With the enactment of the Companies (Amendment) Act No. 12 of 2025, Sri Lanka signals its commitment to global standards of transparency, accountability, and financial integrity. These reforms, such as the mandatory disclosure of beneficial ownership, are designed to combat money laundering and align Sri Lanka with international compliance frameworks like those of the Financial Action Task Force (FATF).
Investors and regulators alike stand to benefit from these changes. For investors, this means greater confidence in the legitimacy and governance of Sri Lankan companies, and regulators now have more tools to monitor corporate activity and enforce ethical conduct.
In this discussion, Nihal Jayawardene, President’s Counsel and Chairman of HNB PLC; Shivandini Liyanage, Senior Vice President – Legal, Enforcement, and Compliance of Colombo Stock Exchange (CSE); and Disna Perera, Director – Corporate Secretarial of Deloitte Sri Lanka, examine the environment that led to support for these amendments and what they could mean for the future of business in Sri Lanka.
You chaired the Company Law Advisory Commission of Sri Lanka. In your view, what historical shortcomings or governance failures made the amendments so urgent to enact?
Nihal Jayawardene: To put it into perspective, we had adopted the English Companies Ordinance in 1939. In 1982, it was repealed and replaced by Act No. 17 of 1982. That Act was essentially a copy of the 1948 UK Companies Act.
Nihal Jayawardene, President’s Counsel & Chairman of HNB PLC
“Illicit funds from drug trafficking, international crime, and terrorism can be channelled through companies in ways that are not immediately visible”
The commercial community wanted that law updated, and that was one reason we became involved in the reform process. At that point, we considered moving from the English model to the Canadian model. We focused on clarity, accessibility and relevance. Those were the key factors we looked at.
The then Advisory Commission, along with Dr David Goddard QC from New Zealand, drafted the present principal enactment. It became law when Parliament passed it on 11th October, 2006. Thereafter, the Company Law Advisory Commission identified several shortcomings and even printing errors that caused practical difficulties in implementation. The Commission took stock of these issues and considered the possible corrective actions needed.
In this backdrop, the Central Bank had to incorporate Financial Action Task Force (FATF) requirements. In order to combat terrorist financing and money laundering, they wanted to introduce the concept of beneficial ownership. The idea was to identify a natural person, as opposed to a corporate personality, who could be a shareholder and who would ultimately benefit from the shares.
When the amendments were reviewed, particularly in that area, by 2017 there was a set of proposed provisions that were almost identical. The distinction was that these were intended to be introduced not as amendments to section 126, but as new sections following it, numbered 126A to 126J. In the current draft, this has been revised to sections 130A to 130J.
Why is the concept of beneficial ownership important?
Nihal: Illicit funds from drug trafficking, international crime, and terrorism can be channelled through companies in ways that are not immediately visible. The FATF promoted beneficial ownership disclosure as a global standard, implemented through national laws.
While developed countries adopted this more easily due to better data access, implementation remains challenging in this region. The Central Bank strongly supported including this concept due to international obligations on anti-money laundering.
They considered it a critical part of the reform package and pushed for its inclusion even before my term as Chair of the Advisory Commission. Other parts of the amendments were considered less urgent, although they could have been introduced earlier.
How is the CSE preparing listed companies to adapt to the responsibilities placed under the Companies Amendment Act?
Shivandini Liyanage: The Companies Amendment Act requires listed companies to identify natural persons who are beneficial owners of the Company. This applies when there is a new share allotment or a share transfer. The threshold for disclosure is 10% of the shareholding of the company. Identifying beneficial owners is challenging.
The listed companies have traditionally relied on the Central Depository System (CDS) for shareholder information. The CDS is dependent on the shareholder information submitted to it by the custodian banks and the stockbrokers, collected when CDS accounts are opened. The CDS plays the role of a facilitator between listed companies and these intermediaries.
Ultimately, the responsibility is with the listed company to comply with the requirements of the new law. Therefore, the listed companies must establish mechanisms to identify shareholders, monitor shareholding activities, and report information to the registrar within prescribed deadlines.
Who is responsible for identifying beneficial ownership under the new amendments?
Nihal: When a share is issued or transferred, the company must report the details to the registrar within the prescribed period. The company secretary’s workload has increased due to these requirements. Ultimately, the responsibility to provide beneficial ownership information lies with the shareholder acquiring the shares.
For example, if one company purchases shares in another, the purchasing company must disclose its beneficial owners to the company whose shares it has acquired. These requirements apply only when the beneficial ownership threshold of 10% is exceeded. In some countries, such as New Zealand, this threshold is set higher, at 25%.
From a company secretarial perspective, can secretaries effectively manage and ensure the accuracy of beneficial ownership information under the current system?
