Solvency test 47 Reduction of stated capital 49 Dividends 50 Recovery of distributions 50 Company may acquire or redeem its own shares 52 Purchase of own shares 53 Redemption option of company 55 Redemption at option of shareholder 55 Restrictions on giving financial assistance 56 Transfer not to be registered except on production of instrument of transfer.
Transfer by legal representative 60 Registration of transfer at the request of transferor 60 Notice of refusal to register transfer 60 Certification of transfers 61 Duties of company with respect to issue of certificates 62 Certificate to be evidence of title 63 Right of debenture holders and shareholders to inspect register of debenture holders and to have copies of any trust deed 63 Directors prohibited from acting as trustees 64 Perpetual debentures 65 Power to re-issue redeemed debentures in certain cases 65 Liability of shareholder 68 Liability for calls 68 Exercise of powers reserved to shareholders 69 Exercise of powers by ordinary resolution 69 Shareholder may require company to purchase shares 70 Notice requiring purchase 71 Purchase by company 72 Purchase of shares by third party 74 Court may grant exemption 74 Court may grant exemption if company is insolvent 75 Alteration of shareholder rights 76 Shareholder may require company to purchase shares 76 Registration of charges created by companies registered in Sri Lanka 77 Unregistered charges void in certain cases 81 Duty of company to register charges existing on property acquired 81 Register of charges to be kept by Registrar 82 Endorsement of certificate of registration on debentures 83 Entries of satisfaction and release 84 Copies of instruments creating charges to be kept by company 85 Registered office of a company 87 Change of registered office 88 Location of company records 89 Inspection of records by directors 92 Inspection of company records by shareholders 92 Public inspection of company records 93 Manner of inspection 94 Company to maintain share register 95 Place of share register 95 Stamp duties in case of shares registered in register outside Sri Lanka 97 Index of shareholders.
Power to close register 98 Power of court to rectify register. Trusts not to be entered on share register 99 Annual return Annual general meeting Convening of extraordinary general meeting on requisition Length of notice for calling meetings Provisions as to meetings and votes Power of court to order meeting Proxies Right to demand a poll Voting on a poll Special resolutions Resolution in lieu of meeting Resolutions requiring special notice Resolutions passed at adjourned meetings Duty to keep accounting records Obligation to prepare financial statements Contents and form of financial statements Obligation to prepare group financial statements Appointment of auditor.
Appointment of partnership as auditor Qualifications of auditors Automatic re-appointment Appointment of first auditor Replacement of auditor Statement by person ceasing to hold office as auditor Auditor to avoid conflict of interest Obligation to prepare annual report Sending of annual report to shareholders Contents of annual report Failure to send reports etc. Power of inspectors to carry out investigations into affairs of related companies Production of documents and evidence at investigation Appointment and powers of inspectors to investigate ownership of company Power to require information as to persons interested in shares or debentures Power to impose restrictions on shares or debentures Management of company Major transactions Duty of directors to act in good faith and in the interests of company Directors standard of care Disclosure of interest Avoidance of transactions Effect on third parties Non- application of sections and in certain cases Interested director may vote Relevant interests to be disregarded in certain cases Number of directors Qualification of directors Appointment of first and subsequent directors Removal of directors Director ceasing to hold office Resignation of last remaining director Age limit for directors Age limit not to apply if company so resolves Persons prohibited from managing companies Proceedings of board Remuneration and other benefits Restrictions on loans to directors Indemnity and insurance Duty of directors on insolvency Secretary Oppression Mismanagement Who may make an application Power of court to act under section or section during winding up proceedings.
