Foreign investors usually incorporate a private limited company under the Companies Act No. 7 of 2007. Incorporation needs articles of association, a director, a company secretary, a registered office and a reserved name. One shareholder is enough, and most sectors allow full foreign ownership.
Sri Lanka's place on the Indian Ocean shipping routes, its trade access and its recovering economy keep drawing foreign investors across sectors as varied as logistics, manufacturing, technology and tourism. For most of them the first legal step is the same: incorporate a local company to hold and run the investment.
Choosing the company vehicle
Company law is governed by the Companies Act No. 7 of 2007, a modern statute administered by the Registrar of Companies. The Act recognises several company types, but the usual vehicle for commercial ventures, local and foreign alike, is the private limited company. It offers limited liability, a familiar governance structure and straightforward administration.
The incorporation process
Incorporation itself is mostly a documentary exercise. It turns on the company's articles of association, the appointment of at least one director and a company secretary, a registered office in Sri Lanka, and a reserved company name. Once the documents are filed and accepted, the Registrar issues a certificate of incorporation and the company exists as a separate legal person. On shareholders, the Companies (Amendment) Act No. 12 of 2025 replaced section 4(2) of the principal Act to provide expressly that a company other than one limited by guarantee may have a single shareholder, who may be a natural person, a body corporate, or the Secretary to the Treasury holding shares on behalf of the Government. A foreign investor does not need a second shareholder to incorporate.
Foreign shareholding rules
The question that shapes most structuring is foreign shareholding. In general terms, Sri Lanka allows up to full foreign ownership of companies in the majority of sectors. There are exceptions. Some activities are reserved, some are capped at a percentage of foreign holding, some need approval, and a few are closed to foreign participation altogether. Working out where a proposed business sits on that spectrum is an essential early step, because it decides whether the intended shareholding is even permissible.
The Board of Investment route
Many larger or export-focused investors do not simply incorporate and start trading. They route the project through the Board of Investment, the state agency that promotes and facilitates foreign investment. A company that signs an agreement with the BOI and meets the relevant investment and eligibility criteria can access a separate regime that may offer incentives and smoother treatment. Whether the BOI route is worth it depends on the size and sector of the project, and it is a commercial decision as much as a legal one.
Tax and getting the structure right
Incorporation is also the point at which to settle the company's tax and regulatory position. A new company will need to register for tax and, depending on what it does, for other regulatory purposes. Its constitution and shareholder arrangements are best settled before capital and outside parties come in, because reworking a share structure or a shareholders' agreement once a business is running is always harder than getting it right at the start.
For foreign investors, the mechanics of registration are the easy part. The decisions that matter are the choice of vehicle, the split of shares, whether to seek BOI status, and how to document the relationship between investors. Those are the ones worth taking advice on before the certificate is issued.
