Companies (Amendment) Act No. 12 of 2025: Legal reforms and comparative insights

Introduction

The enactment of the Companies (Amendment) Act No. 12 of 2025 marks a significant development in Sri Lanka’s corporate legal framework. Certified on 4 August 2025, this amendment to the Companies Act No. 07 of 2007 introduces a series of legal reforms aimed at enhancing corporate transparency, governance, and compliance with international standards.

This article outlines the key functional changes introduced by the amendment, assesses their implications for companies operating in Sri Lanka, and provides a comparative overview with Australia’s Corporations Act 2001, a benchmark from a developed jurisdiction.

Key legal changes

1. Single shareholder incorporation

Companies (excluding those limited by guarantee) may now be incorporated with a single shareholder. This shareholder may be a natural person, a corporate entity, or the Secretary to the Treasury.

2. Prohibition of bearer shares

The issuance of bearer shares and share warrants to bearer is now prohibited. Existing bearer instruments must be converted to registered shares within 60 days.

3. Beneficial ownership disclosure

New provisions (Sections 130A–130J) require companies to maintain a register of beneficial owners. A beneficial owner is defined as a natural person who holds at least 10% ownership or exercises effective control. Non-compliance may result in fines up to Rs. 1 million or imprisonment up to 10 years.

4. Governance enhancements

Directors facing removal must be given special notice and an opportunity to respond. Share allotments must be completed within 20 working days. Auditor appointments now extend until the next Annual General Meeting.

5. Registrar-General of Companies

Additional Registrars-General may be appointed. The Registrar is empowered to grant extensions for statutory filings. A general penalty clause has been introduced for contraventions without specified penalties.

6. Liquidation and re-registration

Liquidators must file returns within one week of meetings. Companies struck off may seek re-registration within 10 years via court order.

7. Miscellaneous amendments

Clarification of definitions (e.g., “distribution”), typographical corrections, and establishment of a Companies Disputes Board for mediation.

Implications for Sri Lankan companies

The amendments impose new compliance obligations, particularly in relation to beneficial ownership tracking and reporting. These changes are designed to align Sri Lanka’s corporate governance standards with international anti-money laundering frameworks, notably those of the Financial Action Task Force (FATF) and the Asia-Pacific Group on Money Laundering (APGML).

Companies will need to update internal systems and governance practices to meet these requirements, which may increase administrative overhead but also enhance transparency and investor confidence.

Comparative overview: Australia’s Corporations Act 2001

Similarities

• Single shareholder companies: Australia permits proprietary companies with a single shareholder and director.
• Director duties: Both jurisdictions impose fiduciary duties on directors, including acting in good faith and avoiding conflicts of interest.
• Transparency: Australia enforces financial reporting and anti-money laundering obligations, though beneficial ownership disclosure is less publicly accessible.

Differences

• Replaceable rules: Australia’s Act includes default governance rules that apply unless replaced by a company constitution.
• Digital governance: Australia allows virtual meetings and electronic signatures, enhancing operational flexibility.
• Takeover regulations: Australia has detailed provisions governing takeovers, which are not yet mirrored in Sri Lanka’s framework.

Conclusion

The Companies (Amendment) Act No. 12 of 2025 introduces substantive legal reforms that modernise Sri Lanka’s corporate regulatory environment. These changes reflect a commitment to international best practices and legal harmonisation. The comparison with Australia’s Corporations Act 2001 highlights both convergence and areas for future development, particularly in digital governance and market regulation.

(The writer is Chartered Corporate Secretary and The Founder of The Boardroom Ltd.)