Disna Perera: At Deloitte, we do not view the new beneficial ownership requirements as an administrative burden, but rather as necessary regulations that must be implemented. Our focus is on finding effective ways to comply with these rules rather than resisting them.
We believe technology will play a crucial role in addressing the increased compliance demands. By leveraging technological solutions, companies can better manage the additional reporting and monitoring requirements while also reducing associated costs.
Specifically, maintaining accurate and up-to-date beneficial ownership information requires a robust surveillance system that can track triggering events and ensure timely disclosure to the registrar. Technology facilitates this continuous monitoring and data management.
In summary, Deloitte considers technology essential for efficiently handling the additional administrative responsibilities brought on by the amendments, ensuring compliance while keeping costs manageable.
Will these changes improve market confidence and alter how Sri Lanka’s capital markets are perceived?
Shivandini: The changes will provide transparency and credibility to the market. We believe the investor confidence will improve, and this will attract strategic investors and even institutional investors to the market.
Nihal: To comment on what Shivandini said, I agree transparency and credibility are the qualities that serious investors seek when evaluating a market.
Sri Lanka should focus on attracting such genuine investors rather than transient or speculative ones. While there may be some initial challenges in the short term; in the long run, the introduction of these measures will help build investor confidence and attract reputable investors. This will ultimately benefit the capital markets.
Similar amendment proposals existed before 2025 but took time to be enacted. What challenges delayed this?
Nihal: Regulatory stakeholders, particularly the Central Bank and the Financial Intelligence Unit (FIU), contributed positively to the process, approaching it practically. However, the main challenges arose during implementation, specifically in incorporating certain measures into the law.
There were concerns about whether such measures could be effectively implemented in this jurisdiction. Various stakeholders raised differing views. For example, some argued that foreign companies or beneficial owners should be required to provide extensive identification and documentation, which faced resistance due to privacy concerns.
A delicate balance had to be struck between privacy, security, and governance. From a governance perspective, it was widely acknowledged that these measures would ultimately benefit society, the market, and the economy as a whole. However, many foreign directors and stakeholders opposed the provisions, fearing an impact on their personal financial security. This opposition was significant and contributed to delays in finalising the amendments.
Sri Lanka’s economic challenges, combined with IMF recommendations for governance improvements, added urgency to the need for legal reforms.
In this context, heated debates arose between international organisations advocating for measures that were not always practical or feasible locally. The focus on beneficial ownership amendments may have also caused the Commission to overlook other areas that could have been addressed. The full consequences of these omissions will become apparent over time.
What challenges do shareholders’ reluctance to provide full visibility pose to the CDS, and do you have a roadmap to address these issues?
Shivandini: The Companies Amendment Act places the responsibility on us to disclose shareholder information which we currently have, which serves as a starting point to initiate the process. If required, eventually we may need to amend our rules to require depository participants to collect specific information.
Shivandini Liyanage, Senior Vice President – Legal, Enforcement and Compliance, of Colombo Stock Exchange (CSE)
“The responsibility is with the listed company to comply with the requirements of the new law”
However, this will take time, as rule changes need regulator approval and consensus, involving deliberation. Meanwhile, listed companies must develop mechanisms to ensure ongoing compliance with reporting requirements.
If technology is key to improving compliance, should company secretaries take the lead, or is this the responsibility of the board and company leadership?
Disna: The beneficial disclosure requirement ultimately rests with the shareholder, but the reporting responsibility lies with the directors, company secretaries, officers, and the shareholders themselves. Today, technology is no longer a luxury but a necessity for companies of all sizes.
Most companies now use automation and AI to streamline compliance. By automating these processes, companies can track and monitor performance through dashboards, reducing the need for manual intervention.
For example, automation can identify triggering events such as shareholding changes and send alerts to shareholders requesting the necessary information. AI tools can then validate this data, as the law requires verification and not just collection.
However, relying solely on technology is risky. Human intervention remains critical for decision-making and oversight. Technology can handle repetitive, time-consuming tasks while humans provide the critical analysis needed for compliance.
Combining technology with human insights offers a cost-effective and robust compliance solution, reducing workload and improving accuracy.
What obligations do institutions like the CDS, or company secretaries and companies, have to ensure the accuracy of this information?
Disna: The Personal Data Protection Actmust also be considered when handling personal data. Otherwise, companies risk breaching these regulations. It is important to balance governance requirements with compliance under the Personal Data Protection Act.
As I mentioned, it is the shareholder’s obligation to disclose their beneficial ownership. That is why we have conducted awareness sessions for our clients and companies to explain this requirement and reassure them that their data will be handled securely.
When we spoke with the Registrar of Companies, they confirmed the beneficial ownership data would be managed in compliance with the Personal Data Protection Act. However, challenges remain. Often, the ultimate beneficial owner is not visible or may be unwilling to share certain information.
