Private Limited Company Registration in Sri Lanka
This article explains the process of registering private limited entities in Sri Lanka. If you have an unregistered business, your business’s name is your name. Or the name of the person who owns it. But if you want to rename your company, you must register it. You can register it as a Private Limited Company.
A brief introduction to Private Limited Entities
Private limited companies are a form of Companies that gives unique advantages. Private limited companies are the most popular business type all over the globe and also in Sri Lanka. There are some differences from country to country.
E.g.: – “LLC” in the United States is a privately owned company. In Sri Lanka, we can recognize it as a “Private Limited Company.”
So, we are talking about Sri Lanka; this company type is privately owned. You need at least two employees, one shareholder, and one director to start a Private Limited Company. A private limited company’s maximum number of owners is limited to 50.
Here are some main Advantages of setting up a private limited company.
- Separate Legal Entity
- Limited liability
Limited liability is a huge advantage of PVT LTD companies. It limits the owners’ risk and protects their private assets legally.
- No minimum share capital
- Easy transfer of Ownership
- Easy to raise money.
Registering your business is a significant step because registering the company will give you various benefits and security.
Let us explain the Advantages of Registering your Business.
If you register your business,
- You ensure that your distinctive company name will be protected.
- Licenses and permits.
- Register with the tax authorities and the Inland Revenue Department.
- When you open a bank account and choose financial services for your company’s needs.
- When performing marketing campaigns, you can establish brand identity.
Unlike the present, company registration has been a complicated and time-consuming process in the past. Now it is effortless to do because you can do it online. Using the E-ROC website, you can register your business hassle-free. From this point, we will explain the process of registering a private limited company step by step.
Step-01
Reserving a Unique Company name
To register your business as a private limited company, your company should have a name. You can choose your desired name and check the availability of that name, whether it is taken or not by someone else. And reserve it from the website of “The Department of Registrar of Companies” or “E-ROC.”
(https://eroc.drc.gov.lk/ – You can use this link to access E-ROC)
To use this service, you should register in E-ROC. Search your desired name in the website’s search bar. You could use that name if any company name did not list under search results. But In case you found the same company name as yours in the search results, you need to go for another name. The government cost for business name reservations is LKR 2300 + VAT 15%. Once a company name has been reserved, the reservation is valid for 03 months.
Step-02
Registration of the company
After a successful company name reservation, you can follow these steps to register your company.
- Filling company details
Fill usual basic information about your company.
- Registered office address
- Province
- District
- Divisional Secretariat Division
- Grama Niladhari Division
- Postal code
- E-mail address of the company
- Entering shareholder Details
In this section, you should include details about your company’s directors/shareholders and secretaries.
- Submitting the Company Registration Forms
In the company registration process, there are some forms to submit. You can download them for E-ROC. The E-ROC system will automatically generate the documents in the appropriate step.
The Company Act No.07 of 2007 has full guidelines about companies. Article 221(1) states that every company must have a director and a secretary. And there is one thing most important. You must hire the company secretary before the company registration process. The reason is the company secretary must sign confirming that he or she will function as the new company’s secretary.
- Form 1 – Company Registration (Rs. 4,600 + VAT 15%).
- Form 18 – Consent and Certificate of Director (Rs. 2,300 + VAT 15%).
- Form 19 – Consent and Certificate of Secretary/Secretaries (Rs. 2,300 + VAT 15%).
According to section 475 in Company Act no.07 of 2007, no handwritten forms are allowed. All documents must be printed or typewritten. After filling out the forms, you should scan them and save them as PDF files. Then you can upload them to the E-ROC. There are relevant fields to upload the appropriate file. Keep them as PDF files because uploading PDFs is the only allowed file type.
Step-03
Submitting Articles of Association
What are Articles of Association? Let us explain.
According to the company act of Sri Lanka (Act no.07 of 2007), every company should have a set of Articles of Association. This document covers the company’s objectives, rights, and obligations of the shareholders, the management, and the administration. Simply put, this document tells what your company is about to the registrar and everyone.
What is inside the Articles of Association?
Articles of Association is a set of paragraphs in which each section includes information about your company.
- The company name.
This is to show your company has a unique name and prove your company is a legal entity.
- The purpose of the company
This includes why you created your company. What is the reason behind it? What you want to achieve future.
- The organization
This is for some organizational details like the below,
- The company address.
- Number of directors
- Identity of the founders
- Original shareholders etc.
- Shares and shareholders
You should include All details about issuing, calling, and distributing shares in this topic.
- Meetings
This is about the meeting of the shareholders. The rules apply when holding a shareholder meeting, notice of the meetings, details about voting, etc.
- Director/s and Secretary
Includes powers and duties of directors and secretaries, details about managing directors and executive directors, appointment and removals of the directors and secretaries, and details about their meetings.
- Accounts, audits, and indemnity
In this section, you should explain how the company maintains accounts and financial statements. Since the Audit is a necessary part of an operating company, you should say about conducting audits.
- Liquidation and removal from the register.
If you have to close down your company, what is your process? How you appoint a liquidator and the method you follow to distribute your surplus assets. You need to include those details in this section.
- Miscellaneous
There are some details you can include in this topic.
- The documents which the company will keep.
- The rights of the directors and shareholders to the above documents.
- Name of the company
- Information about insurance, notices, indemnity, and modifications concerning private companies.
You should draft all the above topics to create an Articles of Association. You have two options to submit Articles of Association.
- Adopt the standard set of Articles of Association from the companies act.
- Draft your own Articles of Association.
Step-05
Making the Payment
After the above steps, after successfully all the necessary document uploading, you can make the payments online. You can use credit or debit card for the charges.
Step-06
Public notice of company incorporation
This is the final step of registration of a private limited company. And this is the only process that you cannot do online. This is typically accomplished by posting a brief article in the local newspapers. This notice should be published in a gazette and a daily newspaper. In the statement, this information should be included.
- Company registration number
- Address of the registered office
- Company name
