07of2007.pdf
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PARLIAMENT OF THE DEMOCRATIC
SOCIALIST REPUBLIC OF
SRI LANKA
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COMPANIES ACT, No. 07 OF 2007
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[Certified on 20th March, 2007]
Printed on the Order of Government
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Published as a Supplement to Part II of the Gazette of the Democratic
Socialist Republic of Sri Lanka of March 23, 2007
PRINTEDATTHE DEPARTMENTOFGOVERNMENTPRINTING,SRI LANKA
TOBEPURCHASED ATTHEGOVERNMENTPUBLICATIONSBUREAU,COLOMBO1
Price : Rs. Postage : Rs.
COMPANIES ACT No . 07 OF 2007
TABLE OF SECTIONS
Section Page No.
1. Short title and date of operation 1
PART I – INCORPORATION OF COMPANIES AND
RELATED MATTERS
ESSENTIAL CHARACTERISTICS OF COMPANIES
2. Legal status and capacity of a company 1
3. Different types of companies 2
INCORPORATION OF COMPANIES
4. Method of incorporating a company 2
5. Incorporation of a company 3
COMPANY NAMES
6. Requirements as to names 4
7. Restrictions on names 4
8. Change of name 6
9. Public notice of name 7
10. Direction to change name 8
11. Change of name upon change of status of company 9
12. Use of company name and company number 10
ARTICLES OFASSOCIATION
13. Contents of articles 11
14. Application of model articles 12
15. Adoption or amendment of articles 12
16. Effect of articles 13
17. Effect of statement of objects in articles 13
18. Right of shareholders to a copy of the articles 14
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Section Page No.
COMPANY CONTRACTS ETC.
19. Method of contracting 14
20. Attorneys 15
21. Authority of directors, officers and agents 16
22. No constructive notice 17
PRE – INCORPORATION CONTRACTS
23. Pre-incorporation contracts may be ratified 17
24. Warranties implied in pre-incorporation contracts 18
25. Failure to ratify 19
AUTHENTICATION OF DOCUMENTS BY COMPANY
26. Authentication of documents by company 19
PART II – PRIVATE COMPANIES
27. Articles of a private company 19
28. Company ceasing to be a private company 20
29. Company may become a private company 21
30. Private companies need not keep interests register 21
31. Unanimous agreement of shareholders 21
PART III – COMPANIES LIMITED BY GUARANTEE
32. Application for incorporation of a company limited by guarantee 23
33. Company limited by guarantee must have articles 24
34. Power to dispose with “limited” in the name of charitable and
other companies. 24
35. Provisions which apply to companies limited by guarantee 26
PART IV – SHARES AND DEBENTURES
PROSPECTUS
36. Dating of prospectus. 26
37. Specific requirements as to particulars in prospectus 27
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38. Expert’s consent to issue of prospectus containing
statement by him 29
39. Consent of bank or attorney-at-law or auditor necessary for
inclusion of name in prospectus 29
40. Registration of prospectus 31
41. Civil liability for untrue in prospectus 32
42. Criminal liability for untrue statements in a prospectus 37
43. Document containing offer of shares or debentures for sale
to be deemed a prospectus 37
44. Interpretation of provisions relating to prospectuses 39
ALLOTMENT
45. Prohibition of allotment unless minium subscription received 39
46. Effect of irregular allotment 40
47. Applications for and allotment of shares and debentures 40
48. Construction of reference to offering shares or debentures
to the public 42
NATURE AND TYPE OF SHARES
49. Nature and types of shares. 43
ISSUE OF SHARES
50. Initial shares 43
51. Issue of shares 44
52. Consideration for issue of shares 45
53. Pre-emptive rights to new issues 45
54. Method of issuing shares 46
CALLS ON SHAREs
55. Calls on shares 46
DISTRIBUTIONS TO SHAREHOLDERS
56. Distributions 46
57. Solvency test 47
58. Stated capital 48
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Section Page No.
59. Reduction of stated capital 49
60. Dividends 50
61. Recovery of distributions 50
62. Reduction of shareholder liability to be a distribution 51
REPURCHASE OF SHARES
63. Company may acquire or redeem its own shares 52
64. Purchase of own shares 53
65. Enforceability of contract to purchase shares 54
REDEMPTION OF SHARES
66. Meaning of “redeemable” 55
67. Redemption option of company 55
68. Redemption at option of shareholder 55
69. Redemption on fixed date 56
FINANCIAL ASSISTANCE IN CONNECTION
WITH PURCHASE OF SHARES
70. Restrictions on giving financial assistance 56
71. Transactions not prohibited by section 70 57
CROSS – HOLDINGS
72. Restriction on subsidiary holding shares in holding company 59
TRANSFER OF SHARES AND DEBENTURES, EVIDENCE OF TITLE & C.
73. Transfer not to be registered except on production of instrument
of transfer. 60
74. Transfer by legal representative 60
75. Registration of transfer at the request of transferor 60
76. Notice of refusal to register transfer 60
77. Certification of transfers 61
78. Duties of company with respect to issue of certificates 62
79. Certificate to be evidence of title 63
80. Evidence of grant of probate, &c. 63
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SPECIAL PROVISIONS AS TO DEBENTURES
81. Right of debenture holders and shareholders to inspect register
of debenture holders and to have copies of any trust deed 63
82. Directors prohibited from acting as trustees 64
83. Perpetual debentures 65
84. Power to re-issue redeemed debentures in certain cases 65
85. Specific performance of contracts to subscribe for debentures 66
PART V – SHAREHOLDERS AND THEIR RIGHTS AND
OBLIGATIONS
86. Meaning of “shareholder” 66
LIABILITY OF SHAREHOLDERS
87. Liability of shareholder 68
88. Liability for calls 68
89. Shareholders must agree to increase in liability 69
POWERS OF SHAREHOLDERS
90. Exercise of powers reserved to shareholders 69
91. Exercise of powers by ordinary resolution 69
92. Powers exercised by special resolution 69
MINORITY BUY – OUT RIGHTS
93. Shareholder may require company to purchase shares 70
94. Notice requiring purchase 71
95. Purchase by company 72
96. Purchase of shares by third party 74
97. Court may grant exemption 74
98. Court may grant exemption if company is insolvent 75
99. Alteration of shareholder rights 76
100. Shareholder may require company to purchase shares 76
101. Action not invalid 77
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Section Page No.
PART VI – REGISTRATION OF CHARGES
REGISTRATION OF CHARGES WITH REGISTRAR
102. Registration of charges created by companies registered in
Sri Lanka 77
103. Unregistered charges void in certain cases 81
104. Duty of company to register charges existing on property
acquired 81
105. Register of charges to be kept by Registrar 82
106. Endorsement of certificate of registration on debentures 83
107. Entries of satisfaction and release 84
108. Rectification of register of charges 84
PROVISIONS AS TO COMPANY’SREGISTER OF CHARGES AND AS TO COPIES OF
INSTRUMENTS CREATING CHARGES
109. Copies of instruments creating charges to be kept by company 85
110. Company’s register of charges. 85
REVIEW OF REGISTER OF CHARGES
111. Review of Register of charges 86
APPLICATION OF THIS PART TO OVERSEAS COMPANIES
112. Application of this Part to charges and property to be acquired
by an overseas company 87
PART VII – MANAGEMENT AND ADMINISTRATION
REGISTERED OFFICE
113. Registered office of a company 87
114. Change of registered office 88
115. Requirement to change registered office 88
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COMPANY RECORDS
116. Location of company records 89
117. Form of records 91
INSPECTION OF COMPANY RECORDS
118. Inspection of records by directors 92
119. Inspection of company records by shareholders 92
120. Public inspection of company records 93
121. Manner of inspection 94
122. Copies of documents 94
SHARE REGISTER
123. Company to maintain share register 95
124. Place of share register 95
125. Stamp duties in case of shares registered in register outside
Sri Lanka 97
126. Index of shareholders. 97
127. Power to close register 98
128. Power of court to rectify register. 98
129. Trusts not to be entered on share register 99
130. Share register to be evidence 99
ANNUAL RETURN
131. Annual return 100
132. Declaration and certificate to be sent by private company
with annual return 101
MEETINGSAND PROCEEDINGS
133. Annual general meeting 101
134. Convening of extraordinary general meeting on requisition 103
135. Length of notice for calling meetings 104
136. Provisions as to meetings and votes 105
137. Power of court to order meeting 106
138. Representation of companies at meetings of other
companies and of creditors 107
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Section Page No.
139. Proxies 107
140. Right to demand a poll 109
141. Voting on a poll 110
142. Circulation of shareholder’s resolutions on requisition 110
143. Special resolutions 113
144. Resolution in lieu of meeting 114
145. Resolutions requiring special notice 115
146. Resolutions passed at adjourned meetings 116
147. Minutes of proceedings of meetings of shareholders and directors116
ACCOUNTING RECORDS
148. Duty to keep accounting records 117
149. Place where accounting records are kept 118
DUTYTO PREPARE FINANCIAL STATEMENTS
150. Obligation to prepare financial statements 119
151. Contents and form of financial statements 120
152. Obligation to prepare group financial statements 120
153. Contents and form of group financial statements 121
AUDITORS
154. Appointment of auditor. 123
155. Auditor’s fees and expenses 124
156. Appointment of partnership as auditor 124
157. Qualifications of auditors 125
158. Automatic re-appointment 126
159. Appointment of first auditor 126
160. Replacement of auditor 127
161. Statement by person ceasing to hold office as auditor 127
162. Auditor to avoid conflict of interest 128
163. Auditor’s report 129
164. Auditor’s access to information 130
165. Auditor’s attendance at shareholders’ meeting 130
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ANNUAL REPORT TO SHAREHOLDERS
166. Obligation to prepare annual report 131
167. Sending of annual report to shareholders 131
168. Contents of annual report 132
169. Failure to send reports etc. 134
REGISTRATION OF FINANCIAL STATEMENTS
170. Registration of financial statements 134
INTERPRETATION
171. Balance sheet date 134
INVESTIGATION OF COMPANY’SAFFAIRS
172. Investigation of company’s affairs on application of
shareholders 135
173. Investigation of company’s affairs in other cases 136
174. Power of inspectors to carry out investigations into
affairs of related companies 137
175. Production of documents and evidence at investigation 138
176. Inspector’s report 140
177. Proceedings on inspector’s report 141
178. Expenses of investigation of company’s affairs 142
179. Inspector’s report to be evidence 144
180. Appointment and powers of inspectors to investigate
ownership of company 144
181. Power to require information as to persons interested in
shares or debentures 146
182. Power to impose restrictions on shares or debentures 147
183. Registrar’s powers to verify assets and liabilities 149
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Section Page No.
POWERS OF MANAGEMENT
184. Management of company 149
185. Major transactions 149
186. Delegation of powers 151
DIRECTORS’ DUTIES
187. Duty of directors to act in good faith and in the interests of
company 151
188. Directors to comply with Act and company’s articles 151
189. Directors standard of care 152
190. Use of information and advice 152
TRANSACTIONS IN WHICH ADIRECTORS IS INTERESTED
191. Meaning of “interested” 153
192. Disclosure of interest 154
193. Avoidance of transactions 154
194. Effect on third parties 155
195. Non- application of sections 192 and 193 in certain cases 156
196. Interested director may vote 156
197. Use of company information 156
DISCLOSURE OF DIRECTORS’ INTERESTS IN SHARES
198. Meaning of “relevant interest” 157
199. Relevant interests to be disregarded in certain cases 160
200. Disclosure of share dealing by directors 161
APPOINTMENT AND REMOVAL OF DIRECTORS
201. Number of directors 162
202. Qualification of directors 162
203. Director’s consent required 163
204. Appointment of first and subsequent directors 163
205. Appointment of directors to be voted in individually 163
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206. Removal of directors 164
207. Director ceasing to hold office 165
208. Resignation of last remaining director 165
209. Validity of director’s acts 166
RETIRING AGE OF DIRECTORS
210. Age limit for directors 166
211. Age limit not to apply if company so resolves 167
212. Duty of directors to disclose age 167
DISQUALIFICATION OF DIRECTORs
213. Persons prohibited from managing companies 168
214. Court may disqualify directors 169
MISCELLANEOUS PROVISIONS RELATING TO DIRECTORS
215. Proceedings of board 170
216. Remuneration and other benefits 170
217. Restrictions on loans to directors 172
218. Indemnity and insurance 174
219. Duty of directors on insolvency 176
220. Duty of directors on serious loss of capital 177
SECRETARIES
221. Secretary 178
222. Qualifications of secretary to be prescribed 178
REGISTER OF DIRECTORS AND SECRETARIES
223. Register of directors and secretaries 179
PREVENTION OF OPPRESSION AND MISMANAGEMENT
224. Oppression 180
225. Mismanagement 181
226. Who may make an application 182
227. Power of court to act under section 224 or section 225
during winding up proceedings. 183
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Section Page No.
228. Powers of court on application under section 224 or section 225. 183
229. Effect of alteration of articles of company by order under
section 224 or 225 184
230. Addition of respondents to application under section 224
or section 225 185
231. Consequences of termination or modification of
certain agreements 185
232. Extended meaning of “shareholder” 186
RESTRAINING ORDERS
233. Restraining orders 187
DERIVATIVEACTIONS
234. Derivative actions 187
235. Costs of derivative action to be met by company 189
236. Powers of court where leave is granted 189
237. Compromise, settlement or continuance of
derivative action 190
RATIFICATION
238. Ratification of certain actions of directors 190
PART VIII – AMALGAMATIONS
239. Amalgamations 190
240. Amalgamation proposal 190
241. Approval of amalgamation proposal 192
242. Short form amalgamation 195
243. Registration of amalgamation proposal 197
244. Certificate of amalgamation 198
245. Effect of certificate of amalgamation 198
246. Powers to acquire shares of shareholders dissenting from
scheme or contract approved by majority 199
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PART IX – COMPROMISES WITH CREDITORS
247. Interpretation 201
248. Compromise proposal 202
249. Notice of proposed compromise 202
250. Effect of compromise 204
251. Variation of compromise 205
252. Powers of court 205
253. Effect of compromise in liquidation of a company 206
254. Costs of compromise 207
PART X – APPROVAL OF ARRANGEMENTS, AMALGAMATIONS AND
COMPROMISES BY COURT
255. Interpretation 208
256. Court approval of arrangements, amalgamation and
compromises 208
257. Court may make additional orders 210
258. Application of Part VIII 211
259. Application of section 253 to compromise approved
under this Part 211
PART XI – PROVISIONS RELATING TO OFFSHORE COMPANIES
260. Interpretation 212
261. Company incorporated for business outside Sri Lanka 212
262. Grant of certificate of registration to off-shore company 213
263. Continuation of business of off-shore company 214
264. Prohibition on carrying on business in Sri Lanka 215
265. Cessation of business as an off-shore company 215
PART XII – WINDING UP
(1) PRELIMINARY
Modes of winding up
266. Definition of contributory 215
267. Modes of winding – up 215
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Section Page No.
CONTRIBUTORIES
268. Power of liquidator to enforce liability of share holders and
former shareholders 216
269. Liability of former shareholders for unpaid calls 216
(II) WINDING UP BY THE COURT
CASES IN WHICH COMPANY MAY BE WOUND UP BY THE COURT
270. Circumstance in which a company may be wound up
by the court 217
271. Definition of inability to pay debts 217
PETITION FOR WINDING UP AND EFFECTS THEREOF
272. Application for winding up 218
273. Powers of court on hearing petition 219
274. Power to stay or restrain proceedings against a Company 220
275. Avoidance of disposition of property &c. after
commencement of winding-up 220
276. Avoidance of attachments &c. 220
COMMENCEMENT OF WINDING UP
277. Commencement of winding up by the court 221
CONSEQUENCES OF WINDING UP ORDER
278. Copy of order to be forwarded to Registrar 221
279. Actions stayed on winding up 221
280. Effect of winding up order 221
OFFICIAL RECEIVER IN WINDING UP
281. Official receiver 222
282. Appointment of official receiver by court in certain cases 222
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283. Statement of company’s affairs to be submitted to official
receiver 222
284. Report by official receiver 224
LIQUIDATORS
285. Power of court to appoint liquidators 225
286. Appointment and powers of provisional liquidator 225
287. Appointment style, &c. of liquidators 225
288. Provisions where person other than official receiver is
appointed a liquidator 226
289. General provisions as to liquidators 226
290. Custody of company’s property 227
291. Vesting of property of company in liquidator 227
292. Powers of liquidator 228
293. Exercise and control of liquidator’s powers 230
294. Books to be kept by liquidators 231
295. Payments by liquidator into bank 231
296. Audit of liquidator’s accounts 231
297. Control of Registrar over liquidator 232
298. Release of liquidators 233
COMMITTEE OF INSPECTION
299. Meetings of creditors and contributories to determine whether
committee of inspections shall be appointed 234
300. Constitution and proceedings of committee of inspection 234
301. Powers of court where there is no committee of inspection 235
GENERAL POWERS OF COURT IN CASE OF WINDING UP BY COURT
302. Power to stay winding up 236
303. Settlement of list of contributories and application of assets 236
304. Delivery of property to liquidator 237
305. Payment of debts due by contributory to company and extent
to which set-off is allowed 237
306. Payment into bank of moneys due to company 237
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Section Page No.
