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. Since 30 March 2026 the company must also disclose its beneficial owners, meaning each natural person holding or controlling ten per cent or more, to the Registrar at incorporation and keep that disclosure current.
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, section 2 of 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. The amendment was certified on 4 August 2025, and its section 1(2) left commencement to an Order of the Minister; the Registrar of Companies records the Act, and the Companies (Beneficial Ownership) Regulations No. 01 of 2026 made under it, as in operation from 30 March 2026.
Two smaller changes in the same Act bear on a new company's early months. Section 6 substitutes section 52(3) so that shares must be allotted within twenty working days of the company receiving the consideration, save for a bonus issue from reserves. And section 4 inserts section 51(1A), which prohibits a company from issuing a share warrant to bearer or a bearer share whatever its articles say; an existing holder had sixty days from 30 March 2026 to identify themselves to the company under section 51A, failing which the rights attached to the instrument stood nullified.
Beneficial ownership disclosure
The change most likely to catch a foreign investor is the new division on beneficial ownership, sections 130A to 130J, inserted by section 7 of the 2025 amendment. Section 130J defines a beneficial owner as a natural person who ultimately owns or controls ten per cent or more of a company, directly or indirectly, through shares, voting rights or other ownership interest, and extends the definition to anyone who exercises effective control by other means, including through a chain of ownership or the power to appoint or remove a director. A holding company or a nominee is not the answer to the question; the individual behind it is.
The duties fall on the company, its shareholders and its officers together:
- Notice to the Registrar. Under section 130A(1) the company must give the Registrar, at incorporation or within twenty working days of any issue or transfer of shares, the beneficial owners' full and former names, dates and places of birth, nationalities, countries of residence, addresses, identity card, tax identification or passport numbers, contact details, and a statement of the nature and extent of the beneficial ownership.
- Shareholders and officers. Each shareholder must give those details to the company within ten working days of subscribing for or receiving shares (section 130A(2)), and any director or secretary who becomes aware of them must disclose them to the Registrar (section 130A(3)).
- The register and the authorised person. The company keeps a register of beneficial owners at its registered office and retains the records for at least ten years (section 130A(4) and (5)). Under section 130C it must appoint a natural person resident in Sri Lanka as the authorised person responsible for that register and for producing it to the authorities listed in section 130B, which include the Attorney-General, the Financial Intelligence Unit, Customs and Inland Revenue.
- Keeping it current. A change in beneficial ownership must be notified to the Registrar within fourteen working days of the company learning of it (section 130A(7)), and the details are delivered again with each annual return (section 130A(8)).
- Public access. Under section 130D the Registrar makes the names, nationalities, countries of residence, business addresses and the nature and extent of each beneficial owner's interest available to the public.
The regime reaches overseas companies and offshore companies registered under the Act, whatever section 262(2) says about them otherwise (section 130A(10)). Existing companies with beneficial owners on 30 March 2026 had six months from that date to file under section 130H(1). And section 130F gives the disclosure teeth of an unusual kind: a claim to beneficial ownership that has not been disclosed and registered in this way may not be claimed or recognised for any lawful purpose. Non-compliance by the company, or knowingly false or withheld details, is an offence under section 130G punishable by a fine of up to one million rupees or imprisonment of up to ten years or both, and every director and officer is deemed to have committed it unless they prove it was committed without their knowledge or that they exercised all due diligence. A shareholder, secretary or authorised person who fails in their own duty faces the same maximum.
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.
A company that will operate in and from Port City Colombo is licensed by the Commission under a separate statute, with its own registration route, currency rules and — since the Regulations of 2025 and the Amendment Act of 2026 — a changed incentive framework. That regime is described on the Port City Colombo page and chapter by chapter in the guide to the Act.
