Government company
A company in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government, one or more State Governments, or both, including a subsidiary of such a company.
Explained
Section 2(45) of the Companies Act, 2013 defines a Government company as 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. The test is shareholding in paid-up share capital, and holdings of the Centre and States may be added together. The earlier definition was in Section 617 of the Companies Act, 1956, to which some statutes still refer.
A Government company remains a company with a separate legal personality; it is not a department of Government. Special rules apply to it. Under Section 139(5) the Comptroller and Auditor-General of India appoints its auditor, under Section 143(5) the CAG may direct how the accounts are audited, and under Section 394 the Central Government must lay an annual report on its working before both Houses of Parliament.
The term is used in criminal law to extend the idea of public servant. Under Section 2(28)(k)(ii) of the BNS, every person in the service or pay of a Government company as defined in Section 2(45) of the Companies Act, 2013 is a public servant. The Prevention of Corruption Act, 1988 similarly includes employees of a Government company within public servant, defined by reference to the 1956 Act.
Whether a Government company is State under Article 12 is a separate question. In Ajay Hasia v. Khalid Mujib Sehravardi (1980) the Supreme Court held that it is immaterial whether an entity is a statutory corporation, a Government company or a registered society; what matters is whether it is an instrumentality or agency of Government, judged by tests such as financial support, deep and pervasive State control and public functions. Examiners test the fifty-one per cent threshold, the inclusion of subsidiaries and the public servant link.
What the law says
(45) “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(45) defines Government company
(5) Notwithstanding anything contained in sub-section (1), in the case of a Government company or any other company owned or controlled, directly or indirectly, 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, the Comptroller and Auditor-General of India shall, in respect of a financial year, appoint an auditor duly qualified to be appointed as an auditor of companies under this Act, within a period of one hundred and eighty days from the commencement of the financial year, who shall hold office till the conclusion of the annual general meeting.
(6) Notwithstanding anything contained in sub-section (1), the first auditor of a company, other than a Government company, shall be appointed by the Board of Directors within thirty days from the date of registration of the company and in the case of failure of the Board to appoint such auditor, it shall inform the members of the company, who shall within ninety days at an extraordinary general meeting appoint such auditor and such auditor shall hold office till the conclusion of the first annual general meeting.
(7) Notwithstanding anything contained in sub-section (1) or sub-section (5), in the case of a Government company or any other company owned or controlled, directly or indirectly, 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, the first auditor shall be appointed by the Comptroller and Auditor-General of India within sixty days from the date of registration of the company and in case the Comptroller and Auditor-General of India does not appoint such auditor within the said period, the Board of Directors of the company shall appoint such auditor within the next thirty days; and in the case of failure of the Board to appoint such auditor within the next thirty days, it shall inform the members of the company who shall appoint such auditor within the sixty days at an extraordinary general meeting, who shall hold office till the conclusion of the first annual general meeting.
Section 139(5): CAG appoints the auditor
(1) Where the Central Government is a member of a Government company, the Central Government shall cause an annual report on the working and affairs of that company to be—
(a) prepared within three months of its annual general meeting before which the comments given by the Comptroller and Auditor-General of India and the audit report is placed under the proviso to sub-section (6) of section 143; and
(b) as soon as may be after such preparation, laid 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 India.
Annual report on Government companies before Parliament
(ii) in the service or pay of a local authority as defined in clause (31) of section 3 of the General Clauses Act, 1897 (10 of 1897), a corporation established by or under a Central or State Act or a Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013).
Explanation.—
(a) persons falling under any of the descriptions made in this clause are public servants, whether appointed by the Government or not;
Section 2(28): employees of Government companies are public servants
Earlier law: IPC 33. “Act”. “Omission”; 47. “Animal”.; New Sub-Section; 28. “Counterfeit”.; 20. “Court of Justice”.; 46. “Death”.; 24. “Dishonestly”.; 29. “Document”.; 25. “Fraudulently”; 8. Gender.; 52. “Good faith”; 17. “Government”.; 52A. “Harbour“.; 44. “Injury”.; 43. “Illegal”. “Legally bound to do”.; 19. “Judge”.; 45. “Life”.; 42. “Local law”.; 10. “Man”. “Woman”.; 49. “Year”. “Month”.; 22. “Movable property”; 9. Number.; 51. “Oath”.; 40. “Offence”.; 33. “Act”. “Omission”; 11. “Person”.; 12. “Public”.; 21. “Public servant”.; 26. “Reason to believe”
Explanation.—In this clause “State” includes a corporation established by or under a Central, Provincial or State Act, or an authority or a body owned or controlled or aided by the Government or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956);
(c) “public servant” means—
(i) any person in the service or pay of the Government or remunerated by the Government by fees or commission for the performance of any public duty;
Public servant includes Government company employees
In this Part, unless the context otherwise requires, “the State” includes the Government and Parliament of India and the Government and the Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India.
Definition of the State for Part III
For the exam
- Section 2(45) Companies Act 2013: at least 51% of paid-up share capital held by Governments.
- Central and State holdings may be combined; subsidiaries are included.
- CAG appoints the auditor (Section 139(5)).
- Its employees are public servants under Section 2(28) BNS.
- Being State under Article 12 depends on the Ajay Hasia tests, not the label.
19 questions in the Law Maker question bank use this term. Practise Company Law questions
Judgments
Related terms
- Public servantA person falling within the descriptions in Section 2(28) of the BNS, such as Judges, officers of the Government and Courts, and persons in the pay of the Government or a Government company.
- The State (Article 12)For Part III of the Constitution, the Government and Parliament of India, the Government and Legislature of each State, and all local or other authorities in India or under the control of the Government of India.
- Public companyUnder Section 2(71) of the Companies Act, 2013, a company that is not a private company and has the prescribed minimum paid-up capital, including a subsidiary of a non private company.
- Private companyA company whose articles restrict share transfer, limit members to two hundred (except a One Person Company) and bar public invitation to subscribe for its securities. Section 2(68), Companies Act, 2013.
- Independent directorA director, other than a managing, whole-time or nominee director, who meets the independence criteria in Section 149(6) of the Companies Act, 2013 (Section 2(47)).
Further reading
Checked 6 November 2026. Statutory text is quoted from the Bare Acts library, taken from India Code. See the full glossary.