The Companies (Amendment) Act, No. 12 of 2025, which was certified on 04 August 2025, introduces wide-ranging reforms to the Companies Act, No. 07 of 2007. The Act, originally gazetted as a bill on 24 April 2025 and presented to Parliament on 5 June 2025, marks a significant shift in Sri Lanka’s corporate regulatory framework.

The proposed changes focus on enhancing ownership transparency, simplifying certain compliance processes, and modernising governance procedures. These developments are particularly relevant for companies with layered ownership structures, foreign shareholders, and those operating in regulated sectors.

We are setting out below a summary of the key amendments introduced by the new amendment and their practical implications.

Single-Shareholder Companies

The Companies Act has always permitted single-member companies, and in practice, many companies have been incorporated with a single shareholder. However, the previous language in Section 4(2) of the Act lacked clarity. The amendment clarifies the position by expressly stating that a company limited by shares may have a single shareholder, who may be a natural person, a body corporate, or the Secretary to the Treasury holding shares on behalf of the Government of Sri Lanka.

Prohibition of Bearer Shares and Warrants

The Bill introduces a complete prohibition on the issuance of bearer shares and share warrants to bearer. These instruments, which confer ownership based solely on possession and allow for untraceable transfers, are incompatible with international standards for transparency and anti-money laundering.

The proposed Section 51A imposes retrospective compliance requirements. Holders of existing bearer shares or warrants must disclose their identities to the issuing company within 60 days of the Act coming into force. The company is required to maintain a register of such holders. Failure to comply within this period results in the automatic nullification of rights associated with the shares or warrants. In addition, holders are required to convert such instruments into registered form to be entered into the company’s share register.
This measure brings Sri Lanka in line with global reforms aimed at closing loopholes exploited for illicit financial flows and is of particular significance to entities with legacy share structures.

Introduction of a Beneficial Ownership Register

The most substantive and far-reaching reform is the introduction of a mandatory regime for identifying and disclosing beneficial ownership of shares. The new Division titled “Beneficial Ownership” (Sections 130A to 130J) imposes a duty on companies, shareholders, and officers to ascertain and report individuals who hold ultimate ownership or effective control.

A beneficial owner is defined as a natural person, who directly or indirectly holds or controls 10% or more of the shares or voting rights of the company, or otherwise exercises effective control. Every company is required to collect detailed information of its beneficial owners, including their full name, nationality, address, NIC/passport details, tax identification, and the nature and extent of their ownership.

The said information should be submitted by the shareholders within 10 working days of any subscription or transfer of shares in a company. Further, the company secretaries or directors must report beneficial ownership information to the Registrar of Companies once they become aware of it. Companies are required to maintain a dedicated register of beneficial owners and submit this information to the Registrar within 14 working days from the date of such changes or together with the company’s annual return.

The Registrar will maintain a separate beneficial ownership registry and provide such information to authorities such as the Attorney General, the Financial Intelligence Unit (FIU), the Inland Revenue Department, the Director-General of Customs, and other regulators are specifically authorised to request this information. In addition, limited information such as the name address and extent of ownership will be accessible to the public. Complete information may be obtained by the public through applications under the Right to Information Act.

The aforesaid compliance obligation extends to offshore and overseas companies registered in Sri Lanka. Companies already incorporated under the Act must submit the required beneficial ownership information within six months of the law’s commencement. Depositaries of licensed stock exchanges must notify the Registrar of persons holding 10% or more of issued shares as at the effective date, within 30 days.

Failure to comply with the beneficial ownership provisions attracts severe penalties: fines of up to Rs. 1 million and/or imprisonment for up to 10 years for companies and responsible individuals, with additional offences created for misrepresentation or false entries.
This marks a significant compliance shift and companies with layered or foreign-held ownership structures will need to undertake immediate internal reviews to ensure data collection, documentation, and reporting processes are in place.

Revised Procedure for Director Removal

The procedure for removing directors under Section 206 is being strengthened to ensure due process. Where a company seeks to remove a director and appoint a replacement, a special notice must be given to all shareholders, and the outgoing director must be provided with a copy. The said director is entitled to be heard at the meeting and may submit a written representation, which the company must circulate to all shareholders or, if received late, read aloud at the meeting upon request.

If the director is misusing the process to secure defamatory publicity, the company may apply to court to prevent the circulation of the representation and recover costs. This is a balanced provision that protects directors from arbitrary removal while safeguarding the company from abusive tactics.

Re-Registration of Struck-Off Companies

The Bill introduces a new mechanism for companies whose names have been struck off the register under Section 487 to apply for re-registration within 10 years, subject to court approval. If the court is satisfied with the reasons for the company’s non-compliance and grants relief, the company may be restored and regain ownership of property previously vested in the State. This provision may be particularly useful for foreign-owned entities or project companies that were struck off due to administrative lapses but still hold valuable intellectual property, land, or regulatory licences.

Timelines for Share Allotment and Public Notices

Section 52 now requires that shares must be allotted within 20 working days of receipt of consideration. However, bonus issues funded from company reserves and allotted pro rata to shareholders are exempted from this timeline.

Additionally, the time for notifying a change of company name (Section 11) has been extended from 10 to 20 working days, aligning procedural timelines with practical realities for document updates and publication.

Expanded Powers of the Registrar

A new Section 484A allows the Registrar to extend time periods for the furnishing of documents or information under Section 484 upon written request by the company. This gives the Registrar discretionary power to grant extensions where compliance within the statutory time frame is impracticable.

Furthermore, the Registrar is empowered to issue directives requiring companies to rectify non-compliance with the beneficial ownership provisions within 7 working days. The Registrar is also authorised to appoint Additional Registrars-General and pay incentive allowances to registry officers, potentially improving administrative efficiency.

Dispute Resolution and Penalty Provisions

The Bill expands the scope of mediation under Section 508, allowing parties involved in disputes concerning company management or the interpretation of the Act to request mediation before the Companies Disputes Board.

A new general penalty clause (Section 513A) has been introduced, applying to any contravention of the Act where a specific penalty is not already provided. Offending companies or individuals may face fines of up to Rs. 500,000 and/or imprisonment of up to six months. Where the offender is a corporate body, individual directors or officers may be deemed personally liable unless they can demonstrate that they had no knowledge of the offence and exercised due diligence.

Other Amendments

•    Section 341 introduces penalties for liquidators who fail to file dissolution-related documentation within the specified time.

•    The definition of “distribution” under Section 529 has been revised to exclude capitalisation of reserves by way of shares.

•    Over 90 typographical and grammatical errors across all language versions of the principal enactment have been corrected through a comprehensive Schedule.

Concluding Remarks

The Companies (Amendment) Bill, 2025 introduces significant reforms aimed at promoting corporate transparency, modernising compliance, and aligning Sri Lanka’s company law with international norms. The introduction of beneficial ownership reporting alone represents a paradigm shift in how companies are expected to manage shareholder information and corporate governance.

Companies, directors, company secretaries, and professional advisors should familiarise themselves with these proposed amendments and begin implementing the necessary systems to ensure compliance. Particular attention should be paid to the beneficial ownership register, internal shareholder documentation, and deadlines for statutory filings.

We would be pleased to assist clients with undertaking a compliance audit, amending internal company records, preparing disclosures, or advising on restructuring options in light of these developments.