1. Introduction
The Companies (Amendment) Act, No. 12 of 2025, certified on 4th August 2025, introduces significant reforms to the Companies Act, No. 07 of 2007 of Sri Lanka. The amendments aim to strengthen corporate governance, enhance transparency, align with international anti-money laundering (AML) and counter-terrorist financing (CTF) standards, and modernize company law procedures.
2. Key Amendments
2.1 Shareholding and Incorporation
- A company (other than one limited by guarantee) may now be incorporated with aย single shareholder, who may be:
- A natural person,
- A body corporate, or
- The Secretary to the Treasury holding shares for the Government of Sri Lanka.
(Section 4 amendment)
- Time for filing company name approvals extended fromย 10 working days to 20 working days.
(Section 11 amendment)
2.2 Share Warrants and Bearer Shares
- Issuance of bearer shares or share warrants to bearer is strictly prohibited.
- Existing holders must notify companies withinย 60 daysย and convert them into registered shares.
- Non-compliance results inย nullification of rightsย attached to such instruments.
(New Section 51A)
2.3 Beneficial Ownership Disclosure
A new division on โBeneficial Ownershipโ (Sections 130Aโ130J) has been introduced:
- Companies must discloseย full details of beneficial ownersย (identity, addresses, nationality, identification numbers, extent of ownership).
- Registers of beneficial owners must be kept at the registered office and submitted to the Registrar.
- Beneficial ownership details will beย publicly accessibleย (limited data openly, full details viaย Right to Information Act).
- Non-disclosure is an offence, punishable byย up to Rs. 1 million fine or 10 yearsโ imprisonment.
- โBeneficial ownerโ defined as aย natural person holding โฅ10% ownership or exercising effective controldirectly/indirectly.
2.4 Strengthening Governance and Transparency
- Directors facing removal must be givenย special noticeย and a right to respond.
- Company secretaries are responsible for circulating directorsโ representations.
- Share allotments must be completed withinย 20 working daysย unless shares are fully paid from reserves.
- Auditorsโ appointments are valid until the next AGM (instead of one year).
2.5 Registrar-General of Companies
- Appointment ofย Additional Registrars-General of Companiesย authorised.
- Registrar empowered to grantย extensionsย for statutory filings and company responses.
- A new offence category introduced:
- General contraventions without specified penalties can lead toย fines up to Rs. 1 million or imprisonment.
2.6 Liquidation and Dissolution
- Liquidators must file returns with the Registrar within one week of meetings.
- Companies struck off may seekย re-registration within 10 yearsย by court order.
2.7 Miscellaneous Amendments
- Corrections of numerous typographical errors in the principal Act.
- Definitions of โdistributionโ clarified to include direct/indirect transfers of property to shareholders.
- Companies Disputes Board may mediate disputes relating to management of companies.
3. Implications
3.1 For Companies
- Mandatory disclosure of beneficial ownership increasesย administrative responsibilities.
- Stronger penalties createย higher compliance risks.
- Prohibition of bearer shares strengthensย traceability of ownershipย and reduces anonymity.
3.2 For Investors
- Greater transparency improvesย investor confidence.
- Public access to beneficial ownership promotes accountability.
3.3 For Regulators & Authorities
- Aligns Sri Lanka withย FATF (Financial Action Task Force)ย recommendations on AML/CTF.
- Enhances tools for combatingย money laundering, tax evasion, and illicit financing.
4. Conclusion
The Companies (Amendment) Act, No. 12 of 2025 represents a landmark reform in Sri Lankaโs corporate governance framework. It addresses long-standing gaps by outlawing bearer shares, mandating beneficial ownership disclosure, strengthening directorsโ accountability, and empowering the Registrar.
While compliance costs for companies will rise, these reforms enhance transparency, investor trust, and alignment with international standards, marking a critical step in modernizing Sri Lankaโs corporate law regime.
