Strengthening Corporate Governance: Sri Lanka Enacts Amended Companies Act No. 12 of 2025

COLOMBO (News 1st): The amended Companies Act No. 12 of 2025 has been enacted into law with the objective of strengthening the governance framework of corporate entities in Sri Lanka.

Primarily, these amendments aim to enhance corporate transparency, reinforce governance, and align with international anti-money laundering (AML) and counter-terrorist financing (CTF) standards, which form the foundation of the country’s AML/CFT framework.

With 21 amendments introduced, the new Act was certified and enacted on 4 August 2025.

The most significant update in the Amended Companies Act is the introduction of beneficial ownership disclosures under Sections 130A to 130J.

This provision requires companies, including offshore and overseas entities registered locally, to disclose and maintain up-to-date records of their beneficial owners.

Rationale for Business Beneficial Ownership (BO) Disclosure

The Central Bank of Sri Lanka (CBSL) advocated for the introduction of Beneficial Ownership (BO) disclosures primarily to address deficiencies in AML/CFT controls.

This measure follows recent instances in which criminal elements have utilized anonymous shell companies to conceal illicit funds and pyramid schemes.

BO regulations make it considerably more difficult to obscure the identity of individuals behind suspicious corporate structures.

Furthermore, these disclosures support the Financial Intelligence Unit (FIU) of CBSL by providing accurate ownership information necessary to conduct effective investigations and risk assessments.

Accordingly, every company is required to maintain a register of its beneficial owners at its registered office, which must be kept up to date with accurate and timely information.

Information Required:

* Full name
* Date of birth
* Nationality
* Residential and business addresses
* Nature and extent of interest or control
* Date on which the person became a beneficial owner

Additional Key Amendments in the New Companies Act:

Single Shareholder Companies: Companies limited by shares may now be incorporated with a single shareholder.

Prohibition of Bearer Shares: The issuance of bearer shares and share warrants to bearer is strictly prohibited. 

Existing holders must disclose their identities within 60 days and convert them into registered shares. 

Non-compliance will result in the nullification of rights attached to such instruments.

Share Allotment Timelines: Companies are now required to allot shares within 20 working days of receiving consideration, except in cases of bonus issues funded from reserves.

Director Removal Procedure: The process for removing directors has been revised to ensure due process, including the requirement for special notice and the opportunity for directors to respond.

Accordingly, these essential reforms are expected to enhance investor confidence and support efforts to combat financial crimes and related offences.

Read More Here: https://www.parliament.lk/uploads/acts/gbills/english/6389.pdf