1. Overview of Company Incorporation in Sri Lanka
Sri Lanka is a culturally rich nation. It enjoys a diverse population and natural beauty. The high employment rate among the working class and freedom of doing business make a good business portfolio for foreign and domestic entrepreneurs. Among South Asian countries, Sri Lanka has the most liberal trade market, allowing up to 100% foreign investment (100% ownership to foreign shareholders) in the private sector with some restrictions in certain business sectors. Sri Lanka ranks highest among South Asian countries for ease of incorporation. The country has a well-documented and established procedure for setting up a business.
2. Why should you register your business in Sri Lanka?
It has many competitive advantages compared with South Asian countries in the region, and Sri Lanka takes its pride among others mainly;
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The first and foremost factor is that being a resident is not essential as 100% foreign ownership is allowed with restrictions in certain areas for foreign entrepreneurs
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It takes a very few days to incorporate the company ( within three days from the submission of the registry documents)
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Existence of a corporate-friendly environment
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Social stability among residents
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Highest literacy rate in the world
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English speaking ability
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Cost-effectiveness including foreign currency advantage ( 1 US$ = 300 LKR)
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Friendliness of the people of Sri Lanka
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Highest in IT literacy among others
3. The process of company incorporation
Company incorporation in Sri Lanka is a straightforward process that can be completed relatively quickly. This article provides an overview of the steps involved in incorporating a company in Sri Lanka.
Step 1: Choose a company name.
The first step in incorporating a company in Sri Lanka is to choose a suitable name for the company. The name should not be identical or similar to the name of any other company registered in Sri Lanka. The name should also not be offensive or misleading. We should seek name approval from the Registrar of Companies (ROC) to obtain a name approval number for the rest of the process.
Step 2: Preparation of documents
It is required to prepare necessary documents such as articles of the company (Company’s constitution), forms 1, 18 and form 19. It is advisable to hire an experienced company secretary for the incorporation process because it prevents errors in the process to avoid delays and incurring additional costs.
Step 3: Register the company.
Once a name has been chosen, the next step is to register the company with the Registrar of Companies. The registration process involves submitting the company’s articles of association, memorandum of association, and other relevant documents to the Registrar of Companies. The registration fee varies depending on the type of company being registered.
Step 4: Obtain a business registration certificate (incorporation certificate)
After the company has been registered with the Registrar of Companies. In addition, it is advisable to obtain a Tax Identification Number (TIN) from the Department of Inland Revenue. This certificate is required for tax purposes in compliance matters.
Step 5: Obtain any necessary licenses and permits Depending on the nature of the business,
it may be necessary to obtain additional licenses and permits from various government agencies. For example, if the business involves importing or exporting goods, it may be necessary to obtain an import or export license.
Step 6: Opening a bank account (Inward Investment AC and Current AC)
Once all the necessary registrations and licenses have been obtained, the next step is to open a bank account in the name of the company. This account will be used for all financial transactions related to the business. In addition to the company’s current accounts, it is mandatory to open an Inward Investment Account (IIA) in the name of the foreign shareholder(s). Investing in the company will route to the company via IIA. After the incorporation, the company secretary shall issue shares to the foreign shareholders upon receipt of money to the company via IIA. In addition, the company repatriates profit through IIA to its shareholders.
4. The Type of company you register in Sri Lanka
1. Private Limited Company: This is the most sought-after establishment for registering a company in Sri Lanka. This type of company requires a minimum of one director and one shareholder to run its business in the country. It has an independent existence from its officeholders, and their liability is limited to the share they have invested in the business. There is no minimum capital required for starting a private Ltd Co, in Sri Lanka. This setup can be wholly foreign-owned with only the requirement that the company Secretary be a Sri Lankan Citizen.
1. Private Limited Company: This is the most sought-after establishment for registering a company in Sri Lanka. This type of company requires a minimum of one director and one shareholder to run its business in the country. It has an independent existence from its officeholders, and their liability is limited to the share they have invested in the business. There is no minimum capital required for starting a private Ltd Co, in Sri Lanka. This setup can be wholly foreign-owned with only the requirement that the company Secretary be a Sri Lankan Citizen.
2. Overseas Company: A foreign entity whose business is registered outside the country and is governed by the norms set by the parent company in the Home country. It operates as a branch of the parent company in Sri Lanka. (Ref for more details https://www.scbcorporate.com/forming-an-overseas-company-in-sri-lanka/)
5. Other matters for consideration
As we mentioned above, there should be at least one shareholder and one director for the company at the time of company incorporation. That shareholder and director could be the same person who could be a foreign national or local individual.
Further, at the time of company registration, it requires the intended office address. ROC shall not register a company without a proper address in Sri Lanka, therefore, it is a mandatory requirement.
6. In conclusion
In conclusion, incorporating a company in Sri Lanka involves several steps, but the process is relatively straightforward. It is important to choose a suitable name for the company, register it with the Registrar of Companies, obtain a business registration certificate, obtain any necessary licenses and permits, and open a bank account. By following these steps, entrepreneurs can establish a legal and compliant business in Sri Lanka.