Exclusive right only in distinctive matter of trademark

Exclusive rights are only in distinctive matter of trademark, that is going to be discussed here in detail.

The 1999 act has omitted the law relating to disclaimers altogether. The 1999 act has declared that the exclusive right to use a trademark has to be viewed for the trademark as a whole. If it consists of several matters or parts within a trademark, the parts of the trademark do not have any exclusive right in them, as it shall be in the use of a mark as a whole.

exclusive

Section 17(2)(a) declares that parts

Moreover, section 17(2)(b) is unequivocal in declaring that the registration of a trademark would not entail any exclusive right to the use of

  • Matter comprised in a trademark which is common to trade, or
  • The matter comprised in a trademark which is non-distinctive character.

In other words, in spite of the registration of such matter as forming part of a trademark there would be no exclusive right in the above two types of matter, i.e., common to trade and non-distinctive matter, and both may validly be used by others.

Difficulty of understanding exclusivity of rights:

exclusive

The law in section 17 of the 1999 act has introduced imprecision of understanding of rights which will contribute to litigation and a source of dissatisfaction. A mark or part of the mark or a matter in a mark may be said to be common to the trade, when (1) it is in common use in the trade or (2) when it is open to the trade to use. Any symbol, word or get-up commonly used by traders in connection with their trade and in respect of which no particular trader can claim an exclusive right to use may be considered common to that particular trade, or publici juris. The question whether a mark is common to the trade being a question fact, the onus of proof is on the party alleging this fact.

A feature which is common to one trade may not be so to another trade. A mark may continue to be a trademark in some countries and may become publici juris in others. A mark may be common to trade at one time and may become distinctive in course of time. There is no exhaustive list of circumstances in which a mark is said to publici juris.

What constitutes non-distinctive:

exclusive

If the mark has come to be co public and is in such universal use that nobody can be deceived or induced by its use into believing that he is buying the goods of the original trader, in such a situation the right to the trademark is lost. To say that a mark has become common to the trade is another way of saying that it has ceased to be distinctive of goods of a particular trader.

Normally numeral trademarks are considered non-distinctive; by a series of cases it is now accepted that a single numeral is the weakest, but as the numerals grow to 2 figures, then to 3 and 4 figures their distinctiveness is accepted progressively. Moreover, mostly the numerals are intertwined with

Other matter when adopted as trademarks and the composite matter can mostly satisfy the requirement of distinctive character. The composite matter now faces obstruction of section 17 wherein parts of a composite mark, which are either common to trade or non-distinctive are not protected.

Automatic disclaimer in 17(2) of 1999 act:

exclusive

In 1999 act, the effect in relation to exclusive rights is the same as was in the 1958 act. The only difference is that under the 1958 act the proprietor had to disclaim the right to the exclusive use of non-distinctive part of trademark and the disclaimers were entered in the register. Now section 17 serves as an automatic disclaimer. It was known that what has been required to be disclaimed as a condition of registration of trademark. The proprietor knew his exclusive rights are in non-disclaimed matter of the trademark and he could structure his affairs and avoid futile litigation.

Imprecise exclusive rights:

exclusive

The difficulty now is that it is not precisely known which part of the trademark does not have exclusive rights. As such, there is no exclusive right in the parts of a trademark as now the right is only in respect of the whole of the trademark. If the parts of a trademark of “X” are copied by another Y and Y is challenged by X., Y would set up a claim that the matters copied by him from trademark of X, do not enjoy exclusive rights as they are non-distinctive parts in X’s trademark. Thus, there could be a spate of litigation in relation to every trademark that the copied matter is of “descriptive character” or “common to the trade” and as such non-distinctive. The real irritant likely to be is that neither X nor Y, would come to know their rights only after a superior court determines the same in infringement proceedings, as no proprietor may be assured of the result of litigation.

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What are the duties of directors?

Directors occupy a key-position in the management and administration of the company. They are given wide powers. They owe certain duties to the company. These duties are partly statutory, partly regulatory and partly dependent on the law of agents and trustees or persons in a fiduciary position. Duties of directors vary from company to company depending on the size and its business activities, division of work between the directors and officials of the company. Generally speaking, duties of directors include

directors

For the sake of convenience the various duties of directors can be more or less classified under the following broad heads:

  • Fiduciary duties of loyalty and good faith (analogous to the duties of trustees);
  • Duties of care, skill and diligence (differing fundamentally from the duties of normal trustees);
  • Collective duties of directors under company law;
  • Individual duties of directors under company law.