307. Appointment of special manager 238
308. Inspection of books by creditors and contributories 238
309. Power to order costs of winding up to be paid out of assets 238
310. Power to summon persons suspected of having property of
company 238
311. Power to order public examination of promoters, directors &c. 239
312. Person or officer being examined to be represented by an
attorney-at-law, &c. 240
313. Power to arrest absconding contributory 241
314. Powers of court cumulative 241
315. Delegation to liquidator of certain powers of court 241
316. Dissolution of a company 242
317. Manner of enforcing order of court 242
318. Enforcement of winding up order in another court 242
(III) VOLUNTARY WINDING UP
RESOLUTIONS FOR AND COMMENCEMENT OF VOLUNTARY WINDING UP
319. Circumstances in which company may be wound up
voluntarily 243
320. Notice of resolution to wind up voluntarily 243
321. Commencement of voluntary winding up 244
CONSEQUENCES OFVOLUNTARYWINDING UP
322. Effect of voluntary winding up on business and status of
company 244
323. Avoidance of transfers,&c. after commencement of voluntary
winding up 244
DECLARATION OFSOLVENCY
324. Statutory declaration of solvency in case of proposal to wind up
voluntarily 244
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PROVISIONSAPPLICABLETOASHAREHOLDERS’ VOLUNTARYWINDING UP
325. Provisions relating to a shareholders’ voluntary winding up 245
326. Power of company to appoint and fix remuneration of
liquidators 245
327. Power to fill vacancy in office of liquidator 246
328. Power of liquidator to accept shares &c. in consideration
for sale of property of company 246
329. Duty of liquidators to call creditiors’ meeting in case of
insolvency 247
330. Duty of liquidator to call general meeting in case of insolvency 248
331. Final meeting and dissolution 248
332. Alternative provision as to annual and final meetings in case of
insolvency 249
PROVISIONSAPPLICABLE TO ACREDITOR’SVOLUNTARYWINDING UP
333. Provisions applicable to a creditors’ winding up 250
334. Meeting of creditors 250
335. Appointment of liquidator 251
336. Appointment of committee of inspection 252
337. Fixing of liquidators’ remuneration and ceasing of
directors’ powers 253
338. Power to fill vacancy in office of liquidator 253
339. Application of section 328 to a creditors’ voluntary winding up 253
340. Duty of liquidator to call meetings of company and of creditors
at end of each year 253
341. Final meeting and dissolution 254
PROVISIONSAPPLICABLE TO EVERYVOLUNTARYWINDING UP
342. Provisions applicable to every voluntary winding up 255
343. Distribution of property of company 255
344. Powers and duties of liquidator in voluntary winding up 255
345. Power of court to appoint and remove liquidator in voluntary
winding up 256
346. Notice by liquidator of his appointment 257
347. Arrangement when binding on creditors 257
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Section Page No.
348. Power to apply to court to have question determined or powers
exercised 257
349. Costs of voluntary winding up 258
350. Saving for rights of creditors and contributories 258
(IV) WINDING UP SUBJECT TO SUPERVISION OF COURT
351. Power to order winding up subject to supervision 258
352. Effect of petition for winding up subject to supervision 258
353. Applications of section 275 and 276 to winding up subject to
supervision 258
354. Power of court to appoint or remove liquidators 258
355. Effect of supervision order 259
PROOF AND RANKING OF CLAIMS
356. Admissible claims 260
357. Claims by unsecured creditors 260
358. Rights and duties of secured creditors 261
359. Ascertainment of amount of claim 265
360. Claim not of an ascertained amount 265
361. Fines, penalties or recoveries 265
362. Claims relating to debts payable after commencement of
winding up 266
363. Mutual credit and set-off 266
364. Interest on claims 267
365. Preferential claims 267
366. Claims of other creditors and distribution of surplus assets 268
VOIDABLE TRANSACTIONS
367. Transactions having preferential effect 268
368. Voidable charges 269
369. Uncommercial transactions 271
370. Procedure for setting aside voidable transactions and charges 272
371. Other orders 273
372. Additional provisions relating to setting aside transactions
and charges 274
373. Interpretation in relation to preferences &c. 275
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MALPRACTICE BEFORE WINDING UP AND LIABILITY OF OFFICERS
374. Fraud etc. in anticipation of winding up 277
375. Fraudulent trading 278
376. Power of court to require persons to repay money or return
property 279
377. Disclaimer of onerous property 280
378. Restriction of rights of creditors as to execution or attachment
in case of company 283
379. Duty of fiscal as to goods taken in execution 284
OFFENCESANTECEDENT TO OR IN THE COURSE OFWINDING UP
380. Offences by officers of companies in liquidation 285
381. Liability where proper accounts are not kept 287
382. Prosecution of delinquent officers and members of the company 288
SUPPLEMENTARY PROVISIONS AS TO WINDING UP
383. Qualifications of liquidators 290
384. Corrupt inducement affecting appointment as liquidator 291
385. Enforcement of duty to liquidator to make returns, &c. 291
386. Notification that a company is in liquidation 292
387. Exemption of certain documents from stamp duty on
winding up of companies. 292
388. Books of company to be evidence 292
389. Disposal of books and papers of the company 293
390. Information as to pending liquidations 294
391. Resolutions passed at adjourned meetings of creditors and
contributories 294
SUPPLEMENTARY POWERS OF COURT
392. Meetings to ascertain wishes of creditors or contributories 294
PROVISIONS AS TO DISSOLUTION
393. Power of court to declare dissolution of company void 295
394. Registrar may strike off defunct company from register 295
395. Property of dissolved company to vest in the State 297
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Section Page No.
COMPANIESLIQUIDATIONACCOUNT
396. Establishment of Companies Liquation Account 297
397. Payments into and out of Companies Liquidation Account 298
398. Refusal to supply essential services prohibited 299
RULES AND FEES
399. Rules and fees for winding up 300
PART XIII – ADMINISTRATORS
APPOINTMENT OFADMINISTRATOR
400. Interpretation 300
401. Power of board to appoint administrator 301
402. Notice to charge holders of appointment of administrator 302
403. Effect of appointment of administrator 302
INITIAL MEETING AND CONFIRMATION OF APPOINTMENT
404. Duty of administrator to summon initial meeting 303
405. Effect of confirmation of administrator 304
ADMINISTRATOR’S PROPOSALS
406. Statement of proposals 305
407. Consideration of proposals by creditors’ meeting 306
408. Consequential orders where administrator ceases to hold office 306
409. Approval of substantial revisions to proposals 306
NOTICE OFADMINISTRATION
410. Notice of appointment of administrator 307
411. Notice of administration 308
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THE ADMINISTRATOR
412. Qualifications of administrator 308
413. Validity of acts of administrator 310
414. Consent to be appointmented 310
415. Vacancy in office of administrator 310
POWERS OFADMINISTRATOR
416. Powers of administrators 311
417. Power to deal with charged property &c. 312
418. General duties of administrator 314
419. Discharge of administrator or variation of resolution appointing
administrator 314
420. Remuneration and expenses of administrator 315
421. Liability of administrator 316
422. Relief from liability 317
ASCERTAINMENT AND INVESTIGATION OF COMPANY’SAFFAIRS
423. Obligations of company and directors to provide
information,etc. 318
MISCELLANEOUS
424. Creditors’ committee 318
425. Protection of interests of creditors and share holders 319
426. Application to administrator of provisions relating to receivers 320
PART XIV– FLOATING CHARGES
427. Company may grant floating charge 320
428. Instrument creating floating charge 321
429. Provisions of instrument creating floating charge 322
430. Dealing with property subject to floating charge before
attachment 323
431. Ranking of floating charges 324
432. Alteration and discharge of floating charges 326
433. Circumstances in which floating charge attaches to property 327
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PART XV – RECEIVERS AND MANAGERS
434. Interpretation 330
POWER TO APPOINT RECEIVER
435. Instrument may confer power to appoint receiver 331
QUALIFICATIONS OF RECEIVERS
436. Qualifications of receivers 332
APPOINTMENT OF RECEIVER
437. Appointment of receiver under an instrument 333
438. Extent of power to appoint receiver 334
439. Court may appoint receiver 334
440. Notice of appointment of receiver 335
441. Notice of receivership 336
442. Vacancy in office of receiver 336
POWERS OF RECEIVERS
443. Powers of receivers 337
444. Precedence among receivers 338
445. Power to make calls on shares 339
446. Execution of documents 339
447. Obligations of company and directors 340
448. Validity of acts of receivers 340
449. Consent of mortgagee to sale of property 341
DUTIES OF RECEIVERS
450. General duties of receivers 342
451. Duty of receivers selling property 342
452. No defence or indemnity 343
453. Duty in relation to money 343
454. Accounting records 343
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REPORTS OF RECEIVERS
455. First report by receivers 343
456. Further reports by receiver 345
457. Extension of time for preparing reports 346
458. Persons entitled to receive reports 346
459. Persons entitled to inspect reports 347
460. Duty to notify breaches of any provisions of this Act 347
461. Notice of end of receivership 347
APPLICATION OF PROPERTY AND LIABILITY FORCOMPANY OBLIGATIONS
462. Preferential claims 348
463. Powers of receiver on liquidation 349
464. Liability of receiver 349
465. Relief from liability 351
COURT SUPERVISION OF RECEIVERS
466. Court supervision of receivers 352
467. Court may terminate or limit receivership 353
468. Orders to enforce receiver’s duties 354
469. Orders protecting property in receivership 357
REFUSAL TO SUPPLY ESSENTIAL SERVICES
470. Refusal to supply essential services prohibited 358
PART XVI – REGISTRAR-GENERAL OF COMPANIES AND
REGISTRATION
APPOINTMENT OF OFFICERS
471. Appointment of officers 359
472. Appeals from Registrar’s decisions 359
REGISTERS AND REGISTRATION OF DOCUMENTS
473. Registers to be kept 360
474. Authentication of documents by seal 360
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Section Page No.
475. Registration of documents, copies of documents, notices &c. 361
476. Translations of documents filed 362
477. Fees 362
478. Recovery of expenses and fees 363
FUND
479. Fund 363
INSPECTION AND PRODUCTION OF DOCUMENTS, ENFORCEMENT OF DUTY OF COMPANIES
TO MAKE RETURNS AND THE PRODUCTION AND INSPECTION OF BOOKS
480. Inspection, production and evidence of documents kept by
Registrar 364
481. Enforcement of duty of company to make returns to
Registrar 366
482. Unlawful disclosure of information relating to companies 366
483. Production and inspection of books where an offence is
suspected 366
484. Registrar’s power to call for information and to inspect books,
registers and documents 367
PART XVII – APPLICATION OF ACT TO EXISTING COMPANIES
485. Application of Act to existing companies 368
486. Provisions relating to articles of existing companies 370
487. Provisions relating to company numbers of existing
companies &c. 370
PART XVIII – OVERSEAS COMPANIES
488. Interpretation 371
489. Documents and particulars to be delivered to Registrar by
overseas companies 372
490. Power of overseas companies to hold lands 374
491. Return to be delivered to Registrar where documents etc. altered 374
492. Financial statements of overseas company 375
493. Name of overseas company 375
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494. Obligation to state name and particulars of company 377
495. Service on overseas company 378
496. Registrar to be notified when company ceases to have place of
business in Sri Lanka 378
497. Liquidation of assets in Sri Lanka of overseas company 379
498. Penalties for non-compliance 379
499. Enforcement of duty to comply with provisions of this Part 379
RESTRICTIONS ON SALE OF SHARES AND OFFER OF SHARE FOR SALE
500. Dating of prospectus and particulars to be contained therein 380
501. Provisions as to expert’s consent and allotment 383
502. Registration of prospectus 384
503. Penalty for contravention of section 500, section 501 or
section 502 384
504. Civil liability for misstatements in prospectus 384
505. Interpretation of provisions as to prospectuses 385
PART XIX – ADVISORY COMMISSION
506. Appointment &c. of Advisory Commission 385
PART XX – COMPANIES DISPUTES BOARD
507. Companies Disputes Board 387
508. Board members may mediate disputes 388
509. Privilege in respect of mediation proceedings 390
510. Fees payable in respect of mediation 390
PART XXI – OFFENCES
MISCELLANEOUS OFFENCES
511. Penalty for false statement 391
512. Penalty for falsification of records 391
513. Penalty for improper use of word “Limited” 391
xxv
Section Page No.
GENERAL PROVISIONS AS TO OFFENCES
514. Compounding of certain offences 392
515. Offences summarily triable 392
516. Imposition and application of fines 393
517. Savings as to private prosecutors 393
518. Savings for privileged communications 393
PART XXII – MISCELLANEOUS
PROHIBITION OF PARTNERSHIP WITH MORE THAN TWENTY MEMBERS
519. Prohibition of partnership with more than twenty members 393
APPLICATION AND REFERENCE TO COURT
520. Procedure 395
521. Grant of interim relief 395
522. Savings for attorney-at-law and bankers 397
523. Service of documents on company 397
524. Documents to be received in evidence 397
525. Costs in action by certain limited companies 397
526. Power of court to grant relief in certain cases 398
527. Regulations 398
528. Sinhala text to prevail in case of inconsistency 399
529. Interpretation 399
TRANSITIONAL PROVISIONS AND SAVINGS
530. Transitional provisions 411
531. Savings 412
532. Savings of pending proceedings for winding up 413
PART XXIII – REPEALS AND AMENDMENTS
533. Repeals 414
534. Amendment of the First Schedule of the Act, No. 10 of 1996 414
xxvi
Page No.
FIRST SCHEDULE 414
SECOND SCHEDULE 433
THIRD SCHEDULE 434
FOURTH SCHEDULE 434
FIFTH SCHEDULE 442
SIXTH SCHEDULE 443
SEVENTH SCHEDULE 443
EIGHTH SCHEDULE 448
NINTH SCHEDULE 449
TENTH SCHEDULE 452
ELEVENTH SCHEDULE 454
TWELFTH SCHEDULE 456
THIRTEENTH SCHEDULE 458
xxvii
Companies Act, No. 07 of 2007 1
[Certified on 20th March, 2007]
L.D.—O. 44/2005
ANACT TO AMENDAND CONSOLIDATE THE LAW RELATING TO
COMPANIES
BE it enacted by the Parliament of the Democratic Socialist
Republic of Sri Lanka as follows :-
1. (1) This Act may be cited as the Companies Act, No. 07 Short title and
of 2007. date of
operation.
(2) The provisions of this Act shall come into operation
on such date (hereinafter referred to as the “appointed date”)
as the Minister may appoint, by Order published in the
Gazette.
PART I
INCORPORATION OF COMPANIES AND RELATED MATTERS
ESSENTIAL CHARACTERISTICS OF COMPANIES
2. (1) A company incorporated under this Act shall, by Legal status and
the name by which it is registered from time to time, be a capacity of a
company.
body corporate.
(2) A company shall have, both within and outside Sri
Lanka—
(a) subject to the provisions of section 13 of the Act,
the capacity to carry on or undertake any business
or activity, do any act or enter into any transaction ;
and
(b) subject to the provisions of any written law of Sri
Lanka or of any other country, all the rights, powers
and privileges necessary for the purposes of
paragraph (a).
