Question

3 Limitations of the government company.​

Answer 1

Government company Definition:

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

Limitations of Government Companies:

Here are the main reasons of limitations of some government companies,

1.Provisions of Companies Act not relevant: In a government company, the government is the only shareholder. The management and administration lies in the hands of the government. Some of the provisions of the Companies Act do not have much relevance.

2.Evades constitutional responsibility: In some of the companies, the provisions of the Companies Act do not have much relevance because the government is the only shareholder. These companies are not directly answerable to the parliament, thus they evade constitutional responsibility, which an enterprise financed by the government should have.

3.Main purpose defeated : The whole management and administration lies in the hands of the government. Thus, the purpose of registering it under the Companies Act, 1956 gets somewhat defeated.

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Answer 2

Answer:

Limitations of the Government Company are as follows:

(a) These companies face a lot of government interference and involvement of government officials, ministers, and politicians.

(b) As these companies are financed by the government, so these companies evade all constitutional responsibilities of not answering to the parliament.

(c) The efficient operations of the company are hampered, as the board of the company comprises mainly of politicians and civil servants, who have more emphasis and interest in pleasing their political party co-workers or owners and less concentrated on growth and development of the company.

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