The voluntary association of individuals who come together to work towards a shared objective is referred to as a “business.” It is a formal entity created by a number of persons to conduct and engage in business. It is crucial to keep in mind that a business and its members are separate legal entities with separate legal identities. A firm can be set up in many ways for tax and financial liability reasons depending on the corporate legislation of its jurisdiction. In this article, we will discuss the differences between Government Company and Public Limited Company.
Government Company and Public Limited Company – Differences
The following is a list of the distinctions between a Government Company and Public Limited Company.
A company has a big impact on the economy of the country whether it is a public limited corporation or a government-run business. The distinctions between a government Company and public limited company are still unclear to the public. As a result, this article will explain the distinctions between a public limited business and a government firm. This blog will therefore educate you on the distinctions between these two categories of businesses.
- Government Companies
A business or institution that the Companies Act 2013[1] designates as a “government company.” At least 51% of the fully paid-up share capital is held by the Central Government, a State Government, or a joint venture between the Central and State Governments.
There are two types of government businesses. The first is a company that is entirely owned by the government. Despite being jointly owned by the public and the government, other government organisations get the majority of their revenue from that source.
- Public Limited Company
Directors manage and shareholders own public limited companies. A public limited company is a unique legal form for business owners that provides protection from obligations and debts, in contrast to a sole proprietorship and a partnership.
The public might be able to buy shares in these companies. When a PLC goes public, it must finish additional administrative tasks related to taxes and make its financial reports accessible to the general public so that investors can make well-informed choices. A government firm is not required to disclose as much information as a public limited company that is also listed on the stock exchange.
Features of Government Company and Public Limited Company
Following are the features of Government Company and Public Limited Company:
Government Company Features
- An organisation that is owned by the government is financed by both public and private shareholdings.
- An additional source of finance for the company is the capital market.
- It is a separate legal entity.
- The Memorandum of Association and Articles of Association regulate employee appointments.
- Its incorporation is governed by the Companies Act of 1956 and 2013, respectively.
- Management is subject to and governed by the laws of the Companies Act.
Public Limited Company
- The members of a public limited company are the people who buy its shares, which are sold to raise money. The amount in question is referred to as the share capital.
- Its formation, operation, and dissolution are governed by rules, laws, and regulations.
- A business must have at least seven members, but there is no maximum.
- By completing and signing a share transfer form, a public limited company may grant its shareholders readily transferable shares to any third party.
- Shareholders of a corporation do not have the right to take part in running the business on a daily basis. This ensures that management and ownership remain distinct.
- The Board of Directors has the power to make decisions on behalf of the corporation, and it follows the majority rule when deciding on any policy. It demonstrates that management is moving forward at the same rate.
What Are The Roles And Needs Of The Auditors In Government Company And Public Limited Company?
Following are the roles and needs of the auditors in Government Company and Public Limited Company:
- Government Company: Auditors monitor and examine the financial records of businesses that carry out tasks that are governed by the law, taxes, or regulations. Government auditors make sure money is received and spent in accordance with the law and the norms. The government appoints the auditor of a government-owned corporation on the advice of India’s Comptroller and Auditor General. The CAG also has the power to instruct the auditor on how to perform the audit.
- Public Limited Company: An auditor must assess the correctness and consistency of a public limited company’s financial statements. At the conclusion of the audit, the auditor provides the company with a report that details the organisation’s level of accuracy and clarity in accounting.
Benefits of Government Company and Public Limited Company
Following are some benefits of Government Company and Public Limited Company:
- Government Company
- A Government business may be established in accordance with the Companies Act with merely a government executive decision.
- Its daily operations are comparatively free from political interference and governmental control.
- The Government Company is subject to the rules of the Companies Act, which maintains its management’s involvement, vigilance, and discipline.
- The Annual Report of a Government Company is delivered to the Parliament or State Legislature. These reports can be examined and commented on.
- A government firm can employ managers with the required credentials thanks to its personnel policies.
- Public Limited Company
- The law requires the firm to reveal its information and reports, including its quarterly or annual Accounts and financial reports summarising its current financial status, due to the public’s interest in the information.
- The shareholders and directors stand to benefit the most from a public limited corporation because they are not vulnerable to additional liabilities.
- It is more likely for a public limited corporation to obtain advantageous interest rates and loan repayment arrangements.
- In the event that the company suffers a loss, shareholders and directors are protected from losing their assets because the value of the company’s shares represents their maximum liability.
Conclusion
A corporation is deemed to be government-owned if at least 51% of the paid-up share capital is owned by the federal or state governments. A listed public limited company is one whose stock is traded on one or more stock exchanges and whose ownership is made up of the general public. Contact the professionals at Corpbiz to learn more about the distinction between Government Company and Public Limited Company.
Also Read:
Public Limited Company Registration Process In India
Public Limited Company: Documents And Registration Process
Procedure For Sole Proprietorship Registration: A Step By Step Guide
