The company, Mediprobe, which puts doctors in contact with major health insurance companies, has Dr Aylward's wife, Angela, listed as director.
It has also emerged that Mediprobe, which is totally independent of the DSS, has paid Dr Aylward for work done on its behalf, even though he was advised he could not be involved in the establishment of the company.
Last night, senior civil service trade unionists, when informed by the Independent on Sunday of Dr Aylward's role, said they would raise the matter with the National Audit Office. David Luxton, national officer for the Institution of Professionals, Managers and Specialists, said: "We are alarmed to hear of this. It raises the issue of propriety."
The company was set up in the mid-1990s at the instigation of Dr Aylward when he was on the board of the Benefits Agency Medical Service (BAMS), which verifies state disability benefit claims and employs 220 doctors, 1,200 administrative staff and 3,000 part-time doctors. He was asked to explore ways in which BAMS' work could be contracted out. However, the Treasury's solicitor said it was inappropriate for BAMS to solicit and undertake work for the private sector.
As a result, Dr Aylward examined how BAMS doctors could still work for private insurance companies and the department solicitor said it was possible for doctors to do such work, provided it did not conflict with their civil service work.
After Dr Aylward received the government legal advice, he asked a former business colleague to administer an independent pilot study called Medi- probe which helped civil servant doctors to work for insurance companies in their spare time.
Details of Mediprobe, whose trading name is the Nationwide Medical Examination Advisory Service Ltd, listed at Companies House in Cardiff show two directors, Colin Cornelius and Dr Aylward's wife, Angela, who is also company secretary. Accounts for the 15 months from December 1995 to March 1997, filed at the start of this year, show that the two directors received pounds 36,000 renumeration and pounds 30,000 in pension contributions.
The accounts also show the company paid Dr Aylward pounds 2,000 in fees for examinations carried out on behalf of the company. The accounts note that Dr Aylward is married to Mrs Aylward.
Mr Cornelius said Mediprobe was "a clearing house" that involved some 60 doctors and 20 insurance companies. "Our job is really administrative," he said. He added that Angela Aylward has sat on health tribunals.
BAMS was contracted out last month for pounds 305m to Sema, the Anglo-French computer services group. Dr Aylward headed the evaluation committee which recommended the bid by Sema. Unions fear his personal connection with Mediprobe, a potential rival firm, raises the issue of conflict of interest.
Last night a DSS spokeswoman said Dr Aylward denied any impropriety. "We have spoken to Dr Aylward and he denies all the allegations," she said.