Any change in the status of the business, i.e., change of name of the business, change of nature of the business, change of registered address of the business, must be notified within 14 days of such change on the prescribed form accompanied by the prescribed fee.

On the cessation of the business operation or on the death of the proprietor of a business, notification of it must be made to the registering authority in the prescribed form within 3 months of cessation or death of the proprietor. The notice should be accompanied by the original certificate of registration of the business or if the original certificate is lost or misplaced, a certified copy of same together with an affidavit sworn by the proprietor in the case of cessation of business and by a personal representative of the proprietor in the case of death. The affidavit must testify that the original is lost or misplaced and that the certified copy is field in lieu of such original. There is no fee payable on this notice of cessation.

PARTNERSHIP
There are several enactments that govern the laws relating to partnerships in Sri Lanka. Section 3 of the Introduction of Civil Law Ordinance Chapter 89 provides that the English Law will apply to partnerships. Partnerships Ordinance Chapter 179 of 1866 contain a few provisions amending the law of partnership. The other ordinance, which is applicable, specifically to partnerships, is the Prevention of Frauds Ordinance Chapter 84.

A brief description of matters that should be stipulated in the partnership agreement is given below.

(i) Nature of business, place of business and name of the firm
(ii) Date of commencement of the partnership and the duration of the partnership
(iii) How the capital is to be provided
(iv) Maintaining of banking accounts and the signatories to the bank accounts
(v) Profits and outgoings and method of sharing
(vi) The Management of the business and the active partners
(vii) Accounts
(viii) Arbitration procedure
(ix) Borrowing powers of the partners
(x) Method of dissolution

Any change in the status of a business, i.e., change of name of the business, change of nature of the business, change of registered address of the business, addition or deletion of partners and change of personal details of the partners must be notified within 14 days of such change on the prescribed form accompanied by the prescribed fee.

If the partnership ceases to carry on business, it must deliver to the Registrar a notice in the prescribed form within 3 months. There is no fee payable on this notice.

COMPANIES
The Companies established in Sri Lanka are governed by the Companies Act No. 17 of 1982 (the Companies Act). The Companies Ordinance Chapter 145 of 1939 governs the companies, which were incorporated prior to 1982.

The registering authority for a limited liability company is the Registrar of Companies. The Registrar of Companies comes under the purview of the Minister of Trade and is administered by the Department of Registrar of Companies. Unlike in the case of a sole proprietorship or partnership business where the registration is effected in the area of operation, for a limited liability company the registration can only be effected at the Department of Registrar of Companies. For example, even if a company is to operate in Jaffna or in Ampara the registration has to be done in Colombo with the Registrar of Companies.

The investors who are promoting the establishment of the company and who place their signatures on the document called the Memorandum and Articles of Association are called subscribers. The subscribers in the case of a limited liability company limited by shares have to take (purchase) a minimum of one share each in order to be a subscriber.

The Memorandum and Articles of Association is a booklet made up of two parts. Part one is the Memorandum of Association and part 2 is the Articles of Association.

The Memorandum of Association is made up of 5 essential components. They are:

(i) The name of the company.
(ii) The district in which the company is to be registered.
(iii) The objects of the company, which is categorized into three parts or
categories viz. the primary objects, the ancillary powers and other objects.
The latter category is optional but the first two categories are essential.
(iv) The statement that the liability of the members is limited.
(v) The authorized or nominal capital of the company and its composition in the case of a company limited by shares and the extent of the guarantee in the case of a company limited by guarantee.

The Articles of Association embodies the rules and regulations governing the operation of the company. These rules and regulations have to be formulated or set up within the framework of the Companies Act. There are schedules in the companies Act, which set out the guidelines for operation of the various categories of companies. The Articles of Association must fall within these guidelines but may be modified or amended to suit particular needs and aspirations provided those modifications are not contrary to the provisions of the Companies Act.

The privilege of limited liability for business debts is one of the principal advantages of doing business as a company. A company’s existence continues irrespective of the change in the composition of its members. A company should have a common seal and this common seal acts as the official signature of the company. A company can sue and be sued in its corporate name.

The financial statements of a company should be audited by a chartered accountant who should state an opinion whether the financial statements give a true and fair view.

On incorporation of the company, the Registrar of Companies (Registrar) will issue a Certificate of incorporation. This is generally regarded as the birth certificate of the company. A specific number will be given for the company and this is called the registration number of the company.

The specific details of the forms of companies that can be incorporated in Sri Lanka are discussed below:

PRIVATE COMPANY
Out of the many forms of companies that can be incorporated to carry on business, the most common and popular is the private company. Two or more members can incorporate a private company. The membership of a private company is limited to 50 members. A private company cannot invite the public to subscribe to its shares neither can it issue share warrants for debentures. The right to transfer its shares is also restricted.

The liability of the members of the company is limited to their unpaid amount if any, on the shares allotted to them. As members of the company the shareholders will not be personally liable for the debts of the debts of the company except for the amount that is unpaid on their allotted shares.

There should be at least one director and a secretary for a private company. There is no limit to the maximum number of directors that can be appointed, stipulated in the Act. Usually the maximum and in most cases the minimum number of Directors is prescribed in the Articles of Association. A director can function as a secretary if there are two or more directors appointed. The secretary of a private company has to be a secretary registered with the Department of Registrar of Companies (ROC), if the turnover of the company is more than Rs. 1 million or the company has a paid up capital of Rs. 500,000/- or more. The qualifications for a person seeking Registration as a secretary are set out in the Government Gazette No. 471/6 of 14th September 1987. there is no age limit for directors of a private company.