The law states that if someone knowingly withholds information, they are at fault. But if the information is genuinely unavailable despite all reasonable efforts, companies can explain this to the authorities. This is part of the due diligence process.
Nihal: To clarify, this may not be an issue for the CSE, as they handle many compliance matters and generally know who the beneficial owners are. However, challenges arise with other companies, especially private, family-owned, or closely held companies. For example, if a shareholder dies or cannot be found, practical issues emerge.
In such cases, companies might have to stop at the last point where information could not be obtained. As Shivandini correctly pointed out, if the regulator is satisfied with the company’s compliance efforts, then from a governance perspective, that is the practical limit of what can be done.
From a governance perspective, how will this affect investor relations, market transparency, and shareholder activism in the capital markets?
Shivandini: They are all critical pillars. Investor relations is primarily the responsibility of listed companies, and in recent years, there have been many developments, including progressive listing rules that facilitate investor relations through improved methods of holding general meetings.
Regarding market transparency, the CSE’s listing rules include extensive and stringent corporate governance provisions. Companies must disclose information at key trigger points, and company secretaries and directors have been well educated on these requirements, ensuring strong visibility and compliance.
“Maintaining accurate and up-to-date beneficial ownership information requires a robust surveillance system”
However, shareholder activism is a different matter. While the Companies Act, the Securities and Exchange Commission Law, and the listing rules provide ample protections and rights for shareholders, activism itself cannot be mandated by law. It depends on the willingness of shareholders to come forward. Shareholder activism is ultimately a mindset, not something a law can enforce.
What other reforms do you see on the horizon, now that the current amendments have been enacted?
Nihal: The challenges I mentioned earlier relate to how we could implement this in a way that is universally acceptable. It is not possible to have a solution that satisfies everyone because some so-called investors may prefer to remain undisclosed. In fact, some economies have benefitted from such investors in the past.
However, the global trend is shifting. The world is increasingly scrutinising these issues, investigating wrongdoing, and promoting clean investments rather than questionable ones. It became a global focus after the early 2000s, more noticeably from around 2010 or 2015, as awareness and scrutiny around these issues increased. This is why I believe Sri Lanka would have implemented these amendments eventually, even without the added urgency created by its economic challenges.
Now that the law imposes added compliance on investors and companies, how can the CSE leverage the fact that Sri Lanka’s company law is ahead of similar legislation in the region?
Shivandini: These are global standards that companies and countries must comply with to combat issues like money laundering, tax evasion, and bribery, and to gain political and economic advantage. The key is implementing these laws in a way that minimises the cost to competitiveness.
Clear guidelines, practical enforcement, and consistent regulatory guidance can help reduce compliance costs. Once proper measures are in place, maintaining compliance is a much easier task.
Can you give us a quick rundown of what else has changed with the new amendment?
Disna: The main focus of the amendments is the beneficial ownership disclosure requirement. However, several other provisions aim to enhance clarity, transparency, and address ambiguities in the original Companies Act No. 7 of 2007.
For instance, the issuance of bearer shares is now explicitly prohibited. Bearer shares are shares held by someone whose name is not recorded in the register, making ownership untraceable, similar to bearer cheques. This prohibition aligns with the principles of beneficial ownership and transparency.
Other amendments include new procedures for the removal of directors, allowing a removed director the right to make representations at the general meeting and give proper notice. This strengthens governance and due process.
There is also a new mechanism to address companies that were struck off during the re-registration process under the 2007 Act. Some companies failed to re-register and had their assets vested with the government. Now, under the amended law, such companies can approach the court to be restored and reclaim their assets. However, how practical this process will be remains to be seen.
Nihal: For context, the Companies Registry was still using a manual system at that time, and there were many defunct companies on the register that had stopped operating and weren’t even filing annual returns. Maintaining these inactive companies imposed a significant administrative burden on the Registry. As such, the aim was to clean up the register and identify which companies were actually active.
When we discussed this with David Goddard, our consultant at the time, he shared how New Zealand had handled a similar issue. They introduced a re-registration process with their new law, and we quickly adopted a similar approach here as a practical solution.
One issue that came up was what to do with assets left behind by these defunct companies. The only logical solution at the time seemed to be to vest those assets in the State, and at the disposal of the State.
Now, this provision, section 487, was introduced in a hurry. It was one of the last ones added before the Act was tabled in Parliament, and unfortunately, it was not thoroughly reviewed. We overlooked an existing provision in section 394, which allowed defunct companies to be struck off, which also gave a five-year window to apply to court for restoration in cases where the company was struck off inad- vertently, due to no filings being made whilst the Company was still functional and the Court was of the view that it is reasonable to be restored back to the Register.
That five-year restoration mechanism was not incorporated into section 487. Even as late as 2019, this wasn’t corrected. So, under section 487, companies that failed to re-register within a year were simply struck off, without a clear process for restoration.
