Page 203 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes 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 firm 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)].

7.5.8 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, modifications
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
specifically 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.

7.5.9 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

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