Directors:

directors

Directors are sometimes described as quasi-agents and sometimes as constructive trustees of the company. They may be regarded as agents in the transactions which they enter into with third parties on behalf of the company and the normal rules of agency apply to them. Hence, a director may not make a secret profit. Directors are trustees of the company’s money and property. They are trustees of the powers entrusted to them. Some of the matters where directors are expected to act as trustees in exercising their powers are:

Difference between the position of a directors and that of a trustee:

                          Trustee               Director
A trustee is the legal owner of the property and he holds it in his own name subject to the condition that he holds it for the benefit of the beneficiary. A director never holds the company’s property in his own name since the company itself is the legal owner.
The position of a trustee is a creation of equity. The position of a director is a creation of law.
A trustee can mix up trust fund with his own and in that case certain principles of drawing as lay down. A director is not authorised to mix the company’s fund or properly with his own.

 

A trustee is not entitled to remuneration. A director is entitled to sitting fees.

 

A trustee does not manage the property for his own benefit. He manages the property for the benefit of the beneficiaries of the trust. Directors are commercial men managing a business for the benefit of themselves and of all the shareholders of the company.
A trustee is required to discharge duties well recognised by law. Duties of a director are different from those of a trustee of a will or settlement. It is difficult to enumerate the various duties of directors. A director has to perform a number of diverse duties which cannot be precisely defined.
Any person capable of holding property may be a trustee. So the trustee may be a bank. Trustee need not necessarily be an individual. Only an individual can be director
A trustee cannot be an employee of the trust

 

 

 

A director may become an employee of a company. A managing director is an employee of the company.
A trustee cannot resign his office except

·         With the permission of the court, or

·         With the consent of beneficiary if he is a major, or

·         By virtue of a special power in the trust deed.

A director (other than a managing or whole-time director) can resign his office without assigning any reason.
A person can be a trustee of any number of trusts A person cannot be a director for more than 15 public limited companies.

Duties of skill, care and diligence:

directors

In India, there are no specific things regarding the duties of skill, care of the directors in the companies act. Courts mostly follow English decision and the common law rules. A director must understand what an ordinary man might be expected while conducting the affairs of the company. He is not an insurer of the success of the company. A director’s duty is to act reasonably regards with his knowledge and experience. He should not sign a cheque without inquiring the purpose, later it may be discovered that it was required for an ultra vires purpose. A director is always bound to act with the reasonable diligence and use such skills as he possesses.

The directors are not liable for mere errors of judgement. They are not bound to give continuous attention to the company.

The skill owned by the directors of the company:

directors

  • A director is the one who has no need to give continuous attention to the company affairs. Intermittently he can appear and perform the duties at the board meetings. He is not bound to attend all the board meetings, but he ought to attend whenever it is reasonable to do so.
  • A director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience. A director of a life insurance company for instance does not guarantee that he has the skill of an actuary or of a physician.
  • In respect of all duties that having regard to the exigencies of business and the articles of association may properly be left to some other official, a director is in the absence of grounds for suspicion justified in trusting that official in performing his duties.

directors

These are general propositions and highlight the minimum standards expected from non-executive directors. A far greater degree of skill and commitment to the company will be expected from managing director and executive directors/whole time directors.

Important aspects and view on Managers and the Managing Director of the company

 Who are Managers and Managing Directors and how to differentiate them with their roles and responsibilities under the law, will be discussed here. It is significant to know and understand the concepts before stepping into a business.

Manager:

managers

Manager is the one who is subject to control, direction and superintendence of the directors.  He is the one who manages whole or substantially the affairs of a company. Director or any other person, who occupy the position of a manager, can only through by a form of contract. Thus, the individual can only be appointed as a manager in a company. There is a difference in the mode of appointing the manager and the managing director.

Managers and Managing directors:

managers managers

Manager can also be appointed as a director, if for any reasons, the director of the office is vacated, the office of manager held by him is not affected. But, in the case of managing director, if he ceases to be a director for any reason, his office as managing director also will cease along with it. Managing director is the director, by virtue of an agreement with the company or by its virtue of memorandum or articles of association or any resolution passed by the company in the general meeting by its board of directors, is entrusted all the substantial powers of management which would not be exercisable by him. Only a director can be appointed as a managing director as compared to the manager, who may be any individual or a person not necessarily be a director.

Number of managers in a company:

The company can at the same time, have two or more managing directors or two or more managers but cannot have both manager and managing director.

Director as manager:

managers

A manager may or may not be a director of the company. If one director of the company appointed as a manager, he would ipso facto, become a managing director where an act envisages a distinction between the tow. The department of company affairs holds the point that “ A person who is a manager under the section 2(24) and also a director of the company would be considered as a managing director and he would be subject to all the restrictions which are applicable to a managing director under the act. In this connection manager means an individual or a person who has the management regards with whole affairs of the company.