2 —PL000786—425 (11/2005)
2 Companies Act, No. 07 of 2007
Different types 3. (1) A company incorporated under this Act may be
of companies.
either—
(a) a company that issues shares, the holders of which
have the liability to contribute to the assets of the
company, if any, specified in the company’s articles
as attaching to those shares (in this Act referred to as
a “limited company”) ; or
(b) a company that issues shares, the holders of which
have an unlimited liability to contribute to the assets
of the company under its articles (in this Act referred
to as an “unlimited company”) ; or
(c) a company that does not issue shares, the members
of which undertake to contribute to the assets of the
company in the event of its being put into
liquidation, in an amount specified in the company’s
articles (in this Act referred to as a “company limited
by guarantee”).
(2) Where a limited company is incorporated as a private
company or as an off-shore company, the provisions of Part II
or Part XI shall apply respectively, to such a company.
INCORPORATION OF COMPANIES
Method of 4. (1) Subject to the provisions of subsection (2), any
incorporating a person or persons may apply to incorporate a company, other
company.
than a company limited by guarantee, by making an
application for the same to the Registrar in the prescribed
form signed by each of the initial shareholders, together with
the following documents :-
(a) a declaration stating that to the best of such person
or persons knowledge, the name of the company is
not identical or similar to that of an existing
company;
Companies Act, No. 07 of 2007 3
(b) the articles of association of the company, if different
from the articles set out in the First Schedule hereto,
and signed by each of the initial shareholders ;
(c) consent from each of the initial directors under section
203, to act as a director of the company ; and
(d) consent from the initial secretary under subsection
(2) of section 221, to act as secretary of the company.
(2) A company shall have not less than two shareholders,
provided that a company may have a single shareholder where
such single shareholder is the Secretary to the Treasury who
is holding shares on behalf of the Government of Sri Lanka
or is an individual or a body corporate.
5. (1) On receipt of a properly completed application Incorporation of
for incorporation in the prescribed form, the Registrar shall— a company.
(a) enter the particulars of the company on the Register;
(b) assign a unique number to that company as its
company number ; and
(c) issue a certificate of incorporation in the prescribed
form to the applicant company.
(2) The certificate of incorporation issued under
subsection (1) shall specify—
(a) the name and number of the company ;
(b) the date on which the company was incorporated ;
(c) whether the company is a limited company, an
unlimited company or a company limited by
guarantee ;
(d) whether the company is a private company ; and
(e) whether the company is an off-shore company ;
4 Companies Act, No. 07 of 2007
(3) A certificate of incorporation issued under this section
in-respect of any company, shall be conclusive evidence of
the fact that—
(a) all the requirements under this Act relating to the
incorporation of a company have been complied
with ; and
(b) the company has been incorporated under this Act
on the date specified in such certificate of
incorporation.
COMPANY NAMES
Requirements as 6. The name of every—
to name.
(a) limited company other than a listed company, shall
end in the word “Limited” or by the abbreviation
“Ltd” ;
(b) private company, shall end in the words “(Private)
Limited” or by the abbreviation “(Pvt) Ltd” ; and
(c) limited company which is a listed company, shall
end in the words “Public Limited Company” or by
the abbreviation “PLC”.
Restrictions on 7. (1) A company shall not be registered by a name
names. which—
(a) is identical with the name of any other company or
of any registered overseas company ;
(b) contains the words “Chamber of Commerce”, unless
the company is a company which is to be registered
under a licence granted under section 34 without
the addition of the word “Limited” to its name ; or
Companies Act, No. 07 of 2007 5
(c) is in the opinion of the Registrar, misleading.
(2) Except with the consent of the Minister given having
regard to the national interest, no company shall be registered
by a name which contains the words :—
(a) “President”, “Presidential” or other words which in
the opinion of the Registrar suggest or are calculated
to suggest, the patronage of the President or
connection with the Government or any Government
Department ;
(b) “Municipal”, “incorporated” or other words which
in the opinion of the Registrar suggest or are
calculated to suggest, connection with any
Municipality or other local authority or with any
society or body incorporated by an Act of
Parliament;
(c) “Co-operative” or “Society” ; or
(d) “National”, “State” or “Sri Lanka” or other words
which in the opinion of the Registrar suggest or are
calculated to suggest, any connection with the
Government or any Government Department.
(3) In determining for the purposes of subsection (1)
whether one name is identical with another, the following
words shall be disregarded :—
(a) the word “the”, where it is the first word of the name;
(b) the following words and expressions, where they
appear at the end of the name :
(i) “company” ;
(ii) “and company” ;
(iii) “company limited” ;
6 Companies Act, No. 07 of 2007
(iv) “and company limited” ;
(v) “limited” ;
(vi) “unlimited” ;
(vii) “(Private) limited” ;
(viii) “Public Limited Company” ;
(c) abbreviations referred to in section 6, where they
appear at the end of the name ;
(d) type and case of letters, accents, spaces between
letters and punctuation marks ; and
(e) “and” or “&”.
Change of 8. (1) A company may change its name by special
name. resolution with the prior approval in writing of the Registrar.
(2) Where a company has resolved to change its name
under subsection (1), it shall within ten working days of the
change, give notice of the change to the Registrar in the
prescribed form.
(3) Upon receiving notice that a company has changed
its name, the Registrar shall—
(a) enter the new name on the Register in place of the
former name ; and
(b) issue a fresh certificate of incorporation in the
prescribed form, altered to indicate—
(i) the change of name ; and
(ii) where the company has become or has ceased
to be a private company, the fact of that change.
Companies Act, No. 07 of 2007 7
(4) The change of name shall not affect any rights or
obligations of the company, or render ineffective any legal
proceedings by or against the company. Any legal
proceedings that might have been continued or commenced
against it by its former name, may be continued or commenced
against it by its new name.
(5) Where a company fails to comply with
subsection(2)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding fifty
thousand rupees ; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
9. (1) A company shall within thirty working days of Public notice of
its incorporation under this Act, give public notice of its name.
incorporation, specifying —
(a) the name and company number of the company ;
and
(b) the address of the company’s registered office.
(2) Where a company changes its name in accordance
with the provisions of section 8, it shall within twenty working
days of such change give public notice of it, specifying—
(a) the former name of the company ;
(b) the company number ;
(c) the address of the registered office of the company ;
and
(d) the new name of the company.
8 Companies Act, No. 07 of 2007
(3) Where a company fails to publish the notice required
under subsection (1) or (2) :—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding fifty
thousand rupees ; and
(b) the Registrar shall cause the relevant notice to be
published.
Direction to 10. (1) Notwithstanding the provisions of section 7, the
change name. Registrar may direct a company to change its name in the
following circumstances :—
(a) where through inadvertence or otherwise, it has been
registered with a name which contravenes the
provisions of section 6 ;
(b) a request is made to the Registrar to do so within
three months of the company giving public notice
of the name objected to under section 9, by another
company or by a registered overseas company,
where—
(i) the name of the first-mentioned company is
so similar to the name of the requesting
company that it is likely to cause confusion;
and
(ii) the requesting company was registered with
its current name before the first-mentioned
company was registered with the name
objected to ; or
(c) a request is made to the Registrar to do so by any
person and the Registrar is satisfied that the name
was not applied for in good faith for the purpose of
identifying the company.
Companies Act, No. 07 of 2007 9
(2) A company shall comply with a direction issued by a
Registrar under subsection (1) within a period of six weeks
from the date of the issue of such direction, or such longer
period as the Registrar may in his discretion permit.
(3) A company which fails to comply with a direction
issued under this section shall be guilty of an offence and be
liable on conviction to a fine not exceeding two hundred
thousand rupees.
11. (1) Where a company ceases to be a private company, Change of name
it shall be deemed to have resolved to change its name in upon change of
accordance with the provisions of subsection (1) of section status of
company.
8, by omitting the word “(Private)”.
(2) Where a company which was not a private company
becomes a private company under section 29, it shall be
deemed to have resolved to change its name in accordance
with the provisions of subsection (1) of section 8 by
substituting for the word “Limited” at the end of its name, of
the words “(Private) Limited”.
(3) Where a limited company becomes a listed company,
it shall be deemed to have resolved to change its name in
accordance with the provisions of subsection (1) of section 8
by substituting for the word “Limited” at the end of its name,
of the words “Public Limited Company”.
(4) Where a limited company ceases to be a listed
company, it shall be deemed to have resolved to change its
name in accordance with the provisions of subsection (1) of
section 8, by substituting for the words “Public Limited
Company” at the end of its name, of the word “Limited”.
(5) Where a company is deemed to have resolved to
change its name under this section, it shall within ten working
days of such change, give public notice of the change and
send a copy of such notice to the Registrar, and the provisions
of subsections (3) and (4) of section 8, shall apply to and in
relation to such change of name.
10 Companies Act, No. 07 of 2007
(6) Where a company fails to comply with the
requirements of subsection (5) —
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding fifty
thousand rupees ; and
(b) every officer of the company who is in default shall
be guilty an offence and be liable on conviction to
a fine not exceeding fifty thousand rupees.
Use of company 12. (1) A company shall ensure that its name and its
name and company number are clearly stated in—
company
number.
(a) all business letters of the company ;
(b) all notices and other official publications of the
company ;
(c) all bills of exchange, promissory notes,
endorsements, cheques and orders for money or
goods signed on behalf of the company ;
(d) all invoices, receipts and letters of credit of the
company ;
(e) all other documents issued or signed by the
company which creates or is evidence of a legal
obligation of the company ; and
(f) the company seal, if any.
(2) Every company shall ensure that its name and its
company number are clearly displayed at its registered office.
(3) Where a company fails to comply with the provisions
of subsection (1) or subsection (2)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding fifty
thousand rupees ; and
Companies Act, No. 07 of 2007 11
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
(4) Where—
(a) a document that creates or is evidence of a legal
obligation of a company, is issued or signed by or
on behalf of the company ; and
(b) the name and company number of the company are
not correctly stated in the document,
every person who issued or signed the document will be
liable to the same extent as the company if the company
fails to discharge the obligation, unless-
(c) the person who issued or signed the document
proves, that the person in whose favour the
obligation was incurred was aware at the time the
document was issued or signed, that the obligation
was incurred by the company ; or
(d) the court is satisfied that it would not be just and
equitable for that person to be so liable.
(5) For the purposes of subsections (1) and (2), a company
may use a generally recognized abbreviation of any word in
its name, unless it is misleading to do so.
ARTICLES OFASSOCIATION
13. The articles of association of a company may provide Contents of
for any matter not inconsistent with the provisions of this Act articles.
other than the First Schedule hereto, and in particular may
provide for—
(a) the objects of the company ;
12 Companies Act, No. 07 of 2007
(b) the rights and obligations of shareholders of the
company ; and
(c) the management and administration of the company.
Application of 14. The articles of association set out in the First
model articles. Schedule hereto (hereinafter referred to as “model articles”)
shall apply in respect of any company other than a company
limited by guarantee, except to the extent that the company
adopts articles which exclude, modify or are inconsistent
with the model articles.
Adoption or 15. (1) Subject to the provisions of this Act and any
amendment of conditions contained in its articles, a company may at any
articles.
time by special resolution —
(a) adopt new articles ;
(b) if it has articles which differ from the articles of
association set out in the First Schedule, adopt such
articles as its articles ; or
(c) alter its articles.
(2) Where a company by a special resolution alters its
articles, it shall give notice of such resolution to the Registrar
within ten working days, setting out in full the text of the
resolution and of any new articles or of any alterations to the
company’s articles.
(3) Where a company fails to comply with the requirement
of subsection (2)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding fifty
thousand rupees ; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
Companies Act, No. 07 of 2007 13
16. Subject to the provision of section 89, the articles of Effect of articles.
a company shall bind the company and its shareholders as if
there were a contract between the company and its
shareholders. In particular, all money payable by any
shareholder to the company under the articles, shall be a debt
due from that shareholder to the company.
17. (1) Where the articles of a company sets-out the Effect of
objects of the company, there shall be deemed to be a statement of
objects in
restriction placed by the articles in carrying on any business articles.
or activity that is not within those objects, unless the articles
expressly provide otherwise.
(2) Where the articles of a company provide for any
restriction on the business or activities in which the company
may engage—
(a) the capacity and powers of the company shall not
be affected by such restriction ; and
(b) no act of the company, no contract or other
obligation entered into by the company and no
transfer of property by or to the company, shall be
invalid by reason only of the fact that it was done in
contravention of such restriction.
(3) Nothing in subsection (2) shall affect —
(a) the ability of a shareholder or director of the
company to make an application to court under
section 233 to restrain the company from acting in a
manner inconsistent with a restriction placed by the
articles, unless the company has entered into a
contract or other binding obligation to do so; or
(b) the liability of a director of the company for acting
in breach of the provisions of section 188.
14 Companies Act, No. 07 of 2007
Right of 18. (1) A shareholder has a right at any time to request
shareholders to a a company in writing for a copy of the articles of the company,
copy of the
and subject to subsection (2), the company shall comply
articles.
with such request within five working days of the date of
receipt and such request.
(2) A company to which a request is made under
subsection (1) may—
(a) require the shareholder to pay a fee of not more than
five hundred rupees before providing a copy of the
articles; or
(b) decline to provide a copy of the articles, if a copy
has been provided to that shareholder within the
previous six months.
(3) Where a company fails to comply with the
requirements of subsection (1) —
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding two
hundred thousand rupees; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding one hundred thousand
rupees.
COMPANY CONTRACTS ETC.
Method of 19. (1) A contract or other enforceable obligation may
contracting. be entered into by a company as follows :—
(a) an obligation which, if entered into by a natural
person is required by law to be in writing signed by
that person and be notarially attested, may be
entered into on behalf of the company in writing
signed under the name of the company by —
(i) two directors of the company;
Companies Act, No. 07 of 2007 15
(ii) if there be only one director, by that director;
(iii) if the articles of the company so provide, by
any other person or class of persons; or
(iv) one or more attorneys appointed by the
company,
and be notarially executed;
(b) an obligation which, if entered into by a natural
person is required by law to be in writing and signed
by that person, may be entered into on behalf of the
company in writing signed by a person acting under
the company’s express or implied authority;
(c) an obligation which if entered into by a natural
person is not required by law to be in writing, may
be entered into on behalf of the company in writing
or orally, by a person acting under the company’s
express or implied authority.
(2) The provisions of subsection (1) shall apply to a
contract or other obligation —
(a) whether or not that contract or obligation is entered
into in Sri Lanka; and
(c) whether or not the law governing the contract or
obligation is the law of Sri Lanka.
(3) For the purpose of this section, a company may use a
generally recognised abbreviation of any word in the name,
unless it is misleading to do so.
20. (1) Subject to its articles, a company may by an Attorneys.
instrument in writing executed in accordance with the
provisions of section 19, appoint a person as its attorney
either generally or in relation to a specified matter.
16 Companies Act, No. 07 of 2007
(2) Any act of the attorney carried out in accordance with
the instrument referred to in subsection (1), shall be binding
on the company.
(3) The provisions of the Powers of Attorney Ordinance
(Chapter 122) and the law relating to powers of attorney
executed by a natural person, shall with necessary
modifications, apply in relation to a power of attorney
executed by a company to the same extent as if the company
was a natural person, and as if the commencement of the
liquidation or if there is no liquidation, the removal of the
company from the Register, was the death of a person.
Authority of 21. (1) A company or a guarantor of an obligation of
directors, the company or any person claiming under the company,
officers and
agents. may not assert against a person dealing with that company or
with any person who has acquired rights from the company,
that —
(a) the articles of the company have not been complied
with; or
(b) the persons named in the most recent notice filed
under section 223 or the annual return delivered
under section 131of this Act, are not the directors or
the secretary of the company, as the case may be; or
(c) a person held out by a company as a director, officer
or agent of the company—
(i) has not been duly appointed; or
(ii) does not have authority to exercise the powers
and perform the duties that are customary in
the business of the company or are normal for
a director, officer or agent of a company
carrying on business of the kind carried on by
that company; or
Companies Act, No. 07 of 2007 17
(d) a document issued by any director, the secretary of
the company or by any officer or agent, with actual
or normal authority to issue the document, is not
valid or genuine,
unless that person has, or by virtue of that person’s position
with or relationship to the company, ought to have
knowledge to the contrary.
