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New law to be enacted soon for re-registration of companies in Sri Lanka 

July 11, Colombo (LNW): The government of Sri Lanka is set to enact a new law to identify active companies, aiming to enhance policy-making and economic planning. 

As of March 2024, the country had 199,484 registered companies, with 1,995 new companies established in January 2024 and 4,500 in 2023. This follows a period of economic resurgence after a crisis, with company registrations increasing from 17,819 in 2022 to 22,376 in 2023.

To streamline the re-registration of companies under the Companies Act No. 07 of 2007, the Cabinet of Ministers approved the introduction of a new law. 

This will involve instructing the Legal Draftsman to prepare a Bill based on a developed concept paper. The new law aims to keep data on active companies’ current, aiding in accurate policy-making and economic planning.

Currently, while there are nearly 200,000 registered companies, the existing Companies Act lacks provisions to determine which of these are actively operating. 

The proposed legislative update aims to close this gap, ensuring better regulatory oversight and governance. The proposal, presented by the Industries Minister, underscores the need for this legislative change to improve the system.

In addition to identifying active companies, Sri Lanka is also enhancing transparency regarding beneficial ownership of companies.

 The Fiscal Policy Department of the Ministry of Finance has made it compulsory for companies to disclose beneficial ownership details. This includes information on shareholders with more than a 25% stake or beneficiaries who actively control the company.

New amendments to the Companies Act will be enacted by June 2024 to align with the Financial Action Task Force (FATF) standards. 

These amendments will require the Registrar General of Companies (RoC) to maintain a separate register on beneficial ownership. This register will provide information for investigative purposes and ensure timely access for competent authorities.

The current system lacks a mechanism to identify beneficial ownership, with law enforcement agencies accessing this information through financial institutions.

 Although the Companies Registrar maintains basic legal information on companies, the beneficial ownership data is not widely available. Given the legal gaps, the information provided to financial institutions may not be comprehensive or accurate.

To address these issues, the RoC, in collaboration with the Financial Intelligence Unit (FIU) and other authorities, has drafted amendments to fully align the legal framework with FATF standards. These amendments are pending final review and will be submitted to Parliament for approval and adoption next year.

 Sri Lanka’s new legislative measures aim to improve the identification of active companies and ensure transparency in beneficial ownership. This will support better economic planning, policy-making, and regulatory oversight, aligning with international standards

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