Saturday, October 2, 2010

How to start a company in Sri Lanka - 1


(Picture credit - sundaytimes.lk)

I'm not an expert on company law. But since we were involved with registering couple of companies, I think I can write something with my personal experience and refer you to relevant places as well. If anything here is not appropriate or incorrect, please feel free to correct it.


Who can to start a company in Sri Lanka?

As per my knowledge, I can simply say - Anyone!!

How to start a business in Sri Lanka?

Obviously, first you should have an idea as to what is the business you are planning to do. And how to do it etc. So if you are dreaming to be a businessman, just start looking out for opportunities. Start with what you know. Check how to market it. Think how you can fit in there.

If you need any help to obtain more information on developing an idea, just drop us a mail. We should be able to refer you to a place where you can get consultation. Since scope for a business is too wide, I do not wish to write all those here.



Why a company should be registered?

There are many reasons.

1. Then it gets a legal validity as a company. Otherwise it is no more than like a small grocery shop you find in the road.

2. Then your name cannot be used for anyone else.

3. You cannot expand/develop a company without registering it. There are many difficulties of carrying out a business without registering it.

4. You cannot get big customers/buyers without being a registered company. Specially corporate customers will not get any service from you unless you can issue them a bill/receipt/invoice with your registration number in it.


5. Suppliers will not trust you to do business with you.

6. When it’s a private limited company, in case of any issue with the business, a legal case should be filed against the company, not against the owner. So your liability is limited.

7. There are tax benefits such as you can claim VAT.

There are many other reasons as well but these are the basics.


What should I know before I register a company in Sri Lanka?

If you are starting a company, it’s always good to have some idea regarding the company law in Sri Lanka. When you practically involve with the business you will be guided by many other laws such as Inland Revenue Act, local government regulations, industry regulations, stock market regulations etc. But at the starting point I would say, at least you should go through the companies Act.

http://www.drc.gov.lk/App/ComReg.nsf?Open

If you are hoping to recruit employees for the planned business, it’s good to have an idea about the "Shop and Office Employees Act".

http://www.labourdept.gov.lk/Legislations/Shop%20&%20Office%20Employees.pdf

I will guide you through the other necessary Laws and regulations in my next articles on this topic.


How to register a company in Sri Lanka


1. Read the procedure

First carefully go through the below link. It has all the information and the procedure.

http://www.drc.gov.lk/App/ComReg.nsf?Open

2. Obtain Forms

You can obtain the forms as soft copies from this site. Or you can get it from Registrar of companies in below address.

No 400, D R Wijewardana Mawatha , Colombo 10.

If you are going there to get the forms, you have to go there between 9.00am to 2.30pm SL time. After that cash collection counter will be closed. You can give them a call and check before you go.

3. Check for the available names

You have to decide a name for your company first and then check whether it’s already taken by another company. This can be checked by below link. But I'm not sure how frequently they update this list. Many newly established company names may not be there. Best thing is you can go to Registrar of companies. Employees there will help you to find it from their data base.

http://www.drc.gov.lk/App/ComReg.nsf?Open


4. How to select a name for a company?

If you are planning to start a small regional company which you do not plan to advertise or expand, then checking the name availability in the ROC data base is sufficient. But if you are planning to make it to a top level company in the country, there are other things as well you need to check while selecting a name.

One such thing is checking whether there is a web site by that name.  Because if you need to start a web site to the company, this is important.

Another one is whether the name you propose is matching for the trade you involve in? For example a name suitable for a hardware stores would not be suitable for a women's saloon. Name suitable for a perfumary item will not go with a name of a automobile company.

5. Register the name

First you have to register the name for your company. You can do this by login in to above site. If not you can go to Registrar of companies and get it done.

You have to go to ROC and obtain an A16 form (It’s called "Application for Search" form). Once you tell them that you need to do a name registration, they will issue you the right form. You have to fill it. Then you have to present it to the cashier's counter and pay approximately Rs 418 (Rs 350+ 12% VAT+ 3% NBT+ Processing charges). In couple of days, name will be registered. You have to obtain the name registration number in order to fill the next documents.

6. Registering the company

After that you have to proceed with filling next set of documentation to register the company.

For this, you will have to find a lawyer / company secretary.


What Next?

Anyway I will write another article on how to fill those forms and what are the "do’s and "don’ts in that procedure. There are many other small but important details you should know in this registering process.

Some companies should publish the name in the newspapers, there are returns to be filed annually, and there are fines involved if you don't submit things on time.