(2) The provisions of subsection (1) shall apply even in a
situation where a person referred to in paragraphs (b) to (d) of
that subsection acts fraudulently or forges a document that
appears to have been signed on behalf of the company, unless
the person dealing with the company or who has acquired
rights from the company, has actual knowledge of such fraud
or forgery.
22. Subject to the provisions of subsection (3) of section No constructive
105, a person shall not be affected by or deemed to have notice.
notice or knowledge of the contents of the articles of company
or any other document relating to a company, by reason only
of the fact that it has been delivered to the Registrar for filing
or is available for inspection at any office of the company.
PRE-INCORPORATION CONTRACTS
23. (1) For the purpose of this section and sections 24 pre-
incorporation
and 25 of this Act, the expression “pre-incorporation contracts may be
contract” means — ratified.
(a) a contract purported to have been entered into by a
company before its incorporation; or
(b) a contract entered into by a person on behalf of a
company before and in contemplation of its
incorporation.
18 Companies Act, No. 07 of 2007
(2) Notwithstanding anything to the contrary in any law,
a pre-incorporation contract may be ratified within such
period as may be specified in the contract or if no such period
is specified, within a reasonable time after the incorporation
of such company, in the name of which or on behalf of which
it has been entered into.
(3) A pre-incorporation contract that is ratified under
subsection (2), shall be as valid and enforceable as if the
company had been a party to the contract at the time it was
entered into.
(4) A pre-incorporation contract may be ratified by a
company in the same manner as a contract may be entered
into on behalf of a company under section 19.
Warranties 24. (1) Notwithstanding anything to the contrary in any
implied in pre- law, in a pre-incorporation contract, unless a contrary intention
incorporation
is expressed in the contract, there shall be an implied warranty
contracts.
by the person who purports to enter into such contract in the
name of or on behalf of the company—
(a) that the company will be incorporated within such
period as may be specified in the contract, or if no
period is specified, within a reasonable time after
the making of the contract; and
(b) that the company will ratify the contract within such
period as may be specified in the contract or if no
period is specified, within a reasonable time after
the incorporation of such company.
(2) The amount of damages recoverable in an action for
breach of an implied warranty referred to in subsection (1),
shall be the same as the amount of damages that may be
recoverable in an action against the company for damages
for breach by the company of the unperformed obligations
under the contract, if the contract had been ratified by the
company.
Companies Act, No. 07 of 2007 19
(3) Where after its incorporation, a company enters into a
contract in the same terms as or in substitution for, a pre-
incorporation contract (not being a contract ratified by the
company under section 23), the liability of a person under
subsection (1) shall be discharged.
25. Where a company has acquired property pursuant to Failure to
a pre-incorporation contract that has not been ratified by the ratify.
company after its incorporation, a court may on an application
made in that behalf by the party from whom the property was
acquired, make an order —
(a) directing the company to return property acquired
under the pre-incorporation contract, to that party;
(b) validating the contract in whole or in part; or
(c) granting any other relief in favour of that party
relating to that property acquired.
AUTHENTICATION OF DOCUMENTS BY COMPANY
26. A document or record of proceedings requiring Authentication
authentication by a company shall be signed by a director, of documents
secretary, or other authorised officer of the company. by company.
PART II
PRIVATE COMPANIES
27. The articles of a private company shall include Articles of a
provisions which— private
company.
(a) prohibit the company from offering shares or other
securities issued by the company to the public; and
(b) limit the number of its shareholders to fifty, not
including shareholders who are—
(i) employees of the company; or
20 Companies Act, No. 07 of 2007
(ii) former employees of the company who
became shareholders of the company while
being employees of such company and who
have continued to be shareholders after
ceasing to be employees of the company.
Company 28. (1) If a private company alters its articles in such a
ceasing to be a way that the articles no longer comply with the requirments
private of section 27—
company.
(a) the company shall cease to be a private company;
(b) provisions of sections 30 and 31 shall cease to apply
to that company; and
(c) the company shall be deemed to have changed its
name in accordance with section 11.
(2) If a private company fails to comply with the
requirements specified in section 27—
(a) the company shall cease to be a private company;
(b) provisions of sections 30 and 31 shall cease to apply
to that company; and
(c) the company shall be deemed to have changed its
name in accordance with section 11.
(3) The court may determine that provisions of subsection
(2) shall not apply in respect of failure by a private company,
where it is satisfied that—
(a) the failure to comply was due to inadvertence;
(b) the failure to comply has been rectified; or
(c) in all the circumstances of the case it is just and
equitable to reach such determination.
Companies Act, No. 07 of 2007 21
29. Where a limited company alters its articles so that Company may
the articles comply with the requirement of section 27— become a private
company.
(a) the company shall become a private company; and
(b) the company shall be deemed to have changed its
name in accordance with the provisions of
section11.
30. (1) A private company may by unanimous Private
resolution of its shareholders dispense with the keeping of companies need
an interests register, and while such a resolution is in force, not keep interests
register.
no provision of this Act which requires any matter to be entered
in the interests register of a company, shall apply to such
private company.
(2) A unanimous resolution under subsection (1) shall
cease to have effect, if any shareholder gives notice in writing
to the company, that he requires it to keep an interests register.
31. (1) Where all the shareholders of a private company Unanimous
agree in writing to any action which has been taken, or is to agreement of
shareholders.
be taken by the company—
(a) the taking of that action is deemed to be validly
authorised by the company, notwithstanding any
provision in the articles of the company to the
contrary; and
(b) the provisions contained in the list of sections of
this Act specified in the Second Schedule hereto,
shall not apply to and in relation to that action.
(2) Without limiting the matters which may be agreed to
under subsection (1), the provisions of that subsection shall
apply where all the shareholders of a private company agree
to or concur in —
(a) the issue of shares by the company;
22 Companies Act, No. 07 of 2007
(b) the making of a distribution by the company;
(c) the repurchase or redemption of shares in the
company;
(d) the giving of financial assistance by a company for
the purpose of or in connection with the purchase of
shares in the company;
(e) the payment of remuneration to a director, or the
making of a loan to a director, or the conferment of
any other benefit on a director; or
(f) the entering into a contract between an interested
director and the company.
(3) Where a distribution is made by a company under
subsection (2) and as a consequence of making that
distribution the company fails to satisfy the solvency test,
such distribution shall be deemed not to have been made
validly.
(4) A distribution to a shareholder which is deemed not
to have been validly made under subsection (3) may be
recovered by the company from such shareholder, unless —
(a) the shareholder received the distribution in good
faith and without knowledge of the company’s failure
to satisfy the solvency test;
(b) the shareholder has altered his position relying on
the validity of such distribution; and
(c) it would be unreasonable in view of the
circumstances, to require repayment in full or at all.
(5) Where reasonable grounds did not exist for believing
that the company would be able to satisfy the solvency test
Companies Act, No. 07 of 2007 23
after the making of a distribution which is deemed not to
have been validly made, each shareholder who agreed to the
making of such distribution will be personally liable to the
company, to repay to the company so much of the distribution
which the company is not able to recover from the
shareholders to whom the distribution was made.
(6) Where an action for recovery is brought against a
shareholder under subsection (4) or (5), and the court is
satisfied that the company could by making a distribution of
a lesser amount have satisfied the solvency test, the court
may —
(a) permit the shareholder to retain; or
(b) relieve the shareholder from liability in respect of,
an amount equal to the value of any distribution that the
company could properly have made under the circumstances.
PART III
COMPANIES LIMITED BY GUARANTEE
32. Any two or more persons may apply to form a Application for
company limited by guarantee by making an application to incorporation of
the Registrar for the same in the prescribed form signed by a company
limited by
each of the initial members, together with the following
guarantee.
documents :—
(a) the articles of association of the company;
(b) a consent under section 203 from each of the initial
directors, to act as a director of the company; and
(c) a consent under section 221 from the initial
secretary, to act as secretary of the company.
24 Companies Act, No. 07 of 2007
Company 33. (1) A company limited by guarantee shall have
limited by articles which sets out—
guarantee
must have
articles. (a) the objects of the company; and
(b) the amount which each member of the company
undertakes to contribute to the assets of the company,
in the event of such company being put into
liquidation.
(2) Nothing in subsection (1) shall prevent a company
limited by guarantee from providing in its articles, that
specified clauses of the articles of association set out in the
First Schedule hereto, shall apply to that company and any
such provision shall have effect accordingly.
Power to 34. (1) Where the Registrar is satisfied that an
dispose with association about to be formed as a company limited by
“limited” in
guarantee is to be formed for promoting commerce, art,
the name of
charitable science, religion, charity, sport, or any other useful object,
and other and intends to apply its profits, if any, or other income in
companies. promoting its objects, and to prohibit the payment of any
dividend to its members —
(a) the Registrar may by licence direct that the
association be registered as a company limited by
guarantee, without the addition of the word
“Limited” to its name; and
(b) the association may be registered accordingly and
shall on registration enjoy all the privileges and
subject to the provisions of this section, be subject
to all the obligations of a limited company.
(2) Where it is proved to the satisfaction of the Registrar—
(a) that the objects of a company limited by guarantee
are restricted to those specified in subsection (1)
and to objects incidental or conducive to them; and
Companies Act, No. 07 of 2007 25
(b) that by its articles the company is required to apply
its profits or other income in promoting its objects
and is prohibited from paying any dividend to its
members,
the Registrar may by licence authorize the company to make
by special resolution a change in its name including or
consisting of the omission of the word “Limited”. The
provisions of subsections (2), (3), (4) and (5) of section 8
shall apply to a change of name under this subsection.
(3) A licence granted under this section may be subject
to such terms and conditions as the Registrar thinks necessary
for the purpose of ensuring that the association conforms to
the requirements of subsection (1). The terms and conditions
shall be binding on the association and shall, if the Registrar
so directs, be incorporated into the articles of such company.
(4) No alteration may be made in the articles of a company
to which a licence has been granted under this section, without
the prior written approval of the Registrar.
(5) The provisions of section 6 shall not apply in respect
of a company to which a licence is granted under this section.
(6) A licence granted under this section may at any time
be revoked by the Registrar where the company to which the
licence is granted fails to comply with the requirements of
subsection (1) or subsection (3). Upon revocation of a licnece,
the Registrar shall enter upon the register the word “Limited”
at the end of the name of the company, and the company
shall cease to enjoy the exemptions and privileges granted
by the provisions of this section. The provision of subsections
(3) and (4) of section 8 shall apply to a change of name under
this subsection.
(7) Before a licence is revoked under subsection (6), the
Registrar shall give the company notice in writing of his
26 Companies Act, No. 07 of 2007
intention and shall afford the association or company an
opportunity of being heard in opposition to the revocation.
(8) Where an association in respect of which a licence
under this section is in force alters the provisions of its
constitution with respect to its objects, the Registrar may,
unless he sees fit to revoke the licence, vary, add to or alter
the terms and conditions subject to which the license was
granted.
Provisions 35. (1) The provisions contained in the list of sections
which apply to of this Act specified in the Third Schedule hereto, shall not
companies
apply to and in respect of a company limited by guarantee.
limited by
guarantee.
(2) The provisions of this Act other than the sections
referred to in subsection (1), shall apply to a company limited
by guarantee with all necessary modifications, as if—
(a) the company were a limited company ;
(b) references to shareholders were references to
members of the company ;
(c) each member held one share in the company ; and
(d) references to the share register were references to
the register of members.
PART IV
SHARES AND DEBENTURES
PROSPECTUS
Dating of 36. A prospectus issued by or on behalf of a company or
prospectus. in relation to a company to be formed shall bear a date, and
such date shall unless the contrary is proved, be taken as the
date of publication of such prospectus.
Companies Act, No. 07 of 2007 27
37. (1) Every prospectus issued by or on behalf of a Specific
company or by or on behalf of any person who is or has been requirements as
to particulars in
engaged or interested in the formation of the company, shall prospectus.
contain the information specified in Part I of the Fourth
Schedule hereto and set out the reports specified in Part II of
that Schedule. The provisions of Parts I and II shall have
effect, subject to the provisions contained in Part III of that
Schedule.
(2) A condition requiring or binding an applicant for
shares in or debentures of a company, to waive compliance
with any requirement of this section, or purporting to affect
him with notice of any contract, document, or matter not
specifically referred to in the prospectus, shall be void.
(3) It shall not be lawful to issue any form for application
for shares in or debentures of a company, unless the form is
issued with a prospectus which complies with the requirements
of this section :
Provided that the provisions of this subsection shall not
apply, where it is shown that the form for application was
issued either—
(a) in connection with a bona fide invitation to a person
to enter into an under-writing agreement with respect
to the shatres or debentures ;
(b) in relation to shares or debentures which were not
offered to the public ; or
(c) in relation to issuance of commercial papers by a
company listed on a stock exchange and offered to
the public.
(4) Subject to the provisions of subsections (1) and (2),
any person who acts in contravention of the provisions of
subsection (3) shall be guilty of an offence and be liable on
conviction to a fine not exceeding two hundred thousand
rupees.
28 Companies Act, No. 07 of 2007
(5) In the event of non-compliance with or contravention
of any of the requirements of this section, a director or other
person responsible for the issue of the prospectus shall not
incur any liability by reason of such non-compliance or
contravention, if—
(a) as regards any matter not disclosed he proves that
he was not cognizant thereof ;
(b) he proves that the non-compliance or contravention
arose from an honest mistake of fact on his part ; or
(c) the non-compliance or contravention was in respect
of any matter which in the opinion of the court was
immaterial or was otherwise such as ought, having
regard to all the circumstances of the case, reasonably
to be excused :
Provided that, in the event of failure to include in a
prospectus a statement with respect to the matters specified
in paragraph 17 of the Fourth Schedule hereto, no director or
other person shall incur any liability in respect of the failure,
unless it be proved that he had knowledge of the matters not
disclosed.
(6) The provision of this section shall not apply to the
issue to existing shareholders or debenture holders of a
company, of a prospectus or form of application relating to
shares in or debentures of the company, whether an applicant
for shares or debentures shall or shall not have the right to
renounce in favour of other persons. Save as aforesaid, the
provisions of this section shall apply to a prospectus or a
form of application whether issued on or with reference to
the formation of a company or subsequently.
(7) Nothing in this section shall limit or diminish any
liability which a person may incur under any written law or
under this Act (other than this section).
(8) Where a prospectus has been sent for registration in
accordance with the provisions of section 40 and has been
1-25T 7
Companies Act, No. 07 of 2007 29
registered by the Registrar, nothing in the preceding
provisions of this section shall be deemed or construed to
prohibit the issue or publication of any notice, circular or
advertisement stating that the prospectus has been registered
and issued and that copies thereof are available on
application, if such notice, circular or advertisement does
not contain any invitation to the public to subscribe for or
purchase any shares in or debentures of a company.
38. (1) A prospectus inviting persons to subscribe for Expert’s consent
shares in or debentures of a company and including a to issue of
prospectus
statement purporting to be made by an expert, shall not be
containing
issued, unless— statement by
him.
(a) such expert has given and has not before delivery of
a copy of the prospectus for registration, withdrawn
his written consent to the issue thereof with the
statement included in the form and context in which
it is included ; and
(b) a statement appears in the prospectus that such expert
has given and has not withdrawn his consent as
referred to in paragraph (a).
(2) Where any prospectus is issued in contravention of
the provision of this section, the company and every person
who is knowingly a party to the issue thereof, shall be guilty
of an offence and be liable on conviction to a fine not
exceeding two hundred thousand rupees.
(3) For the purpose of this section, the term “expert”
includes an engineer, a valuer, an auditor, an accountant and
any other person having similar professional qualifications.
39. (1) No bank shall be named as a company’s banker Consent of bank
in any prospectus inviting persons to subscribe for shares in or attorney-at-
law or auditor
or debentures of the company, unless such bank has given necessary for
and has not before delivery of a copy of the prospectus for inclusion of
registration, withdrawn its written consent to the inclusion name in
prospectus.
in such prospectus of its names as the company’s banker :
30 Companies Act, No. 07 of 2007
Provided that a bank shall not be deemed for the purposes
of this Act to have authorised the issue of a prospectus, by
reason only of it having given the consent to the inclusion in
such prospectus of its name as the company’s bankers.
