COMPANIES ACT, No.

07 OF
2007

Asanka Karunaratna
Attorney at Law, LL.B., M.A.(Hon’s),
M.Sc. (KDU), LL.M. (IMLI-Malta), MP.A.
Notary Public, Company Secretary, Commissioner for 0aths, Dip.
in BS, icdl, E-citizen, jnsc
 ESSENTIAL CHARACTERISTICS OF
COMPANIES
Section 2 - Legal status and capacity

Corporate body

Capacity to carry on or undertake any business

Rights, powers and privileges

• Section 3- Different types of companies

• Limited company
• Unlimited company
• Company limited by guarantee

• Private company - Part II

• Off-shore company - Part XI
 Limited company
• a company that issues shares, the holders of
which have the liability to contribute to the
assets of the company, if any, specified in the
company’s articles as attaching to those
shares
 Unlimited company
• a company that issues shares, the holders of
which have an unlimited liability to contribute
to the assets of the company under its articles
 Company limited by guarantee
• a company that does not issue shares, the
members of which undertake to contribute to
the assets of the company in the event of its
being put into liquidation, in an amount
specified in the company’s articles
 Sec.4 - INCORPORATION OF COMPANIES

 Any person may apply to incorporate a

company,
 by making an application to the Registrar
 in the prescribed form
 signed by each of the initial shareholders (2+),
 together with
the following documents :-
• a declaration stating that to the best of such person
or persons knowledge, the name of the company is
not identical or similar to that of an existing
company ;
• the articles of association of the company
• consent from each of the initial directors to act as a
director of the company
• consent from the initial secretary to act as secretary
of the company.
 Sec. 5 - Registrar shall -
(a) enter the particulars of the company on the
Register ;

(b) assign a unique number to that company as

its company number ; and

(c) issue a certificate of incorporation in the

prescribed form to the applicant company.
Certificate of Incorporation shall specify
—
(a) the name and number of the company ;
(b) the date on which the company was
incorporated ;
(c) whether the company is a limited company, an
unlimited company or a company limited by
guarantee ;
(d) whether the company is a private company ; and
(e) whether the company is an off-shore company ;
Certificate of Incorporation shall be
conclusive evidence of the fact -

(a) all the requirements under this Act relating

to the incorporation of a company have been
complied with ; and
(b) the company has been incorporated under
this Act on the date specified in such certificate
of incorporation
 Sec. 6- COMPANY NAMES
(a) limited company, shall end in the word
“Limited” or by the abbreviation “Ltd” ;

(b) private company, shall end in the words

“(Private) Limited” or by the abbreviation “(Pvt)
Ltd” ;

(c) limited company, shall end in the words “Public

Limited Company” or by the abbreviation “PLC”.
Sec. 7 - A company shall not be registered by
a name which—
(a) is identical with the name of any other
company or of any registered overseas
company ;

(b) contains the words “Chamber of Commerce”,

(c) is in the opinion of the Registrar, misleading

 Except with the consent of the Minister
given having regard to the national interest,
no company shall be registered by a name
which contains the words -

(a) “President”, “Presidential”

(b) “Municipal”, “incorporated”
(c) “Co-operative” or “Society”
(d) “National”, “State” or “Sri Lanka”
 Sec. 8 - company may change its
name by special resolution with
the prior approval in writing of the
Registrar
 Sec. 9 -A company shall within thirty
working days of
its incorporation under this Act, give
public notice of its
incorporation, specifying -
(a) the name and company number of
the company ;and
(b) the address of the company’s
registered office.
Sec. 10 - Registrar may direct a company
to change its name in the
following circumstances

• it has been registered with a name which

contravenes the provisions of section 6 ;
• is likely to cause confusion
• Name was not applied for in good faith for the
purpose of identifying the company.
Sec.11 - Change of name upon
change of status of company
Sec.12 - Use of company name and
company number.
(a) all business letters of the company ;
(b) all notices and other official publications ;
(c) all bills of exchange, promissory notes,
endorsements, cheques and orders for money or
goods signed on behalf of the company ;
(d) all invoices, receipts and letters of credit ;
(e) all other documents issued or signed by the
company which creates or is evidence of a legal
obligation of the company ; and
(f) the company seal
 Sec. 13 - ARTICLES OF ASSOCIATION
(a) the objects of the company

(b) the rights and obligations of shareholders of the

company ; and

(c) the management and administration of the

company

• First Schedule = “model articles”

 Sec. 16 & 17 – Effects of AA
• articles of a company shall bind the company
and its shareholders as if there were a
contract between the company and its
shareholders
 COMPANY CONTRACTS
• Sec. 19 - Method of contracting

