Meaning, Definition and Features of Government Company.

Meaning, Definition and Features of Government Company.

A public enterprise incorporated under the Indian Companies Act, 1956 is called a government company. These companies are owned and managed by the central or the state government. According to Indian Companies Act, 1956, a government company means "any company in which not less than 51 percent of the paid up share capital is held by the central or by state government and partly by the central government and include a company which is a subsidiary of government company". These companies are registered as private limited companies though their management and their control vest with the government. This is a type of organisation where both the government and private individuals are shareholders. Sometimes these companies are called as a mixed ownership company.

The following are some of the essential features of a government company:

  • It is formed under the provisions of the Indian Companies Act, 1956.
  • The total share capital or 51 percent or more of share capital is held by the government.
  • It enjoys the status of a legal entity and therefore it can use or be sued by others.
  • The finance of a government company is obtained from the government and from private share holders.
  • The employees are governed by the rules prescribed for the company by the board of directors.
  • It is not subject to budgeting, accounting, and audit rules applicable to a government department.
  • The directors are nominated by the government depending upon participation of private capital.