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Company & Commercial
Sri Lanka
Overview
Including: Colonial Ties; New Companies Act; Investment Law; Other Relevant Developments
The Department of the Registrar of Companies has established a website which contains all the information required by parties wishing to incorporate a company. The necessary statutory forms may also be submitted electronically via the website. The site aims to expedite the incorporation procedure in order to boost foreign investment.
New Act to Shake Up Company Law
Businesses in Sri Lanka are awaiting the enactment of a new Company Act. The draft act incorporates certain aspects of modern company law that are conspicuously absent from existing legislation. Among other things it includes provisions allowing companies to purchase their own shares and takes into account the need for tougher penalties for offenders who flout the law.
A recent case has highlighted that courts are unsympathetic to companies acting ultra vires, that is beyond the scope of their powers, in order to disclaim liability for their own actions.
Commission Takes Control
In a recent case the Supreme Court clarified the role of the Securities and Exchange Commission of Sri Lanka. This case serves as a warning to companies who mislead their shareholders and then seek refuge in red tape.
New legislation will enable the state to more closely monitor the activities of companies engaged in insurance or leasing. This update outlines some of the changes the new legislation will bring.
People or Profit?
In a recent case brought by local residents a US company was found guilty of environmentally unfriendly activities that were affecting local communities.
Litigation
Sri Lanka
Public Duty to Control Foreign Borrowings
A judge has ruled that the controller of exchange was justified in refusing to allow a company to accept a foreign exchange loan at a time of low liquidity, even though he had allowed the company to accept a previous loan. The judgment reiterated that it is a public duty to maintain checks and controls on foreign borrowings.
The Supreme Court has ruled that the Inland Revenue (Special Provisions) Act is inconsistent with the Constitution and grants immunities and indemnities to persons who have contravened the law and defrauded public revenue, causing extensive revenue losses. The ruling was delivered following a reference on the legality of the act made by the president to the court.
