1.

Company Registration procedure

Section 4: A company may be incorporated by making an application

to the RGOC in the prescribed form (i.e., Form 1) signed by each of
the initial shareholders, together with the articles signed by each of
the initial shareholders, consent from each director (Form 18) and
initial secretary (Form 19).

Section 5: The RGOC will enter the points of interest of the company in
the Register, appoint a unique number and issue a certificate of
incorporation. Thus, within 60 working days of the incorporation of the
company, the RGOC will inform the general public, by a notice
published in a daily newspaper which has circulation in Sinhala, English
and Tamil languages specifying (i) the name of the company; (ii) the
company registration number; and (iii) the address of the registered
office of the company.

Section 6: Company name should end as follows:

a listed company – “Public Limited Company” or “PLC”.

other limited company – “Limited” or “Ltd”.

private company – “(Private) Limited” or “(Pvt) Ltd”.

Section 7(1): Prohibited names:

 A name that is indistinguishable from a name of another

organization.
 A name that contains the words “Chamber of Commerce” except
it is a company limited by guarantee incorporated for the
 purpose of promoting art, science, religion, charity, sport or any
other like valuable object.
 A name that is misleading in the opinion of the RGOC.

Section 7(2): The consent of the Minister, having regard to the

national interest, is required, to use:

 'President' or 'Presidential” or similar words.

 'Municipal' or 'other Local Authority' or proposing association
with any Society or body incorporated by an Act of Parliament.
 'Co-operative' or 'Society’.
 'National', 'State' or ' Sri Lanka ' or similar words.

2. Types of companies

According to section 3 of Companies act; Subsection (1)

 Limiting Companies

Limited companies are the most usually utilized strategy for operating
a business under the corporation structure. These are companies that
issue shares, the holders of which have the obligation to add to the
assets of the company, assuming any, specified in the company’s
articles as attaching to those shares. The responsibility of the
shareholders is restricted to what they have invested. There can be
public limited companies or private limited companies.

Public limited companies: This is a limited company that has listed its
shares on the stock exchange. A listed company has the chance to
raise its capital from the people in general and therefore has access to
a larger capital base.
Private limited companies: These companies are prohibited from
offering shares or other securities to the public. The number of
shareholders is restricted to between 1 to 50. Those who obtain shares
by virtue of their employment with the company (for example, under
an employee share option scheme) are not considered in calculating
the aforesaid number of shareholders.

 Unlimited Companies

These are companies that issue shares, the holders of which have a
limitless responsibility to contribute to the assets of the company
under its articles. Accordingly, the shareholders have a joint, a few
and non-restricted obligation to meet any deficiency in the assets of
the company to empower settlement of any remarkable financial
liability in the event of the company's formal liquidation. These
companies extend, in general, a greater assurance and confidence to
creditors and trade financial transactions, because of the unlimited
liability taken upon by the shareholders.

 Companies Limited by Guarantee

These are companies that do not issue shares, the individual from
which embrace to contribute to the assets of the company in the case
of its being put into liquidation, in an amount indicated in the
company’s articles. This is unsuitable for business purposes. They are
frequently used for establishing not-for- profit or charitable
organizations.
The articles should set out the objects of the company and incorporate
a statement to the effect that the liability of its members is restricted
by the amount of guarantee undertaken by each member in the event
of the company being put into liquidation. At least two individuals are
necessary.

3.Who are eligible to become a director of a company?

Any individual who is not disqualified under Section 202(2) can be

named as a Director of a company. The accompanying people are so
precluded:

 an individual who is under eighteen years of age.

 a person who is an undischarged insolvent.
 a person who is or would be precluded from being a director of or
be concerned or participating the promotion, development, or
management of a company, under the Companies Act, No. 17 of
1982, but for the repeal of that Act.
 a person who is prohibited from being a director or advisor of or
being concerned or part taking in the administration of a
company under section 213 or section 214 of the Act.
 a person who has been adjudged to be of unsound mind.
 a person that is not a natural person.
 in relation to any specific company, a person who does not agree
with any qualifications for directors contained in the articles of
that company.

4.Directors’ duties

The new Act forces legal obligations on directors of a company:

  to act in good faith and in the best interests of the Company.
(Section 187).
 To follow the Act and the Company's articles of association.
(Section 188).
 not to act in a way which is reckless or grossly negligent but to
exercise the degree of skill and care that may reasonably be
anticipated of a person of his knowledge and experience.
(Section 189).
 to depend on and use information and advice got from others
only if he knows that such reliance is not unwarranted and if he
is not put on notice after making adequate inquiries. (Section
190).
 to make exposure of interests. (Section 192)
 not to utilize company information. (Section 197)
 to disclose share dealings. (Section 200)
 to approve remuneration and different benefits for directors only
as provided for in Section 216.
 not to give loan or give guarantee or security to a director unless
permitted under Section 217.
 to act as provided for in Section 219 in the event of a situation
of insolvency.
 to call an extra-ordinary general meeting if it appears that there
will be serious loss of capital. (As provided for in Section 220).

5.Calls on share

Where a call is made on a share or some other obligation connected to

a share and is performed by the shareholder, the company shall within
ten working days give notice to the Registrar in the prescribed type of:
  the amount of the call or its value as controlled by the board
under subsection (3) of section 58; and
 the amount of the stated capital of the company following the
making of the call.

Where a company fails to comply with the following requirement

 the company shall be guilty of an offence and be obligated on

conviction to a fine not exceeding fifty thousand rupees.
 every officer of the company who is in default will be guilty of an
offence and be liable on conviction to a fine not exceeding fifty
thousand rupees.
References
Anon., n.d. Helplinelaw. [Online]
Available at: https://www.helplinelaw.com/law/sri%20lanka/company
%20law/incorporation.php
[Accessed 30 07 2021].

Shanila H. Gunawardena [ LL.B. (Hons.) (Colombo), A.-a.-L. C. (.,

2019/2020. COMPANY LAW – PART I, s.l.: s.n.