rejected and no resubmission is allowed as against earlier system and further if rejected a fresh payment of Rs.1000/- is required to be made again. Further, the Validity of Name approved / reserved under RUN system is only for 20 days from the date of approval as compared to 60 days against earlier system.

This step by the MCA though is not a significant step towards improvement of ranking ease of doing business in the country it certainly contributes towards the scale of the ranking. There is lot more scope to further improve, such as single window registration system where various registrations and licences required to be obtained while starting a business are granted with one single application, as already existing in other countries like Singapore.

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