When a firm is incepted, it is said to have a separate entity. But actually, this is an association of people with some common goals carrying out business for profit. Generally, the directors run a company; the shareholders are the investors in the company who work to get a return someday. Usually, there are different people for control, management, and shareholding. In this article we will understand; Can a Government Employee own a Business?
This type of diversification of powers provides excellent powers to the controlling and the managing groups that may take detrimental decisions to the interest of the shareholders as they hold minimal control over it.
The power provides the management group with an upper hand in the company, and there is a concentration of economic forces in their hands. This power is strategically distributed to the interest of the public, creditors, and employees. Hence, it is important to have government employees in a private firm to have a proper balance between the management and the shareholder. Now, the questions come can a Government Employee own a Business?
Legally, a government employee is not allowed to own a business in India. Luckily that does not stop them from doing one. They can start a business on their spouse name, or children’s name and supervise the business.
Besides, if you are a government employee and you are planning to own a business, first of all, you must secure the permission of an ethics committee prior to starting side businesses. Make sure your side business is separate from your day-to-day work as an employee.
The next important point, a government employee can be a Partner or Director however subject to restriction. He can only be a sleeping partner and you can’t be a whole-time or part-time director. He can also be a non-executive director. However such an appointment as a director or becoming a sleeping partner may require the approval of the concerned department of the Government.
The All India Services (Conduct) Rules, 1968 have been made for government employees. All the government employees are obliged to follow these rules for their code of conduct.
According to the Section 13 of the Act- 13(I) Subject to the provisions of sub-rule (2), no member of the Service shall except, with the previous sanction of the government, –
Engagement directly or indirectly in any business or trade, or undertake or negotiate, any other employment, or participate, except in the discharge of his official duties, in the registration, promotion or management of any bank or other firm registered or needed to be registered under the Companies Act, 1956 (1 of 1956), or any other law for the time being in force, or of any co-operative society for commercial purposes.
As per the section, the government employees are barred from taking other private firms without prior government section. Only when the government provides prior consent to the employee, then they may become the director of a private firm; otherwise, they are not allowed to take any other employment.
Why Government Employees are not allowed being a Director of a Private Firm
They will receive remuneration from both ends, from the private firm and the government. As per the Indian government rules, one cannot get payment from two sources at a single point of time. They are allowed to use government power, privileges and connections to get benefit in a private firm. Also, many government employees misuse government posts as a weapon to dominate the other directors to run the firm, to their disadvantage.
Government employees can own a business, whether he is working for something else or running a business of their own. Here are some terms to keep in mind when you are looking for the answer- can a Government Employee own a Business?
- Conflicts of Interest: This is quite legal to take the job skills you have developed as government employees and put them to use in the private sector. But make sure there is no conflict of interest between your side hustle and your day job.
- The Appearance of Impropriety: It is not enough that there is no conflict of interest between your two careers. You also need to avoid any appearance of impropriety, government-speak for things that look shady even though they are legit.
- Pre-Approval for Business: Stay within the law, don’t launch your business without clearing it with the government first. Depending on which government you work for, you may have to run it by the agency ahead. Ensure the officials that you are not looking to quit and that you will not be any less committed to your work.
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