1.Provisions of Companies Act not relevant: In a government company, the government is the only shareholder. The management and administration lies in the hands of the government. Some of the provisions of the Companies Act do not have much relevance.
2.Evades constitutional responsibility: In some of the companies, the provisions of the Companies Act do not have much relevance because the government is the only shareholder. These companies are not directly answerable to the parliament, thus they evade constitutional responsibility, which an enterprise financed by the government should have.
3.Main purpose defeated : The whole management and administration lies in the hands of the government. Thus, the purpose of registering it under the Companies Act, 1956 gets somewhat defeated.