Types of Public Sector and Private Sector Companies

Public & Private Sector Companies - Types and Role

Types of Companies vary according to their ownership, and there are millions of companies across the globe having billions of employees. Before moving on to its types, let’s first understand what a company is! A company is a legal body that represents the association of people. These people can be naturally or legally linked with each other for some specific objectives under consideration. Additionally, the members of a company share the same interests and work to achieve some pre-declared goals.

Types of Companies

Moving on to the types of companies; the companies categorise as:

  1. Private

  2. Public

Private companies are the private sector organisations and the public ones are the public sector companies. A public sector organisation further classifies as departmental undertakings, government companies and others. Now, let us move on to a more detailed understanding of the private sector and public sector company meaning.

Private Sector Companies

Private sector companies are the ones that are not under the control of any governmental body. These companies are controlled and managed by some individuals or other companies. They also follow the basic discipline-based and other legal guidelines. Even though the government has no control over private companies, they contribute to the economy of the nation.

Public Sector Companies

Moving on to what is a public sector company, and what are the forms of organising the public sector? The government or any other department coming under it owns the Public Sector Companies. There are three main types of public sector organisations, which are:

  1. Departmental Undertakings:

Departmental organizations are one of the most ancient forms of public enterprises, and they are also known as a department of the government. The existence of these depends on the government and the ministry controls their work. The companies that are the departmental organisations are Railways, Post-service, some Telephone service, and others. Either the central or state government has full control over the working of this public sector organisation. The treasury of the government has access to the revenue of departmental undertakings. Further, the annual budget of the government finances these Departmental Undertakings.

The best thing about this form of public enterprise is that the formation of a departmental undertaking is pretty easy, and it does not require any registration. The accountability of these organisations is also high as the parliament directly controls them, i.e., their matters get discussed in the parliament.

  1. Public or Statutory Corporation:

Public or Statutory Corporations are the types of public sector formed by the parliament’s special action or state/central legislatures. Additionally, the government finances these types of public sector undertakings, and the legislature decides its objectives, powers, limitations and other rights. Public/ Statutory Corporations are - Indian airlines, State Bank of India, Oil & Natural Gas Corporation, etc.

A Statutory Corporation is a separate entity that forms legally, and it also automatically incorporates with the passing of any act in the Parliament. Either state or the central government decides the operations of statutory corporations. Moreover, nothing in these corporations happens behind their backs, thus ensuring that the public interests stay protected.

A Public Corporation independently manages its affairs with higher flexibility. It is also far away from red tape due to the lower file work and lesser need of the formalities before taking any major or minor decision.

  1. Government Companies:

Government Companies are the types of public enterprises in which either state or central government holds a minimum of 51% of the paid shares. These types of public sector undertakings follow the provisions of the Companies act, just like the other registered ones. The Government Companies are Hindustan Machine tools, State Trading Corporation, etc.

The registration of the Government Companies accomplishes under 1956’s Companies Act, and all its provisions apply to them. As the government partially or wholly owns them, their shares are in the name of the president of the nation.

To manage these types of public sector undertakings, the government and other shareholders nominate the board of directors. Despite being controlled and managed by the government, it stays far away from the political interferences and is financed and audited, just like the other private sector companies.

Government Companies can also have access to the technical, management, and other expert skills of the private sector organisations by collaborating with them.

FAQs (Frequently Asked Questions)

Q1: What is a Company? Explain its Types in Brief.

Ans: A company is a legal body representing the association of some individuals. These individuals naturally or legally link for certain objectives, share the same interests and work to achieve the specific goals. There are two types of companies:

  1. Private Sector Companies – These companies are controlled and managed by some individuals or some other companies. The government has no control over them, but their revenue contributes to the government’s economy.

  2. Public Sector Companies – The state or central government or any of their department owns these companies. The government funds them and directly or indirectly decides their rights and limitations.

Q2: What are the Types of Public Sector Organizations? Explain.

Ans: There are three types of public sector enterprises:

  1. Departmental Undertakings: Their existence is dependent on the government that completely controls their working. E.g., Railways, telephone services, etc.

  2. Public/ Statutory Corporations: They form legally, the government finances them and also decides their rights and limitations. E.g., State Bank of India, Air India, etc.

  3. Government Companies: In these, either the state or the central government holds at least 51% of the paid shares. E.g., Hindustan Machine Tools, State Trading Corporation, etc.