The Registrar did conduct a robust noti- fication process, through announcements in the Gazette and newspapers, requiring companies to confirm whether they were operational by 2nd May, 2008. Those that didn’t respond were eventually struck off.
After a gap of several years, we’ve now introduced a process to allow such companies to apply to court to be reinstated and recover their assets.
What lessons can Sri Lanka draw from corporate reforms in countries like Singapore or India to ensure the positive effects of these amendments go beyond compliance?
Disna: Sri Lanka can draw important lessons here, one of which is that the changes introduced by our Companies Amendment Act should not become a box-ticking exercise. They must be used to drive sustainable corporate growth.
Singapore has built a corporate governance framework with zero tolerance for corruption, and its clarity, efficiency, and strong regulatory enforcement have helped it climb the global Ease of Doing Business rankings. Sri Lanka can follow this example by strengthening surveillance systems and law enforcement, which would help combat corruption and create a more investor-friendly environment.
On the other hand, India has already implemented beneficial ownership disclosure requirements, similar to ours, but has gone a step further by leveraging regulatory technology. They’ve developed monitoring systems that support enforcement and transparency. Sri Lanka can consider adopting similar technological solutions to enhance compliance and oversight.
Disna Perera, Director – Corporate Secretarial, of Deloitte Sri Lanka
“The claim of over-regulation should be viewed critically. It’s important to carefully assess whether such concerns are truly justified”
These reforms should not remain just on paper; they must actively drive sustainable growth. To achieve that, an effective monitoring system is essential. With the government’s push towards a digital economy, it is important to empower and equip regulatory bodies, such as the Registrar of Companies and others, with the digital tools needed to establish a strong monitoring framework.
That said, this responsibility should not rest with the Registrar alone. Other regulatory bodies like the Central Bank, with its FIU, and the Colombo Stock Exchange also collect beneficial ownership data. Therefore, it needs to be a coordinated effort among all these institutions.
Nihal: One key point is that these systemsneed to be interconnected. Another valid concern, as Disna mentioned, is functionality, as many stakeholders have raised issues about delays caused by digital platforms that are not user-friendly or responsive. If we are serious about moving the economy forward, these inefficiencies must be addressed.
The government’s push towards a digital economy is important and timely. However, the Registrar of Companies plays a central role in Sri Lanka’s commercial landscape. Persistent issues like red tape in recruiting qualified personnel, and limitations in deploying efficient digital platforms, continue to hinder progress. Addressing these challenges will require the government’s attention and investment.
How will companies navigate the challenges these changes will bring?
Disna: A key component here is the use of digital technology, but companies can also benefit by aligning with ESG principles. Those that stay ahead of the curve and embrace governance requirements will see reputational gains. A strong reputation positions them as ethical and transparent leaders, which appeals to investors, lenders, and customers alike. This in turn creates a competitive advantage.
ESG alignment can also help lower the cost of capital, making companies more attractive to investors. When raising capital, businesses with robust governance systems and proper due diligence, especially in line with Central Bank FIU requirements, are more likely to secure favourable terms and attract partnerships.
Eventually, companies that proactively embrace these reforms can turn compliance into a strategic advantage.
What can the CSE do to help companies innovate and grow while ensuring compliance with the newly introduced regulations?
Shivandini: Regulations are not intended to stifle the market. It’s quite the opposite: they are meant to facilitate market activity. Proper compliance helps build market confidence, enhances participation, and ultimately strengthens the market overall.
The claim of over-regulation should be viewed critically. It’s important to carefully assess whether such concerns are truly justified. That said, once regulations are in place, the responsibility falls on regulators to ensure enforcement is carried out pragmatically, supporting market development instead of hindering it.
Briefly put, what are your conclusions, given all that has been achieved?
Disna: We see this Companies Amendment as a game-changer, particularly in relation to the beneficial ownership disclosure requirement, because Sri Lanka is now aligning itself with global standards. This alignment is likely to enhance investor confidence and help create a more conducive environment for both foreign and local investors. It also opens the door for Sri Lanka to engage with larger multinational organisations and potentially position itself as a trusted and preferred destination in the region for capital investment.
That, I believe, is the direction we should be heading in. While there are certainly challenges, we should continue to focus on the positives and keep moving forward.
Shivandini: We need to start somewhere, take the first small steps. What matters is that we work together to make this a reality.
In the end, if we can improve the credibility of the market and attract investors, it will benefit the economy and help the country move forward. This is a collective effort that requires everyone’s involvement.
Nihal: This main amendment that has been brought in will help attract quality investors, especially those who are gen- uinely interested in investing in a market and earning in a proper way. They will anyway not invest in a market without a return.
That aspect will also need to be carefully considered by regulators, legislators, and policymakers to enhance the effectiveness of the amendment’s intended outcomes.