Government Company

Introduction to Business World

To work in the business world, the owners are required to choose the form of business structure that they need to function in. There are Sole Proprietorships, Corporates, MNCs and other organizations. Among these, Companies play an impressive role in the growth of the economy of India.

Also, Companies are divided into two – Private and Public Owned. The Public Owned Companies are also called the ‘Government Companies’. In this context we will understand what a Government Company is? Who owns a Government Company? And so forth to talk about these government companies.

 

What is a Government Company? 

There are companies where the Central or the State Government, or any of the two, or both of them combined holds 51% of the stake or capital of that particular company, then the specified company is deemed to be a ‘Government Company’. ‘Public Enterprises’ or ‘State Enterprises’ are the other names for this government company. They are to be registered legally under the Companies Act. 

Under section 2(45) of the Companies Act 2013, a Government Company is defined as “any company in which not less than 51% 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”. 

This means that one of the basic features of the company is to have 51% of governmental stake.


Subsidiary Company

Another extended part of the Government Company is this – Subsidiary Company. A ‘Subsidiary Company’ or simply a ‘Subsidiary’ is a subsidiary or the side or extended part of a Government company. In the case of a subsidiary company, the board is controlled by the government company itself. 

The government company exercises more than half of the control of voting rights on the subsidiary. Joint Ventures created by governments and even the public sector undertakings are also considered as the government companies. The BOD or Board of Directors are controlled by the government. 

In case of Government Companies, the auditor is appointed by the CAG (Comptroller and Auditor General of India). Also, a government company’s books are presented to both the houses of parliament, and unlike other companies, a government company cannot contribute directly to the political parties.

 

Features of Government Company

Specified features are anticipated to be present in any kind of organization. Similarly, in Government Company too, some distinct features bloom. Those features are discussed in the following paragraph. 

Features of a Government Company are:

  1. Government Companies are legally registered under the Companies Act 2013, under section 2(45). The Government Companies observe the rules engraved in this section.

  2.  Like all other companies, Government Companies too have a separate legal entity, that is to be sued and can sue in legal matters. They can also hold properties in their name.

  3. The annual reports, at the end of the financial year, are to be presented in the houses of Parliament.

  4. The capital of the company is to be held wholly or partially by the state government and the central government together or individually.

  5. They are managed by the directors who are appointed by the government itself.

  6. Accounting and Audit Practices are done by Chartered Accountants appointed by the government. 

  7. The employees are not civil servants. They regulate their own personal policy following the Articles of Associations.


Government Companies in India

India is enrolled as a developing country, with a mixed economic system in regard to the trade. This means that the big enterprises in India are both owned by the Private Company as well as still by the Government Companies. While the Government remains predominantly engaged in the crucial sectors, like the petrol or mines, the private companies remain engaged in developmental sectors as well.

 

There is a huge list of Government Companies in India. Few of them are listed below:


Name of the Companies 

Net Profit (Amount in Crore, INR)

  1. Indian Oil Corp. Ltd. 

16,894

  1. NTPC Ltd.

11,750

  1. Coal India Ltd.

10,470

  1. Power Grid Corporation of India Ltd. 

9,939

  1. Bharat Petroleum Corporation Ltd.

7,132

  1. Power Finance Corporation Ltd. 

6,953

  1. Mahanadi CoalFields Ltd.

6,040

  1. Hindustan Petroleum Corporation Ltd.

6,029

  1. Gail (India) Ltd. 

6,029

FAQs (Frequently Asked Questions)

1. What is PSU?

Ans. PSU is the abbreviated form of Public Sector Undertakings. Another name for Government Companies is Public Sector Undertakings, that are owned and managed by the government and government appointed directors. After the post-independence era, governmental companies are lessened considerably yet the crucial sectors are still handled by the government.

2. When Does a Company Become a Subsidiary of the Government Company?

Ans. If a company’s 51% of voting powers are held by the state or central government individually or combined both, they are deemed as government companies. Even a private company becomes a government company once it becomes the subsidiary of the government company.

3. How are the Board of Directors Controlled by the Government?

Ans. The board of directors are appointed by the government, their expulsion too is majorly under the control of the state or central or both. They function according to the decisions cast by the majority directors who eventually represent the government, this way the government controls the BOD or Board of Directors.

4. What are the Advantages of Government Companies?

Ans. The advantages of the government company are enumerated below:

  1. The procedure of establishment is simple.

  2. They function efficiently.

  3. The management system is efficient.

  4. There exists a healthy competition among the PSUs.