It’s true that your corporate secretary will take care of these things. But it’s always good that you also have an idea. Because when a company secretary done a mistake also, burden is with the company. So it’s good that you know what to do and when to do.


Can non Sri Lankans start companies in Sri Lanka?

Yes of course. Any foreigner can start companies in Sri Lanka. But only through the Board of Investment (BOI) Sri Lanka. There is set of guidelines which you have to follow. But BOI is offering so many benefits such as tax holidays to foreign investors. Please visit the BOI web site (I've given the link below), you have all the information in it. You can get all the contact numbers from this. If you need any more details, it’s only a phone call away.

Board of Investment - Sri Lanka - FAQs
http://www.boi.lk/2009/faq.asp

Its advantageous to go through this Act as well.

Immigrants and Emigrants Act No. 20 of 1948

http://www.idpsrilanka.lk/html/Children/Domestic/1948%20No%2020%20Immigrants%20and%20emmigrants.PDF

Other related sites

For more information, please refer to the below sites. Information in the internet can be slightly different with regard to cost and duration. But you can obtain almost all the details.

1. Procedure of registering a company in Sri Lanka - Registrar of Companies
http://www.drc.gov.lk/App/ComReg.nsf/eb209294bae3f1a0462573f4001cad99?OpenForm

2. Types of companies and Registration of a company in Sri Lanka - helpline Law.com

http://www.helplinelaw.com/law/sri%20lanka/company%20law/incorporation.php

3. Starting a company in Sri Lanka

http://www.kandyinvestor.org/index.php?option=com_content&view=article&id=73&Itemid=75




30 comments:

Anonymous said...

great piece of advice.. thank you very much... this cleared many doubts i has as well as the links are of extreme help, indeed..

Nishadee said...

Thank you. In next year hopefully I will write the second part of this :)

Anonymous said...

Hi, I'm Irosh HR Consultant cum Project Manager running few overseas projects. The time has come for me to register my business. Your article is great and very useful for those who lost the way to the correct path.
I tried to access the Government web site but it doesn't work (from last week). This is the problem in Sri Lanka. Not only www.drc.gov.lk some other Govt sites too. I informed responsible parties regarding but the issue but it is still there. Very disappointing.

Nishadee said...

Thanks for the comment Irosh.

Well for most of the departments, you cannot rely on their web sites. Most of those has only a inter face or a home page. When click on links, nothing inside. Therefore I would say either you go there or call them to get details.

On a separate note - we should comment on good things as well. Therefore I would like to mention about a government web site which managed to impress me. Thats the web site of Moratuwa municipal council. I'm just posting the link, if any other government departments want to get an example :)

http://www.moratuwamc.lk

Anand Spicerbs said...

h nisha

This is anand from india. I am in the field of spices and i want to start an branch office in srilanka and export spices from lanka to my country. Is there anyway you can give me a detailed procedure. My email anand@kabfoods.com
thanks

Nishadee said...

Anand - Sorry for the delay to reply. You can get all the information by talking to Sri Lanka export development board. Below links has the contact details.

http://www.srilankabusiness.com/contactus.htm

http://www.srilankabusiness.com/announ/chater/charter.pdf

Mush said...

Many thanks for the great piece of advice, am living in overseas and a friend of mine interested starting up a fashion-interior company in a partnership. please let me know if there's anything special to note other than the normal formalities according to the business law in Srilanka. Wishing you all the very best

Unknown said...

Respected Madam,

I am an Indian. I would like to start a small training institute in Sri Lanka. What will be the cost and how much days will it take to register the same.

Anonymous said...

hi nishadee, a greate piece of work. it is very simple and effectively comprehensive. we are living overseas and want to start up a FMCG trading company.appreciate your advice in this regard.

Chandra said...

hi nisha i am planing to open new shiping company but i dont have any idea about thefield also i want to know the coast of the investment for this & what type company and regestration i have to do how i can do that i need all the details can u help me on this your help will be highly appricted, thx

madushanka limports said...

hi this advice is very helpful for people like us who need to start but have no idea how.i saw in companies act 1982 that it says seven people need to start private limited and 2 people can start only peoples company but i want to start a private limited me and my sister please advise me.

And also i saw in your article it need a lawyer or a company secretary to register a company.i thought my sister can be the secretary but now your article confusing me.who is the secretary you mention here?i am not rich so if lawyers charge too much i can't afford it please advise

And also about memorandum and articles of association does it need to be written by a lawyer? and please explain how it done.can a normal person like me write it?

Best wishes

Madushanka

Anonymous said...

Thanks Nishadee,
The information you have given on the article is so important for me because I was wondering about pros and cons of a registration of a company of my own.

shiyanthan balachandran said...

