A business is litigation ready when it can find and prove its records, knows the Prescription Ordinance time limit for each claim, keeps the registers and minutes the Companies Act requires, and has read its dispute resolution clauses before a dispute starts.
By the time a commercial dispute reaches a courtroom, its outcome has often already been shaped. What was documented, what was kept, and what was done in the weeks after the problem first surfaced tend to matter more than anything that happens at trial. Litigation readiness is the habit of making those early decisions well, before a disagreement hardens into a claim.
Watch the time limits
Legal claims do not stay enforceable forever. Sri Lankan law, mainly through the Prescription Ordinance, sets periods within which different kinds of action have to be brought, and a claim left too long can be defeated on limitation alone, whatever its merits. The operative sections are short.
| Type of claim | Period | Runs from | Section |
|---|---|---|---|
| Mortgage, hypothecation or bond for payment of money | Ten years | Expiry of the time fixed; otherwise the instrument, last interest payment or breach | Section 5 |
| Partnership deed, promissory note, bill of exchange, or any written contract, promise or agreement | Six years | The breach, the due date of the note or bill, or last interest payment | Section 6 |
| Movable property, rent, money lent without written security, account stated, unwritten contract | Three years | The cause of action | Section 7 |
| Goods sold and delivered, shop bill or book debt, work and labour, wages of artisans, labourers or servants | One year | The debt falling due | Section 8 |
| Any loss, injury or damage | Two years | The cause of action | Section 9 |
| Any cause of action not otherwise provided for | Three years | The cause of action | Section 10 |
| Restoration of possession of immovable property after dispossession otherwise than by process of law | One year | The dispossession | Section 4 |
Two features of the Ordinance catch businesses out. How an unpaid invoice is classified can change the period from one year to six: goods sold and delivered or a book debt fall under section 8, while a claim on a written contract falls under section 6, so the classification should be checked when the debt first goes unpaid. And section 11 bars a claim in reconvention or set-off once the right to sue on it has itself been prescribed, so a stale counterclaim cannot be revived by waiting to be sued.
Two later statutes stop the clock: section 44 of the Arbitration Act No. 11 of 1995 excludes the period of an arbitration when calculating prescription, and section 6 of the Mediation (Civil and Commercial Disputes) Act No. 13 of 2026 excludes the mediation period in the same way.
Document retention: what the Companies Act already requires
Retention is not only good practice. Section 116(1) of the Companies Act No. 07 of 2007 requires a company to keep at its registered office, or another place in Sri Lanka notified to the Registrar, the minutes of all shareholder and board meetings and resolutions for the last ten years, directors' certificates and communications to shareholders for ten years, financial statements for the last ten completed accounting periods, the registers of charges, shares, directors and secretaries, and the accounting records required by section 148 for the current and the last ten completed accounting periods.
Section 148 requires accounting records that correctly record and explain the company's transactions, with daily entries of money received and spent, a record of assets and liabilities, and, for a trading company, a record of goods bought and sold that identifies the buyers, the sellers and the relevant invoices. Failure is an offence by the company and by every officer in default, each liable to a fine of up to two hundred thousand rupees under section 148(3). Ten years therefore exceeds every limitation period in the table above, and it is the sensible retention period for commercial contracts and the documents that prove performance as well.
Preserve the evidence, including the electronic record
As soon as a dispute looks reasonably likely, a business should preserve the relevant record: the contract and its amendments, the correspondence, the invoices and delivery documents, the meeting notes, and increasingly the decisive category, the electronic trail of emails, messages and system data. Routine deletion should be suspended for the affected material. Documents that disappear in the ordinary course before anyone thought to keep them are the most common self-inflicted wound in commercial litigation.
The rules of proof explain why originals matter. Section 64 of the Evidence Ordinance requires documents to be proved by primary evidence, the document itself. A copy is admissible only in the cases listed in section 65, such as where the original is in the opponent's hands and is not produced after notice under section 66, or has been lost without the party's own default. Section 34 adds that entries in books of account are relevant but not alone sufficient to fix anyone with liability, so a ledger has to be backed by the delivery notes and correspondence behind it.
Electronic records are governed by the Electronic Transactions Act No. 19 of 2006. Section 5 treats a requirement for an original as met where there is reliable assurance that the information has remained complete and unaltered, and section 6 sets the conditions for electronic retention: the record must remain accessible, be kept in the format in which it was generated, sent or received, and retain the information identifying its origin, destination and the date and time of sending or receipt. That last condition is the reason to preserve emails and messages with their metadata rather than as pasted text. On admissibility, section 21(2) makes information in an electronic record compiled in the course of business admissible notwithstanding the Evidence Ordinance, provided there is no reason to believe it is unreliable, and section 21(3) requires the court to presume its truth and authorship unless the contrary is proved.
Board minutes and authority
Section 147(1) of the Companies Act requires minutes of general meetings and board meetings to be kept. Minutes signed by the chairman are evidence of the proceedings under section 147(2), and section 147(3) presumes, until the contrary is proved, that the meeting was duly held. A signed minute is the cheapest piece of evidence a company will ever produce.