Powers of court on application under section or section Effect of alteration of articles of company by order under section or Addition of respondents to application under section or section Consequences of termination or modification of certain agreements Derivative actions Costs of derivative action to be met by company Powers of court where leave is granted Amalgamations Amalgamation proposal Approval of amalgamation proposal Short form amalgamation Registration of amalgamation proposal Certificate of amalgamation Effect of certificate of amalgamation Interpretation Compromise proposal Notice of proposed compromise Effect of compromise Variation of compromise Powers of court Effect of compromise in liquidation of a company Court approval of arrangements, amalgamation and compromises Court may make additional orders Company incorporated for business outside Sri Lanka Grant of certificate of registration to off-shore company Continuation of business of off-shore company Prohibition on carrying on business in Sri Lanka Definition of contributory Power of liquidator to enforce liability of share holders and former shareholders Circumstance in which a company may be wound up by the court Application for winding up Powers of court on hearing petition Power to stay or restrain proceedings against a Company Copy of order to be forwarded to Registrar Actions stayed on winding up Official receiver Power of court to appoint liquidators Appointment and powers of provisional liquidator Provisions where person other than official receiver is appointed a liquidator General provisions as to liquidators Vesting of property of company in liquidator Powers of liquidator Books to be kept by liquidators Payments by liquidator into bank Control of Registrar over liquidator Meetings of creditors and contributories to determine whether committee of inspections shall be appointed Constitution and proceedings of committee of inspection Power to stay winding up Settlement of list of contributories and application of assets Delivery of property to liquidator Payment of debts due by contributory to company and extent to which set-off is allowed Appointment of special manager Inspection of books by creditors and contributories Power to order costs of winding up to be paid out of assets Power to summon persons suspected of having property of company Power to arrest absconding contributory Powers of court cumulative Delegation to liquidator of certain powers of court Dissolution of a company Manner of enforcing order of court Circumstances in which company may be wound up voluntarily Notice of resolution to wind up voluntarily Effect of voluntary winding up on business and status of company Power of company to appoint and fix remuneration of liquidators Power to fill vacancy in office of liquidator Duty of liquidator to call general meeting in case of insolvency Final meeting and dissolution Meeting of creditors Appointment of liquidator Appointment of committee of inspection Duty of liquidator to call meetings of company and of creditors at end of each year Provisions applicable to every voluntary winding up Distribution of property of company Powers and duties of liquidator in voluntary winding up Power of court to appoint and remove liquidator in voluntary winding up Notice by liquidator of his appointment Power to apply to court to have question determined or powers exercised Costs of voluntary winding up Power to order winding up subject to supervision Effect of petition for winding up subject to supervision Applications of section and to winding up subject to supervision Power of court to appoint or remove liquidators Admissible claims Claims by unsecured creditors Rights and duties of secured creditors Ascertainment of amount of claim Claim not of an ascertained amount Fines, penalties or recoveries Claims relating to debts payable after commencement of winding up Mutual credit and set-off Interest on claims Preferential claims Transactions having preferential effect Voidable charges Uncommercial transactions Procedure for setting aside voidable transactions and charges Other orders Additional provisions relating to setting aside transactions and charges Fraud etc.
Fraudulent trading Power of court to require persons to repay money or return property Disclaimer of onerous property Restriction of rights of creditors as to execution or attachment in case of company Offences by officers of companies in liquidation Liability where proper accounts are not kept Qualifications of liquidators Corrupt inducement affecting appointment as liquidator Notification that a company is in liquidation Exemption of certain documents from stamp duty on winding up of companies.
Books of company to be evidence Disposal of books and papers of the company Information as to pending liquidations Power of court to declare dissolution of company void Registrar may strike off defunct company from register Establishment of Companies Liquation Account Payments into and out of Companies Liquidation Account Power of board to appoint administrator Notice to charge holders of appointment of administrator Duty of administrator to summon initial meeting Statement of proposals Consequential orders where administrator ceases to hold office Notice of appointment of administrator Qualifications of administrator Validity of acts of administrator Consent to be appointmented Powers of administrators General duties of administrator Discharge of administrator or variation of resolution appointing administrator Remuneration and expenses of administrator Liability of administrator Obligations of company and directors to provide information, etc.
Protection of interests of creditors and share holders Company may grant floating charge Instrument creating floating charge Provisions of instrument creating floating charge Dealing with property subject to floating charge before attachment Ranking of floating charges Alteration and discharge of floating charges Appointment of receiver under an instrument Extent of power to appoint receiver Court may appoint receiver Notice of appointment of receiver Notice of receivership Powers of receivers Precedence among receivers Power to make calls on shares Execution of documents Obligations of company and directors Validity of acts of receivers General duties of receivers Duty of receivers selling property No defence or indemnity Duty in relation to money First report by receivers Further reports by receiver Extension of time for preparing reports Persons entitled to receive reports Persons entitled to inspect reports Duty to notify breaches of any provisions of this Act Powers of receiver on liquidation Liability of receiver Court supervision of receivers Court may terminate or limit receivership Appointment of officers Registers to be kept Translations of documents filed Fees Recovery of expenses and fees FUND Inspection, production and evidence of documents kept by Registrar Enforcement of duty of company to make returns to Registrar Unlawful disclosure of information relating to companies Production and inspection of books where an offence is suspected Application of Act to existing companies Provisions relating to articles of existing companies Documents and particulars to be delivered to Registrar by overseas companies Power of overseas companies to hold lands Return to be delivered to Registrar where documents etc.