Good Job

pandukabaya said...

Thanks for the advice

Cham said...

Hi Nishadee,

I'm cham and I have an idea to register my own company for buying and selling of Engineering item from Malaysia.But I want to register it for some other person name due to I am an employee in private firm. Pls advise me how to do that and which will be good among propriatorship, partnership and company.

Soory I forgot to thanks for your brilliant advise over web site...

Thanks.

Lakmal Kumara said...

:(...? UPLIFT LIVES :)..!!

Thanks..

Lakmal:)





Ancient Sri Lanka - Sigiriya Rock Fortress said...

Hi Nishadee,

This thread is very useful. I am not sure you are still supporting this thread as i could not see any answers from you since 2012. I am planning to form a private company.I have loads of questions.If u are still supporting would you pls let know a way to contact you.Even via this thread is ok for me.

Thank you,
Roshan

Nishadee said...

Hi everyone ,
Much apologies for the much delyed reply.
These days I'm involved with researching on early childhood development and therefore bit away from business arena. I'm afraid I may not be able to answer all your questions properly.
I suggest you to read companies Act of Sri Lanka which contain legal answers to most of your questions.

http://www.drc.gov.lk/App/comreg.nsf/200392d5acdb66c246256b76001be7d8/$FILE/Act%207%20of%202007%20(English).pdf

For more practical information, please contact, please refer to the below link and call or email the relevant person depending on your area of need. Staff at BOI are always very helpful and will refer you to where ever required.

http://www.investsrilanka.com/services_provided_by_boi/contact_us.html

Minindu Sudaraka said...

Hi Nishadee,
I'm Minindu an Engineering Undergraduate at KDU. I have a dream of Starting up a business and make it to the top of the cooperate sector. Could you please give me some advice on how i should go on with it. Should i start by registering a company or should i just start it small and register it later when it grows big?
I would be much obliged if you could drop me an email if possible. minindums@gmail.com

Nishadee said...

Hi Minindu,

Sorry for the delayed reply. It all depends on what time of a company you want to start. There are both advantages and disadvantages of registering a company. For example when you register a company, you need to open a tax file some times, you need to submit accounts annually, you need to have your accounts audited etc etc work. But then again you can get VAT benefits for certain types of companies and do business in a good way. Not black money. On the other hand if your business is something like a software company or engineering products, you may need a registration to sell the products if you plan to sell it big hand. But my advice is start small. But no harm in registering any trade name.

Sritharan Jasintheran said...

Hi
i am jasi
i want to start a construction company
how to registar and what are the requirement for the registation

poorna said...

Hello Nishade.

Hope you are Doing good.

We are Manufacturers and exporters of granite Slabs from india.We have a plan to setup a manufacturing unit and Showroom in Srilanka Colombo.Can you please Help me out of this things

1) How much time it will take for a Registration?
2)what safety norms we need take when we getting in to Srilanka?
3)Deposit for a company is required for a investor from other country?
4)any rules to take a lease for a land in industrial zones?
5)i need a partner from srilanka where can i approach?
6)what all the benefits i can get from sri Lankan government?

Even i followed your Suggested links but it will be greatfull if you reply for above queries with your ace :).



poorna@vasavigranites.com,poorna835@gmail.com

thanks.

Nishadee said...


Hi Poorna,

Please contact Ms R. M. Weerakone , Executive Director (Investment and Promotion)at board of investment Sri Lanka.

You will be able to get more details from her.

Office Tel - +94 11 2438972, 2427071
E-Mail - renukaw@boi.lk

BOI Web site too have some details. You can have a look.

Apologies for not being able to make a long reply, due to work load.

Wish you all the best.

http://www.investsrilanka.com/#services

David Garner said...

Hi Nishadee,

Very useful and informative article

Please advise how to get proper information for setting up an offshore company in Sri Lanka. We are a US based internet company and are looking at possibility of opening an offshore development center in Sri Lanka.

The company will only be responsible for back-end services.

Please guide.

Tech Centurions said...
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Tech Centurions said...
This comment has been removed by the author.
khyati mehta said...

Dear Madam. I want to start my business in Sri Lanka and I need to get information for it. So kindly give us your contact details or mail us the information on khyati.mehta196@gmail.com

Sarah Throlson said...

It almost seems easier to start a business in Sri Lanka than it is in the US!

Sarah | travelsrilanka.co.uk

Unknown said...

Want to start business in srilanka email is anispmp@gmail.com

Unknown said...

Want to start business in srilanka email is anispmp@gmail.com