Page 137 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Corporate Legal Framework

Notes privileges and obligations that a limited company has under the Act. This licence is revocable
by the Central Government and on revocation, the Registrar will put ‘Limited’ or ‘Private Ltd.’
against the company’s name in the Register maintained by him. But before taking such a step, the
Central Government has to give a written notice of its intention to revoke the licence and also an
opportunity to be heard in the matter.
It is worth noting that even a partnership fi rm can be a member of such a company, in its own
name. But on dissolution of the partnership, its membership of the company will come to an end
[s.25 (4)].

7.10 Government Company

Section 617 defines a Government Company as any company in which not less than 51% 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 of a Government Company.
Government Companies are as much governed by the provisions of the Companies Act as any
other company; but by virtue of s.620 the Central Government may direct that any of the provisions
of the Act will not apply to them or shall apply only with such exceptions, modifi cations and

adaptations as may be notified by the Government. However, the Central Government cannot
exempt the Government Companies from the provisions of Ss.619 and 619-A which specifi cally
deal with such companies.
Section 619 provides that the auditor of a Government Company shall be appointed or reappointed
by the Central Government on the advice of the Comptroller and Auditor-General of India. The
ceilings on the number of audits to be undertaken by an auditor under s.224 are equally applicable
to audit of Government Companies. The Comptroller and Auditor General of India have the
power to direct the manner in which the accounts are to be audited and to give instructions to the
auditor in regard to any matter relating the performance of his functions. He is also empowered
to get a supplementary test audit of accounts conducted by persons authorised by him. The
auditor of the Government Company has to submit a copy of his audit report to the C.&A.G.I.
who has the right to comment upon, or supplement the audit report in such manner as he thinks

fit. Such comments or supplementary audit report must be placed before the annual general
meeting of the company at the same time and in the same manner as the auditor’s report.
Section 619-A provides that the Central Government must place before both House of Parliament
an annual report on the working and affairs of each Government Company to be prepared within
three months of its annual general meetings, together with a copy of the audit report and any
comments upon or supplement to, such audit report, made by the C.& A.G.I. Where a State
Government is a participant in a Government Company, this report has, likewise, to be placed
before the State Legislature.
Section 619-B provides that the provisions of s.619 as stated above also apply to a company in
which the Central Government or any State Government or any Government Corporation hold
either singly or jointly not less than 51% of the paid-up share capital.

7.11 Foreign Company

Foreign Company is a company incorporated in a country outside India and has a place of
business in India.
However, where not less than 50% of the paid-up share capital (whether equity or preference
or partly equity and partly preference) of a company incorporated outside India and having an
established place of business in India, is held by one or more citizens of India or by one or more

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