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Last update: January 2008

Sri Lanka

Setting up a Company

 

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 Setting up a Company 

Today, Sri Lanka is ranked as the most liberalized economy in South Asia. Total foreign ownership is welcome in almost all areas of the economy, with only a few areas limited or restricted to foreigners

The higher rankings are indicative of the more attractive investment climate in the country, with Sri Lanka's score in most of the categories used to evaluate the business environment improving significantly. For instance, Sri Lanka is ranked highly for its liberal approach to foreign investment. 

Please note that information provided is for guideline purposes only. For further information please contact a member of the IPTU Team.

 

Board of Investment

The Board of Investment (BOI) Promotion Department is the first stop for a foreign investor. Here investors can obtain information on the investment opportunities in Sri Lanka and the incentive packages on offer.

Prospective investors are required to submit a formal application to the BOI. The form has two components:

  • Approval of investment
  • Approval of site

For further information, please download:

Application for approval of an Investment form

Application for site approval of an Investment form

Completed forms must be submitted to the Appraisal Department. A fee is charged to process the applications. Once the completed form reaches the Appraisal Department, a case officer is assigned to assist and guide the investor throughout the approval process.

 

Foreign Investment Resctriction

Following the practice of most countries, Sri Lanka has a list of business activities, which restrict foreign investment and require approval by other statutory agencies.

The degree of restriction varies across different areas of investment. Foreign investment is not allowed in the following areas:

  • Money lending
  • Pawn broking
  • Retail trade with a capital investment of less than US$1mn.
  • Personal services other than for export or tourism
  • Coastal fishing
  • Education of students who are citizens of Sri Lanka and not over 14 years of age
  • Award of local educational degrees

For further information, please read the Guidebook for European Investors in Sri Lanka Chapter IV

 

Foreign Investment

In most instances, foreign investment is transparent and simple. However, when a project is evaluated for fiscal concessions, comprehensive documentation is required in order to complete the assessment.

For regulated sectors the BOI forward the duly completed application form to the relevant authorities who will recommend approval of foreign investment.

If the project has met the necessary conditions, a Letter of Approval will be issued, which informs the investor of the conditions, privileges and benefits granted.

On receiving the Letter of Approval, the applicant must respond, in writing, agreeing to the terms and conditions.

For the agreement to be finalised investors are required to incorporate the business as a company with the Registrar of Companies.

The Letter of Approval from the BOI is sufficient to confirm to the Registrar that the foreign investment has been officially approved. The formal Agreement is usually signed within the period stipulated in the Letter of Approval.

The Agreement will confirm the incentives and concessions the company will be entitled to under Section 17 of the BOI Act.

For further information, please go to the Board of Investment of Sri Lanka website

 

Department of Registrar of Companies

The main objective of The Department of the Registrar of Companies is the efficient and effective implementation, administration and enforcement of several legislative enactments assigned to it; namely:

  • Companies Act No 17 of 1982 contains the rules, procedures, accounting and reporting requirements for companies incorporated or registered in Sri Lanka. The registration of companies, filing of accounts and annual returns are done with the Registrar of Companies. The Societies Ordinance No 16 of 1891is the next in terms of the number of societies registered
  • The Cheetus Ordinance No 61 of 1935 provides for the registration and regulation of cheetus.
  • Public Contracts Act No 3 of 1987 provides for the registration of any persons who act as agent or subagent, representatives or nominees for and behalf of any tenders in respect of a public contract, which exceeds Rs 5 million and such public contracts.

 

Type of Companies

  • A Private Companies

It must consist of at least two and not more than fifty members. It must have at least one director.

  • A Public Companies

It must consist of at least seven members are required to form a public company. It must have at least two directors.

  • Offshore Companies

A company registered within or outside Sri Lanka may register itself in Sri Lanka as an offshore company to carry on any business outside the shores of Sri Lanka.

  • Subsidiaries

To establish a business in Sri Lanka foreign companies can incorporate as a local subsidiary company.

  • Branches

A company incorporated outside Sri Lanka may establish a place of business in Sri Lanka by registering a branch office with the Registrar of Companies.