Authority follows the same logic. Under section 19 an obligation that would need notarial attestation if made by an individual must be signed under the company's name by two directors (or the sole director, persons the articles allow, or an attorney) and notarially executed, while other written obligations can be signed by anyone with the company's express or implied authority. Section 21 prevents a company from denying, against an outsider who dealt with it in good faith, that a person it held out as an officer had the usual authority. Minute the decision to contract, any delegation under section 186, and later the decision to sue or settle, so that authority can be proved from the minute book rather than from memory.
The contract clauses that decide where a dispute goes
Where and how a dispute gets resolved is often fixed not by later choice but by the underlying contract. Four clauses do most of the work.
- Governing law. The chosen law governs the substance of the dispute, and section 24 of the Arbitration Act gives effect to that choice in an arbitration.
- Jurisdiction. A clause may point to the Sri Lankan courts or to a foreign court. A foreign judgment is enforceable here only under the Reciprocal Recognition, Registration and Enforcement of Foreign Judgments Act No. 49 of 2024, and only where the Minister has listed that country.
- Arbitration. Under section 3 of the Arbitration Act the agreement must be in writing, and under section 5 a court has no jurisdiction over a matter it covers if the other party objects. The award is enforced through the High Court, the route described in enforcing a foreign arbitral award.
- Mediation and notice. Since section 5 of the Mediation Act, an agreement to mediate can prevent a court from entertaining the case until a certificate of non-settlement is produced; the note on the Mediation Act explains the bar and its exceptions. Section 18 of the Arbitration Act treats an arbitration as commenced when notice is received, so the notice clause should say where and how notice is given.
The Commercial High Court in Colombo is the forum for larger claims. Section 2 of the High Court of the Provinces (Special Provisions) Act No. 10 of 1996 designates the High Court of the Western Province sitting in Colombo to hear the matters in its Schedules, and paragraph (1) of the First Schedule covers actions arising out of commercial transactions where the debt, damage or demand exceeds an amount the Minister fixes by Gazette notification. That amount has been raised repeatedly, most recently to fifty million rupees by Notification in Gazette Extraordinary No. 2312/26 of 28 December 2022, with effect from 1 February 2023. Because it moves by Ministerial Order rather than by amendment of the Act, confirm the figure current at the date of filing.
Provisional remedies and the first procedural steps
Part V of the Civil Procedure Code provides remedies that operate before judgment. Under section 653 a plaintiff with a money claim of at least one thousand five hundred rupees who satisfies the judge by affidavit that the defendant is fraudulently alienating property to avoid payment, or has with that same intent quitted Sri Lanka leaving property behind, may obtain a mandate to the Fiscal to seize and sequester that property. Section 654 requires the plaintiff to give security for the costs and damages the defendant may sustain before the mandate issues. Sections 662 to 667 govern injunctions on the grounds in section 54 of the Judicature Act No. 2 of 1978: an act that would injure the plaintiff, an act that would render the judgment ineffectual, or the removal of property with intent to defraud. Section 5(2) of the Mediation Act preserves these remedies even where the mediation bar applies.
Once an action is filed, the Code rewards preparation. Section 121(2) requires every party, not less than fifteen days before trial, to file its lists of witnesses and documents, and section 175 bars a witness who was not listed unless the court finds special circumstances. A business whose records are already organised can meet these deadlines; one still searching its inboxes cannot.
Advice early, and a readiness checklist
There is a common instinct to keep lawyers out until a dispute is unavoidable, on the theory that involving them escalates things. In practice the opposite is usually true. Early advice is when the options are widest: counsel brought in at the start can preserve privilege over sensitive analysis, frame without-prejudice settlement talks, and set the tone of correspondence so it does not damage the client's position later. Civil law practice covers this stage as well as any trial that follows.
- Diarise the limitation date for every receivable and potential claim, and check whether section 8 (one year) or section 6 (six years) applies to each unpaid invoice.
- Keep the section 116 records for ten years, and hold originals of signed contracts, guarantees and delivery documents in a known place.
- Preserve electronic records in native format with metadata, so they satisfy section 6 of the Electronic Transactions Act and attract the presumption in section 21(3).
- Suspend routine deletion in writing as soon as a dispute is reasonably likely, and minute every board decision to contract, delegate, sue or settle.
- Read the governing law, jurisdiction, arbitration, mediation and notice clauses before sending the first letter, and check whether the claim size puts it in the Commercial High Court.
- Consider whether sequestration or an injunction under Part V of the Civil Procedure Code is needed, and take advice before the first substantive letter.
None of this means a business has to turn adversarial at the first sign of friction. Most commercial disagreements are still best resolved commercially. But a party that has kept its evidence, understands its time limits, knows its forum and has taken advice negotiates from strength. If the matter does go ahead, that party arrives already prepared instead of reconstructing events after the fact.
