What is Government Company?

This post gives information on what is government company and the features of government company


Government company is a company which either registered as a Private Company or as a Public company with the Registrar of Companies under the Companies Act, 1956, & the Government has taken over or purchased 51% or more capital of the company. The remaining capital may be taken over by the public.

Bharat Heavy Electricals Limited, Steel Authority of India Limited, etc are some examples of Government Company.

According to Section 617 of the Indian Companies Act, 1956, a Government company means, "any company in which not less than fifty one percent of the share capital is held by the Central Government or any State Government or partly by the Central Government and partly by one or more State Governments".

Features of Government Companies:

(1) Formation: Government company is formed & registered under Indian Companies Act, 1956, either as a Private company or Public company.

(2) Ownership: It may be partly or wholly owned by Government. State Government or Central Government or both may own the Government Company. If it is partly owned by Government then at least 51% of the capital must be taken over by the government.

(3) Management: Management of Government company is vested in the hands of Board of Directors. The Directors may be nominated by government or even the shareholders can appoint the Board of Directors.

(4) Separate Legal Status: A Government company, like a joint stock company is an incorporated association & artificial person having a common seal & perpetual succession. It has a separate legal entity from its owners.

(5) Body Corporate: A Government company is incorporated under the Indian Companies Act, 1956. It enjoys the status of body corporate. "It can enter into contract in its own name & can acquire properties in its own name. It can sue & can sued by others

(6) Employees: The employees & other staff members in government company are appointed by the company itself. The employees are neither government servants nor they work under civil servants; the government may in exceptional cases nominate some top executives.

(7) Capital Collection: A government company requires huge capital for its business operations. The company is free to collect capital through its own sources & it can even borrow the money depending upon its requirements.

(8) Approval of Accounts: Government company has to place its Annual Accounts & Annual Reports for the approval of Legislature Assembly or Parliament as it is compulsory as per the act.

(9) Flexibility: A government company enjoys full flexibility in its operations. It is free to adopt different changing policies according to changing business environment.

(10) Exemptions: A government company is exempted from Budgetary Accounting & Audit. But, its Auditors are appointed by the government as per the guidance of controller & Auditor General of India.


Guest Author: SUMIT25 Jun 2013

Very nice information with a very comprehensive definition with some examples and features. Some more examples can be added like BSNL, Bharat Petroleum limited.

Guest Author: khushboo jha03 Sep 2014

very nice information and easily explainable. Thank you

Guest Author: Dileepkumar05 Dec 2014

What is difference between PSU and Govt. company?

Guest Author: Shivani srivastav17 Jan 2016

Superb article with a brief explanation.

  • Do not include your name, "with regards" etc in the comment. Write detailed comment, relevant to the topic.
  • No HTML formatting and links to other web sites are allowed.
  • This is a strictly moderated site. Absolutely no spam allowed.
  • Name: