Government Company: Definition, Features, Advantages, Disadvantages of Government Companies
Government Company Definition, Features, Advantages, Disadvantages of Government Companies
A government company is a company in which the Government or State Government holds 51 or farther of the paid-up capital. Government Company, also called Public Enterprise, State Enterprise. It works as other companies registered under the Companies Act.
Features of Government Companies
The main features of Government companies are as follows
It's registered under the Companies Act.
It has a separate legal substance. It can sue and be sued and can acquire property in its name.
The yearly reports of the government companies are bore to be presented in congress.
The capital is wholly or partly delivered by the government. In the case of a partly commanded company, the capital is delivered both by the government and private investors. But in such a case, the central or state government must command at least 51 shares of the company.
It's managed by the Board of Directors. All the Directors or the adultness of Directors are appointed by the government, depending upon the extent of private participation.
Its case and inspection practic s are more like those of private enterprises, and its jurists are Chartered Accountants appointed by the government.
Its workers aren't civil stewards. It regulates its workforce programs according to its themes of associations.
Advantages of Government Companies
The virtues of government company form of organizing a public enterprise are as follows
Simple Procedure of Establishment
A government company, as compared to other public enterprises, can be freely formed as there's no need to get a bill passed by the congress or state diet.
It can be formed simply by following the procedure laid down by the Companies Act.
Potent Working on Business Lines
The government company can be run on business principles. It's exhaustively independent in pecuniary and supervisory matters. Its Board of Directors normally consists of some professionals and independent persons of report.
As the Annual Report of the government, the company is placed before both the house of congress for discussion; its superintendence is safe in carrying out its exertion and ensures productiveness in managing the business.
These companies normally offer healthy competition to the private sector and, so, guarantee the availableness of goods and services at reasonable prices without compromising the quality.
Disadvantages/ Limitations of Government Companies
The government companies suffer from the following limitations
Lack of Initiative
The charge of government companies always has a fear of public answerability. As a result, they enjoin action in taking the right calls at the right time