Appointment:

managers

A manager can be appointed or reappointed by the board only when the articles of the company vest the power in the company to be exercised at a general meeting. According to section 388 of the act, the provisions of section 301, 269, 311, 312 and 317 of the act would apply in relation to the manager of the concern as they apply in relation to the managing director thereof. Those of section 312 shall apply in relation to the manager of the firm, as they apply to the director thereof.

Disqualification:

Under the section 384, no company shall appoint or employ any firm, body corporate or association as its manager. A manager must be an individual. He must not be disqualified under section 385. If he is a director, he shouldn’t be disqualified under section 274 as far as his office of director is concerned.

Terms of office:

Under section 317, a company can permit to appoint or reappoint a manager for a period not exceeding five years at a time. The central government may also, if it is of the opinion that in the interest of the company it is necessary so to do, accord its approval to the proposed appointment or reappointment for a period shorter that the period for which the person is proposed to be appointed by the company.

Restriction on the number of companies of which a person may be appointed manager:

According to section 386, company cannot appoint or employ any person as a manager, if he is already a managing director or manager of the company. A company can appoint or employ any person as a manager if he is managing director or manager at one, not more than any other company. Such a kind of appointment or employment has to be made or approved by the resolution passed at the meeting of the board. This can be approved only if the directors give their consent at the board meeting. That resolution and the meeting to be moved thereat, specific notice will be given to all the directors. The central government may permit any person to appoint as a manager of more than two companies, if the central government satisfied that it is necessary that the companies should have proper functioning  by acting as a single unit and having a common manager.

Restriction on appointment of managers:

Under section 202, the appointment of an individual as a managerial personnel who is an undischarged insolvent, would be prohibited.

Section 385 has some restriction towards appointing the manager of the company. They are as follows:

  • Undischarged insolvent, at any time, within the preceding period of five years been adjudged an insolvent; or
  • Who suspended the payment to the creditors or made any kind of composition with them within the preceding five years;
  • If the person been convicted by the court India for the offence of moral turpitude within the preceding five years.

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Steps required for obtaining certificate of commencement of business

Steps required for obtaining certificate of commencement of business:

The company having a share capital has issued prospectus:

certificate

  • Allot the shares at least equal to the amount of minimum subscription
  • Have the application and allotment money paid by the directors on the shares taken or contracted to be taken by them having been paid in cash at least to the extent such moneys are payable by the public.
  • Obtain or apply for permission for dealing in the shares or debentures on the recognized stock exchange so that the moneys of the applicants for shares or debentures do not become refundable.
  • File a declaration in form no 19 duly verified by one of the directors or the secretary or where the company has not appointed a secretary, by a secretary in whole time practice with the registrar of companies to the effect that the aforesaid three conditions have been compiled with.
  • Pay the stamp duty as prevalent in the state in which the company is registered according to the Indian stamp act.
  • Attach a treasury Challan to the declaration evidencing the payment of the requisite fees prescribed under the companies act and in accordance with the rule of the Companies general rule and forms.
  • The registrar will then issue the certificate of commencement of business.

The company having a share capital has not issued prospectus:

  • Have the application and allotment moneys paid in cash by your directors, which they are liable to pay in cash on the shares taken or contracted to be taken by them.
  • File the statement in lieu of prospectus according to the form and requirements of schedule III.
  • Do not allot any share or debenture at least for three days after filing the above statement.
  • File a declaration in Form No. 20 duly verified by one of the directors or the secretary or where the company has not appointed a secretary, by a secretary in whole time practice with the registrar of companies to the effect that the first mentioned condition has been compiled with.
  • Pay the stamp duty as prevalent in the state in which the company is registered according to the Indian stamp act.
  • Attach a treasury Challan with the declaration evidencing payment of the requisite fees prescribed under schedule X to the companies act and in accordance with the rule of the companies General Rules and Forms.
  • The registrar will then issue the certificate of commencement of business.

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Appointment of Directors and the terms associated with that

Appointment of directors and the legal concept behind that will be discussed here. Have an eye on this to know the basic things about the how the process will be carried out.

Appointment of Directors:

appointment

Directors may be appointed in the following ways:

  • By subscribers to the memorandum (First directors) section 254.
  • By members in general meeting
  • By board of directors
  • By central government
  • By third parties,  if the articles provide
  • By small shareholders,  if the articles provide.

Appointment of First Directors:

Appointment

  The first director means the director of the company who assumes office from the date of incorporation of the company. The first directors of a company may be named in its articles of association. In case no directors are so named in the articles, the articles may authorize the subscribers to the memorandum to appoint the first directors.

As per section 254, which provides that any absence of a provision in the AOA, the individual subscribers mentioned in the memorandum will be considered as the director until the new directors appoint in accordance with the section 255.