Financial statements of overseas company Obligation to state name and particulars of company Service on overseas company Registrar to be notified when company ceases to have place of business in Sri Lanka Liquidation of assets in Sri Lanka of overseas company Penalties for non-compliance Dating of prospectus and particulars to be contained therein Registration of prospectus Penalty for contravention of section , section or section Civil liability for misstatements in prospectus Companies Disputes Board Board members may mediate disputes Privilege in respect of mediation proceedings Penalty for false statement Penalty for falsification of records Compounding of certain offences Offences summarily triable Imposition and application of fines Savings as to private prosecutors Procedure Grant of interim relief Savings for attorney-at-law and bankers Service of documents on company Documents to be received in evidence Costs in action by certain limited companies Power of court to grant relief in certain cases Regulations Sinhala text to prevail in case of inconsistency Transitional provisions Savings Repeals Amendment of the First Schedule of the Act, No.
The name of every— to name. Restrictions on 7. Change of 8. Companies Act, No. Any legal proceedings that might have been continued or commenced against it by its former name, may be continued or commenced against it by its new name. Direction to Registrar may direct a company to change its name in the following circumstances :— a where through inadvertence or otherwise, it has been registered with a name which contravenes the provisions of section 6 ; b a request is made to the Registrar to do so within three months of the company giving public notice of the name objected to under section 9, by another company or by a registered overseas company, where— i the name of the first-mentioned company is so similar to the name of the requesting company that it is likely to cause confusion ; and ii the requesting company was registered with its current name before the first-mentioned company was registered with the name objected to ; or c a request is made to the Registrar to do so by any person and the Registrar is satisfied that the name was not applied for in good faith for the purpose of identifying the company.
Use of company The articles of association of a company may provide Contents of for any matter not inconsistent with the provisions of this Act articles. Application of The articles of association set out in the First model articles.
Adoption or Subject to the provision of section 89, the articles of Effect of articles. In particular, all money payable by any shareholder to the company under the articles, shall be a debt due from that shareholder to the company. Method of Authority of Subject to the provisions of subsection 3 of section No constructive , a person shall not be affected by or deemed to have notice.
Warranties Where a company has acquired property pursuant to Failure to a pre-incorporation contract that has not been ratified by the ratify.
A document or record of proceedings requiring Authentication authentication by a company shall be signed by a director, of documents secretary, or other authorised officer of the company. The articles of a private company shall include Articles of a provisions which— private company. Company Where a limited company alters its articles so that Company may the articles comply with the requirement of section 27— become a private company.
Any two or more persons may apply to form a Application for company limited by guarantee by making an application to incorporation of the Registrar for the same in the prescribed form signed by a company limited by each of the initial members, together with the following guarantee. Power to The provisions of subsections 2 , 3 , 4 and 5 of section 8 shall apply to a change of name under this subsection.
The terms and conditions shall be binding on the association and shall, if the Registrar so directs, be incorporated into the articles of such company. The provision of subsections 3 and 4 of section 8 shall apply to a change of name under this subsection. Provisions A prospectus issued by or on behalf of a company or prospectus. Save as aforesaid, the provisions of this section shall apply to a prospectus or a form of application whether issued on or with reference to the formation of a company or subsequently.
Civil liability for For purposes of the preceding provisions of this Part Interpretation of provisions of this Act— relating to prospectuses. For the purposes of this subsection, a sum shall be deemed to have been paid to and received by the company, if a cheque for that sum has been received in good faith by the company and the directors of the company have no reason for suspecting that the cheque may not be paid.
Effect of Applications Construction Issue of shares. Stated capital. A resolution to reduce sated capital passed in breach of any such agreement, shall be invalid and of no effect. Recovery of Enforceability Redemption on Transfer not to Notwithstanding anything to the contrary in the be registered articles of a company, it shall not be lawful for the company except on to register a transfer of shares in or debentures of the company, production of unless a proper instrument of transfer has been delivered to instrument of transfer.
Transfer by A transfer of the shares or other interests of a deceased legal shareholder of a company made by his legal representative representative.
Registration of On the application of the transferor of any share or transfer at the other interest in a company, the company shall enter in its request of share register the name of the transferee in the same manner transferor. Notice of refusal Duties of A certificate signed under the name of the company Certificate to be by a director and secretary of the company specifying any evidence of title.
The register shall, except when duly closed but shareholders to subject to such reasonable restrictions the company may inspect register impose at a general meeting so that not less than two hours in of debenture each day shall be allowed for inspection , be opened for the holders and to have copies of inspection by the registered holder of any such debentures or any trust deed.
