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REGISTRATION AND

ESTABLISHMENT OF A QS
COMPANY UNDER THE
COMPANY LAW IN SRI
LANKA

Sampath K Basnayaka
QS.IVQ Level VI Qualified
ACKNOWLEDGEMENT

The success of the assignment is the result of many people’s munificence. I would like to thank
to each and every one who spent their valuable time and effort on many circumstances and to all
who shared their wisdom and professional experience. With no hesitation I can admit that
without you all this would have been an illusion.

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TABLE OF CONTENTS
Topic of the Course Work

REGISTRATION AND ESTABLISHMENT OF A QS COMPANY UNDER THE


COMPANY LAW IN SRI LANKA Page No.

ACKNOWLEDGEMENT I

LIST OF FIGURES IV

LIST OF ABBREVIATION V

TASK 6

1. SRI LANKAN LAW 6

2. WHAT IS A COMPANY 6

3. CHARACTERISTICS OF A COMPANY 6

3.1 Limited Liability 6

3.2 Separate Legal Entity 7

3.3 Perpetual Succession 7

3.4 Right to Property 7

4. TYPES OF COMPANIES 7

4.1 Limited Companies 8

4.2 Unlimited Companies 8

4.3 Company Limited by Grantee 8

5. MOST SUITABLE COMPANY OF QS CONSULTANCY SERVICES UNDER SRI LANKAN COMPANY


LAW8

5.1 Partnership Law in Sri Lanka 8


Advantages 9
Minimum requirements 9
Changing Partners 9
Existing Partner 10
Dissolving Partnership 10
A partnership is jointly liable for 10
Rights and duties of partners 10

6. COMPANIES ACT NO. 7 OF 2007 11

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7. PROCEDURE TO FOLLOW IN REGISTERING LIMITED LIABILITY COMPANY UNDER THE
COMPANIES ACT NO 07OF 2007 11

7.1 Submit Article of Association 12

7.2 Give Public Notice of Incorporation 12

7.3 Obtain the Tax Identification Number (TIN) 12

CONCLUSION AND RECOMMENDATION 13

LIST OF REFERENCE 14

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LIST OF FIGURES

Figure 1 Types of Companies ...................................................................................................... 7

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LIST OF ABBREVIATION

Ltd Limited

Pvt Private

QS Quantity Surveyor

Rs Rupee

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TASK

1. SRI LANKAN LAW

The legal framework of Sri Lanka is complex and a mixture of laws ranging from Rome,
England, Holland, South India and Old Ceylon. The religious and colonial history of the nation,
traced from 1505 to 1948, is the factor responsible for this rich legislative inheritance.

The main objective of this assignment is to provide an idea about Registration and
Establishment of a Qs Company Under the Company Law in Sri Lanka.

2. WHAT IS A COMPANY

Company in the common usage refers to a voluntary association of individuals formed for the
purpose of attaining a common social or economic end. Strictly speaking, the term “Company”
has no technical or legal meaning. In the common law, a company is a juristic personality or
legal person separate from its members. Thus, it exists only in the contemplation of law.

In other words, a company is an artificial or legal person created and devised by the laws for a
variety of purposes such as promotion of charity, art, research, religion, commerce or business.
The company, just like a natural person possesses similar rights and owes similar obligations,
but has neither a mind nor a body of its own. (Tutorialspointcom, 2019)

3. CHARACTERISTICS OF A COMPANY

3.1 LIMITED LIABILITY

The principle of limited liability is a feature as well as a privilege of the corporate form of
enterprise. In other words, the liability of the members is limited. It means that the shareholders
enjoy immunity from liability beyond a certain limit. A shareholder cannot be called upon to
pay anything more than the unpaid value of the share that he has undertaken to pay under a
contract between himself and the company.

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3.2 SEPARATE LEGAL ENTITY

Under Incorporation law, a company becomes a separate legal entity as compared to its
members. The company is distinct and different from its members in law. It has its own seal
and its own name; its assets and liabilities are separate and distinct from those of its members.
It is capable of owning property, incurring debt, and borrowing money, employing people,
having a bank account, entering into contracts and suing and being sued separately.
(Companyformationcom, 2019)

3.3 PERPETUAL SUCCESSION

A company does not cease to exist unless it is specifically wound up or the task for which it
was formed has been completed. Membership of a company may keep on changing from time
to time but that does not affect life of the company. Insolvency or Death of member does not
affect the existence of the company. (Companyformationcom, 2019)

3.4 RIGHT TO PROPERTY

A company, being a legal person has a right to acquire, possess and dispose of property in its
own name. Its property is not that of the shareholders. Although the members contribute the
capital and assets of company, the property of the company will not be considered as the joint
property of the members constituting the company.

