Sirc e-Newsletter April 2013
Companies Bill 2012 which seeks to replace the Companies Act of 1956 has brought with it dramatic
changes in almost all arenas of company administration and management. The bill has proposed
some new provisions for government companies as well.
In the present write up, the provisions relating to Government companies as proposed in the
Companies bill 2012 have been analyzed in comparison to the Companies Act of 1956.
DEFINITION OF GOVERNMENT COMPANY:
Clause 2(45) of the Companies Bill 2012 defines a Government Company as “Government company”
means any company in which not less than fifty one per cent of the paid-up share capital is held by the
Central Government, or by any State Government or Governments, 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”
Section 2(18) of Companies Act, 1956 defines Government Company as – “Government Company”
means a Government Company within the meaning of Section 617.
Section 617 defines a Government company to mean – “Government Company means any company
in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government,
or by any State Government or Governments, or partly by the Central Government and partly by one
or more State Governments and includes a company which is a subsidiary of a Government company
as thus defined.”
From the above it is clear that there is no change in the definition of a Government Company under
the Companies Bill, 2012 as compared to the Companies Act 1956.
APPLICABILITY OF PROVISIONS TO GOVERNMENT COMPANIES
All the provisions of the Companies Bill 2012 apply in the same manner to a Government company as
that to any other company except for provisions which are specifically exempted under the Act itself or
where a provision different from other companies has been specifically prescribed.
Additionally, Clause 462 of the Bill gives a universal power to the Central Government to direct by
means of notification that any of the provisions of this Act,—
(a) shall not apply to such class or classes of companies; or
(b) shall apply to the class or classes of companies with such exceptions, modifications and
adaptations as may be specified in the notification.
Under the Companies Act, 1956, Section 620 empowers the Central Government to exempt any
provisions of the Companies Act, 1956 from being applicable to Government Companies by gazette
notification except Section 619.
Given below is a list of Sections under Companies Act which are not applicable to Government
Companies i.e. which have been exempted by means of gazette notifications issued from time to time:
PROVISIONS RELATING TO
UNDER THE COMPANIES BILL 2012
Sirc e-Newsletter April 2013
Ø Prohibitions and restrictions regarding political contributions
As per Clause 182 of the Bill, a Government Company is prohibited from making contributions
to any political party, directly or indirectly.
Ø Appointment of Auditor
Clause 139 of the Bill contains that Auditor for a Government Company, in respect of each
financial year will be appointed by the Comptroller and Auditor General of India within 180 days of the
commencement of the financial year. The person to be appointed should be an auditor duly qualified
to be appointed as an auditor of companies under this Act and he shall hold office till the conclusion of
the ensuing annual general meeting of the company.
Procedure for appointment of auditors
First Auditor – The First Auditor for a Government Company shall be appointed by the CAG
within 60 days of incorporation, failing which the Board of Directors of the Company can appoint the
first auditor within the next 30 days and failing which also, the members of the Company can appoint
the auditor in a general meeting within the next 60 days.
Appointment of Auditor in casual vacancy – In case of any casual vacancy in the office of
the auditor of a Government company, the CAG will fill the vacancy within 30 days failing which the
vacancy needs to be filled by the Board of Directors within the next 30 days.
Ø Audit procedure
In case of Government companies, CAG will direct the auditor about the manner in which the
audit has to be conducted. Auditor will submit his audit report to the CAG along with directions
issued by CAG, actions taken by the auditor and its impact on financial statements of the
company. On receipt of the audit report, CAG can conduct a supplementary audit or comment
upon/supplement the audit report. Company is required to forward the comments of the CAGto
all people entitled to receive financial statements of the company and also place it in the AGM.
CAG is also authorized to conduct test audit of any Government company or other companies
which are owned or controlled by Government, directly or indirectly, by issuing an order in this
behalf and the report generated out of such audit will be presented by the CAG to the
concerned State or Central Government who in turn will lay it before the State Legislature or
Both Houses of Parliament, as the case may be, respectively.
List of Sections whichapplywithmodifications–
• Sec 108 &108(1)
• Sec 166
• Sec 209(3)(b)
• Sec 392(1)
• Sec 394
• Sec 621
While the Companies Act,1956 had sections earmarked separately to deal with specific provisions
governing Government Companies, namely sections 617 to 620, in the Companies Bill 2012, the
provisions pertaining to Government Companies are provided in the same clauses as that of non-
government companies except for two clauses 394 and 395 which deal with provisions relating to
annual report of Government Companies.
PROVISIONS OFCOMPANIES BILLRELATINGTOGOVERNMENTCOMPANIES
Ø Appointment of NomineeDirector
As per Clause161(3), the Central or StateGovernment maynominate any person as
director onBoard of aGovernment Company byvirtuefortheir share holding in that company,
subject toprovisions of Articlesof Association.
Sirc e-Newsletter April 2013 7/26
Sirc e-Newsletter April 2013
Ø Annual Report of Government Companies
For each Government company, the concerned Government is required to cause annual report
to be prepared, on working and affairs of that company, within three months of the annual general
meeting in which the audit report along with supplemental report or comments of CAG are placed and
the said annual report will be placed, as soon as the report is ready, –
- In case of Government companies in which only Central Government is a member -
before both Houses of Parliament together with a copy of the audit report and comments
upon or supplement to the audit report, made by the Comptroller and Auditor-General of
- In case of Government companies in which only State Government is a member –
before the House or both Houses of the State Legislature together with a copy of the audit
report and comments upon or supplement to the audit report,
- In case of Government companies in which both Central and State Government are
members - before both Houses of Parliament and before the House or both Houses of the
State Legislature together with a copy of the audit report and comments upon or
supplement to the audit report.
Ø Government Companies under liquidation (Refer Clause 294)
- Provisions regarding annual report as mentioned above shall also apply to all Government
companies which are under liquidation.
- In case of audit of accounts of a Government company which is under liquidation, the
official liquidator shall forward a copy of the audit report to the Central or State Government
or to both as the case may be.
- In case the liquidation proceedings of a Government company are not concluded within a
period of one year, then the official liquidator is required to prepare a statement with
respect to the proceedings in, and position of, the liquidation, get the same duly audited
and file a copy thereof to the Central or State Government or both, as the case may be.