A Government Company is a company in which not less than 51% of the paid up share capital is held by the central government; or state government or jointly by both. Hindustan Insecticides Ltd., State Trading Corporation of India, Hindustan Cables Ltd.etc are some of the examples.

Features

• It is registered or incorporated under Companies Act. 
• It has a separate legal entity. 
• Management is regulated by the provision of Companies Act. 
• Employees are recruited and appointed as per the rules and regulations contained in 
• Memorandum and Articles of Association. 
• The Government Company obtains its funds from government shareholdings and other private shareholdings. It can also raise funds from capital market.

Merits

• It can be easily formed as per the provision of Companies Act. Only an executive decision of government is required. 
• It enjoys autonomy in management decisions and flexibility in day to day working. 
• It can appoint professional managers on high salaries.

Limitations

• It suffers from interference from government officials, ministers and politicians. 
• It evades constitutional responsibility, which a company financed by the government should have, as it is not directly answerable to Parliament. 
• The board usually consists of the politicians and civil servants who are interested more in pleasing their political bosses than in efficient operation of the company.