Types of Companies: Private Sector and Public Sector Organizations, Q&A

Companies can either be the private company or public company. Also, there are many types of public sector organizations such as departmental undertakings, government companies etc. So let us take a more detailed look at both these types of companies and public sector organizations.

Private Sector Companies

Private sector companies are companies which are not run by the government. They are the part of a country’s economic system and is run by individual and companies with the intention to earn the profit.

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Public Sector Organizations

Public sector organizations are formed in three different forms:

Departmental undertakings
Public corporations/statutory corporations
Government company

public sector organizations

1. Departmental Undertakings

This is the oldest form of public sector enterprises. The departmental undertaking is considered as one of the departments of government. It has no separate existence than the government. It functions under the overall control of one ministry or department of government.

For example, Railways, post & telegraph, broadcasting, telephone service etc.

Features of departmental undertakings:-

The main characteristics of departmental undertakings are:-

They operate under the overall control of one of the ministries of central or state government.
They are a part of government only, there is no separate entity.
The revenue of departmental undertakings is deposited in the treasury of government.
They are financed from the annual budgets of the government.

Merits of departmental undertakings:

It is very easy to form a departmental undertaking as no registration is compulsory.
There is direct parliamentary control. The performance of departmental undertakings can be discussed in parliament. So there is public accountability.
The revenue of departmental undertaking is deposited in the treasury of the government. So these undertakings help to increase the government revenue.

2. Public Corporation/Statutory Corporation

A statutory corporation is a body corporate formed by a special act of parliament or by the central or state legislature. It is fully financed by the government. Its powers, objects, limitations etc. are also decided by the act of the legislature.

For example Indian airlines, air India, state bank of India, life insurance corporation of India, food corporation of India, oil & natural gas corporation, etc.

Features of a public corporation:-

The main characteristics of a public corporation are:-

It is created by an act of parliament or central or state legislature.
The powers, objectives & limitations of a public corporation are defined in the act only.
Under total control of central or state government operations of public corporations takes place.
a public corporation is a separate legal entity. It gets incorporated automatically when the act is passed in the parliament.

Merits of a public corporation:-

A public corporation is able to manage its affairs with independence & flexibility.
A public corporation is relatively free from red tape, as there is less file work & less formality to be completed before taking decisions.
The activities of the public corporation are discussed in parliament. This ensures the protection of public interest.

3. Government Companies

The company in which at least 51% of the paid-up share capital is held by the central or state government or partly by central or state government is Government Company. The government companies are governed & ruled by the provisions of the companies act, 2013 like any other registered companies. For example, steel authority of India, state trading corporation, Hindustan machine tools.

Features of Government Company:-

Registration: The government company gets incorporated under the companies act, 1956. All the provisions of companies act are applicable to a government company.
Ownership: The government company is wholly or partly owned by the government. The share capital of these companies is owned by the government of India in the name of the president.
Management: The government is managed by the board of directors, who are nominated by the government & other shareholders. The government has the authority to appoint a majority of the directors.

Merits of Government Company:-

The government company is relatively free from government & political interference.
The government company is managed, financed & audited just as any other private sector company. It can, therefore, secure greater flexibility, freedom of operation & quickness of action in running the enterprise.
The government companies can avail & accommodate managerial skill, technical know-how or expertise of the private enterprise of the private enterprise by conveniently collaborating with it.

Solved Questions for You

Q1: What do you mean by Government companies and explain its features.

Ans: Government Company can be defined as a company whose 51% holding is held by the government itself (By central or state government). Features of Government Company are:

Registration: The government company gets incorporated under the companies act, 2013.
Ownership: The government company is wholly or partly owned by the government.
Management: the government is managed by the board of directors.

Q2: What are the features of Departmental undertakings?

Ans: Features of departmental undertakings are:-

The staff of departmental undertakings is civil servants and are recruited and compensated as per the rules of civil servants.
The staff is under the direct control of the departmental head, which is accountable to the concerned minister.
They are a part of government only, there is no separate entity.
They are financed from the annual budgets of the government.

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Types of Companies and Forms of Organising Public Sector

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