  • Liaison/Representative Offices

A company incorporated outside Sri Lanka may maintain its presence in Sri Lanka through a representative office, and is of similar status to that of a branch office.

  • A Joint Venture Company can be with other Sri Lankan companies or foreign entities.

For further information, please go to the Board of Investment website


 

Incorporation of a Company

The registrar has the sole authority to approve incorporation. He will either request for more information if clarifications are required on the drafts attached.

1- The name

You must incorporate your company within three months of name approval. Failure to this will cancel your company name from the database.

  • A person either a professional or a member of the public who is wishing to register a company must first search the database of the registered companies for possible similar names that are already being registered.
  • A company name shall not contains the words "Chamber of Commerce" unless it is a company registered under a licence granted without the addition of the word "Limited" to its name; and do not use, except with the consent to the Minister, giving regard to the national interest, the words "President", "Presidential", "Municipal", "Incorporated", "Co-operative", "Society", "National", "State" and "Sri Lanka".
  • Select Request Type (Name Approval; Name Approval and Incorporation by Members; Name Approval and Incorporation by Capitol)
  • Pay for name Request: once the availability of the Name is verified, you need to fill the Name search form (A16)
  • Name Verification by Department of Registrar: the Name verification document is sent to the database administrator who will run a search for similar names which he will list it out and send it to the registrar
  • Approval of Name: The registrar has the sole authority to approve incorporation

For further information about Registration procedure, search existing name, request name on line, please go to the Department of Registrar of Companies website

2- Memorandum of Association

An important step in the formation of a company is to prepare a document called Memorandum of Association. It is the charter of the company that contains the basic conditions on which the company is incorporated (the name, the State in which the registered office is to be situated, the main objects of the company to be pursued, the liability of the members and the authorized capital).

The registrar has the sole authority to approve the Memorandum of Association. He will examine the content of the Memorandum of Association and approve the document.

3- Articles of Association

Articles of Association of the company are the regulations that govern the internal management of affairs of the company and the conduct of its business. The Articles are subordinate to the Memorandum of Association.

The registrar has the sole authority to approve the Articles of Association. He will examine the content of the Articles of Association and approve the document.

4- Registration of a Company

The registrar has the sole authority to examine all other necessary forms and approve/reject based on the information given. The required forms for incorporation are:

  • Memorandum of Association (2 copies)
  • Articles of Association (2 copies)
  • Form 5: Declaration of Compliance
  • Form 36A: Intended Location of Registered Office
  • Form 46: Consent to Act as a Director
  • Form 47: List of people who have consented to be Directors
  • The Registrar of Companies requires that Companies Forms 36 (Notice of the actual situation of the Reregistered office) and 48 (Particulars of the company's Directors and of its Secretary) are filed by the Company after the Certificate of Incorporation has been received.
  • A fee is payable for registration, depending on the type of companies (limited by shares, without share capital, etc)

For downloading the Forms, please go to the Department of Registrar of Companies website

 


 

Setting up Subsidiary

Foreign companies may prefer to conduct business in Sri Lanka by establishing a subsidiary company.

A subsidiary can be established as a private, public or public listed company. The preferred form is usually that of a private company because incorporation is easier, less expensive and may be accomplished with fewer formalities.

Subsidiaries must comply with all statutory requirements, which apply to domestic companies under the Companies Act. Unlike in the operation of branch, the liability of a subsidiary is limited to its own assets and does not extend to the foreign company.

Operating a business through a subsidiary gives the business a degree of credibility and permanence and allows it to enter into contracts more freely.

The Companies Act (No.17 of 1982) contains the rules, procedures, accounting and reporting requirements for companies incorporated or registered in Sri Lanka. The registration of companies, filing of accounts and annual returns are done with the Registrar of Companies.

As a distinct legal entity, companies can purchase, hold and sell property, enter into contracts, sue and be sued. They have perpetual existence and cannot normally be involuntary terminated except by their creditors in the event of default.

(Source: Professional Services Development Corporation of Malaysian Exporters)

 

Last update: January 2008 

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