# Public Sector Undertaking > Public Sector Undertaking means a business where [Central or State Government] owns or controls the majority equity **Term:** Public Sector Undertaking **Last updated:** 2026-07-29 ## Definition ## What Public Sector Undertaking Means in a Contract A Public Sector Undertaking, often abbreviated as PSU, is a company or corporation in which a government body, whether central or state, holds a controlling equity stake, typically more than fifty percent, or otherwise exercises decisive control over its board and operations. When this term appears in a contract, it signals that one of the parties is not a purely private commercial actor but rather an entity whose ownership structure ties it to public authority, public funds, and public accountability standards. This distinction matters because contracts involving a Public Sector Undertaking frequently carry additional layers of obligation that would not apply between two private companies. These can include statutory audit requirements, parliamentary or legislative oversight, restrictions on how the entity can indemnify counterparties, and constraints imposed by the law governing the contract regarding procurement fairness and transparency. Drafters must treat the label as a substantive classification, not a mere descriptive flourish, because it can change which rules and approval processes govern the deal. Understanding this term correctly also helps counterparties assess risk profiles differently. A Public Sector Undertaking may benefit from implicit government backing, which can lower credit risk, but it may also be slower to negotiate, bound by rigid internal approval chains, and subject to public disclosure obligations that a private company would not face. ## How Public Sector Undertaking Is Defined or Measured The defining test for a Public Sector Undertaking generally rests on ownership percentage and control rights rather than on the nature of the business the entity conducts. A company manufacturing steel, running a bank, or operating a utility can all qualify as a Public Sector Undertaking if the relevant government holds majority equity or exercises effective control through board appointments, veto rights, or statutory powers. Measurement typically looks at several factors together, including the percentage of shares held directly by government departments or through intermediary holding companies, the government's ability to appoint or remove a majority of directors, and whether the entity was created by or operates under a specific government act or charter. Contracts often ask counterparties to confirm their status through representations and warranties, sometimes supported by shareholding certificates or corporate registry extracts. - Majority equity ownership by a central, state, or provincial government body. - Control over board composition or key management decisions. - Formation under specific government legislation, statute, or charter. - Classification recognized by a relevant public administration or regulatory authority. ## Where Public Sector Undertaking Appears in Agreements The term commonly surfaces in eligibility and definitions clauses of procurement documents, particularly where a private vendor is bidding for work governed by a