Sri Lanka’s new Companies (Amendment) Act No. 12 of 2025, certified on August 4 and hailed by the government as a milestone in corporate governance, has sparked mixed reactions within the business community. While international audit firm Deloitte Sri Lanka has praised its alignment with global compliance standards, many private-sector stakeholders question whether the Marxist-oriented government’s reforms reflect an underlying distrust of the very sector that drives national economic growth.
The Act introduces 21 wide-ranging amendments to the Companies Act of 2007, with the most significant being the mandatory disclosure of beneficial ownership (BO). All companies, including offshore and overseas entities operating locally, are now required to maintain and update records of their ultimate beneficial owners. Supporters argue that this move strengthens transparency, curbs money laundering, and positions Sri Lanka closer to Financial Action Task Force (FATF) and Asia-Pacific Group (APG) anti-money laundering benchmarks.
However, private-sector leaders voice concern that while beneficial ownership disclosures improve accountability, they may also deter legitimate foreign investment. For listed companies, tracking beneficial ownership among diverse overseas investors is a complex task that could raise compliance costs and discourage capital inflows.
Deloitte’s analysis emphasizes the long-term advantages. Companies will need digital tools to automate compliance, detect politically exposed persons (PEPs), and protect sensitive data under the Personal Data Protection Act (PDPA). These requirements may initially burden firms, but ultimately enhance investor confidence and support Sri Lanka’s case in the FATF mutual evaluation in 2026.
Other reforms include provisions for stricter enforcement. The Act introduces a general penalty clause (Section 513A) for non-compliance where specific penalties are absent, alongside mechanisms such as Section 484A, which grants extensions for furnishing information to the Registrar of Companies. Such measures aim to eliminate ambiguity and strengthen the regulator’s hand.
Still, critics argue that the sweeping powers given to regulators may reflect the government’s skeptical view of private enterprise. The Marxist-oriented administration has often portrayed the private sector as insufficiently transparent and overly profit-driven. Business chambers fear that excessive monitoring, if implemented without dialogue, could create a climate of state overreach, deterring entrepreneurial risk-taking at a time when economic recovery relies on private-led growth.
From Deloitte’s standpoint, the reforms represent a shift from optional governance to mandatory trust-building. “Transparency and governance are no longer optional, they are the foundation for sustainable business,” said Disna Perera, Director – Corporate Secretarial, Deloitte Sri Lanka and Maldives.
Analysts suggest the real test will be in implementation. Success will depend on modernizing digital infrastructure, building inter-agency coordination, and balancing regulatory oversight with business competitiveness. Without these, reforms may burden firms without delivering the promised investor confidence.
Ultimately, the Companies (Amendment) Act marks a double-edged development. On one side, it modernizes Sri Lanka’s corporate law and boosts international credibility. On the other, it risks reinforcing perceptions of a government wary of the private sector — the very engine of growth the economy desperately needs.