If the articles provide for any share qualification, only such of the subscribers as possess the necessary share qualification shall be deemed to be directors. This provision is applicable only to a public company and not to a private company unless the articles make it applicable.

 If the subscribers who are all in the memorandum are bodies corporate, then none can be deemed to be the directors, and obviously, the company will not have any directors until the first director who will be appointed under the section 255, with the absence of provisions in the AOA. The articles may contain the first director name during the registration time until the new directors appoint at the first AGM.

How to appoint the directors?

appointment

A person who is intended to become a director must obtain DIN (Director Identification Number). The prospective director must declare to the company that he holds a DIN, if not he will be disqualified to be a director. The appointed director needs to notify his consent to the company and as well to the registrar within 30 days from his appointment.

What will happen if the person doesn’t notify his consent to the registrar?

Appointment

If the person who appoints as a director in a particular company need to notify his consent to the registrar within the specified date. If not, it will be taken as an offense and punishable in a way that he will be imprisoned for a period of six months or need to pay the fine amount which may extend up to fifty thousand rupees. If the non-compliance continues, for each day he will be fined the amount of Rs.500.

Terms to be followed for the appointment of directors:

Appointment

Generally, a director will be appointed in the Annual General Meeting (AGM) he can hold the post till next AGM. In the articles of the company, it has been clearly mentioned about the appointment of directors and the permanent directors. In public companies or a subsidiary of a public company, only one-third of the persons will be permanent directors, rest will retire by rotation.

An independent director can act as a director for the consecutive five years. In this case, if the director wants to stay in his position, special resolution can be passed by the board in order to extend his time period. After the two consecutive terms, there should be a gap of three years. In those 3 years, there shouldn’t be any association with that company. After those 3 years, he can be reappointed as a director.

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Concept of Company Directors and the types of directors

There are different types of directors. The directors of a company are eyes, ears, brain, hands, nerves and other essential limbs, upon whose efficient functioning depends the success of the company. In order to enable a company to live and to achieve its objectives, the director acts as an agent to en route in a right way.

why Directors?

types

  • The directors formulate policies and establish organizational setup for implementing those policies and to achieve the objectives as contained in the Memorandum.
  • Muster the resources for achieving the company objectives and control, guide, direct and manage the affairs of the company.
  • Directors as a body, frame the general policy of the company, direct its affairs, appointing the suitable company employees, and ensuring that they carry out their duties and responsibilities. Recommend to the shareholders about the distribution of dividend.

Types of Directors:

Two important directors are there, they are (i) executive directors or whole-time directors with the designation as managing directors, executive directors, and technical directors. (ii) Non-executive or part-time directors who are professionals and do not depend on their company rather they serve on the board of directors of a number of companies.

The Broad classification of “Directors”:

Inside Directors:

types

Those directors are the one who is in the whole-time employment of the company. It includes a technical, executive, managing director etc.

Outside Directors:

types

Those directors who are not in the whole-time employment of the company and they will not be associated with day-to-day working. They will be called in different types as nominated directors, professional directors, statutory directors.

Professional Directors:

types

They are specialized in different fields of management with extensive knowledge and experience in assisting and improving the given organization. They are in a position to offer suggestions for formulating a company’s policies and their income is derived principally which they receive from the companies on whose boards they serve.

Nominee Directors:

types

Those directors are appointed by financial institutions or banks which extend to financial assistance/term loans or working capital assistance to companies. They are mainly used for project supervision, monitoring, and control, particularly following the issue of government guidelines.

Special Directors or executive Directors:

types

Those are the full-time employee of a company and is given this designation in order to appreciate his merit and his usefulness to the company. Such directors will not be a board member and cannot be considered as a director within the provisions of the companies act.

Independent Directors:

types

They are the one who is apart from the director’s remuneration and do not have any pecuniary relationship or the transactions with that concern. Since because the promoters, management, or its subsidiaries who are in the judgment of the board may affect the independence of the directors.

Interested Directors:

types

Those are the ones who are used purposely for the quorum meeting with the board members for any discussion or any matter.

Government Directors:

types

The central government is the authoritative power to appoint the directors under section 408 of the act.

Whole-time director:

types

Whole-time directors are the one who devotes all his time and attention to the management of the company. He will act as a sale, technical, legal and work director since he is the whole-time director of the company.

Managing director:

types

Managing directors are the one, by virtue of an agreement with the company or the resolution which is passed by the company in the general meeting or by its board of directors or by virtue of its memorandum or articles of association entrusted to the managing power of the company.

The managing director’s power is substantial so that he can decide matters such as the appointment of the employees, selling and buying, control and direct the company’s board of directors.

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