• Sec. 20 – Attorneys - Powers of Attorney

Ordinance (Chapter 122)

• Sec. 21 - Authority of directors, officers and

agents
 Sec. 19 - Method of contracting
A contract notarially executed may be entered into
by-
(i) two directors of the company;
(ii) if there be only one director, by that director ;
(iii) if the articles of the company so provide, by any
other person or class of persons; or
(iv) one or more attorneys appointed by the company

In SL or not. Law of SL or not

PRE-INCORPORATION CONTRACTS
• Sec. 23 -a contract purported to have been
entered into by a company before its
incorporation - may be ratified
 AUTHENTICATION OF DOCUMENTS BY
COMPANY
• Sec. 26 - document or record of proceedings
requiring authentication by a company shall
be signed by a director,secretary, or other
authorized officer of the company
PART II - PRIVATE COMPANIES (PC)
• Sections 27 to 31
 Sec. 27 - Articles of a PC shall include -
(a) prohibit the company from offering shares or
other (x) securities issued by the company to
the public; and

(b) limit the number of its shareholders to fifty

PART III - COMPANIES LIMITED BY
GUARANTEE (Sec. 32-35)
 Sec.32 - Application for
incorporation of a company
limited by guarantee.

(a) the articles of association of the company;

(b) a consent under section 203 from each of the
initial directors, to act as a director of the
company; and
(c) a consent under section 221 from the initial
secretary, to act as secretary of the company
 Sec.33 – Company limited by
guarantee must have articles.
(a) the objects of the company; and

(b) the amount which each member of the

company undertakes to contribute to the assets
of the company, in the event of such company
being put into liquidation.
 PART IV -
SHARES AND DEBENTURES
Sec. 36-85
 PROSPECTUS = a preliminary printed
statement that describes an enterprise
• Sec. 36 – Date
• Sec. 37 – Specific requirements in Part I of the
Fourth Schedule
• Sec. 38 - Expert’s (engineer, a valuer, an
auditor, an accountant) consent to issue of
prospectus containing statement by him.
• Sec. 39 - Consent of bank or attorney-at-law or
auditor necessary for inclusion of name in prospectus
• Sec. 40 - Registration of prospectus
• Sec. 41 - Civil liability for untrue in prospectus.
• Sec. 42 - Criminal liability for untrue in prospectus
• Sec. 43 – Document containing offer of shares or
• debentures for sale to be deemed a prospectus
 ALLOTMENT = assignment of a share or
portion
Sec. 45 - Prohibition of allotment unless
minimum subscription is received.
Sec. 46 - Effect of irregular allotment.
Sec. 47 – Applications for and allotment of
shares and debentures
Sec. 48 – Construction of reference to offering
shares or debentures to the public
Sec.49 - NATURE AND TYPES OF SHARES
(1) A share in a company shall be movable property.

(2) Subject to the company’s articles, a share in a company

shall confer on the holder —
• (a) the right to one vote on a poll at a meeting of the
company on any resolution;
• (b) the right to an equal share in dividends paid by the
company;
• (c) the right to an equal share in the distribution of the
surplus assets of the company on liquidation.
(3) A company may issue different classes of shares, and
in particular may issue shares which —

• (a) are redeemable;

• (b) confer preferential rights to distributions;
or
• (c) confer special, limited or conditional voting
rights, or confer no voting rights.
• (4) No share in a company shall have a
nominal or par value
• (5) A share in a company is transferable in the
manner provided for by its articles and such
articles may limit or restrict the extent to
which a share is transferable.
 Sec. 50 & 51 - ISSUE OF SHARES
• (1) Immediately following the incorporation of a
company under section 5, the company shall issue
to each shareholder named in the application for
incorporation, the shares to which that person is
entitled.
• (2) Immediately following the issue of a certificate
of amalgamation (=merge) under section, 244,
the amalgamated company shall issue to each
person who is entitled to shares under the
amalgamation proposal, the shares to which that
person is entitled.
 Sec. 60 - Dividends
(1) A dividend is a distribution out of profits of the company, other than an
acquisition by the company of its own shares or a redemption of shares by
the company.

(2) The board of a company shall not authorise a dividend in respect of some
shares in a class and not others of that class or of a greater amount in respect
of some shares in a class than other shares in that class, except where—

• (a) the amount of the dividend is reduced in proportion to any liability

attached to the shares under the company’s articles; or

• (b) a shareholder has agreed in writing to receive no dividend or a lesser

dividend than would otherwise be payable.
DEBENTURES = a corporate security