Government Company

GOVERNMENT COMPANY
• THE COMPANIES ACT, 2013 ENACTED ON 29TH AUGUST, 2013.

• SECTION 465 OF THE ACT REPEALED THE COMPANY’S ACT OF 1956. NEW
COMPANIES ACT WAS FULLY INCORPORATED IN THE YEAR 2019.
• A COMPANY‖ IS A GROUP OF PERSONS ASSOCIATED TOGETHER TO
ACHIEVE SOME COMMON OBJECTIVE.
• THERE ARE VARIOUS TYPES OF COMPANIES
• MODE OF OPERATION INCLUDES CHARTERED COMPANIES AND
STATUTORY COMPANIES,
• COMPANIES ON THE BASIS OF NUMBER OF MEMBERS SUCH AS, PRIVATE
COMPANY AND PUBLIC COMPANY,
• ON THE BASIS OF CONTROL, HOLDING COMPANY OR SUBSIDIARY
COMPANY,
• ON THE BASIS OF NATIONALITY OF THE COMPANY, INDIAN COMPANIES
AND FOREIGN COMPANIES
• BASIS OF OWNERSHIP OF COMPANY I.E., GOVERNMENT COMPANIES AND
NON- GOVERNMENT COMPANIES.
PREVIEW
• MEANING OF GOVT COMPANY
• FEATURES OF GOVT COMPANY
• PROVISIONS CONTAINED IN THE COMPANY

ACT OF 2013
• ADVANTAGES/DISADVANTAGES
• DISINVESTMENT
GOVT COMPANY
• SECTION 2 (45) OF THE ACT STATES THAT GOVERNMENT COMPANY‖ MEANS ANY COMPANY
IN WHICH NOT LESS THAN FIFTY-ONE PER CENT OF THE PAID-UP SHARE CAPITAL IS HELD BY
THE CENTRAL GOVERNMENT, OR BY ANY STATE GOVERNMENT OR GOVERNMENTS, OR
PARTLY BY THE CENTRAL GOVERNMENT AND PARTLY BY ONE OR MORE STATE
GOVERNMENTS, AND INCLUDES A COMPANY WHICH IS A SUBSIDIARY COMPANY OF SUCH
A GOVERNMENT COMPANY.
• IT IS A COMPANY IN WHICH THE GOVERNMENT OR STATE GOVERNMENT HOLDS 51% OR

MORE OF THE PAID-UP CAPITAL. GOVERNMENT COMPANY IS ALSO CALLED PUBLIC
ENTERPRISE OR STATE ENTERPRISE. IT WORKS AS OTHER COMPANIES REGISTERED UNDER
THE COMPANIES ACT.
• THE CARDINAL FEATURE OF THE GOVERNMENT COMPANY IS NOT LESS THAN 51%
OWNERSHIP BY CENTRAL/STATE GOVERNMENT, EITHER INDIVIDUALLY OR JOINTLY. THERE
ARE MANY GOVERNMENT COMPANIES LIKE, STEEL AUTHORITY OF INDIA LIMITED, BHARAT
HEAVY ELECTRICALS LIMITED, COAL INDIA LIMITED, STATE TRADING CORPORATION OF
INDIA, ETC.
GOVT COMPANY
• A SUBSIDIARY COMPANY OR SUBSIDIARY OF A GOVERNMENT COMPANY
WOULD ALSO BE CATEGORISED AS A GOVERNMENT COMPANY PROVIDED
THE GOVT COMPANY CONTROLS THE COMPOSITION OF THE BOARD OF
DIRECTORS OR EXERCISES OR CONTROLS MORE THAN ONE HALF OF THE
TOTAL VOTING RIGHTS (TILL JAN 2018 THE WORD SHARE CAPITAL WAS
USED INSTEAD OF VOTING RIGHTS) EITHER AT ITS OWN OR TOGETHER
WITH ONE OR MORE OF ITS OTHER SUBSIDIARY COMPANIES.
• EVEN IF THE CONTROL IS OF ANOTHER SUBSIDIARY COMPANY OF THE