4. TYPES OF COMPANIES
The following types of companies can be established under the provisions of the companies
Act No.7 of 2007.

company

(c) company
(a) limited (b) unlimited
limited by
company company
guarantee

Public Company

Privet Company

Off - shore
Company

Figure 1 Types of Companies

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4.1 LIMITED COMPANIES

A limited company is a type of business structure that has been incorporated at Companies
House as a legal ‘person’. It is completely separate from its owners, it can enter into contracts
in its own name and is responsible for its own actions, finances and liabilities. The owners of
a company are protected by ‘limited liability’, which means they are only responsible for
business debts up to the value of their investments or what they guarantee to the company.
(Doingbusinessorg, 2019)

4.2 UNLIMITED COMPANIES

A company in which all members or shareholders have total and joint responsibility to cover
all debts and other liabilities the company generates, regardless of how much capital each
contributes. An unlimited company presents higher risk than a limited company (such as a
publicly-traded company or a limited liability company). However, the finances of an unlimited
company are able to remain private and, for that reason, it may be a preferable business
structure in some circumstances.

4.3 COMPANY LIMITED BY GRANTEE

This type of company is most commonly used by people who want to set up a non-profit
organization or charity. The owners of this type of company usually reinvest surplus income in
the business, rather than taking it for themselves.

5. MOST SUITABLE COMPANY OF QS CONSULTANCY


SERVICES UNDER SRI LANKAN COMPANY LAW

5.1 PARTNERSHIP LAW IN SRI LANKA

It is a relationship which subsists between two or more persons carrying on business in common
with a view to profit and is essentially a relationship that results from a contract.

Private Limited Companies are those types of companies where minimum number of members
is 2 and maximum number is 200. A private limited company has the limited liability of
members but at the same time it has many characteristics as those of a partnership firm. A
private limited company has all the advantages of partnership namely flexibility, greater capital
combination of different and diversified abilities, etc., and at the same time it has advantages
of limited liability, greater stability and legal entity. In this sense, a private limited company
stands between partnership and widely owned public company

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The Law of Partnership in Sri Lanka is the English Law subject to certain provisions contained
in the Partnership Ordinance.

In terms of the Prevention of Frauds Ordinance any agreement for

 establishing a Partnership should be in writing if the capital of the partnership exceeds


Rs.1,000/-.

 A Partnership stands dissolved on the death of a Partner unless provided otherwise by


a written partnership agreement.

 Business being carried out by persons in common.

 Responsibilities

 Contracts

 Property
 Partnership business being operated with a view of profit.
 Companies Act No. 7 of 2007 states that a partnership cannot have more than 20
members.
 In any action to be instituted in a court of law each and every partner should join as
plaintiff in his personal name and should be personally sued. Similarly, in the case of
actions against a partnership each partner should be made a defendant.
Partners are jointly and severally liable in torts but in the case of contracts their liability is only
several unless otherwise agreed to. A Partner is regarded as Agent for the other Partners in most
of the matters.

ADVANTAGES
 Easy to get investments and VC funds
 Most credible
 Preferred by investors
 Ideal for IT startups and other growing businesses

MINIMUM REQUIREMENTS
 2 directors
 100000 share capital (all the shareholders in together have to deposit this amount in
company account within 2 months of incorporation)

CHANGING PARTNERS
 New partner

A new partner does not become liable to the creditors of the firm for anything done

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EXISTING PARTNER

Retiring partner will be liable for the debts contracted while he was a partner. However, he may
be discharged from such liability by an agreement between himself, the new firm and creditors.
By death or bankruptcy, a partner will not be liable for debts contracted after such date of
death/bankruptcy.

DISSOLVING PARTNERSHIP

By an Order of the Court – This happens when a partner is incapable of managing the firm’s
affairs due to a mental disorder or when a partner is permanently incapable of performing
duties.

As well as when a partner commits a breach of agreement or he conducts in a manner that other
partners cannot carry on the business with him.

 Expiration or Notice
 Bankruptcy or Death
 Illegality

A PARTNERSHIP IS JOINTLY LIABLE FOR

 Civil wrongs/delicts
 Committed by any partner

If such wrongs were committed during the ordinary course of partnership business or if such
wrongs were done with the authority of other partners.

RIGHTS AND DUTIES OF PARTNERS

 All partners are entitled to share equally in the capital and profits of partnership.

 No partner is entitled to interest on capital before profits as ascertained.

 No partner is entitled to remuneration for acting in the partnership business.

 Every partner is entitled to take part in the management of partnership.

 The consent of all partners in necessary to introduce a new partner.

 Every partner must render true accounts and full information on all things affecting
partnership.

 Every partner should account to the firm for any benefit derived by him without the
consent of the other partners.

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6. COMPANIES ACT NO. 7 OF 2007

A company can entering into contracts, owning property and commencing legal proceedings.
In the vast majority of companies, the liability of the members will be limited. A company can
be held liable for a civil wrong, or found guilty of committing a crime. A company has
corporate personality, which means that, at law, it is a person. The field of law concerning
companies and other business organizations. Before start a company, we want to register the
company by law, Company Act (Drc.gov.lk, 2017)

The new Companies Act No. 7 of 2007 was enacted by the Parliament on 20th October, 2006
and was certified by the Speaker on 20th March 2007. The provisions of the Act have been
brought into operation on 3rd May 2007 by an Order made by the Minister of Trade, Marketing
Development, Co-operative and Consumer Affairs, and published in the Gazette Extraordinary
No. 1493/20 dated 20th April 2007.

