New Company Act-a ‘strategic advantage’, not just a regulatory hurdle: Deloitte

Disna Perera

Deloitte views Sri Lanka’s new Companies (Amendment) Act No. 12 of 2025 as a pivotal opportunity for businesses to embed trust and accountability into their operations, transforming regulatory compliance into a strategic advantage for long-term growth. 

The legislation, certified on August 4, 2025, is seen as a major milestone for the country’s corporate sector, aimed at boosting investor confidence and strengthening the overall governance framework.

The most significant change introduced by the Act is the requirement for beneficial ownership (BO) disclosures. This new mandate requires all companies, including offshore and overseas entities registered in Sri Lanka, to identify, maintain, and report up-to-date records of their beneficial owners, defined as any individual who directly or indirectly holds 10 percent or more of ownership or voting rights, or exercises effective control.

According to Deloitte, this move is crucial for enhancing accountability and aligning Sri Lanka with international standards set by bodies like the Financial Action Task Force (FATF). 

Existing companies have been given six months from the effective date to disclose their BO details, while new companies must do so upon incorporation. Failure to comply can result in severe penalties, including the non-recognition of ownership by law.

“Transparency and governance are no longer optional; they are the foundation for sustainable business,” commented Disna Perera, Director - Corporate Secretarial at Deloitte Sri Lanka and Maldives.

“These reforms will challenge companies to raise their standards, but they will also create a level playing field that benefits the entire economy”.

Beyond ownership disclosures, the amendments to the Companies Act No. 07 of 2007 clarify several long-standing ambiguities. For instance, a special notice is now required for director removal, granting the director 14 days to make a representation. 

The Act also addresses existing bearer share warrants while prohibiting the issuance of new ones. Furthermore, it clarifies that the re-appointment of a director aged 70 or older at an Annual General Meeting remains valid until the subsequent AGM.

From a practical standpoint, businesses must now adopt a proactive approach to compliance. Deloitte emphasises the need for companies to establish reliable systems to capture and securely manage beneficiary data to meet their reporting obligations. The success of these reforms hinges on digital infrastructure and strong stakeholder engagement, particularly as Sri Lanka prepares for its 2026 FATF mutual evaluation.

While the new rules are set to create a healthier business climate, companies face the challenge of balancing transparency with privacy obligations under the Personal Data Protection Act (PDPA). Deloitte advises businesses to leverage digital tools to automate compliance and identify risks, such as Politically Exposed Persons (PEPs), within their ownership structures.

For publicly listed companies, tracking the beneficial ownership of foreign investors presents a unique hurdle. Deloitte suggests that Sri Lanka could draw inspiration from regional practices, like India’s system where the Securities and Exchange Board receives updates through Designated Depository Participants, to strengthen oversight in capital markets.