Registering a company

By Nilooka Dissanayake
Last week we looked at the types of businesses you can consider and the procedure involved in registering a sole-proprietorship and a partnership. Today we will talk about incorporating a limited liability company in Sri Lanka.

A limited liability company needs to be registered under the Companies Act 17 of 1982. There are companies limited by guarantee such as the Colombo Stock Exchange and there are the peoples companies. We will not discuss these here because as a regular business person, you are more interested in the companies that limit your liability to the face value of the shares you take up in that company.

Limited liability companies can be of two types, namely, private and public. Forming both types is quite similar. The differences are in the number of shareholders and the companies' ability to offer shares to the public. A private company requires a minimum of two shareholders while a public one needs a minimum of seven.

The majority of the companies you know are private limited liability companies. That is why their names always refer to them as "(Private) Limited." There are rules and regulations about naming a company and limitations on the words and terms you can use.

There are also very old private companies that do not have the "Private" in their name. As you can see this naming business is rather confusing.

This is why the Companies Act has special sections setting out the procedure for naming a business. And this is why the whole registration process begins with getting an approval for the name you wish to register.

So, how do you incorporate a company? The procedure is rather complicated, and that perhaps is a bit of an understatement. Still, the Registrar of Companies has made your life easy by putting some of the details and forms online.

Firstly, you need to decide upon a name for your company. You must first verify that no one has used the name before. You can do this online, but you still need to file the Name search form (A16) like everyone else at the Companies’ House situated at D.R. Wijewardena Mawatha.

In a matter of a few days, the Registrar will inform you of acceptance of the name.
Then, you must get your Memorandum and Articles of Association drafted. The Memorandum of Association contains among other things, the authorized share capital and the objectives of the company. The Articles specify how the business will be carried on.

That was just a layman's introduction.

If you are serious about business, you need to consult a lawyer or a company secretary or other professional who will help you draft the Memorandum and Articles of Association. If you are really a stickler for detail, try reading the Companies Act. It is not as bad as you would imagine and, to my knowledge no one has died reading it.

Once these are ready - in the correct number of copies, in the proper paper size and bound as they should be -you must file them at the Registrar's office so that the Registrar will examine the content and approve the documents.

Once the name and the Memorandum & Articles of Association are approved, you need to submit forms 5, 36A, 46 and 47 and two copies of the approved Memorandum & Articles of Association. A fee of Rs 135 will be charged for each form on submission.

Form 5 is the Declaration Of Compliance with the Companies Act. Form 36a specifies the Intended Location Of Registered Office. Form 46 is called Consent To Act As a Director - This is necessary so that no one can register a company with you as a Director without getting your approval first. Form 47 sets out a List Of People Who Have Consented To Be Directors.

The incorporation fee, charges for stamps and the fee for the Articles of Association should be paid at this point. The incorporation fee is based on the authorised share capital of the company.

If you complete the forms properly, and do not give headaches to people at the Companies House, you can get the incorporation process completed in less than a week.

If you want super speed, it is best to check the name availability on line and file the draft of the Memorandum and Articles together with Form A16.

Once the Registrar is satisfied with your documents, he will issue the Certificate of Incorporation.

This should be displayed at your place of business.

I have tried to keep this as simple as possible.

Then again, if you are going into business, you will have to get used to living a complicated life. So, I suggest that you check out the Companies Act or visit the official website of the Department of Registrar of Companies of Sri Lanka at Soon the Companies Act too will be online and your life will be made easier.

Don't forget to read the part about Directors Duties but make sure it does not freak you out.

If the all Directors of companies knew their duties, (and fulfilled them), life certainly will be more livable for a whole lot of us and pretty miserable for the Directors themselves.

If you have specific questions, we look forward to hearing from you. You can reach us on or call on 074-304112.

The writer is the Managing Editor of Athwela Vyaparika Sangarawa (Athwela Business Journal), the only Sinhala management monthly targeting the small and medium sized business operators and its English version, Small Business International magazine.

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