A Guide For Company Registration As A Foreigner In Sri Lanka

For foreign companies or persons looking to expand their horizons toward the South Asian region, Sri Lanka is indeed one country full of potential and promise of a fruitful business venture. But how does the set-up process work and what are the rules and regulations you have to follow?

Below, you will find a simple, reliable, and all-inclusive guide on setting up and getting your foreign company registered in Sri Lanka.

Some all-important facts you have to know

As a foreign company looking to set up a base in Sri Lanka, there are a few things you have to know before your company is registered.

  • Rules and Restrictions

Different industries in Sri Lanka have a different set of rules when it comes to what percentage of a company can be owned by a foreigner. Some industries do not allow any kind of foreign ownership, while some allow a maximum of 40%, and some allow the entire 100% to be owned by a foreigner. Here’s a quick look at certain restrictions that you need to bear in mind:

Areas reserved for Sri Lankans:

Some areas and industries are strictly reserved only for those of Sri Lankan origin. These areas are:

  • Pawn Brokering
  • Money Lending
  • Provision of security services ( private or otherwise)
  • Coastal fishing
  • Retail trade with an investment that is less than $5 million

Areas where only 40% or less foreign ownership is allowed:

  • Education
  • Travel agencies
  • Mass communications
  • Freight forwarding
  • Shipping agencies
  • Deep-sea fishing
  • Timber based industries using local timber
  • Mining and primary processing of non-renewable natural resources
  • Growing and primary processing of tea, cocoa, coconut, rubber, rice, spices, and sugar
  • Production of goods where Sri Lanka’s exports are subject to internationally determined quota restrictions

Areas where Line Ministry approval is required ( foreign ownership percentage depends on the Line Ministry):

  • Air transportation
  • Coastal shipping
  • Lottery
  • Large-scale mechanized mining of gems
  • Any industry producing coins, currency, or security documents
  • Aircraft and military equipment
  • Arms, explosives, and ammunition
  • Drugs, poisons, and other substances

Areas where 100% foreign ownership is allowed:

  • Any industry other than the above-mentioned categories
  • Permission from the Board of Investment or BOI

Not all foreign companies require approval from BOI to go forward with their business. Nevertheless, companies like retail, manufacturing, branch office, etc do require permission from BOI. It takes about $5 million USD to obtain a Board of Investment approval.

To obtain the approval, you will need to:

  1. Discuss with BOI about your business intentions and targets you wish to achieve
  2. Prepare an application for approval
  3. Procure a corporate bank account
  4. Conduct a name check with the Registrar of Companies
  5. Get your ‘Articles of Association’ approved
  6. Present the share certificate
  • The requirement of a local company secretary

All foreign-owned businesses are required to have a local company secretary who will guide and assist in all related processes. Generally, the majority of law and accounting firms will also act as a company secretary for you as one of their services.

Now that you have a clear understanding of all the rules and restrictions before your registration process begins, let’s take a look at the steps to register your company in Sri Lanka:

  • Get your company name approved

Getting your company name approved is one of the first things you should do. Firstly, you can search for the company name you’ve selected on the Department of Registrar of Companies website to ensure there aren’t any other registered companies with similar names. If the name you have selected is found to be similar to an already existing company, chances are that it will not be approved.

  • Registration forms

Once your company name is approved, you will need to fill out the following forms:

Form 1 (Section 4) – lists the company name, type, address, number of directors, their information along with the number of shares.

Form 18 (Section 203) – lists the number of companies, company name, details of director/s along with the date of appointment.

Form 19 (Section 221) – lists company details along with those of the secretary.

All registration forms will have to be printed and handwritten forms will not be accepted during registration.

  • Obtaining the Articles of Association

The Articles of Association are documents that state the regulations for a company’s operations. Each and every Sri Lankan company is governed under these Articles belonging to the Company Act 7 of 2007, which necessitates companies to ensure all changes to company names, directors, shareholders, and share capital are notified to the Registrar of Companies.

  • Issuing a public notice

Your company registration is almost complete now. Next, you will have to make your company exclusive within the local community by issuing a public notice in at least three local newspapers. Remember to include your company name, type, address, and registration number clearly on your notice.

  • Acquiring a corporate bank account

Finally, you need to open a corporate bank account under your company name. Make sure that the cheque and internet banking facilities you receive are ideally suited for you and your business.

Author: Ashfa Anwer