A company in law, is recognised as a separate legal entity having its own rights and obligations separate to that of those who own and/or run the Company. Subsequent to passing the new Companies Act No. 7 of 2007, the laws governing the incorporation of companies (Public, Private and Guarantee ) have been reformed. Such reform was welcome by many since it introduced a new system that made the incorporation process less tedious and making the functioning of the Department of Registrar of Companies (the government body that deals with the company incorporation) more efficient, allowing an incorporation to take place within a week or two. However, there still exists certain draw backs that need to be addressed, such as establishing branch offices of the Registrar of Companies in other districts, so that everyone who wants a company incorporated need not come to Colombo to do so, specially since the government is currently on the fast track to develop particular districts. But since the internet is easily accessible by many, why not allow the incorporation of a company to take place online like in many developed nations.
But according to a foreign investor, he was surprised about the manner in which a company in Sri Lanka was incorporated, since it was an uncomplicated process compared to other developing countries in Asia, in which he had invested in. So clearly it was something to be proud of, but that does not mean we must ponder on such and not evolve with time, specially since the time has come to attract more investment for the development in this country.
For those who are interested in Incorporating a Company, the instructions are clearly given on the Registrar of Companies website.
I happen to meet some young entrepreneurs, wanting to start-up small scale businesses and was opting to incorporate a Private Limited company than to just register the Business name under the Provincial Laws, due to certain benefits that come along by creating a separate legal entity. So quite evidently the new laws being simplified makes it easy for anyone to incorporate a Company in Sri Lanka.
For those wanting to know the process of incorporating a “Private Company” the procedure is as follows;
Step One: Obtaining Company Name Approval;
Time to complete – 3 days
Cost to complete – LKR 500 + 12% VAT (Cost is subject to change)
Comment – The reservation is valid for 3 months
Step Two: Registration of the Company;
Time to complete – 3 days
Cost to complete – LKR 10,000 + 12% VAT for registration fee (form 1) + LKR 500 + 12% VAT for each of the forms: 18 & 19 + LKR 500 + 12% VAT for the Articles of Association (Cost is subject to change)
A company may draft or adopt the standard set of articles of association in Table A of the Companies Act of Sri Lanka, No.7 of 2007. Professional charges are higher for drafting new articles of association than for adopting the standard articles.
Also, will be required to appoint a registered Company Secretary as per Form 19, who can attend to all Company incorporation matters and other matters pertaining to the Company.
According to the Companies Act No.7 of 2007 the articles of association must be submitted in duplicate printed on A4 paper to the Registrar of Companies with the balance of documents for incorporation. No prior approval from the Registrar General of Companies is required for the articles of association. According to the new Companies Act, a notary public is no longer required to witness the signing of the articles of association.
The certificate of incorporation can be obtained usually in about 3 days.