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Company registration being streamlined

Staff said to be rude, lazy, corrupt
Despite expectations of a better service with recent changes at the Department of the Registrar of Companies, legal officers from many private companies say that measures taken to improve the department's performance, such as the introduction of information technology, are inadequate.

"The staff at the counters are rude, lethargic and ignorant," was how one company secretary described the officers in the department. She said that long queues are of no consequence to the officers, who often engaged themselves in private telephone conversations and idle breaks. "The officers are not conversant in English and lack substantial knowledge with regard to most of the services that are offered by the department.

" As a result, many companies are crippled and unable to proceed with their transactions. Another company legal advisor, who did not wish to be identified, explained that for the private sector, time is money. The longer the delay, lower the productivity. "In many instances companies prefer to attach a certain amount of money with their applications in order to expedite the document process.

Such companies are given special treatment ahead of all the others in a queue." In response to these criticisms, the Registrar of Companies, D. K. Hettiarachchi, said his staff lacked the skills to provide a professional service. Most of the staff in the department are employees of the Combined Services Division.

"They are clerks who have been given a very basic training on the general procedures of the department and therefore do not possess in-depth knowledge to deal with the 77 different types of forms we have." These shortcomings would be resolved when the clerks are replaced by new 'client survey officers', who would be permanent employees of the department with IT training and good public relations skills.

Hettiarachchi said he was unaware of the allegations of bribery and corruption, but had requested the Deputy Registrar, Rohini Wijesooriya, to locate her office in the ground floor to monitor the staff.

When contacted, Wijesooriya declined to comment on the allegations.

Companies are also unhappy that the Registrar of Companies opens as late as 9.30 a.m. and closes by 4.30 p.m. The private sector usually works from 8.00 a.m. to 5.00 p.m. "Since there are two separate counters handling approvals and payments, we are made to join two queues," one company legal officer said.

"This is an absolute waste of time." Furthermore, the counters are closed between 12.30 p.m. and 1.30 p.m. and no payments are allowed after 4.30 p.m. even if there is a long queue. Approvals that have not been paid for cannot be removed from the department.

"If you do get an approval, you are compelled to stand in another queue to pay for it. But if you're in a hurry to leave or are too late, you have to get a new approval all over again the next day."

The private sector believes that these key issues, which seemed to have been overlooked by department officials, are of paramount importance if it is to build a reputation for honesty, efficiency and professionalism. - SG

By Suren Gnanaraj
The Department of the Registrar of Companies is being restructured and modernised to meet the demands of an increasingly sophisticated business sector.

Established in 1938 under section 51 of the Companies Act, the department aims to establish business and other institutions under the relevant acts in accordance with the economic and trade policy of the government. So far, it has registered over 40,000 companies.

As part of the re-structuring process, the department launched a website enabling companies and individuals to register their business establishments online. The number of companies that have registered in the last six months has increased considerably following the restructure, which coincided with the peace initiative. However, online registration has not replaced the procedure of physically handing over essential documents such as the Memorandum and Articles of Association, which must be filed before the certificate of registration is issued.

Nevertheless, online registration has made the procedure more convenient and accessible. It has also helped educate the people on how to register a company.

"One of the key reasons for registration delays is the lack of knowledge among the members of the general public in preparing the necessary documents," said D.K. Hettiarachchi, the Registrar of Companies. He feels companies should get the help of legal and business professionals to draft their documents. The department has launched a campaign to educate schoolchildren and published a booklet explaining its procedures.

Hettiarachchi explained that the cumbersome task of leafing through name registers to ascertain whether a company name has been previously established, can now be done with the click of a button. Today, the department can issue the certificate of registration in one day if the necessary documents are submitted according to established procedure.

The department also provides companies with various services. These include issuing certified copies of certificates of registration, needed by companies when opening bank accounts or branches abroad, registration of public contracts between companies and mortgages, and changes in issued share capital.

In response to concerns that enforcement of the law is weak, Hettiarachchi said the department launches inquiries into irregularities and malpractice by companies as soon as they get enough information. These irregularities range from companies submitting false information in their application forms to carrying out illegal activities contrary to that which they were established. Inspectors, usually retired judges, are appointed to conduct inquiries and make necessary recommendations to the registrar, who then decides the course of action that should be taken to punish the wrong-doers.

At the end of each financial year, all registered companies are bound to submit to the registrar their annual report, auditor's report and other statutory documents, together with the annual subscription fee, calculated on their total share capital. Non-compliance would lead to court action and a fee of Rs. 500 for each day taken to comply with the requirements.

The register is constantly updated. Companies are struck off the register as soon as the department gets enough information from either the courts or board of directors or if the registrar receives conclusive evidence that a company no longer continues to function.
Hettiarachchi also stated that under the World Bank sponsored 'Judicial Reform Project', the whole department would be connected to a single database. This would ensure that information could be received instantly and files can be processed with minimum hassle.

With the proposed new Companies Act, the registration procedure is to be further simplified. Once this is law, new companies would not be required to prepare a Memorandum, but simply forward the Articles of Association together with the company's proposed objectives. Such measures have been aimed at demystifying the present system and making it clearer.

Minister of Commerce and Consumer Affairs Ravi Karunanayake has proposed allowing sole-proprietors and partnerships to be registered as limited liability companies at a concessionary rate of Rs. 600, which otherwise is calculated on the total share capital. This proposal has been aimed at bringing all establishments under the limited liability structure. Hettiarachchi was confident that, "Once these changes are in place, the Department would definitely be able to give the public a more efficient and dynamic service."

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