The Companies (Amendment) Bill, 2025 presented to the parliament on 5th June 2025.

• The Companies (Amendment) Bill, 2025 seeks to modernize and tighten corporate governance and compliance in Sri Lanka through a comprehensive amendment to the Companies Act, No. 07 of 2007.

• A draft amendment to the Companies Act which will for the first time compel businesses to disclose their beneficial owners has been placed on the order paper of Parliament.

• The proposed amendment to the Companies Act will compel businesses to disclose their beneficial owners, meeting an International Monetary Fund (IMF) structural benchmark.

• The law aims to make the beneficial ownership framework consistent with Financial Action Task Force (FATF) standards, a set of international guidelines for combating money laundering, terrorist financing, and proliferation financing.

• Beneficial ownership refers to people who control or benefit from a company, with the proposed amendment allowing the public to inspect details of beneficial owners upon request, including full names and nature and extent of ownership.

• Companies will be required to disclose information about beneficial owners, including dates and places of birth, nationalities, and addresses, with a register to be maintained at the registered office for at least 10 years.

• Failure to disclose or providing false information is a criminal offence punishable by fines or imprisonment, with the Registrar of Companies mandated to maintain a register and make details available to authorities upon request.
  

Key Amendements

1. Single Shareholder Companies (Clause 2):
   • Legalizes incorporation of companies with a single shareholder, whether a natural person, body corporate, or the Secretary to the Treasury.
2. Public Notification Period (Clause 3):
   • Extends the timeframe to notify the public about company name changes from 10 to 20 working days.
3. Ban on Bearer Shares and Share Warrants (Clauses 4 & 5):
   • Prohibits issuance of bearer shares and share warrants to bearer.
   • Existing holders must disclose and convert these instruments within 60 days or lose associated rights.
4. Allotment of Shares (Clause 6):
   • Companies must allot shares within 20 working days of receiving consideration, with exceptions for reserve-funded allotments.
5. Beneficial Ownership Disclosure (Clause 7):
   • Introduces a new division mandating disclosure of beneficial ownership details.
   • Companies and shareholders are required to disclose ownership/control details, which must be reported to the Registrar and kept updated.
   • Strict penalties (fines up to Rs. 1 million and/or 10 years imprisonment) for non-compliance or false declarations.
6. Director Removal Procedure (Clause 8):
   • Revamps procedures for removing a director, ensuring due process including notification and representation rights.
7. Director Over 70 Years (Clause 9):
   • Modifies the term validity for directors over 70 to extend until the next AGM, rather than just one year.
8. Registrar’s Administrative Enhancements (Clauses 14, 16, 17):
   • Allows creation of new cadres (e.g., Additional Registrars).
   • Empowers Registrar to extend deadlines for document submissions.
   • Permits companies to re-register within 10 years if previously struck off and recover property.
9. New General Offence Clause (Clause 19):
   • Introduces general penalties for contraventions not otherwise specified: fines up to Rs. 500,000 or six months’ imprisonment.
10. Definition Updates and Minor Corrections (Clauses 20 & 21):
    • Updates definition of “distribution” and fixes language/translation errors across Sinhala, Tamil, and English versions.

Analysis and Implications

• Transparency & Anti-Money Laundering:
  The inclusion of beneficial ownership disclosure is a major step toward aligning Sri Lanka’s legal framework with international anti-money laundering (AML) and counter-terrorist financing (CFT) standards.
• Corporate Governance:
  The reforms surrounding director removal and age-related tenure improve checks and balances within board structures.
• Administrative Efficiency:
  Granting discretionary powers to the Registrar enhances regulatory flexibility and reduces unnecessary penalties for procedural lapses.
• Investor Confidence:
  The removal of bearer shares and increased traceability promotes trust in the integrity of corporate ownership structures.
• Legal Harmonization:
  The Bill addresses long-standing translation errors and inconsistencies, improving accessibility and legal clarity across all official languages.

Read the Full Amendment Bill