Overview of Company Incorporation in Sri Lanka
Sri Lanka is an island country located in the Indian Ocean. Being a culturally rich nation, it enjoys a diverse population and natural beauty. High employment rate amongst the working class and stable economy poise a good business portfolio for foreign and domestic entrepreneurs. Amongst the South Asian Countries, Sri Lanka has the most liberal trade market, and it allows up to 100% Foreign Investments in the Private sector with some restrictions in certain business areas.
Why Should You Register Your Company in Sri Lanka?
Incorporating a company in Sri Lanka is very hassle-free and investor-friendly compared to most countries of the world. The first and foremost factor is that it is not essential to be a resident as 100% foreign ownership is allowed with restrictions in some sectors for foreign entrepreneurs.
Other reasons are:-
- Good market structure and corporate-friendly atmosphere,
- High employment rate,
- Social stability amongst the residents.
Things to Consider Before Incorporating a Company in Sri Lanka
Following is a checklist for the investors who seek to incorporate a business in Sri Lanka.
Where do You Want to Open a Business?
- Demographics of your employees and Target Audience: Any successful business has two essential things: a good customer base and employee satisfaction in the job. Hence these factors are a must to consider while registering your business in Sri Lanka.
- Requirements of your supply chain:Supply chain management is an essential feature of a business, according to the type and setup of your business. Supply chain management includes transportations, storage, delivery patterns, etc. These are different for every business set up the investor needs to think about whether his company will suffice according to their business operations.
- Local competition:Local competitions are a boon and a bane for any new business setup. Boon because it indirectly indicates that the product or service you are taking to the market has a customer base in the area you are planning to do your business, bane because it might overshadow your presence in the market. Hence, it is advised that the business knows about the local competition in the region.
- Overhead costs: Overhead costs include Labour, Property, Utilities, Corporate taxes, Incentives, and other day-to-day expenses. It is the responsibility of business to accommodate these charges according to its business structures and select the area which offers all the services at the least possible cost.
- State and local laws, regulations, and taxes: Sri Lanka has a diverse racial culture spread across the state. Hence it is essential to know the corporate tax policies, employment rates, and other checklists that each area may prescribe for incorporation of your company
- Quality considerations: Quality assurance is necessary for the mental and spiritual growth of the organization that is to be incorporated. The labour orientation and their skill set is substantial factor in successfully running a business. The list is not limited to only Connectivity, Infrastructure (Schools and Hospitals), Risk, and Quality of life which indirectly affect the quality of a corporation's business in the longer run.
Name and Nature of The Business
Naming your Company
The next step in incorporating a business in Sri Lanka is choosing a unique name and registering your IPR according to the repository available at http://www.drc.gov.lk. This requires comprehensive dedicated legal research because the law is strict regarding protecting Intellectual Property Rights in Sri Lanka.
Nature of business
In Sri Lanka, it's essential to choose between different types of companies considering the officeholders and capital requirements for different entities eligible for incorporation. The Major Types of the establishment are as follows:
- Public Limited Companies Requires two directors and two shareholders minimum to start a public Limited company in Sri Lanka. A public company can be listed on the Colombo stock exchange and raise capital from the public. The liability of each shareholder is limited to the extent of shares invested by them in the company. It has its existence as an artificial person, so the officeholders are secluded from any legal trouble that may arise in the normal functioning of the business.
- Limited Liability Company: This is the most sought after establishment for registering a company in Sri Lanka. An LLC requires minimum 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 an LLC in Sri Lanka. This setup can be wholly foreign-owned with only the requirement that the Secretary be a Sri Lankan Citizen.
- Partnerships: When two or more than two people come together to do business together it is called a partnership. The liability is unlimited of the partners can be limited according to the agreement between the partners. Partnerships are registered in the trade register of the city. The liabilities and other regulations between the partners is covered by the agreement that may be in written or oral form.
- Sole Proprietorship: The most accessible form of business structure that may exist in any market is a sole proprietorship because it requires no capital, and the owner's liability is unlimited. The owner can be an individual or a group of individuals. It is easy to operate, and there is no paperwork for opening a Sole proprietorship.
- Overseas Company: A foreign entity whose business is registered outside the country and is governed by the norms set by the parent branch in Home country. It operates as a branch of the parent company in Sri Lanka and has the obligation to publish its financial report in Sinhalese language.
Documents Required for Company Incorporation in Sri Lanka
- Passport Copies of all the desired officeholders.
- Pan Card (in case of an Indian national) of all the desired officeholders
- Photo Identity Proof (Driving License any other registered photo ID card) of all the desired officeholders.
- Utility Bills like electricity, municipal tax receipt or water bills.
- Specimen Signatures of all the desired officeholders.
- Trade name for your company
Benefits of Company Incorporation in Sri Lanka
The benefits are as follows:
- Digital and cost-efficient process;
- Liberal Trade market;
- Good corporate environment;
- Availability of skilled labour;
- Easy disposal;
- Relaxed commercial laws;
- Lower taxation rates.
Process for Company Incorporation in Sri Lanka
The process is as follows:
- Choose the name of business and approval
- Type of Business entity
- Details of proposed shareholders and directors
- Filing forms and other documents
- Online Application
- Issuing a public notice in the newspaper
Other Important Instruments
- Secretary: A resident secretary is needed for running your company in Sri Lanka. Obtaining written consent from the Secretary is a legal requirement before opening your dream company in Sri Lanka. A Secretary can represent the company and perform timely post incorporation compliances for the company.
- Articles of Association – Article of Association are the general bye-laws and regulations of a company. This covers all the internal employee regulations and bye laws governing functioning of organisation.
- Memorandum of Association: Memorandum of association or MOA is the document that signifies the intention of the officeholders to form a company. It is the initial document in which the intended officeholders state the objects and goals of the companies.
- Physical/ Virtual Address: Another important aspect of incorporating a business in Sri Lanka is to obtain an address where all the vital communication by the customers or the authority can be made to the company.
- Sri Lankan Bank account: For handling domestic clients, it is advised to open a Sri Lankan bank account. In case of foreign ownership after issuance of Certificate of Incorporation, the officeholders can proceed with bank account opening for the business.
- Building a Website and Logo: It is required to open a registered website of the company and create a unique logo for your organisation for successful business operations.
- Registered Phone number: Every company must have a registered phone no. which is open to receive calls and communication. It is the responsibility of the management to check that the line is operational and working during the business hours of the company.
From drafting to filing of all the necessary documents, we are a team of specialised Chartered Accountants, Company Secretaries and Advocates that will assist you in every step in the Company Incorporation Process in Sri Lanka.