what is government company? Discuss it's merits and demerits
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Answer :
Government Company is a company or an organization in which at least 51% of the paid up share capital is held by the central government or the state government or partly by both central and state government. There are many government companies, few of them are, Steel Authority of India Limited, Bharat Heavy Electricals Limited, Coal India Limited, State Trading Corporation of India, etc.
These companies are either under fully owned by the government or partly owned. If the government holds 100% share in these companies then they are totally under government control. These companies have a very effective role in the economy of the country. They are useful in managing the GDP & index of the country. Examples of these companies are State trading corporation of India, Steel Authority of India etc.
Merits of Government Company :
- To incorporate a government company, all the provisions of the Companies Act are to be followed.
- The government organization enjoys all autonomy in management decisions and flexibility in day to day activities.
- These companies control the local market and sustain it to curb the unhealthy business practices.
Demerits of Government Company :
- These companies face a lot of government interference and involvement of government officials, ministers, and politicians.
- As these companies are financed by the government, so these companies evade all constitutional responsibilities of not answering to the parliament.
- 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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