What do you mean by a government company? Discuss its various features and two merits? (2024)

A government company means any company in which not less than 51% of the paid up capital is held by the central government or by any state government or partly by central government and partly by one or more state government for e.g., Steel Authority of India State Trading Corporation and so on. The major features of Govt Companies are given below :

(a) Registration—The government companies get incorporated under the Companies Act 1956. All the provisions of Indian Companies Act are applicable to government companies.

(b) Ownership—The government company is wholly or partly owned by the government. The share capital of these companies is owned by the government of India in the name of the President.

(c) Management—The government company is managed by the Board of Directors who are nominated by the government and other shareholders. Its management is regulated by the provisions of the Companies Act like any other public limited company.

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4. Separate Legal Entity—The government company enjoys separate legal entity from its members. The company can enter into a contract in its own name, can buy and sell property in its own name.

5. Staffing—The recruitment and remuneration of employees of a government company is independently decided by the government company itself as per their memorandum and articles of association. They are not governed by civil service rules

6. Accountability—These companies are exempted from the accounting and audit rules and procedures. An auditor is appointed by the central government and The annual report is to presented and discussed in the Parliament or State Assembly.

Merits of a government company.

Merits of a government company.

(a) Easy Formation—A government company can be established by fulfilling the requirements of the Indian Companies Act. A separate Act in the Parliament is not required.

(b) Curbs Unhealthy Competition—By providing goods and services at reasonable prices these companies are able to control the market and curb unhealthy business practices.