(2) No attorney-at-law shall be named as a company’s
lawyer in a prospectus inviting persons to subscribe for shares
in or debentures of the company, unless such attorney-at-law
has given and has not before delivery of a copy of the
prospectus for registration, withdrawn his written consent to
the inclusion in such prospectus of his name as the company’s
lawyer :
Provided that an attorney-at-law shall not be deemed for
the purposes of this Act to have authorised the issue of a
prospectus, by reason only of his having given the consent
to the inclusion in such prospectus of his name as the
company’s lawyer.
(3) No auditor shall be named as a company’s auditor in a
prospectus inviting persons to subscribe for shares in or
debentures of the company, unless such auditor has given
and has not before delivery of a copy of the prospectus for
registration, withdrawn his written consent to the inclusion
in such prospectus of his name as the company’s auditor :
Provided that an auditor shall not be deemed for the
purposes of this Act to have authorized the issue of a
prospectus, by reason only of his having given the consent
to the inclusion in such prospectus of his name as the
company’s auditor.
(4) Where the name of any bank, attorney-at-law or auditor
is included in any prospectus of a company in contravention
of the provisions of this section, the company and every
person who is knowingly a party to the issue thereof, shall be
guilty of an offence and be liable on conviction to a fine not
exceeding two hundred thousand rupees.
Companies Act, No. 07 of 2007 31
40. (1) No prospectus shall be issued by or on behalf of Registration of
prospectus.
a company or in relation to a company to be formed, unless
on or before the date of its publication, there has been
delivered to the Registrar for registration a copy of such
prospectus signed by every person who is named in such
prospectus as a director or proposed director of the company,
or by his agent authorised in writing, and having endorsed
thereon or attached thereto—
(a) written consent from an expert to the issue of the
prospectus as required by section 38 ;
(b) a declaration made and subscribed to by every
person who is named in such prospectus as a director
or a proposed director of the company, to the effect
that he has read the provisions of this Act relating to
the issue of a prospectus and that those provisions
have been complied with ; and
(c) in the case of prospectus issued generally, where the
persons making any report required by Part II of the
Fourth Schedule hereto have made or have without
giving the reasons, indicated in such prospectus any
such adjustments as are mentioned in paragraph 30
of that Schedule, and a written statement signed by
such person setting out the adjustments and giving
the reasons therefor.
(2) Every prospectus shall on the face of it—
(a) state that a copy has been delivered for registration
as required by this section ; and
(b) set out or refer to statements included in the
prospectus which specify any documents required
by this section to be endorsed on or attached to the
copy so delivered.
32 Companies Act, No. 07 of 2007
(3) The Registrar shall not register a prospectus—
(a) unless the copy thereof is signed in the manner
required by this section ;
(b) unless it has endorsed thereon or attached thereto
the dosuments (if any) specified as aforesaid ;
(c) unless it bears the date of the delivery of the copy
thereof to the Registrar under this section, or it bears
a future date to be inserted in such prospectus under
the provisions of section 36 ; and
(d) where it bears a future date as hereinbefore provided,
unless that date has been confirmed or altered by
notice served on the Registrar.
(4) Where a prsopectus is issued without a copy thereof
being delivered under this section to the Registrar or without
a copy so delivered having been endorsed thereon or attached
thereto the required documents referred to in subsection (1),
the company and every person who is knowingly a party to
the issue of the prospectus, shall be guilty of an offence and
be liable on conviction to a fine not exceeding two hundred
thousand rupees.
Civil liability for 41. (1) Subject to the provisions of this section, where
untrue in a prospectus invites persons to subscribe for shares in or
prospectus. debentures of a company, the following persons shall be liable
to pay compensation to all persons who subscribe for any
shares or debentures on the faith of the prospectus, for the
loss or damage they may have sustained by reason of any
untrue statement included in such prospectus, that is to say:—
(a) every person who is a director of the company, at
the time of the issue of the prospectus ;
(b) every person who has authorised himself to be
named and is named in the prospectus as a director
or as having agreed to become a director, either
immediately or after an interval of time ;
Companies Act, No. 07 of 2007 33
(c) every person being a promoter of the company ; and
(d) every person who has authorised the issue of the
prospectus :
Provided that, where under the provisions of section 38,
the consent of any person is required to the issue of a
prospectus and such person has given such consent, such
person shall not by reason of his having given such consent,
be liable under the provisions of this subsection as a person
who has authorised the issue of the prospectus, except in
respect of an untrue statement purporting to be made by him
as an expert.
(2) No person shall be liable under the provisions of
subsection (1), if he proves that—
(a) having consented to become a director of the
company he withdrew his consent before the issue
of the prospectus and that it was issued without his
authority or consent ;
(b) the prospectus was issued without his knowledge or
consent and that on becoming aware of its issue, he
forthwith gave reasonable public notice that it was
issued without his knowledge or consent ;
(c) after the issue of the prospectus and before allotment
thereunder, he on becoming aware of any untrue
statement in such prospectus, withdrew his consent
thereto and gave reasonable pubilc notice of the
withdrawal and of the reasons therefor ; or
(d) (i) as regards every untrue statement not
purporting to be made on the authority of an
expert or of a public official document or
statement, he had reasonable ground to
believe and did up to the time of the allotment
of the shares or debentures, as the case may
be, believed that the statement was true ;
34 Companies Act, No. 07 of 2007
(ii) as regards every untrue statement purporting
to be a statement by an expert or contained
in what purports to be a copy of or extract
from a report or valuation of an expert, it fairly
represented the statement or was a correct and
fair copy of or extract from the report or
valuation, as the case may be, and he had
reasonable ground to believe and did up to
the time of the issue of the prospectus
believed, that the person making the
statement was competent to make it and that
person had given the consent required under
section 38 to the issue of the prospectus and
had not withdrawn that consent before
delivery of a copy of the prospectus for
registration or to his knowledge, before
allotment thereunder; and
(iii) as regards every untrue statement purporting
to be a statement made by a person in his
official capacity or contained in what purports
to be a copy or extract from a public document
issued officially, it was a correct and fair
representation of the statement or copy or
extract from the document :
Provided that the provisions of this
subsection shall not apply in the case of a
person liable, by reason of his having given
the consent required under section 38, as a
person who has authorised the issue of the
prospectus in respect of an untrue statement
purporting to be made by him as an expert.
(3) A person who apart from the provisions of this
subsection, would under the provisions of subsection (1) be
liable by reason of his having given the consent required
under the provisions of section 38 as a person who has
authorised the issue of a prospectus in respect of an untrue
Companies Act, No. 07 of 2007 35
statement purporting to be made by him as an expert, shall
not be so liable, if he proves that —
(a) having given his consent under the provisions of
section 38 to the issue of the prospectus, he withdrew
it in writing before delivery of a copy of the
prospectus for registration ;
(b) after delivery of a copy of the prospectus for
registration and before allotment thereunder, he on
becoming aware of the untrue statement withdrew
his consent in writing and gave reasonable public
notice of the withdrawal and of the reason
therefor;or
(c) he was competent to make the statement and that he
had reasonable ground to believe and did up to the
time of the allotment of the shares or debentures, as
the case may be, believed that the statement was
true.
(4) Where—
(a) the prospectus contains the name of a person as a
director of the company or as having agreed to
become a director of such company and he has not
consented to become a director or has withdrawn
his consent before the issue of the prospectus and
has not authorised or consented to the issue of such
prospectus ; or
(b) the consent of a person is required under section 38
to the issue of the prospectus and he either has not
given that consent or has withdrawn it before the
issue of the prospectus,
the directors of the company, except any director without
whose knowledge or consent the prospectus was issued, and
any other person who authorised the issue of such prospectus,
36 Companies Act, No. 07 of 2007
shall be liable to indemnify the person named under paragraph
(a), or whose consent was required under paragraph (b), as
the case may be, against all damages, costs and expenses to
which he may be made liable by reason of his name having
been inserted in the prospectus or of the inclusion therein of
a statement purporting to be made by him as an expert, as the
case may be, or in defending himself against any action or
legal proceeding brought against him in respect thereof :
Provided that a person shall not be deemed for the purposes
of this subsection to have authorised the issue of a prospectus,
by reason only of his having given the consent required under
section 38 to the inclusion in such prospectus of a statement
purporting to be made by him as an expert.
(5) Every person who, by reason of his being a director or
being named as a director or as having agreed to become a
director or of his having authorised the issue of the prospectus
or of the inclusion in such prospectus of a statement
purporting to be made by him as an expert, becomes liable to
make any payment under this section, may recover
contribution as in cases of contract, from any other person
who, if sued separately, would have been liable to make the
same payment, unless the person who has become so liable
was and that other person was not, guilty of fraudulent
misrepresentation.
(6) For the purposes of this section—
(a) “promoter” means a promoter who was a party to
the preparation of the prospectus or of the portion
thereof containing the untrue statement, but does
not include any person by reason of his acting in a
professional capacity for persons engaged in
procuring the formation of the company ; and
(b) “expert” has the same meaning as in section 38.
Companies Act, No. 07 of 2007 37
42. (1) Where a prospectus issued includes any untrue Criminal liability
statement, any person who authorised the issue of the for untrue
statements in a
prospectus shall be guilty of an offence and be liable on prospectus.
conviction to a fine not exceeding five hundred thousand
rupees or to imprisonment for a term not exceeding two years
or to both to such fine and imprisonment, unless he proves
either that the statement was immaterial or that he had
reasonable ground to believe and up to the time of the issue
of the prospectus did believe, that the statement was true.
(2) A person shall not be deemed for the purposes of this
section to have authorised the issue of a prospectus by reason
only of his having given the consent required by the
provisions of section 38, to the inclusion in such prospectus
of a statement purporting to be made by him as an expert.
(3) No prosecution shall be instituted in respect of any
offence under the provisions of subsection (1), except with
the sanction of the Attorney-General.
43. (1) Where a company allots or agrees to allot any Document
shares in or debentures of the company with a view to offering containing offer
of shares or
all or any of those shares or debentures for sale to the public, debentures for
any document by which the offer for sale to the public is sale to be
made shall for all purposes be deemed to be a prospectus deemed a
prospectus.
issued by the company, and provisions of any written law
which relates to the contents of prospectuses, liability in
respect of statements in and omission from prospectuses or
otherwise generally relating to matters dealing with or
connected to prospectuses, shall apply and have effect
accordingly, as if the shares or debentures has been offered to
the public for subscription and as if persons accepting the
offer in respect of any shares or debentures were subscribers
for those shares or debentures, but without prejudice to the
liability, if any, of the persons by whom the offer is made, in
respect of untrue statements contained in the document or
otherwise in respect thereof.
38 Companies Act, No. 07 of 2007
(2) For the purposes of this Act, it shall, unless the contrary
is proved, be deemed that an allotment of or an agreement to
allot shares or debentures was made with a view to the shares
or debentures being offered for sale to the public, if it is
shown—
(a) that an offer of the shares or debentures for sale to
the public was made within six months after the
allotment or agreement to allot ; or
(b) that at the date when the offer was made, the whole
consideration to be received by the company in
respect of the shares or debentures had not been so
received.
(3) The provisions of section 40 shall be applicable in
relation to this section, as though the persons making the
offer were persons named in a prospectus as directors of a
company, and the provisions of section 37 shall be applicable
in relation to this section, as if it required a prospectus to
state, in addition to the matters required by that section to be
stated in a prospectus—
(a) the net amount of the consideration received by the
company in respect of the shares or debentures to
which the offer relates ; and
(b) the place and time at which the contract under which
the said shares or debentures have been or are to be
allotted, may be inspected.
(4) Where a person making an offer to which this section
relates is a company or a firm, it shall be sufficient if the
document aforesaid is signed on behalf of the company or
firm by two directors of the company or not less than half of
the partners, as the case may be, and any such director or
partner may sign through his agent authorised in writing.
Companies Act, No. 07 of 2007 39
44. For purposes of the preceding provisions of this Part Interpretation of
provisions
of this Act—
relating to
prospectuses.
(a) a statement included in a prospectus shall be deemed
to be untrue, if it is misleading in the form and
context in which it is included ; and
(b) a statement shall be deemed to be included in a
prospectus, if it is contained in or in any report or
memorandum appearing on the face of, or by
referrence incorporated in, or issued with, such
prospectus.
ALLOTMENT
45. (1) No allotment shall be made of any share capital Prohibition of
of a company offered to the public for subscription, unless allotment unless
minimum
the amount stated in the prospectus as the minimum amount
subscription is
which in the opinion of the directors must be raised by the received.
issue of share capital in order to provide for the particulars
specified in paragraph 5 of the Fourth Schedule hereto has
been subscribed, and the sum payable on application for the
amount so stated, has been paid to and received by the
company.
For the purposes of this subsection, a sum shall be deemed
to have been paid to and received by the company, if a cheque
for that sum has been received in good faith by the company
and the directors of the company have no reason for suspecting
that the cheque may not be paid.
(2) Where the conditions set out in subsection (1) has not
been complied with within the expiration of sixty days from
the date of closing of the subscription lists, any money
received from applicants for shares shall be forthwith repaid
to them without interest, and if such money is not so repaid
within seventy-five days from the date of closing of the
subscription lists, the directors of the company shall be jointly
40 Companies Act, No. 07 of 2007
and severally liable to repay that money with interest at the
legal rate, from the expiration of the seventy-fifth day :
Provided that a director shall not be liable if he proves
that the default in the repayment of the money was not due to
any misconduct or negligence on his part.
(3) Any condition requiring or binding any applicant for
shares to waive compliance with any requirement of this
section, shall be void.
(4) The provisions of this section shall not apply to any
allotment of shares subsequent to the first allotment of shares
offered to the public for subscription.
Effect of 46. (1) An allotment made by a company to an applicant
irregular in contravention of the provisions of section 45 shall be
allotment. voidable at the instance of the applicant within one month
from the date of the allotment, and shall be so voidable
notwithstanding that the company is in the course of being
wound up.
(2) Where any director of a company knowingly
contravenes or permits or authorizes the contravention of
any of the provisions of section 45, he shall be liable to
compensate the company and the allotee respectively for
any loss, damages, or costs which the company or the allotee
may have sustained or incurred thereby:
Provided that no proceedings to recover any such loss,
damages, or costs shall be commenced after the expiration of
two years from the date of the allotment.
Applications 47. (1) No allotment shall be made of any shares in or
for and debentures of a company in pursuance of a prospectus issued
allotment of generally and no proceedings shall be taken on applications
shares and
made in pursuance of a prospectus so issued, until the
debentures.
commencement of the third day after the date on which the
prospectus is first issued or such later time (if any) as may be
specified in the prospectus, (hereinafter in this Act referred to
as “the time of the opening of the subscription lists”).
Companies Act, No. 07 of 2007 41
(2) The reference in subsection (1) to the day on which
the prospectus is first issued generally shall be construed as
referring to the date on which it is first issued as a newspaper
advertisement :
Provided that, if it is not issued as a newspaper
advertisement before the third day after the date on which it
is first issued in any other manner, the said reference shall be
construed as referring to the date on which it is first so issued
in such manner.
(3) The validity of an allotment shall not be affected by
any contravention of the preceding provisions of this section
but, in the event of any such contravention—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding two
hundred thousand rupees; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction to
a fine not exceeding one hundred thousand rupees.
(4) In the application of this section to a prospectus offering
shares or debentures for sale, the preceding subsections shall
have effect with the substitution for a reference to allotment
of a reference to sale and for the reference to the company
and every officer of the company who is in default, of a
reference to any person by or through whom the offer is made
and who knowingly and willfully authorises or permits the
contravention.
(5) An application for shares in or debentures of a company
which is made in pursuance of a prospectus issued generally,
shall not be revocable until after the expiration of the third
day from the date of the opening of the subscription lists, or
the giving before the expiration of the said third day, by
some person responsible under the provisions of section 41
for the prospectus, of a public notice having the effect under
that section of excluding or limiting the responsibility of the
person giving it.