GOVERNMENT COMPANY, THE COMPANY WOULD STILL BE CATEGORISED
AS A SUBSIDIARY COMPANY AND HENCE A GOVERNMENT COMPANY.
THUS JOINT VENTURE COMPANIES FORMED BY VARIOUS GOVERNMENT
COMPANIES OR PUBLIC SECTOR UNDERTAKINGS ARE ALSO CONSIDERED
AS GOVERNMENT COMPANIES
FEATURES OF GOVT COY
• IT IS REGISTERED UNDER THE COMPANIES ACT.
• IT HAS A SEPARATE LEGAL ENTITY. IT CAN SUE AND BE SUED AND CAN ACQUIRE
PROPERTY IN ITS NAME.
• THE ANNUAL REPORTS OF THE GOVERNMENT COMPANIES ARE REQUIRED TO BE
PRESENTED IN PARLIAMENT.
• THE CAPITAL IS WHOLLY OR PARTIALLY PROVIDED BY THE GOVERNMENT. IN THE CASE
OF A PARTIALLY OWNED COMPANY, THE CAPITAL IS PROVIDED BOTH BY THE
GOVERNMENT AND PRIVATE INVESTORS. BUT IN SUCH A CASE, THE CENTRAL OR
STATE GOVERNMENT MUST OWN AT LEAST 51% SHARES OF THE COMPANY.
• IT IS MANAGED BY THE BOARD OF DIRECTORS. ALL THE DIRECTORS OR THE MAJORITY
OF DIRECTORS ARE APPOINTED BY THE GOVERNMENT, DEPENDING UPON THE
EXTENT OF PRIVATE PARTICIPATION.
• ITS ACCOUNTING AND AUDIT PRACTICES ARE MORE LIKE THOSE OF PRIVATE
ENTERPRISES, AND ITS AUDITORS ARE CHARTERED ACCOUNTANTS APPOINTED BY THE
GOVERNMENT.
• ITS EMPLOYEES ARE NOT CIVIL SERVANTS. IT REGULATES ITS PERSONNEL POLICIES
ACCORDING TO ITS ARTICLES OF ASSOCIATIONS.
Provisions in Company Act of 2013
AUDIT AND AUDITORS. AS PER SECTION 139 (5), THE COMPTROLLER AND AUDITOR-
GENERAL OF INDIA SHALL, IN RESPECT OF A FINANCIAL YEAR, APPOINT AN AUDITOR
DULY QUALIFIED TO BE APPOINTED AS AN AUDITOR OF COMPANIES UNDER THIS
ACT, WITHIN A PERIOD OF ONE HUNDRED AND EIGHTY DAYS FROM THE
COMMENCEMENT OF THE FINANCIAL YEAR, WHO SHALL HOLD OFFICE TILL THE
CONCLUSION OF THE ANNUAL GENERAL MEETING.
APPOINTMENT OF ADDITIONAL DIRECTOR. AS PER SECTION 161, THE ARTICLES OF A

COMPANY MAY CONFER ON ITS BOARD OF DIRECTORS THE POWER TO APPOINT ANY
PERSON, OTHER THAN A PERSON WHO FAILS TO GET APPOINTED AS A DIRECTOR IN
A GENERAL MEETING, AS AN ADDITIONAL DIRECTOR AT ANY TIME WHO SHALL HOLD
OFFICE UP TO THE DATE OF THE NEXT ANNUAL GENERAL MEETING OR THE LAST
DATE ON WHICH THE ANNUAL GENERAL MEETING SHOULD HAVE BEEN HELD,
WHICHEVER IS EARLIER.
PROHIBITIONS AND RESTRICTIONS REGARDING POLITICAL CONTRIBUTIONS. AS PER

