PARLIAMENT PASSES NEW COMPANIES BILL

A new Bill aimed at updating the Law relating to Companies in Sri Lanka was passed in Parliament on October 20, 2006. During the debate in Parliament on the Bill, which listed for two days, Members of Parliament from all the political parties appreciated the importance of the new Bill which they emphasized as overdue.

Some of the major changes to be introduced by the new Bill, when it will become law, upon the receipt of the assent by the Speaker of Parliament are as follows.

(i)                The simplification of the regulations of companies by introducing "Articles" in registering a new company instead of Memorandum and Articles of Association.

(ii)               Granting of the option to the subscribers to include objectives in the Articles or allowing them to carry on any legal business.

(iii)             Acceptance of 'single shareholder' concept.

(iv)              Simplification of the decision making in private companies if authorized by all shareholders, subject to safeguards against insolvency.

(v)               Doing away with the requirement to file annual financial statements by private companies unless required to do so by the Registrar of Companies.

(vi)              Reduction of share capital with notice, but without court approval.

(vii)            Greater protection for minority shareholders by minority buy-out rights at a fair price.

(viii)           Tabling of accounts - reduction of period to 06 months.

(ix)             When an Auditor resigning or ceasing to hold office, granting of the option to deliver a statement to the company regarding his reasons for resigning or ceasing in office, in the event he feels the shareholders or creditors should be aware of those facts.

(x)              Making the amalgamation of companies easier, by granting the authority for each amalgamating company to approve an amalgamation proposal on the basis of a satisfactory solvency test without applying to the court.

(xi)             Granting of the authority for the Board of Directors to appoint an 'Administrator' to ensure the future survival of the whole or part of the company.

(xii)           Clear statements of directors' responsibility and accountability in company affairs, inclusive of disclosure of interest.

(xiii)          Repeal of the law relating to Peoples Companies and substituting therefore the Law relating to the Public Companies.

(xiv)          Repeal of Companies Act No. 17 of 1982, Companies (Special Provisions) Law No. 19 of 1974 and Foreign Companies (Special Provisions) Law No. 09 of 1975.