42 Companies Act, No. 07 of 2007
(6) In determining for the purposes of this section the
third day after any day, any intervening day which is a bank
holiday or a public holiday shall be disregarded and where
the third day as so determined is itself a bank or a public
holiday, there shall for the said purposes be substituted the
first day thereafter which is not a bank holiday or a public
holiday.
Construction 48. (1) Any reference in this Act to offering of any shares
of reference or debentures to the public shall, subject to any provision to
to offering
the contrary contained therein, be construed as including a
shares or
debentures to reference to offering them to any section of the public,
the public. whether selected as shareholders or debenture holders of the
company concerned or as clients of the person issuing the
prospectus or in any other manner, and references in this Act
or in a company’s articles to invitations to the public to
subscribe for shares or debentures shall, subject to the
preceding provisions, be similarly construed.
(2) The provisions of subsection (1) shall not be taken as
requiring any offer or invitation to be treated as made to the
public, if it can properly be regarded in all the circumstances
as not being calculated to result directly or indirectly, in the
shares or debentures becoming available for subscription or
purchase by persons other than those receiving the offer or
invitation, or otherwise as being a domestic concern of the
persons making and receiving it, and in particular—
(a) a provision in a company’s articles prohibiting
invitation to the public to subscribe for shares or
debentures shall not be taken as prohibiting the
making to members or debenture holders of an
invitation which can properly be regarded as
aforesaid; and
(b) the provisions of this Act relating to private
companies shall be construed accordingly.
Companies Act, No. 07 of 2007 43
NATURE AND TYPES OF SHARES
49. (1) A share in a company shall be movable property. Nature and types
of shares.
(2) Subject to the company’s articles, a share in a company
shall confer on the holder —
(a) the right to one vote on a poll at a meeting of the
company on any resolution;
(b) the right to an equal share in dividends paid by the
company;
(c) the right to an equal share in the distribution of the
surplus assets of the company on liquidation.
(3) A company may issue different classes of shares, and
in particular may issue shares which —
(a) are redeemable;
(b) confer preferential rights to distributions; or
(c) confer special, limited or conditional voting rights
or confer no voting rights.
(4) No share in a company shall have a nominal or par
value
(5) A share in a company is transferable in the manner
provided for by its articles and such articles may limit or
restrict the extent to which a share is transferable.
ISSUE OF SHARES
50. (1) Immediately following the incorporation of a Initial shares.
company under section 5, the company shall issue to each
shareholder named in the application for incorporation, the
shares to which that person is entitled.
44 Companies Act, No. 07 of 2007
(2) Immediately following the issue of a certificate of
amalgamation under section, 244, the amalgamated company
shall issue to each person who is entitled to shares under the
amalgamation proposal, the shares to which that person is
entitled.
Issue of shares. 51. (1) Subject to the provisions of sections 52 and 53
and the company’s articles, the board of a company may
issue such shares to such persons as it considers appropriate.
(2) If the shares issued confer rights other than those set
out in subsection (2) of section 49 or impose any obligation
on the holder, the board shall approve terms of issue which
will set out the rights and obligations attached to those shares.
(3) Terms of issue approved by the board under
subsection(2) —
(a) shall be consistent with the articles of the company,
and to the extent that they are not so consistent, are
invalid and of no effect ;
(b) are deemed to form part of the articles, and may be
amended in accordance with section 15.
(4) Within twenty working days of the issue of any shares
under this section, the company shall —
(a) give notice to the Registrar in the prescribed form of—
(i) the number of shares issued;
(ii) the amount of the consideration for which
the shares have been issued or its value as
determined by the board under subsection(2)
of section 58; and
(iii) the amount of the company’s stated capital
following the issue of the shares;
(b) deliver to the Registrar a copy of any terms of issue
approved under subsection (2).
Companies Act, No. 07 of 2007 45
(5) Where a company fails to comply with requirements
of subsection (4)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding fifty
thousand rupees; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
52. (1) Before issuing any shares, the board shall — Consideration
for issue of
shares.
(a) decide the consideration for which the shares
will be issued; and
(b) resolve that in its opinion that consideration
is fair and reasonable to the company and to
all existing shareholders.
(2) The consideration for which a share is issued may
take any form, including cash, promissory notes, future
services, property of any kind or other securities of the
company.
(3) Upon receipt of the consideration, the company shall
within a period of twenty days, make an allotment of the shares.
53. (1) Subject to the company’s articles, where a Pre-emptive
company issues shares which rank equally with or above rights to new
existing shares in relation to voting or distribution rights, issues.
those shares shall be offered to the holders of existing shares
in a manner which would, if the offer was accepted, maintain
the relative voting and distribution rights of those
shareholders.
(2) An offer which a company is required to make under
subsection (1), shall remain open for acceptance for a
reasonable period of time.
46 Companies Act, No. 07 of 2007
Method of 54. (1) A share is deemed to be issued when the name of
issuing shares. the holder is entered on the share register, and such entry
shall be made prior to compliance with subsection (4) of
section 51.
(2) The issue by a company of a share which imposes a
liability to the company on the holder shall be invalid and of
no effect, until such time as the person to whom it is issued
has consented in writing to become the holder of the share.
CALLS ON SHARES
Calls on shares. 55. (1) Where a call is made on a share or any other
obligation attached to a share and is performed by the
shareholder, the company shall within ten working days give
notice to the Registrar in the prescribed form of—
(a) the amount of the call or its value as determined by
the board under subsection (3) of section 58; and
(b) the amount of the stated capital of the company
following the making of the call.
(2) Where a company fails to comply with the requirement
of subsection (1)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding fifty
thousand rupees; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions. 56. (1) Before a distribution is made by a company to
any shareholder, such distribution shall —
(a) be authorised by the board under subsection (2);
and
Companies Act, No. 07 of 2007 47
(b) unless the company’s articles provide otherwise, be
approved by the shareholders by ordinary resolution.
(2) The board of a company may authorise a distribution
at such time and in such amount as it considers appropriate,
where it is satisfied that the company will, immediately after
the distribution is made satisfy the solvency test, provided
that such board obtains a certificate of solvency from the
auditors.
(3) The directors who vote in favour of a distribution
shall sign a certificate setting that in their opinion, the
company will satisfy the solvency test immediately after the
distribution is made.
(4) In applying the solvency test for the purposes of this
section, “debts” includes fixed preferential returns on shares
ranking ahead of those in respect of which a distribution is
made, except where the fixed preferential return is expressed
to be subject to the power of the board to authorise
distributions.
(5) A director who fails to comply with the requirements
of subsection (2) shall be guilty of an offence and be liable
on conviction to a fine not exceeding two hundred thousand
rupees.
57. (1) A company shall be deemed to have satisfied Solvency test.
the solvency test, if—
(a) it is able to pay its debts as they become due in the
normal course of business; and
(b) the value of the company’s assets is greater than —
(i) the value of its liabilities; and
(ii) the company’s stated capital.
48 Companies Act, No. 07 of 2007
(2) In determining whether a company satisfies the
solvency test, the board—
(a) shall take into account the most recent financial
statements of the company prepared in accordance
with section 151 of the Act ;
(b) shall take into account circumstances the directors
know or ought to know which affect the value of the
company’s assets and liabilities ;
(c) may take into account a fair valuation or other
method of assessing the value of assets and
liabilities.
Stated capital. 58. (1) Subject to section 59, stated capital in relation
to a company means the total of all amounts received by the
company or due and payable to the company —
(a) in respect of the issue of shares; and
(b) in respect of calls on shares.
(2) Where a share is issued for consideration other than
cash, the board shall determine the cash value of such
consideration for the purposes of subsection (1).
(3) Where a share has attached to it an obligation other
than an obligation to pay calls, and that obligation is
performed by the shareholder—
(a) the board shall determine the cash value, if any, of
that performance; and
(b) the cash value of that performance shall be deemed
to be a call which has been paid on the share for the
purposes of subsection (1).
Companies Act, No. 07 of 2007 49
59. (1) Subject to the provisions of subsection (3), a Reduction of
company may by special resolution reduce its stated capital stated capital.
to such amount as it thinks appropriate, in accordance with
the provisions of this Act.
(2) Public notice of a proposed reduction of a company’s
stated capital shall be given not less than sixty days before
the resolution to reduce stated capital is passed.
(3) A company may agree in writing with a creditor of the
company, that it will not reduce its stated capital below a
specified amount without the prior consent of the creditor or
unless specified conditions are satisfied at the time of the
reduction. A resolution to reduce sated capital passed in breach
of any such agreement, shall be invalid and of no effect.
(4) Where —
(a) a share is redeemed at the option of the shareholder
under section 68 or on a fixed date under section
69; or
(b) the company purchases a share under section 95,
and the board is satisfied that as a consequence of the
redemption or purchase, the company would but for this
subsection, fail to satisfy the solvency test—
(c) the board shall after obtaining the auditors
certificate of solvency, resolve that the stated capital
of the company shall be reduced by the amount by
which the company would so fail to satisfy the
solvency test; and
(d) the resolution of the board shall have effect
notwithstanding provisions contained in subsection
(1) to subsection (3) of this section.
(5) A company which has reduced its stated capital shall
within ten working days of such reduction, give notice of the
reduction to the Registrar, specifying the amount of the
reduction and the reduced amount of its stated capital.
50 Companies Act, No. 07 of 2007
(6) Where company fails to comply with requirements of
subsection (2) or subsection (5)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding fifty
thousand rupees; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
Dividends. 60. (1) A dividend is a distribution out of profits of the
company, other than an acquisition by the company of its
own shares or a redemption of shares by the company.
(2) The board of a company shall not authorise a dividend
in respect of some shares in a class and not others of that class
or of a greater amount in respect of some shares in a class than
other shares in that class, except where—
(a) the amount of the dividend is reduced in proportion
to any liability attached to the shares under the
company’s articles; or
(b) a shareholder has agreed in writing to receive no
dividend or a lesser dividend than would otherwise
be payable.
Recovery of 61. (1) A distribution made to a shareholder at a time
distributions. when the company did not, immediately after the distribution,
satisfy the solvency test, may be recovered by the company
from the shareholder, unless—
(a) the shareholder received the distribution in good
faith and without knowledge of the company’s failure
to satisfy the solvency test;
(b) the shareholder has altered his position in relying
on the validity of the distribution; and
Companies Act, No. 07 of 2007 51
(c) it would be unreasonable in view of the
circumstances to require repayment in full at all.
(2) Where in relation to a distribution to which subsection
(1) applies, the procedure set out in section 56 has not been
followed or reasonable grounds for believing that the
company would satisfy the solvency test did not exist at the
time the certificate was signed, every director who—
(a) failed to take reasonable steps to ensure the
procedure was followed; or
(b) signed the certificate,
as the case may be, shall be personally liable to the company
to repay to the company, so much of the distribution as the
company is not able to recover from the shareholders.
(3) Where in an action brought against a director or a
shareholder under this section, the court is satisfied that the
company could by making a distribution of a lesser amount
have satisfied the solvency test, the court may—
(a) permit the shareholder to retain; or
(b) relive the director from liability in respect of,
an amount equal to the value of any distribution that could
properly have been made.
62. (1) Where a company— Reduction of
shareholder
liability to be a
(a) alters its articles; or
distribution.
(b) acquires shares issued by it or redeems shares under
section 67,
in a manner which cancels or reduces the liability of a
shareholder to the company in relation to a share held prior
to that alteration, acquisition, or redemption, as the case may
52 Companies Act, No. 07 of 2007
be, the cancellation or reduction of liability shall be treated,
for the purposes of subsection (1) and subsection (3) of section
61, as if it were a distribution of the amount by which the
liability was reduced.
(2) Where the liability of a shareholder of an
amalgamating company to that company in relation to a share
held before the amalgamation, is—
(a) greater than the liability of that shareholder to the
amalgamated company in relation to a share or
shares into which that share is converted; or
(b) cancelled by the cancellation of that share in the
amalgamation,
the reduction of liability effected by the amalgamation shall
be treated for the purposes of subsection (1) and subsection
(3) of section 61, as a distribution by the amalgamated
company to that shareholder of the amount by which that
liability was reduced.
RE-PURCHASE OF SHARES
Company may 63. (1) A company may purchase or otherwise acquire
acquire or any of its own shares —
redeem its own
shares.
(a) under section 64 or section 67;
(b) if the company is a private company, with the
agreement or concurrence of all shareholders under
section 31; or
(c) in accordance with an order made by the court under
this Act,
but not otherwise.
Companies Act, No. 07 of 2007 53
(2) A company may redeem a share which is a redeemable
share, in accordance with the provisions of sections 66 to 69,
but not otherwise.
(3) A share that is acquired or redeemed by the company
shall be deemed to be cancelled immediately upon
acquisition or redemption, as the case may be.
(4) Immediately following the acquisition or redemption
of shares by the company, the company shall give notice to
the Registrar of the number and class of shares acquired or
redeemed, as the case may be.
(5) Where a company fails to comply with
subsection(4)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding fifty
thousand rupees; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
64. (1) A company may agree to purchase or otherwise Purchase of own
acquire its own shares if the articles of such company provide shares.
for it to do so, with the approval of the board.
(2) Before a company offers or agrees to purchase its own
shares, the board of such company shall resolve that —
(a) the acquisition is in the interests of the company;
(b) the terms of the offer or agreement and the
consideration to be paid for the shares is in the
opinion of the company’s auditors a fair value; and
54 Companies Act, No. 07 of 2007
(c) it is not aware of any information that has not been
disclosed to shareholders which is material to an
assessment of the value of the shares, and as a result
of which the terms of an offer or the consideration
offered for the shares are unfair to shareholders
accepting the offer.
(3) Before the company—
(a) makes and offer to acquire shares other than in a
manner which will if it is accepted in full, leave
unaffected the relative voting and distribution rights
of all shareholders; or
(b) agrees to acquire shares other than in a manner which
leaves unaffected the relative voting and distribution
rights of all shareholders,
the board shall resolve that the making of the offer or entry
into the agreement, as the case may be, is fair to those
shareholders to whom the offer is not made or with whom no
agreement is entered into.
Enforceability 65. (1) A contract with a company providing for the
of contract to acquisition by the company of its shares shall be specifically
purchase
shares. enforceable against the company, except to the extent that
the company would after performing the contract fail to satisfy
the solvency test, and the burden of proving that after the
performance of the contract it would be unable to satisfy the
solvency test, shall be on the company.
(2) Until the company has fully performed a contract
referred to in subsection (1), the other party to the contract
retains the status of a claimant entitled to be paid as soon as
the company is lawfully able to do so or, in the event of a
liquidation, to be ranked subordinate to the rights of creditors,
but in priority to the other shareholders.
Companies Act, No. 07 of 2007 55
REDEMPTION OF SHARES
66. For the purposes of this Act, a share is redeemable if Meaning of
the articles of the company make provision for the redemption “redeemable”.
of that share by the company —
(a) at the option of the company;
(b) at the option of the holder of the share; or
(c) on a date specified in the articles,
for a consideration that is specified or to be calculated by
reference to a formula or required to be fixed by a suitably
qualified person who is not associated with or interested in
the company.
67. (1) A company may exercise an option to redeem a Redemption
share which is redeemable at the option of the company, if option of
company.
the board has previously resolved that the redemption is in
the interest of the company.
(2) A redemption of a share at the option of the company
is deemed to be—
(a) an acquisition by the company of the share, for the
purposes of subsection (3) of section 64; and
(b) a distribution for the pruposes of seciton 56.
68. (1) Where a share is redeemable at the option of the Redemption at
holder of the share and the holder gives proper notice to the the option of the
shareholder.
company requiring the company to redeem the share—
(a) the company shall redeem the share on the date
specified in the notice or if no date is specified, on
the date of receipt of the notice;
(b) the share is deemed to be cancelled on the date of
redemption; and
56 Companies Act, No. 07 of 2007
(c) from the date of redemption, the former shareholder
ranks as an unsecured creditor of the company for
the sum payable on redemption.
(2) A redemption under this section is not a distribution
for the purposes of section 56, but is deemed to be a
distribution for the purposes of subsection (1) and subsection
(3) of section 61.
Redemption on 69. (1) Where a share is redeemable on a specified
fixed date. date—
(a) the company shall redeem the share on that date;
(b) the share is deemed to be cancelled on that date;
and
(c) from that date, the former shareholder ranks as an
unsecured creditor of the company for the sum
payable on redemption.