SECTION 182, A GOVERNMENT COMPANY AND A COMPANY CANNOT CONTRIBUTE
ANY AMOUNT DIRECTLY OR INDIRECTLY TO ANY POLITICAL PARTY.
PROVNS UNDER COMPANY ACT
• AUDIT OF COMPANY LIQUIDATOR‘S ACCOUNTS. AS PER SECTION 294, THE COMPANY LIQUIDATOR SHALL MAINTAIN
PROPER AND REGULAR BOOKS OF ACCOUNT INCLUDING ACCOUNTS OF RECEIPTS AND PAYMENTS MADE BY HIM IN
SUCH FORM AND MANNER AS MAY BE PRESCRIBED AND SHALL FORWARD A COPY THEREOF TO :-
– (I) TO THE CENTRAL GOVERNMENT, IF THAT GOVERNMENT IS A MEMBER OF THE GOVERNMENT COMPANY.
– (II) TO ANY STATE GOVERNMENT, IF THAT GOVERNMENT IS A MEMBER OF THE GOVERNMENT COMPANY.
– (III) TO THE CENTRAL GOVERNMENT AND ANY STATE GOVERNMENT, IF BOTH THE GOVERNMENTS ARE MEMBERS OF THE
GOVERNMENT COMPANY.
• ANNUAL REPORTS ON GOVERNMENT COMPANIES. AS PER SECTION 394, WHERE THE CENTRAL GOVERNMENT IS A
MEMBER OF A GOVERNMENT COMPANY, THE CENTRAL GOVERNMENT SHALL CAUSE AN ANNUAL REPORT ON THE
WORKING AND AFFAIRS OF THAT COMPANY TO BE PREPARED WITHIN THREE MONTHS OF ITS ANNUAL GENERAL
MEETING AND LAID BEFORE BOTH HOUSES OF PARLIAMENT TOGETHER WITH A COPY OF THE AUDIT REPORT AND
COMMENTS UPON OR SUPPLEMENT TO THE AUDIT REPORT, MADE BY THE COMPTROLLER AND AUDITOR-GENERAL OF
INDIA. SIMILARLY, WHERE IN ADDITION TO THE CENTRAL GOVERNMENT, ANY STATE GOVERNMENT IS ALSO A MEMBER
OF A GOVERNMENT COMPANY, THAT STATE GOVERNMENT SHALL CAUSE A COPY OF THE ANNUAL REPORT PREPARED
TO BE LAID BEFORE THE HOUSE OR BOTH HOUSES OF THE STATE LEGISLATURE TOGETHER WITH A COPY OF THE AUDIT
REPORT AND THE COMMENTS UPON OR SUPPLEMENT TO THE AUDIT REPORT.
• ANNUAL REPORTS STATE GOVERNMENTS ARE MEMBERS OF COMPANIES. AS PER SECTION 395, ONLY ONE STATE
GOVERNMENT IS A MEMBER OF THE COMPANY, THAT STATE GOVERNMENT SHALL CAUSE AN ANNUAL REPORT ON THE
WORKING AND AFFAIRS OF THE COMPANY TO BE PREPARED WITHIN THE TIME SPECIFIED AND LAID BEFORE THE
HOUSE OR BOTH HOUSES OF THE STATE LEGISLATURE TOGETHER WITH A COPY OF THE AUDIT REPORT AND
COMMENTS UPON .
ADVANATAGES
• ECONOMIES OF SCALE. INDUSTRIES LIKE, ELECTRIC POWER PLANTS, NATURAL GAS,