Directors A director of a company shall not be capable of being prohibited from appointed as a trustee for the holders of debentures of the acting as company : trustees.
Provided that the provisions of this section shall not apply to any director of a company who holds office as a trustee for the holders of debentures of the company, by virtue of an appointment made on or before July 2, , and accordingly any such director may continue in office as trustee until the termination of that appointment. A condition contained in any debentures or in any Perpetual debentures. But it shall not be so treated for the purposes of any provision limiting the amount or number of debentures to be issued : Provided that any person lending money on the security of a debenture reissued under the provisions of this section which appears to be duly stamped, may give the debenture in evidence in any proceedings for enforcing his security without payment of the stamp duty or any penalty in respect thereof, unless he had notice or but for his negligence might have discovered, that the debenture was not duly stamped.
In any such case the company shall be liable to pay the proper stamp duty and penalty. Specific A contract with a company to take up and pay for performance of any debentures of the company may be enforced by an order contracts to subscribe for for specific performance.
Liability for Notwithstanding anything to the contrary in the Shareholders articles of the company, a shareholder shall not be— must agree to increase in liability.
Unless otherwise provided by this Act or in the Exercise of articles of a company, a power reserved to shareholders may powers by ordinary be exercised by an ordinary resolution. Where a shareholder is entitled to vote on the may require exercise of the power set out in paragraph a of subsection company to 1 of section 92 and the proposed alteration imposes or purchase shares. Purchase by Upon payment of the provisional price by the company, the shareholder shall forthwith deliver any share certificate in respect of the shares to the company.
A person so appointed by court may award interest according to the provisions of subsection 8. Court may grant Alteration of Shareholder Where an interest group has approved the taking may require of any action that affects the rights attached to shares and the company to company becomes entitled to take that action, and— purchase shares.
The taking of any action by a company affecting Action not the rights attached to shares shall not be invalid by reason invalid. The copy of the instrument shall be accompanied by a certificate in the prescribed form issued by a director or secretary of the company or an attorney-at law, verifying the copy as a true copy and containing the prescribed particulars of the charge.
An omission to send such particulars shall not affect the validity of the debentures issued. Where registration is effected on the application of a person other than the company, that person shall be entitled to recover from the company the amount of any fees paid by him to the Registrar. If a charge becomes void under this section, the money which it secures shall immediately become payable. Register of The certificate shall be conclusive evidence that the requirements of this Part as to registration have been complied with.
Entries of Where the Registrar is satisfied that— satisfaction and release. Rectification of If the court is satisfied that— register of charges. Every company shall keep a copy of every Copies of instrument creating any charge requiring registration under instruments creating charges this Part at its registered office or at such other place as may to be kept by be notified to the Registrar under section In the case of company. The provisions of this Part of this Act shall apply in Application of relation to charges on property in Sri Lanka which are created this Part to charges and and to charges on property in Sri Lanka which is acquired, by property to be an overseas company.
Requirement Inspection of Manner of Copies of An instrument of transfer of a share registered in a Stamp duties in register kept outside Sri Lanka shall be deemed to be a transfer case of shares registered in a of property situated out side of Sri Lanka, and unless executed register outside in Sri Lanka, shall be exempt from stamp duty chargeable in Sri Lanka.
Sri Lanka. A company may, after notice published in the register. Gazette and in any nawspaper circulating in the district in which the registered office of the company is situated and in which the share register is kept, close the share register for any time or times not exceeding in the whole thirty working days in each year.
Power of court The company shall forthwith forward to the Registrar a copy of the return, signed both by a director and the secretary of the company. Every private company shall send to the Registrar Declaration and with its annual return— certificate to be sent by private company with a a declaration signed by the directors of the company annual return. The meeting shall be convened not later than fifteen working days after the date of the deposit of the requisition and held not later than thirty working days after the date of the deposit of the requisition.
Length of notice The following provisions shall have effect in so far Provisions as to as the articles of the company do not make other provisions meetings and votes. Where default is made in complying with the provisions of this subsection as respects any meeting, every officer of the company who is in default shall be guilty of an offence and be liable on conviction to a fine not exceeding fifty thousand rupees.
Voting on a poll. The companies formed under this act were university of Manchester and the British India Company. By special Act of parliament This mode of incorporation was resorted to in the case of companies formed for the purpose of carrying out extensive operations of public utility, such as railway, cannel and tramway companies, gas, water, electric lighting and dock companies.