The name of a private company should end with the words “(Private) Limited”. The Articles of Association of a private company should contain that the rights to transfer shares are limited that the membership is limited to 50 members, and that is it is prohibited to invite the public to subscribe to its shares.

To pass resolutions of a private company at a general meeting, certain specified day’s notices should be given to all the shareholders as set out below:

(i) 14 days notice for an annual general meeting (AGM), or for any general meeting to pass a special resolution,
(ii) 10 days notice for any general meeting to pass an ordinary resolution or an extraordinary resolution.

A private company can commence its business immediately on its incorporation and does not have to wait for any other certificate.

PUBLIC COMPANY
In a public company, the membership should be 7 or more but there is no limitation of members and no restriction in transferring the shares of the company.

There should be a minimum of 2 directors in a public company. The maximum limits of the number of directors are usually set in the Articles of Association of the company. The appointment of a qualified secretary who is registered at the ROC is a must for a public company.

The name of a public company has to end with word “Limited”. A director of a public company should retire at the age of 70 unless the company passes a resolution that the said age limit should not apply to that particular director.

To pass any resolutions at general meetings of a public company,

(i) 21 days notice should be given for an annual general meeting (AGM) or to pass a special resolution at a general meeting; and
(ii) 14 days notice should be given to pass an extraordinary or an ordinary resolution at a general meeting.

A public company has to publish a prospectus before it issues shares to the public or deliver to the ROC a statement in lieu or prospectus if no public issue is made. A public company has to obtain a certificate to commence business before commencing business.

Until this certificate is obtained a public company is prohibited of doing business ore exercising its borrowing powers. A public company. Therefore the minimum number of shareholders should be 7.

A company is a guarantee company when the liability of the members is limited by its Memorandum to such amount as the members would in the Memorandum respectively undertake to contribute to the assets of the company in the event it being wound up. The name of the guarantee company should end with the words “(Guarantee) Limited”.

The Articles of a guarantee company should state the number of members with which the company is to be registered. If the number of its members is increased beyond the registered number, it has to give a written notice of such increase to the Registrar within 15 days of such increase.

A guarantee company cannot proceed with its business without obtaining the certificate to commence business.

OTHER TYPES OF COMPANIES
In addition to the types of companies discussed so far, there are other types of companies that could be incorporated or registered in Sri Lanka to carry on a business. These are discussed below.

BRANCH OFFICE OR LIAISON OFFICE
Section 394 of the Companies Act provides for the registration of a foreign company or a branch office. A company that is registered outside Sri Lanka wishing to open a branch office within Sri Lanka is permitted to do so on tendering for registration the documents mentioned below.

(i) A certified copy of the Memorandum and Articles of Association of the parent company (If this document is in any language other than the English language, a certified translation of same), certified list of directors, certified copy of the Certificate of Incorporation/Registration and a certificate of good standing (i.e. a certificate that the company is in operation and has no winding up proceedings or any civil proceedings against it). All these documents have to be certified by the Registrar of companies in the country of origin and counter certified by the Sri Lankan Embassy or Consulate in that country. Further such certification should be of recent date.
(ii) A statement as to whether the company will be engaging in trading activities in Sri Lanka or merely intending to function as a Liaison Office.
(iii) Power of attorney executed in the country of origin in favour of the agent of the company who is authorized to represent the company in Sri Lanka. This document must be re-registered in Sri Lanka.
(iv) Companies Forms 55, 56 and 57, which can be obtained from the Department of Registrar of Companies.

The Memorandum of Association of the parent company must have the power to operate outside the country of the country of origin. If this is not provided for in the Memorandum of Association a resolution must be passed accordingly and a certified copy of it forwarded as provided for the other documents.

UNLIMITED COMPANIES
If the liability of the members is unlimited and if the member’s liability towards the liabilities at the time of winding up is not limited, then the company is called an unlimited company.

BANKING COMPANY
Part XIV of the Companies ACT defines a banking company as a company which carries on, as its principal business, the accepting of deposits of money, subject to withdrawal on demand by cheque, draft, order or otherwise.

The banking trade is restricted to public companies registered under the Companies Act. If however a foreign association, partnership or a company wishes to carry on the business of banking within Sri Lanka, it should have formed as a banking company in the foreign country. It should also establish a place of business within Sri Lanka under the Provisions of the Companies Act.

In addition to the Companies Act, the business of banking is regualated by a number of laws including the Banking Act No. 30 of 1988, Finance Act No 11 of 1963 and Central Bank Regulations.

UNIT TRUSTS
A Unit Trust could be described as a fund where money subscribed by many people is pooled and then used to purchase a variety of investments. The units represent entitlement to the assets of the trust in proportion to the amount invested. All investment funds are held in the name of the “trustee” but the fund manager makes the investment decisions. All the rights and duties of the unit holders, the trustees and the fund manager are set out in a trust deed.

Unit trusts are one form of collective investments, which provide investors with the convenience and cost effective means of participating in a complex and risky share & money markets under the guidance of professional investment mangers. Unit Trust is a relationship between three parties namely, the investor, the trustee and the investment manager.

CO-OPERATIVE SOCIETIES
The Co-operative Societies Law No. 5 of 1972 governs the Co-operative Societies established in Sri Lanka.

Co-operative Societies were established with the object of diverting to the consumer some of the benefits usually derived from the industry by those who provide the capital. For example, consumers can combine in the societies to buy goods wholesale and to retail them to members thereby eliminating the middleman and obtain goods more cheaply.