Government Companies and Statutory Corporations

From Advocatespedia

In the realm of Indian corporate law, government companies and statutory corporations represent two distinct forms of public sector enterprises, each governed by different legislative frameworks.

1. Government Companies

A government company is defined under section 2(45) of the Companies Act, 2013. According to this provision, a government company is any company in which not less than 51% of the paid-up share capital is held by:

  1. The central government, or
  2. Any state government(s), or
  3. Partly by the central government and partly by one or morestate government.


In essence, a government company is a legal entity created under the Companies Act and functions like any other registered company in terms of its formation, operations, and obligations.. Some prominent examples of government companies include Oil and Natural Gas Corporation (ONGC), Steel Authority of India Ltd. (SAIL), and National Thermal Power Corporation (NTPC).

Features of Government Companies:

  • Seperate Legal Entity: A government company is distinct from the government. It can enter into contracts, own property, and sue or be sued in its own name.
  • Limited Liability: The liability of shareholders (government in this case) is limited to the extend of their shareholding.
  • Corporate Structure: Therse cimpanies are governed by the provisions of the Companies Act, which means they have a board of directors, hold general meetings, and comply with various corporate governance standards.
  • Operational Autonomy: while owned by the government, these companies have operational autonomy and are free from day-to-day interference from the government.
  • Audit and Accountability: Government companies are subject to audits by the Comptroller and Auditor General (CAG) of India, ensuring a check on their financial practices.

Legal Framework:

While government companies are regulated by the companies are regulated by the Companies Act, certain exemptions or relaxations are granted to them to facilitate their functioning. For instance, under the Companies (Amendment) Act, 2017, government companies can exmpt from some provisions if the central governmentdeems it necessary for public interest.

2. Statutory Corporations

A statutory corporation is a body corporate created through a special statute passed by the Parliament or state legislature. These corporations are not governed by the Companies Act but by the specific act under which they were established. Examples include Reserve Bank of India (RBI), Life Insurance Corporation (LIC), and Airports Authority of India (AAI).

Features of Statutory Corporations:

  • Created by Statute: These corporations are established under a specific statute, which clearly defines their functionsn powers, and organizational structure.
  • Government Ownership: While statutory corporations are usually entirely owned by the government, their governance and operations are laid down in the statute that created them.
  • Autonomy and Flexibility: Statutory corporations enjoy a high degree of autonomy as they are free from the influence of government ministries or departments in their day-to-day operations. The statute may, however, allow the government to give certain directions.
  • Sovereign Immunity: In certain cases, statutory corporations ecjoys sovereign immunity, meaning they cannot be sued in their official capacity unless specifically allowed by law.
  • Powers and Functions: Unlike government companies, statutory corporations often have regulatory and administrative powers.For instance, the RBI regulates the banking sector, while the LIC manages life insurace in India.
  • Public Accountability: While they enjoy autonomy, statutory corporations are accountable to parliament or the state legislature. Their functioning is reviewed, and their financial activities are audited.

Legal Framework:

Each statutory corporation operates within the framework laid down by its founding legislation. This legislation outlines its powers, areas of operation, and the extent ofits independence from governmental control. For instance,the RBI Act, 1934, defines the powers and functions of the Reserve Bank of India.

Conclusion

While both government companies and statutorycorporations are forms of government-controlled enterprises, the key difference liesin their establishment and governance. Government companies are formed under the companies are formed under the Companies Act, while statutory corporations are establishedby specific legislative statutes. Both play a crucial role in India's public sector, contributing to economic development, social welfare, and infrastructure growth.

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