These statutory companies began to be created towards the end of the 18th century as a result of the demand for British goods, the increasing use of machinery, and the development of transport, and were formed by act of parliament as the only means of acquiring the necessary power to invade private rights.
Each company was governed by the terms of its special act and by the general provisions of appropriate consolidating acts. Regulations which commonly applied to all statutory companies are that the liability of members was limited, that all transfers of shares were by deed and twenty one days notice must be given of calls.
In the case of the assets of company being insufficient to satisfy any execution levied against the company, execution may under the order of court , issue against any shareholder to the extent of any amount unpaid on his shares. The ultra vires doctrine applied to statutory corporations, which were therefore unable to do any act or any contract beyond the powers given by their special Act.
Company law If any business entity, organizations or any association is registered under the companies act no. After 3rd may, the companies are registered under the companies act no 07 of Incorporation of a company In new act the single share companies are permitted.
Any person or persons may apply to incorporate the company other than a company limited by guarantee section 4 2. They are separate legal personality, perpetual succession, Common seal and Increase borrowing power. Public company The companies which can offer shares or securities to the public that have no any limit to the shareholders in the company.
Limited by guarantee The companies which specified the amount of each member of the company undertakes to contribute to the assets of the company, in the event of such company going in to liquidation. Any two or more person can apply to form a company limited by guarantee.
Offshore companies An offshore company is a company that is registered in Sri Lanka, but it does its business abroad and not in Sri Lanka Overseas companies Overseas company means any company or body corporate incorporated outside the Sri Lanka. The procedures of the director meetings are governed by the article of association. Members meetings There are two types of shareholder meetings.
It is board of director who should call this meeting. The annual general meeting must be held not later than 6 months after the balance sheet date of the company.
But newly registered company should hold its first annual general meetings within 18 months from the date of its incorporation. Subsequent annual general meeting must be held within 15 months from the previous annual general meeting. Extra ordinary general meetings Extra ordinary general meetings are the common general meetings in a company which are held depending on the requirement.
Extra ordinary general meetings can be convened by the directors, shareholders or court. It is applicable only private companies. There is no maximum limit in the company act. The minimum number stead above can be increased by the article but cannot be reduced. A person who is disqualified from being a director but who acts as a director shall be treated as a director for the purposes of any provision of this Act that imposes a duty or any obligation on a director of a company.
The first secretary of the company is appointed at the time the company is incorporated and he can act until he ceases to hold office under any provisions of the companies act or under any provision contained in the article of the company or until he is removed by the directors. Subsequent secretaries are appointed by the directors. Subject to supervision of the court When a company has passed a resolution for voluntary winding up, the court may order that the voluntary winding up shall continue subject such supervision of the court.
Comparison between companies act and companies act Incorporation No 17 of companies act Under this act to incorporate the company following documents should be submitted to the registrar to register the company.
This is because memorandum of articles of association had been removed from the present act. Under the present act a company can be incorporated within few minutes with relevant documents.
Types of companies No 17 of companies act There were 4 types of companies under this act. Members No 17 of companies act Public limited company To incorporate a public limited company minimum 7 members were required and no maximum limit. Private companies To incorporate a private limited company minimum 2 members were required and maximum limit is 50 members. Private companies To incorporate a private limited company minimum 1 member are required and maximum limit is 50 members.
Limited by guarantee To incorporate a private limited company minimum 2 members are required. Unlimited companies To incorporate a private limited company minimum 1 member are required. According to the present act a single shareholder is entitle to form a company only companies limited by guarantee is required two members.
Object of the company No 17 of companies act It is mandatory to specify the object of the company under this act but by special resolution objects of the company can be altered. Since the object of the company is mandatory it creates a boundary to the company because company cannot do business other than specified in the object.
No 07 of companies act It is not mandatory to specify the object of the company under the act. Because section 18 provides that article of association of the company may provide for the object of the company. If companies wishes they can provide the object but that will not create a boundary because the capacity powers of company shall not be affected by that object.
Object clause is not mandatory according to the present act. Company seal No 17 of companies act Under this act it is compulsory to maintain a common company seal. Section 12 1 provides that if a company maintains a seal it shall ensure that its name and its company number are clearly stated in the company seal. Company seal is not compulsory to maintain. Apart from those differences there are other differences between these two companies act.
Conclusion In earlier times companies originated in England in the later part of the 17th century. At that time there was a very slow start of the history of companies because there were only two methods to incorporate a company. But according to the No 07 of companies act any person can incorporate a company within few hours. On behalf of the government, the secretary to the treasury is also empowered to incorporate a single share holder company.
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