PETROLEUM ETC ARE UNDER THE CONTROL OF PUBLIC SECTOR COMPANIES.
• REGIONAL BALANCE. FOR THE OVERALL DEVELOPMENT OF THE NATION, VARIOUS
AREAS WHICH ECONOMICALLY BACKWARDS BE NEVER TOUCHED BY COMPANIES.
• DEVELOPMENT OF THE INFRASTRUCTURE. PRIVATE SECTOR WAS NEVER WILLING TO
PARTICIPATE IN THE DEVELOPMENT OF HEAVY INDUSTRIES BECAUSE THE GESTATION
PERIOD WAS TOO LONG IN THESE INDUSTRIES AND THE AMOUNT OF CAPITAL TO BE
INVESTED IS HUGE IN NUMBER. SO THE GOVERNMENT HAD TO RELY ON PUBLIC SECTOR
COMPANIES TO DEVELOP THESE SECTORS WHICH WERE AN INTEGRAL PART OF THE
DEVELOPMENT OF THE NATION.
• CONTROL ON MONOPOLY AND RESTRICTIVE TRADE PRACTICES. PUBLIC SECTOR
COMPANIES HAVE A VERY IMPORTANT ROLE TO CONTROL THE MONOPOLY CREATED BY
PRIVATE SECTOR COMPANIES. PUBLIC SECTOR COMPANIES KEEP A CHECK ON
GUIDELINES OF MONOPOLISTIC AND RESTRICTIVE TRADE PRACTICES.
• IMPORT SUBSTITUTION. PUBLIC ENTERPRISES ARE ALSO ENGAGED IN
MANUFACTURING AND PRODUCTION OF CAPITAL EQUIPMENT WHICH WAS EARLIER
IMPORTED FROM OTHER COUNTRIES.
ADVANTAGES
• SIMPLE PROCEDURE OF ESTABLISHMENT. A GOVERNMENT COMPANY, AS COMPARED TO OTHER PUBLIC
ENTERPRISES, CAN BE EASILY FORMED AS THERE IS NO NEED TO GET A BILL PASSED BY THE PARLIAMENT
OR STATE LEGISLATURE. IT CAN BE FORMED SIMPLY BY FOLLOWING THE PROCEDURE LAID DOWN BY THE
COMPANIES ACT.
• EFFICIENT WORKING ON BUSINESS LINES. THE GOVERNMENT COMPANY CAN BE RUN ON BUSINESS
PRINCIPLES. IT IS FULLY INDEPENDENT IN FINANCIAL AND ADMINISTRATIVE MATTERS EFFICIENT
MANAGEMENT. AS THE ANNUAL REPORT OF THE GOVERNMENT, THE COMPANY IS PLACED BEFORE BOTH
THE HOUSE OF PARLIAMENT FOR DISCUSSION; ITS MANAGEMENT IS CAUTIOUS IN CARRYING OUT ITS
ACTIVITIES AND ENSURES EFFICIENCY IN MANAGING THE BUSINESS.
• HEALTHY COMPETITION. THESE COMPANIES USUALLY OFFER HEALTHY COMPETITION TO THE PRIVATE
SECTOR AND, THUS, ENSURE THE AVAILABILITY OF GOODS AND SERVICES AT REASONABLE PRICES
WITHOUT COMPROMISING THE QUALITY.
• TO ACHIEVE MORE EQUITY IN THE DISTRIBUTION OF WEALTH AND INCOME AMONGST THE CITIZENS OF
THE COUNTRY
• TO GAIN THE MOMENTUM IN THE GROWTH OF THE NATION.

