Company IncorporationLegal Advice

What is the difference between a government company and a public limited company?

The corporate enterprises that make up a country's economic growth are important to managing the index and GDP of that country. Corporate enterprises impact the state of the nation's economy. Government companies and public limited companies are two examples of such businesses.

What Exactly Is a Company?

The term “company” describes the voluntary grouping of people who come together to work toward a common goal. It is a formal organization created by several people to engage in and carry out business. It is a distinct legal entity, so it is important to remember that a corporation and its members have independent legal identities. Depending on the corporate law of its jurisdiction, a business can be structured in various ways for tax and financial liability purposes. 

The Differences between a Public Limited Company and a Government Corporation Are Listed Below.

Regardless of whether it is a government company or a public limited corporation, a company significantly impacts the nation’s economy. People are still unsure, however, what the differences are between a government company and a public limited company. Therefore, this article will inform you of the differences between a government company and a public limited company. As a result, this article will make you aware of the differences between these two types of companies.

  • Government Companies:- A company or organization classified as a “government company” under the 2013 Companies Act. The Central Government, a State Government, or a combination of the Central and State Governments holds at least 51% of the paid-up share capital.

    Government companies come in two different categories. First is a government-owned corporation that is 100% owned by the government. Other government entities are jointly owned by the public and the government but receive the biggest chunk of their funding provided by the government.
  • Public limited company:- A PLC, or public limited company, is a company that is run by directors and owned by shareholders. Unlike a sole trader and a partnership, a public limited company is a separate legal structure for business owners that offers protection from responsibilities and debts.

These businesses may offer shares to the public. When a PLC goes public, it is required to complete additional administrative requirements regarding taxes and make its financial reports available to the public so that shareholders can make informed investment decisions. A public limited company, also listed on the stock exchange, must provide more information than a government company. 

Company Registration

Features of a Government company and a Public limited company

Government Company:

  • A government-owned corporation receives funding from both public and private shareholdings. 
  • The capital market is another source of funding for the business.
  • It has its own legal identity.
  • The appointment of employees is governed by the Memorandum of Association and Articles of Association.
  • The Companies Act of 1956 and 2013 governs its incorporation.
  • The rules of the Companies Act apply to and govern management.

Public limited company:

  • The Public limited company raises funds by selling its shares, and the individuals who purchase the shares are referred to as members. The sum so accrued is known as the share capital.
  • Rules, laws, and regulations govern its creation, operation, and dissolution.
  • The minimum number of members required for a company is 7, but there is no maximum.
  • A public limited company may offer its shareholders easily transferable shares to anyone else by filling out and signing a share transfer form.
  • A company’s shareholders do not have the right to participate in the day-to-day management of the company’s operations. This makes sure that ownership and management are kept separate.  
  • The Board of Directors has the authority to make decisions for the corporation, and all policy decisions are made by the Board using the majority rule. It confirms that management is making the same progress.

What Is the Role and Requirement of the Auditors in a Government Company and a Public Limited Company?

  • Government company:- Auditors keep track of and audit the records of companies that engage in activities subject to law, taxation, or regulation. Government auditors ensure that funds are received and used in line with the rules and laws. On the counsel of India’s Comptroller and Auditor General (CAG), the government appoints the auditor of a government-owned corporation. Additionally, the CAG has the authority to direct the auditor on how to conduct the audit.
  • Public limited company:- A Public limited company’s financial statements must be evaluated by an auditor for accuracy and consistency. At the end of the audit, the auditor gives the company a report in which it is determined to what extent the organization has accounted for accuracy and clarity.

Advantages of a Government Company and a Public Limited Company

Government company:

  • Under the Companies Act, a Government company can be founded with just a government executive decision.
  • Its daily operations are comparatively free from governmental oversight and political meddling.
  • The Government Company is governed by the Companies Act’s regulations, which keeps its management engaged, vigilant, and disciplined.
  • The Parliament or State Legislature receives the Annual Report of a Government Company. There, these reports may be analyzed and discussed.
  • Due to its personnel policies, a government corporation can hire managers with the necessary qualifications.

Public limited company:

  • Due to the public’s interest, the company is required by law to disclose its information and reports, including its quarterly or annual Accounts and financial reports summarizing its present financial situation.
  • Because they are not subject to new liabilities, the shareholders and directors stand to gain the most from a public limited corporation.
  • A public limited company is more likely to secure favorable interest rates and loan payback terms. 
  • Since the value of the company’s shares is the maximum liability for shareholders and directors, they are shielded from losing their assets if the company experiences a loss.

Summary

A government company is one where the federal or state government owns at least 51% of the paid-up share capital. A listed public limited company is one whose ownership is distributed among the general public in the form of shares traded on one or more stock exchanges.

To know more about the difference between a public limited company and a government company, get in touch with the experts at Vakilsearch.

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