Government Company as per section 2(45) of the Companies Act, 2013 means “any company in which not less than 51% of paid-up capital is held by the Central Government, or by any State Government, 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”.
A Subsidiary company of any Government Company is also being treated as Government Company. These Companies are registered as Private Limited Companies though the management and control of these companies are vested with the government.
NEED FOR GOVERNMENT COMPANY
The said company becomes useful in following situations-
(a) The first situation arises if state wants to regulate Company in private sector but without nationalizing the same Due to an emergency created by a financial or employment crisis, the Government may have to take over an existing company. The state can control such an enterprise by acquiring majority of the shares.
(b) The second situation n is when Government wants to start an enterprise entirely as a public venture so that it have a sound footing and to transfer it soon as to the private sector.
(c) The third situation arises in order to promote trade and commerce or to promote a particular field of economic activity.
(d) Another situation when comes in order to enable the private enterprises to set up subsidiary companies and to acquire interest in them.
GOVERNMENT COMPANIES AND COMPANIES ACT
Some important provisions mentioned in the Companies Act in relation to government companies are:
- The provision related to transfer of shares which is section 56(1) does not apply to governmentcompany with respect to securities held by nominees of government. As per the proviso of section 56(1) which is related to transfer of bonds the issue of transfer is not required to be executed and delivered to company. This is not required when the company issuing the bonds is a govt. company.
- A subsidiary of govt Company will also be a govt Company if govt company-
(i) controls composition of Board of Directors, or (ii) exercises or controls more than half of total share capital either at its own or together with one or more of its other subsidiary companies.
- Government Company is eligible to accept deposits as per section 76 of Act up to 35% of aggregate of paid up share capital and free reserves of Company. The limit of 35% will include deposits outstanding as on date of acceptance or renewal.
- Section 149(1) (b) and first proviso to Section 149(1) of the Act which is related to appointment of more than fifteen directors says that a government company can have more than 15 directors. The company is not required to pass any special resolution for appointment of more than fifteen directors.
- As per section 170 of the Act, wherein there is a requirement related to maintenance of register of directors, key managerial personnel and their shareholding and right of members to inspect the same has been relaxed for govt company.
- In a govt company, the First Auditor is appointed by the Comptroller and Auditor General of India within 60 days from date of registration of Company.
- As per section 394 if the central government is also a member of the company then within 3 months after annual general meeting is held, must prepare an annual report on working affairs of government company. The report shall be laid before both the House of Parliament together with a copy of the Audit Report.Also, if any state government is member of Government Company, the state government shall prepare copy of the Annual Report. The same shall be laid before both House of the State Legislature.
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