(2) A redemption under this section is not a distribution
for the purposes of section 56, but is deemed to be a
distribution for the purposes of subsection (1) and subsection
(3) of section 61.
FINANCIALASSISTANCE IN CONNECTION WITH PURCHASE OF SHARES
Restrictions on 70. (1) A company shall not give financial assistance
giving financial directly or indirectly for the purpose of or in connection with
assistance. the acquisition of its own shares, other than in accordance
with this section.
(2) Notwithstanding the provisions of subsection (1), a
company may give financial assistance for the purpose of or
in connection with the acquisition of its own shares, if the
board has previously resolved that —
(a) giving such assistance is in the interest of the
company;
Companies Act, No. 07 of 2007 57
(b) the terms and conditions on which the assistance is
given are fair and reasonable to the company and to
any share holders not receiving that assistance; and
(c) immediately after giving the assistance, the company
will satisfy the solvency test.
(3) Where the amount of any financial assistance
approved under subsection (2) together with the amount of
any other financial assistance given by the company which
is still outstanding, exceeds ten per centum of the company’s
stated capital, the company shall not give the assistance unless
it first obtains from its auditor or if it does not have an auditor
from a person qualified to act as its auditor, a certificate to the
effect that—
(a) he has inquired into the state of affairs of the
company; and
(b) he is not aware of anything to indicate that the
opinion of the board that the company will,
immediately after giving the assistance satisfy the
solvency test, is unreasonable in all the
circumstances.
(4) The giving of financial assistance under this section
is not a distribution for the purposes of section 56.
(5) Where a company acts in contravention of the
provisions of this section, every officer of the company who
is in default shall be guilty of an offence and be liable on
conviction to a fine not exceeding one million rupees or to a
term of imprisonment not exceeding five years or to both
such imprisonment and fine.
71. (1) The provisions of section 70 shall not apply to Transactions not
the giving of financial assistance by a company for the prohibited by
purpose of or in connection with the acquisition of its own section 70.
shares, if—
(a) the company’s principal purpose in giving the
assistance is not to give it for the purpose of that
58 Companies Act, No. 07 of 2007
acquisition or the giving of the assistance is an
incidental part of any other larger purpose of the
company; and
(b) the assistance is given in good faith in the interest
of the company.
(2) The provisions of section 70 shall also not apply in
respect of—
(a) a distribution to a shareholder approved under
section 56;
(b) the issue of shares by the company;
(c) a repurchase or redemption of shares by the
company;
(d) anything done in terms of a compromise reached
under the provisions of Part IX or a compromise or
arrangement approved under the provisions of
PartX;
(e) the lending of money by a company in the
ordinary course of business, where the ordinary
business of the company includes the lending of
money;
(f) the provision by a company in good faith in the
interest of the company, of financial assistance for
the purposes of an employees’ share scheme;
(g) the granting of loans by a company to its employees
other than directors in good faith in the interest of
the company, with a view to enabling those persons
to acquire beneficial ownership of shares in the
company.
Companies Act, No. 07 of 2007 59
CROSS-HOLDINGS
72. (1) A company which is a subsidiary of another Restriction on
company (referred to in this section as the “holding subsidiary
company”)— holding shares in
holding
company.
(a) shall not acquire shares in the holding company;
(b) may continue to hold any shares in the holding
company acquired by the subsidiary before it
became a subsidiary of the holding company, but
may not exercise any right to vote which is attached
to those shares.
(2) Nothing in subsection (1) shall apply to a company
which —
(a) holds shares in the holding company only as a
trustee or legal representative and has no beneficial
interest in the shares; or
(b) holds an interest in shares in the holding company
by way of security for the purposes of a transaction
entered into by it in the ordinary course of business
and on usual terms and conditions.
(3) Where a body corporate—
(a) became a holder of shares in the holding company
before the commencement of this Act, it may
continue to be a member of that company, but it has
no right to vote in respect of those shares at any
meetings of the company; and
(b) is permitted to continue as a member of the holding
company by virtue of paragraph (b) of subsection
(1) and paragraph (a) of this subsection, an allotment
of fully paid shares in the company may be validly
made by way of capitalisation of reserves of the
company, which shares also will have no right to
vote.
60 Companies Act, No. 07 of 2007
(4) The provisions of subsections (1), (2) and (3) shall
apply in relation to a nominee for a company which is a
subsidiary, as if a reference to the company were a reference
to the nominee.
TRANSFER OF SHARES AND DEBENTURES, EVIDENCE OF TITLE &C.
Transfer not to 73. Notwithstanding anything to the contrary in the
be registered articles of a company, it shall not be lawful for the company
except on to register a transfer of shares in or debentures of the company,
production of unless a proper instrument of transfer has been delivered to
instrument of
the company:
transfer.
Provided that, nothing in this section shall affect any power
of the company to register as shareholder or debenture holder,
any person to whom the right of any shares in or debentures
of the company has been transmitted by operation of law.
Transfer by 74. A transfer of the shares or other interests of a deceased
legal shareholder of a company made by his legal representative
representative. shall, although the legal representative is not himself a
shareholder of the company, be as valid as if he had been
such a shareholder at the time of the execution of the
instrument of transfer.
Registration of 75. On the application of the transferor of any share or
transfer at the other interest in a company, the company shall enter in its
request of share register the name of the transferee in the same manner
transferor.
and subject to the same conditions, as if the application for
the entry were made by the transferee.
Notice of refusal 76. (1) Where a company refuses to register a transfer of
to register any shares or debentures, the company shall within two
transfer. months from the date on which the transfer was lodged with
the company, send to the transferee a notice of such refusal.
(2) Where a company fails to comply with the provisions
of subsection (1)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding fifty
thousand rupees; and
Companies Act, No. 07 of 2007 61
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
77. (1) The certification by a company of any instrument Certification of
of transfer of shares in or debentures of the company shall be transfers.
taken as a representation by the company to any person acting
on the faith of such certification, that there have been
produced to the company such documents as on the face of
there show a prima facie title to the shares or debters in the
transferor named in the instrument of transfer, but not as a
representation that the transferor has any title to the shares or
debentures.
(2) Where any person acts on the faith of a false
certification made by a company negligently, the company
shall be under the same liability to him as if the certification
had been made fraudulently.
(3) For the purposes of this section —
(a) an instrument of transfer shall be deemed to be
certified if it bears the words “certificate lodged” or
words to the like effect;
(b) the certification of an instrument of transfer shall be
deemed to be made by a company, where —
(i) the person issuing the instrument is a person
authorised to issue certificated instruments of
transfer on the company’s behalf; and
(ii) the certification is signed by a person authorised
to certify transfers on the company’s behalf or
by an officer or servant either of the company
or of a body corporate so authorised ;
(c) a certification shall be deemed to be signed by any
person where —
(i) it purports to be authenticated by his signature
or initials, whether handwritten or not; and
62 Companies Act, No. 07 of 2007
(ii) it is not shown that the signature or initials
was or were placed there neither by himself
nor by any person authorised to use the
signature or initials for the purpose of
certifying transfers on the company’s behalf.
Duties of 78. (1) Every company shall within two months from
company with the date of allotment of any of its shares, debentures or
respect to issue debenture stock and within two months from the date on
of certificates.
which a transfer of any such shares, debentures or debenture
stock, is lodged with the company, complete and have ready
for delivery the certification of all shares, the debentures,
and the certificates of all debenture stock allotted or
transferred, unless the conditions of issue of the shares,
debentures, or debenture stock provide otherwise.
For the purposes of this subsection the expression
“transfer” means a transfer duly stamped and otherwise valid
and does not include a transfer which the company is for any
reason entitled to refuse to register and does not register.
(2) Where a company fails to comply with the requirements
of subsection (1)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding fifty
thousand rupees; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
(3) Where any company on whom a notice has been served
requiring the company to make good any default in
complying with the provisions of subsection (1), fails to make
good the default within ten days from the date of service of
the notice, the court may on the application of the person
entitled to have the certificates or the debentures delivered
to him, make an order directing the company and any officer
Companies Act, No. 07 of 2007 63
of the company, to make good the default within such time as
may be specified in the order and any such order may provide
that all costs of and incidental to the application shall be
borne by the company or any officer of the company
responsible for the default.
79. A certificate signed under the name of the company Certificate to be
by a director and secretary of the company specifying any evidence of title.
shares held by any shareholder, shall be prima facie evidence
of the title of the shareholder to the shares.
80. The production to a company of any document which Evidence of
by law is sufficient evidence of probate of a will or of letters grant of probate,
&c.
of administration of the estate or confirmation as executor of
a deceased person having been granted to some person, shall
be accepted by the company notwithstanding anything in its
articles, as sufficient evidence of the grant.
SPECIAL PROVISIONS AS TO DEBENTURES
81. (1) Every company which has issued debentures Right of
shall maintain a register of holders of debentures of the debenture
holders and
company. The register shall, except when duly closed (but
shareholders to
subject to such reasonable restrictions the company may inspect register
impose at a general meeting so that not less than two hours in of debenture
each day shall be allowed for inspection), be opened for the holders and to
have copies of
inspection by the registered holder of any such debentures or
any trust deed.
any holder of shares in the company without a fee, and by
any other person on payment of a fee of ten rupees or such
lesser sum as may be specified by the company.
(2) For the purposes of subsection (1), a register shall be
deemed to be duly closed if closed in accordance with the
provisions contained in the company’s articles or in the
debentures, or in the case of debenture stock, in the stock
certificates or in the trust deed or other document securing
the debentures or debenture stock, during such period or
periods not exceeding in the whole thirty days in any year, as
may be therein specified.
64 Companies Act, No. 07 of 2007
(3) Any registered holder of the debentures or holder of
shares as aforesaid or any other person, may require a copy of
the register of the holders of debentures of the company or
any part thereof to be furnished on payment of a sum not
exceeding ten rupees for every page required to be copied.
(4) A copy of any trust deed for securing an issue of
debentures shall be forwarded to every holder of any such
debentures at his request, on payment in the case of a printed
trust deed of the sum of ten rupees or such lesser sum as may
be specified by the company, or where the trust deed has not
been printed, on payment of a sum not exceeding one rupee
for every hundred words required to be copied.
(5) Where inspection of the register is refused or a copy
as aforesaid is refused or not forwarded—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding fifty
thousand rupees; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
(6) Where a company is in default as referred to in
subsection (5), the court may also by order compel an
immediate inspection of the register or direct that any copy
required as aforesaid shall be sent to the person requiring
them.
Directors 82. A director of a company shall not be capable of being
prohibited from appointed as a trustee for the holders of debentures of the
acting as company:
trustees.
Provided that the provisions of this section shall not apply
to any director of a company who holds office as a trustee for
the holders of debentures of the company, by virtue of an
appointment made on or before July 2, 1982, and accordingly
any such director may continue in office as trustee until the
termination of that appointment.
Companies Act, No. 07 of 2007 65
83. A condition contained in any debentures or in any Perpetual
debentures.
deed for securing any debentures whether issued or executed
before or after the appointed date, shall not be invalid by
reason only of the fact that the debentures are thereby made
irredeemable or redeemable only on the happening of a
contingency, however remote, or on the expiration of the
period, however long.
84. (1) Where a company has redeemed any debentures Power to reissue
previously issued, then— redeemed
debentures in
certain cases.
(a) unless any provision to the contrary, whether express
or implied, is contained in the company’s articles or
in any contract entered into by the company; or
(b) unless the company has by passing a resolution to
that effect or by some other act, manifested its
intention that the debentures shall be cancelled,
the company shall have and shall be deemed always to have
had, power to reissue the debentures, either by reissuing the
same debentures or by issuing other debentures in their place.
(2) On a reissue of redeemed debentures, the person
entitled to the debentures shall have and shall be deemed
always to have had the same priorites as if the debentures had
never been redeemed.
(3) Where a company has deposited any of its debentures
to secure advances from time to time on current account or
otherwise, the debentures shall not be deemed to have been
redeemed by reason only of the account of the company
having ceased to be in debit, whilst the debentures remained
so deposited.
(4) The reissue of a debenture or the issue of another
denenture in its place under the power by this section given
to or deemed to have been possessed by a company, shall be
treated as the issue of a new debenture for the purposes of
66 Companies Act, No. 07 of 2007
stamp duty. But it shall not be so treated for the purposes of
any provision limiting the amount or number of debentures
to be issued :
Provided that any person lending money on the security
of a debenture reissued under the provisions of this section
which appears to be duly stamped, may give the debenture in
evidence in any proceedings for enforcing his security
without payment of the stamp duty or any penalty in respect
thereof, unless he had notice or but for his negligence might
have discovered, that the debenture was not duly stamped. In
any such case the company shall be liable to pay the proper
stamp duty and penalty.
(5) The re-issue after the appointed date of debentures
redeemed before that date, shall not prejudice any right or
priority wihch any person would have had under or by virtue
of any mortgage or charge created before that date.
Specific 85. A contract with a company to take up and pay for
performance of any debentures of the company may be enforced by an order
contracts to
subscribe for for specific performance.
debentures.
PART V
SHAREHOLDERS ANDTHEIR RIGHTSAND OBLIGATIONS
Meaning of 86. (1) In this Act, the term “shareholder” means—
“shareholder”.
(a) a person whose name is entered in the share register
as the holder for the time being of one or more shares
in the company ;
(b) until a person’s name is entered in the share register,
a person named as a shareholder in an application
for incorporation of a company at the time of
registration of the company ;
Companies Act, No. 07 of 2007 67
(c) until a person’s name is entered in the share register,
a person who is entitled to have that person’s name
entered in the share register under a registered
amalgamation proposal as a shareholder in an
amalgamated company ;
(d) until a person’s name is entered in the share register,
a person to whom a share has been transferred and
whose name ought to be but has not been entered in
the register.
(2) Where a notice of any trust has been entered in the
share register in respect of any shares in a company under
subsection (2) of section 129, the person for whose benefit
those shares are held in trust—
(a) shall be deemed to be a shareholder in the company;
and
(b) shall in respect of those shares, enjoy all such rights
and privileges and be subject to all such duties and
obligations under this Act, as if his name had been
entered in the share register as the holder of those
shares.
(3) Where a company has wrongfully failed to enter in the
share register the name of a person to whom shares have been
transfered, that person—
(a) shall be deemed to be a shareholder in the company;
and
(b) shall in respect of those shares, enjoy all such rights
and privileges and be subject to all such duties and
obligations under this Act, as if his name had been
entered in the share register as the holder of those
shares.
68 Companies Act, No. 07 of 2007
LIABILITYOF SHAREHOLDERS
Liability of 87. (1) A shareholder shall not be liable for any act,
shareholder. default or an obligation of the company, by reason only of
being a shareholder.
(2) The liability of a shareholder to the company is limited
to any liability expressly provided for in the articles of the
company or under this Act.
(3) Nothing in this section shall effect the liability of a
shareholder to a company under a contract including a
contract for the issue of shares, or for any tort or breach of a
fiduciary duty or other actionable wrong committed by the
shareholder.
Liability for 88. (1) Subject to section 269, where a share renders its
calls. holder liable to calls or otherwise imposes a liability on its
holder, that liability shall attach to the holder of the share for
the time being and not to a former holder of the share, whether
or not the liability became enforceable before the share was
registered in the name of the current holder.
(2) Where—
(a) all or part of the consideration payable in respect of
the issue of a share remains unsatisfied ; and
(b) the person to whom the share was issued no longer
holds that share,
liability in respect of that unsatisfied considerations shall
not attach to subsequent holders of the share, but shall remain
the liability of the person to whom the share was issued or of
any other person who assumed that liability at the time of
issue.
Companies Act, No. 07 of 2007 69
89. Notwithstanding anything to the contrary in the Shareholders
articles of the company, a shareholder shall not be— must agree to
increase in
liability.
(a) bound by a resolution altering its articles ; or
(b) required to acquire or hold more shares in the
company,
where that resolution or the holding of those shares would
increase the liability of the shareholder to the company, unless
the shareholder agrees in writing to be bound by the
resolution or to accept the shares, as the case may be.
POWERS OF SHAREHOLDERS
90. (1) Powers reserved to the shareholders of a Exercise of
company by this Act may be exercised only— powers reserved
to shareholders.