7. PROCEDURE TO FOLLOW IN REGISTERING LIMITED


LIABILITY COMPANY UNDER THE COMPANIES ACT NO
07OF 2007

Business can be registered under Private Limited entity do it under sole proprietorship but
registering a business in Sri Lanka as a Private Limited will give more benefits and more secure.

Being a Private Limited company will act as two separated parties, business assets and
liabilities.

Here I'll show how to register a private limited business with step by step.

1. Obtain a name approval.

2. Fill Form Nos. 1, 18 and 19 together with two copies of Articles of Association prepared
(on A4 paper). All forms should be printed or typewritten. (Hand written forms will not
be accepted.)

 Form 1 – REGISTRATION OF A COMPANY Form 18 – CONSENT AND


CERTIFICATE OF DIRECTOR (should be filled by each Director)

 Form 19 – CONSENT AND CERTIFICATE OF SECRETARY / SECRETARIES

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According to Article 221(1) of the Companies Act No. 7 of 2007, every company shall have a
director and a secretary.

The Company Secretary must be hired before incorporation because one of the requirements to
incorporate is a consent form that the Company Secretary must sign saying he/she will be the
secretary for the newly formed company.

 Form 1 – Company Registration (Rs. 4,000 + VAT 15%)

 Form 18 – Consent and Certificate of Director (Rs. 2,000 + VAT 15%)

 Form 19 – Consent and Certificate of Secretary/Secretaries (Rs. 2,000 + VAT 15%)

7.1 SUBMIT ARTICLE OF ASSOCIATION

A company may either adopt the standard set of Articles of Association in Table A of the
Companies Act of Sri Lanka or draft its own Articles of Association. You must submit 2 copies.
(Rs. 2,000 + VAT 15%)

7.2 GIVE PUBLIC NOTICE OF INCORPORATION

According to Section 9 of Sri Lanka's Companies Act No. 7 of 2007 and section 3(a) of the
Gazette Notice No. 1566/32 dated 12/09.2008 public notice must be given within 30 working
days of the incorporation of a company. The notice of incorporation specifying the name of the
company, registration number, date of incorporation, and address of the registered office should
be published in the Government Gazette and in any daily newspaper in three languages:
English, Sinhala and Tamil. The proof of publication should then be filed with the Registrar of
Companies.

The newspaper publications once handed over with the payment which depends on the size of
the notice, will appear within 3 - 4 days. The publication in the Gazette will appear within 2
weeks of submitting the request with the payment. The Registrar of Companies accepts a copy
of the receipt issued by the Government Printer as proof of publication. (Rs. 8,500)

7.3 OBTAIN THE TAX IDENTIFICATION NUMBER (TIN)

The applicant or an authorized representative of the applicant must be physically present at the
Taxpayer Services Unit of Inland Revenue Department to pick up and complete the application
for a Taxpayer Identification Number (TIN) number with supporting documents including a
copy of Form 1, Certificate of Incorporation and Articles of Association. (Rs. 1,500)

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CONCLUSION AND RECOMMENDATION

There are different forms of business organizations in Sri Lanka. Most popular business
organization in Sri Lanka are Companies and legislative enactment for Companies is
Companies Act No 07 2007. The word “corporation” is also often used in place of the word
“company”. Both terms mean the same thing. The term used for forming a company is
“incorporation”. On incorporation, the company becomes a separate legal person.

Thus, a company can enter into contracts even between itself and natural persons who had
established it. It can also sue and be sued. This separate legal existence of a company gives rise
to the advantages of the corporate structure for business purpose. Another great advantage of a
company is that it is perpetual. This means that it does not matter if the individual human
owners come in and then leave the company – either voluntarily by selling their shares. Every
corporate legal entity is a separate legal person. Separate legal personality is an indispensable
part of the character of a company. In the eyes of the law the company is a person distinct and
altogether different from its members and it capable of suing and being sued by company name.

Company law or the law of the trade association in the field of employment law of companies
and other business organizations. Possibility of incorporating companies, associations and
other associations of employees in the course of borrowing. A company can run a business, put
up ownership and money, enter into contracts and in case of infringement

Company law governs the people who own the company and explains the procedure to be
followed when enter into the contract etc. The law which is applied in Sri Lanka is the
Companies Act No. 7 of 2007.

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LIST OF REFERENCE

Company-formation.co. (2019). Characteristics of a Company. Retrieved from


http://www.company-formation.co.in/characteristics-of-a-company.php

GIC. (2019). Registration of Importers/Exporters (TIN/VAT Registration). Retrieved from


http://www.gic.gov.lk/gic/index.php/en/component/info/?task=info&id=2281

DRC. (2019). THE COMPANIES ACT. Retrieved from http://www.drc.gov.lk/?page_id=1998

Tutorialspointcom. (2019). Business Law - Company Law. Retrieved from


https://www.tutorialspoint.com/business_law/business_law_company_law.htm

The Shape of Law. (2019). PARTNERSHIP LAW OF SRI LANKA. Retrieved from
https://theshapeoflaw.wordpress.com/2018/07/16/partnership-law-of-sri-lanka/

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