Section 617 of the companies act defines a government company as a 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 government. It also includes a company which is a subsidiary of a government company.
Certain special provisions have been laid down in the act regarding a government company. They are discussed below:
1. The auditor of a Government Company shall be appointed or re-appointed by the central government on the advice of the comptroller and auditor general of India. The comptroller and auditor general of India will have the power to direct the manner in which the company’s accounts shall be audited by the auditor. He shall also have the power to conduct a supplementary or test audit of the company’s accounts by such person or persons as he may authorize in this behalf.
2. The auditor will submit a copy of the audit report to the comptroller and auditor general of India who may comment upon or supplement the audit report in such manner as he may think fit. Such comments or supplementary report shall be placed before the annual general meeting along with the audit report.
3. Where the central government is a member of the government company it shall cause an annual report on the working and affairs of the company to be prepared and laid before both houses of parliament along with the audit report and the comment, if any, of the comptroller and auditor general or India. The report shall be prepared within 3 months of the annual general meeting. Where the state government is also a member, the report shall also be laid before the state legislature. But where the central government in not a member of the government company, the state government concerned shall cause the above documents prepared and laid before the state legislature.
4. The companies’ amendment Act 1974 has enlarged the concept of Government Company for the purposes of audit. Section 619-B has been inserted and it provides that the provisions of section 619 for the purposes of audit shall apply to a company in which at least 51% of the paid up share capital is held by the one or more the following or any combination thereof:
(a) The central government and one or more government companies;
(b) Any state government or governments and one or more government companies;
(c) The central government, one or more state governments and one or more government companies;
(d) The central government and one or more corporations owned or controlled by the central government;
(e) The central government, one or more state governments and one or more corporations owned or controlled by the central government;
(f) One or more corporations owned or controlled by the central government or any state government;
(g) More than one Government Company.
5. The central government may by notification in the official gazette direct that any of the provisions of the Act (except the above noted provisions) shall not apply to any government company or shall apply with such exceptions, modifications and adaptations as may be specified in the notification. A copy of every such notification shall be laid in draft before both houses of the parliament for a period of not less than 30 days while they are in session. Since the said period of 30 days cannot, sometimes be completed in one session, section 620 has been amended by the companies’ Amendment Act 1977 to permit the period of 30 days to be completed in one session or in two or more successive sessions.