What is Government Company? State its special features. How far it governed by the Companies Act., 2013?

Ans.

GOVERNMENT COMPANY

According to Section 2(45) of the Companies Act, 2013 – A government company means any company in which not less than 51 percent of the paid-up share capital is held by-

(a) the Central Government, or

(b) any State Government or Governments, or

(c) partly by the Central Government and partly by one or more State Governments? The subsidiary of a government company is also a Government company.

The provisions of Section 394 of the Companies Act, 2013 must be complied with by all government companies. Section 395 of the Act empowers the Central Government to direct that any of the provisions of the Act shall not apply to them only with such exemptions, modifications and adaptation, as may be specified.

RULES APPLICABLE TO GOVERNMENT COMPANIES

These are as under-

(1) Appointment of Auditor and Audit Reports: The auditor of a government company shall be appointed or re-appointed by the Comptroller and Auditor General of India. He has power to direct the manner in which the company’s accounts shall be audited by the auditor. He has the power to conduct a supplementary or test audit of the company T accounts.

Audit Reports to be Submitted to Comptroller and Auditor General of India: The auditor of a government company shall submit a copy of his audit report to the Comptroller and Auditor General of India.

(II) Annual Report to be Placed before the Parliament: Where the Central Government is a member of a Government company, it shall cause an annual report on the working and affairs of the company to be prepared within 3 months of its annual general meeting before which the audit report is placed. The report shall be laid before both Houses of Parliament together with a copy of the audit report, and any comments upon, or supplement to, the audit, made by the Comptroller and Auditor General of India.

Where in addition to the Central Government, any State Government is also a member of a Government company, the State Government shall cause a copy of the above documents to be laid before the House or both Houses of the State Legislature. Where the Central Government is not a member of a company, the Government shall cause the above documents to be prepared within the specified time and laid before the House or both Houses of the State Legislature.

(III) Certain Provisions of the Companies Act not to apply: The Central Government may, by notification in the Official Gazette, direct that some of the provisions of the Companies Act shall not apply. The government companies are exempt from some of the provisions –

1. Section 152 – Provision relating to appointment of directors.

2. Provision regarding appointment and remuneration of MD/whole time Director.

3. Sections 162 and 163- Provisions relating to resolution for appointment of Directors, restrictions, consent to be filed.

4. Section 124 – Provisions relating to transfer of unpaid dividend to a Special Dividend Account Provisions of Section 185, 188, 56, 112 etc. also not applicable on the government companies.

A Government company, may be wound up under the Companies Act, 2013.

Is a Government Company as defined in Sec. 2(45) a “State” ? The Supreme Court observed that the cumulative effect of the following indicators is to be taken into account while deciding whether a particular government company is a “State” or not:

1. Whether the entire share capital of the company or corporation is held by the Government.

2. Existence of deep and pervasive State control.

3. Whether the company or corporation enjoys monopoly status which is State conferred or State protected.

4. Whether the function of the company or corporation is of public importance and closely related of Government function.

5. Specifically if a department of the Government is transferred to a company or corporation.

The government company has some special features, it cannot be equated with the State or Government. A government company is like any other company.

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