DISADVANTAGES
LACK OF INITIATIVE. THE MANAGEMENT OF GOVERNMENT COMPANIES ALWAYS HAS A FEAR OF PUBLIC ACCOUNTABILITY.
LACK OF BUSINESS EXPERIENCE.

CHANGE IN POLICIES AND MANAGEMENT.
LACK OF DECISION MAKING. ALL THE NECESSARY MATTERS ARE DECIDED BY VARIOUS OFFICIALS AND COMMITTEES.
LACK OF EFFICIENCY. NATIONALIZED INDUSTRIES ARE MANAGED BY SALARIED PERSONS WHO ARE GENERALLY FOUND LESS
EFFICIENT AS COMPARED WITH PRIVATELY OWNED CONCERNS.
BUREAUCRACY.
ABSENCE OF PROFIT MOTIVE.
CHANCES OF LOSS. THE LOSS OF NATIONALIZED ENTERPRISES IS REGARDED AS THE LOSS OF THE NATION. SO THE STRUCTURE OF A
NATIONALIZED ECONOMY WILL GREATLY BE AFFECTED BY THE FAILURE OF SUCH A SCHEME.
LIMITED INVESTMENT. INVESTORS HESITATE TO INVEST A LARGE SUM OF MONEY DUE TO THE RISK OF NATIONALIZATION.
UNDUE INTERFERENCES. NATIONALIZED ENTERPRISES ARE UNDESIRABLY INTERFERED WITH BY POLITICAL PARTIES.
OBJECTIONABLE TO PUBLIC. THE PUBLIC GENERALLY CRITICIZES THE GIANT POLICY OF NATIONALIZATION. SO THE GOVERNMENT
MAY NOT BE IN A POSITION TO INITIATE NEW SCHEMES FREELY.
LOOSE SUPERVISION. SKILLED AND EFFICIENT BUSINESSMEN ARE REPLACED AFTER NATIONALIZATION. THE CHARGE USUALLY IS
TAKEN OVER BY THE OFFICIALS WHO ARE INCOMPETENT AND INEXPERIENCED TO RUN THE INDUSTRIES. SO THE PRODUCTION
VOLUME IS AFFECTED DUE TO LOOSE SUPERVISION.
DISINVESTMENT
• THE NEW ECONOMIC POLICY INITIATED IN JULY 1991 INDICATED THAT PSUS HAD SHOWN A VERY
NEGATIVE RATE OF RETURN ON CAPITAL EMPLOYED.
– UNDER–UTILISATION OF CAPACITY
– PROBLEMS RELATED TO PLANNING AND CONSTRUCTION OF PROJECTS
– PROBLEMS OF LABOUR, PERSONNEL AND MANAGEMENT
– LACK OF AUTONOMY
• THE NEED FOR THE GOVERNMENT TO GET RID OF THESE UNITS AND TO CONCENTRATE ON CORE
ACTIVITIES WAS IDENTIFIED. THE GOVERNMENT ALSO TOOK A VIEW THAT IT SHOULD MOVE OUT OF
NON-CORE BUSINESSES, ESPECIALLY THE ONES WHERE THE PRIVATE SECTOR HAD NOW ENTERED IN A
SIGNIFICANT WAY. FINALLY, DISINVESTMENT WAS ALSO SEEN BY THE GOVERNMENT TO RAISE FUNDS
FOR MEETING GENERAL/SPECIFIC NEEDS. IN THIS DIRECTION, THE GOVERNMENT ADOPTED THE
'DISINVESTMENT POLICY'. THIS WAS IDENTIFIED AS AN ACTIVE TOOL TO REDUCE THE BURDEN OF
FINANCING THE PSUS. THE FOLLOWING MAIN OBJECTIVES OF DISINVESTMENT WERE OUTLINED:
– TO REDUCE THE FINANCIAL BURDEN ON THE GOVERNMENT

– TO IMPROVE PUBLIC FINANCES T O INTRODUCE, COMPETITION AND MARKET DISCIPLINE
– TO FUND GROWTH
– TO ENCOURAGE WIDER SHARE OF OWNERSHIP
– TO DEPOLITICISE NON-ESSENTIAL SERVICES

Government Company

Uploaded by

Copyright:

Available Formats

Government Company

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Government Company

Uploaded by

Copyright:

Available Formats

GOVERNMENT COMPANY

• THE COMPANIES ACT, 2013 ENACTED ON 29TH AUGUST, 2013.

• FEATURES OF GOVT COMPANY

• PROVISIONS CONTAINED IN THE COMPANY

• IT IS A COMPANY IN WHICH THE GOVERNMENT OR STATE GOVERNMENT HOLDS 51% OR

• EVEN IF THE CONTROL IS OF ANOTHER SUBSIDIARY COMPANY OF THE

APPOINTMENT OF ADDITIONAL DIRECTOR. AS PER SECTION 161, THE ARTICLES OF A

PROHIBITIONS AND RESTRICTIONS REGARDING POLITICAL CONTRIBUTIONS. AS PER

• TO GAIN THE MOMENTUM IN THE GROWTH OF THE NATION.

LACK OF BUSINESS EXPERIENCE.

– TO REDUCE THE FINANCIAL BURDEN ON THE GOVERNMENT

You might also like