NOTES

A company owned by central and/or state government is called a government company.

Either whole of the capital or majority of the shares are owned by the government. According to Indian Companies Act, 1956, “Government company means any company in which not less than 51 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 of a government company.In Company A, 30% shares are held by union government, 10% by Gujarat government, 11% by Madhya Pradesh government, still Company A is a Government company (30+10+11=51%)

Management of these companies is under the control of the government. Subsidiary companies of government companies are also covered under government companies. Defining Government Company Professor A.M. Hanson says, “State Company is an enterprise established under the ordinary company law of the land /country, concerned in which the government has a controlling interest through its ownership of all or some of the share”.It is a company in which government holds not less than 51% of paid-up share capital,for example, ONGC, SAIL

The government company is managed by the board of directors.Board of Directors  are appointed by the shareholders. But since government owns majority of the shares, majority of directors are chosen by the government.They can borrow extra money from public via IPOs and bonds.This company does not need Parliament’s approval on how to use the profit, But it will need approval of Board of directors on how to spend the profit.They’re not directly audited by CAG, but CAG appoints the private firms (Chartered accountants) as auditors. Civil servants are appointed on important managerial posts of these companies. They are not capable of running these undertakings on sound business lines.It has a minimum paid-up capital of Rs.1 lakhIt needs minimum two members and maximum 200 members (i.e. The persons who hold its ‘equity’)This company is to use the word “Private Limited” at the end of its name.It cannot have more than 50 membersIt cannot borrow for general public.