(a) at a meeting of shareholders ; or
(b) by a resolution in lieu of a meeting in terms of
section 144.
(2) Powers reserved to the shareholders of a company by
the articles of the company may subject to the articles, be
exercised—
(a) at a meeting of shareholders ; or
(b) by a resolution in lieu of a meeting pursuant to
section 144.
91. Unless otherwise provided by this Act or in the Exercise of
articles of a company, a power reserved to shareholders may powers by
ordinary
be exercised by an ordinary resolution.
resolution.
92. (1) Notwithstanding anything to the contrary Powers exercised
contained in the articles of a company, when shareholders by special
exercise a power to— resolution.
(a) alter the company’s articles ;
70 Companies Act, No. 07 of 2007
(b) approve a major transaction for the purpse of
paragraphs (a) or (b) of subsection (1) of section
185 of this Act;
(c) approve an amalgamation of the company under
section 241 of this Act ;
(d) reduce the company’s stated capital ;
(e) resolve that the company be wound up voluntarily
in terms of paragraph (b) or (c) of suchection (1) of
section 319 of this Act;
(f) change the name of a company ; or
(g) change the status of a company,
such powers shall be exercised by special resolution.
(2) A special resolution passed in relation to a power
referred to in paragraph (a), paragraph (b) or paragraph (c) of
subsection (1), may be rescinded only by another special
resolution.
(3) A special resolution passed in relation to a power
referred to in paragraph (d) or paragraph (e) of subsection (1),
cannot be rescinded thereafter.
MINORITY BUY-OUT RIGHTS
Shareholder 93. Where a shareholder is entitled to vote on the
may require exercise of the power set out in paragraph (a) of subsection
company to (1) of section 92 and the proposed alteration imposes or
purchase shares.
removes a restriction on the business or activities in which
the company may engage, or set out in paragraph (b) or (c) of
subsection (1) of section 92, and the shareholder resolved to
exercise those powers , and-
(a) the shareholder cast all the votes attached to shares
registered in the shareholder’s name and having the
same beneficial owner against the exercise of the
power ; or
Companies Act, No. 07 of 2007 71
(b) where the resolution to exercise the power was
passed under section 144, the shareholder did not
sign the resolution in respect of the shares registered
in the shareholder’s name and having the same
beneficial owner,
that shareholder shall be entitled to require the company to
purchase those shares in accordance with section 94.
94. (1) A shareholder of a company who is entitled to Notice requiring
require the company to purchase shares by virtue of the purchase.
provisions of section 93 or section 100 may—
(a) within ten working days of the passing of the
resolution at a meeting of shareholders ; or
(b) where the resolution was passed under section 144,
before the expiration of ten working days after the
date on which notice of the passing of the resolution
is given to the shareholder,
give a written notice to the company, requiring the company
to purchase those shares.
(2) Within twenty working days of receiving a notice under
subsection (1), the board shall—
(a) agree to the purchase of the shares by the company;
(b) arrange for some other person to agree to purchase
the shares ;
(c) apply to the court for an order under section 97 or
section 98 ; or
(d) arrange before taking the action concerned for the
resolution to be rescinded in accordance with
section 92 or decide in the appropriate manner not
to take the action concerned, as the case may be,
72 Companies Act, No. 07 of 2007
and give written notice to the shareholder of the board’s
decision under this subsection.
Purchase by 95. (1) Where the board agree under paragraph (a) of
company. subsection (2) of section 94 to the purchase of the shares by
the company, it shall, on giving notice under that subsection
or within five working days of doing so—
(a) nominate a fair and reasonable price for the shares
to be acquired ; and
(b) give notice of the price nominated to the holder of
those shares.
(2) The shares are deemed to have been purchased by the
company upon receipt by the shareholder of a notice under
susection (1).
(3) A shareholder who considers that the price nominated
by the board is not fair or reasonable, shall forthwith give a
notice of objection to the company.
(4) If within ten working days of giving notice to a
shareholder under subsection (1), no objection to the price
has been received by the company—
(a) the company shall forthwith pay the price nominated
to the shareholder ; and
(b) the shareholder shall forthwith deliver any share
certificate in respect of the shares to the company.
(5) If within ten working days of giving notice to a
shareholder under subsection (1), an objection to the price
has been received by the company, the company shall within
five working days—
(a) refer the question as to what amounts to a fair and
reasonable price to the auditors of the company ;
and
Companies Act, No. 07 of 2007 73
(b) pay a provisional price in respect of the shares, equal
to the price nominated by the board.
Upon payment of the provisional price by the company,
the shareholder shall forthwith deliver any share certificate
in respect of the shares to the company.
(6) Where a reference is made under paragraph (a) of
subsection 5, the auditor shall expeditiously determine a fair
and reasonable price for the shares to be purchased.
(7) Where the price determined under subsection (6)—
(a) exceeds the provisional price already paid, the
company shall forthwith pay the balance owing to
the shareholder ; or
(b) is less than the provisional price already paid, the
shareholder shall forthwith repay the excess to the
company.
(8) The auditors may determine the interest on any balance
payable or excess to be repaid under subsection (7) at such
rate as they think fit, having regard to whether the provisional
price paid was reasonable.
(9) Where the company fails to refer the question to the
auditors under paragraph (a) of subsection (5), a shareholder
who has given notice of objection under subsection (3) and a
shareholder not satisfied with the price as determined under
subsection (6), may apply to court to appoint a fit and proper
person for the purposes of determining a fair and reasonable
price for the shares and the court may appoint such person as
it thinks fit. A person so appointed by court may award
interest according to the provisions of subsection (8).
(10) A purchase of shares by a company under this section
is deemed not to be a distribution for the purposes of section
56, but is deemed to be a distribution for the purposes of
subsections (1) and (3) of section 61.
74 Companies Act, No. 07 of 2007
Purchase of 96. (1) The provisions of section 95 shall apply to the
shares by third purchase of shares by a person with whom the company has
party.
entered into an arrangement for the purchase in accordance
with the provisions of paragraph (b) of subsection (2) of section
94, subject to such modifications as may be necessary, and in
particular as if references in that section to the board and the
company were references to that person.
(2) Every holder of shares that are to be purchased in
accordance with the arrangement, shall be indemnified by
the company in respect of any loss that may be suffered by
such holder due to the failure by the person who has agreed
to purchase the shares to purchase them at the price nominated
or as determined under subsections (6) or (9) of section 95, as
the case may be.
Court may grant 97. (1) A company to which a notice has been given
exemption. under section 94 may apply to court for an order exempting
it from the obligation to purchase the shares to which the
notice relates, on the ground that—
(a) the purchase would be disproportionately damaging
to the company ; or
(b) the company cannot reasonably be required to
finance the purchase.
(2) On an application made under this section, the court
may make an order exempting the company from the
obligation to purchase the shares, and may make any other
order it thinks fit, including an order—
(a) setting aside a resolution of the shareholders ;
(b) directing the company to take or refrain from taking,
any action specified in the order ;
(c) requiring the company to pay compensation to the
shareholders affected ; or
(d) that the company be wound up by the court.
Companies Act, No. 07 of 2007 75
(3) The court shall not make an order under subsection
(2) of this section, unless it is satisfied that the company has
made reasonable efforts to arrange for another person to
purchase the shares in accordance with paragraph (b) of
subsection (2) of section 94.
98. (1) Where a notice is given to a company under Court may grant
section 94, and— exemption if
company is
insolvent.
(a) the board considers that after the purchase by the
company of the shares, the company would fail to
satisfy the solvency test ; and
(b) the company has made reasonable efforts to arrange
for the shares to be purchased by another person in
accordance with the provisions of paragraph (b) of
subsection (2) of section 94, but has been unable to
do so,
the company shall apply to the court for an order exempting
it from the obligation to purchase those shares.
(2) The court may on an application made under
subsection (1) and where it is satisfied that after the purchase
of the shares the company would fail to satisfy the solvency
test and the compnay has made reasonable efforts to arrange
for the shares to be purchased by another person in accordance
with paragraph (b) of subsection (2) of section 94, make—
(a) an order exempting the company from the obligation
to purchase the shares ;
(b) an order suspending the obligation to purchase the
shares ; or
(c) such other order as it thinks fit, including any order
referred to in subsection (2) of section 97.
76 Companies Act, No. 07 of 2007
(3) For the purposes of this section, the stated capital of a
company shall not be taken into account in determining
whether the company will after the purchase, fail to satisfy
the solvency test.
Alteration of 99. (1) A company shall not take any action that would
shareholder affect the rights attached to shares, unless that action has
rights.
been approved by a special resolution of each interest group.
(2) For the purposes of this section, the rights attached to
a share include—
(a) the rights, privileges, limitations, and conditions
attached to the share under this Act or the articles of
the company, including voting rights and rights to
distributions ;
(b) pre-emptive rights under section 53 ;
(c) the right to have the procedure set out in this section,
and any further procedure required by the articles of
the company for the amendment or alteration of the
articles, observed by the company ; and
(d) the right that a procedure required by the articles of
the company for the amendment or alteration of the
articles, not be amended or altered.
Shareholder 100. Where an interest group has approved the taking
may require of any action that affects the rights attached to shares and the
company to company becomes entitled to take that action, and—
purchase shares.
(a) a shareholder who was a member of the interest group
cast all the votes attached to the shares registered in
that shareholder’s name and having the same
beneficial owner against approving the action ; or
(b) where the resolution approving the taking of the
action was passed under section 144, a shareholder
Companies Act, No. 07 of 2007 77
who was a member of the interest group did not sign
the resolution in respect of the shares registered in
that shareholder’s name and having the same
beneficial owner,
such shareholder shall be entitled to require the company to
purchase those shares in accordance with section 94.
101. The taking of any action by a company affecting Action not
the rights attached to shares shall not be invalid by reason invalid.
only that the action was not approved under section 99.
PART VI
REGISTRATION OF CHARGES
REGISTRATION OF CHARGES WITH REGISTRAR
102. (1) Where a company creates a charge to which Registration of
this section applies, it shall be the duty of the company within charges created
by companies
the time specified in subsection (3), to cause a copy of the
registered in Sri
instrument by which the charge is created or evidenced, to be Lanka.
delivered to the Registrar for registration under this Act. The
copy of the instrument shall be accompanied by a certificate
in the prescribed form issued by a director or secretary of the
company or an attorney-at law, verifying the copy as a true
copy and containing the prescribed particulars of the charge.
(2) This section shall apply to the following charges :—
(a) a charge for the purpose of securing any issue of
debentures ;
(b) a charge on uncalled share capital of the company ;
(c) a charge created or evidenced by an instrument
which, if executed by an individual, would require
registration as a bill of sale ;
78 Companies Act, No. 07 of 2007
(d) a charge on land wherever situated, or on any interest
in land ;
(e) a charge on book debts of the company ;
(f) a floating charge on the undertaking or property of
the company ;
(g) a charge on calls made but not paid ;
(h) a charge on a ship or aircraft or any share in a ship or
aircraft ;
(i) a charge on goodwill or intellectual property within
the meaning of the Intellectual Property Act, No. 36
of 2003 ; and
(j) a trust receipt to which section 4 of the Trust Receipts
Ordinance (Cap. 86) applies or an inland trust receipt
within the meaning of the Inland Trust Receipts
Act, No. 14 of 1990.
(3) An instrument which is required to be registered under
this section shall—
(a) in the case of instruments executed in Sri Lanka, be
registered within twenty-one working days of the
date of execution of the instrument ; or
(b) in the case of an instrument executed outside Sri
Lanka, be registered within three months of the date
of execution of the instrument.
(4) Where a charge is created in Sri Lanka but comprises
of property outside Sri Lanka, the instrument creating or
purporting to create the charge may be sent for registration
under the provisions of this secetion, notwithstanding that
further proceedings may be necessary to make the charge
valid or effectual according to the law of the country in which
the property is situated.
Companies Act, No. 07 of 2007 79
(5) Where a negotiable instrument has been given to
secure the payment of any book debts of a company, the
deposit of the instrument for the purpose of securing an
advance to the company, shall not for the purposes of this
section, be treated as a charge on those book debts.
(6) The holding of debentures entitling the holder to a
charge on land shall not for the purposes of this section, be
treated as an interest in land.
(7) Where a series of debentures containing or giving by
reference to any other instrument any charge to the benefit of
which the debenture holder of that series are entitled pari
passu is created by a company, it shall for the purposes of this
section be sufficient if, within fifteen working days from the
date of execution of the deed containing the charge or if
there is no such deed, from the date of execution of any
debentures of the series, the following particulars :—
(a) the total amount secured by the whole series ;
(b) the dates of the resolutions authorising the issue of
the series and the date of the covering deed, if any,
by which the security is created or defined ;
(c) a general description of the property charged ; and
(d) the names of the trustees, if any, for the debenture
holders,
together with a copy of the deed containing the charge
verified in the prescribed manner, or if there is no such deed,
one of the debentures of the series, are delivered to or received
by the Registrar :
Provided that, where more than one issue is made of
debentures in the series, there shall be sent to the Registrar
for entry in the register particulars of the date and amount of
each issue. An omission to send such particulars shall not
affect the validity of the debentures issued.
80 Companies Act, No. 07 of 2007
(8) Where any commission, allowance or discount has
been paid or made either directly or indirectly by a company
to any person, in consideration of his—
(a) subscribing or agreeing to subscribe whether
absolutely or conditionally, for any debentures of
the company ; or
(b) procuring or agreeing to procure subscriptions
whether absolute or conditional, for any such
debentures,
the particulars required to be sent for registration under the
provisions of this section shall include particulars as to the
amount or rate per centum of the commission, discount or
allowance so paid or made. An omission to send such
particulars shall not affect the validity of the debentures
issued.
(9) The deposit of any debentures as security for any debt
of the company shall not for the purposes of subsection (8),
be treated as the issue of the debentures at a discount.
(10) Registration of a charge under this section may be
effected on the application of any person interested in it.
Where registration is effected on the application of a person
other than the company, that person shall be entitled to recover
from the company the amount of any fees paid by him to the
Registrar.
(11) Where any company fails to send to the Registrar for
registration the particulars of any charge created by the
company or of the issue of debentures of a series which requires
registration under this section, then, unless the registration
has been affected on the application of some other person—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding fifty
thouand rupees ; and
Companies Act, No. 07 of 2007 81
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
(12) The provisions of this section shall be in addition to
and not in substitution of any other written law relating to
the registration of any document or instrument creating or
purporting to create a charge on any property, whether
movable or immovable.
(13) For the purpose of this Part of this Act, “charge”
includes a mortgage.
103. (1) Subject to the provisions of this Part, every Unregistered
charge shall in so far as it confers any security on the charges void in
certain cases.
company’s property or undertaking, be void against the
liquidator and any creditor of the company, unless it is
registered in the manner and within the time prescribed by
section 102 of this Act or by section 91 of the Companies
Act, No. 17 of 1982, as the case may be, or if the time for
registration has been extended under section 108 of this Act,
or under section 97 the Companies Act, No. 17 of 1982, then
within such extended time.
(2) Nothing in this section shall affect any contract or
obligation for repayment of money secured by a charge. If a
charge becomes void under this section, the money which it
secures shall immediately become payable.
(3) For the purpose of this section “charge” means a charge
created on or after July 2, 1982, which was required to be
registered under section 91 of the Companies Act, No. 17 of
1982 or under section 102 of this Act.
104. (1) Where a company registered in Sri Lanka Duty of
acquires any property which is subject to a charge that would, company to
register charges
if it had been created by the company after the acquisition of existing on
the property, have been required to be registered under this property
acquired.
82 Companies Act, No. 07 of 2007
Part, the company shall, within the time specified by
subsection (2), deliver to the Registrar for registration—
(a) the prescribed particulars of the charge ; and
(b) a copy (certified in the prescribed manner to be a
correct copy) of the instrument, if any, by which the
charge was created or is evidenced.
(2) Particulars of a charge which is required to be
registered under subsection (1) shall be delivered to the
Registrar—
(a) if the property is situated and the charge was created
outside Sri Lanka, within three months of the date
on which the acquisition is completed ; or
(b) in all other cases within twenty-one working days
of the date on which the acquisition is completed.
(3) Where a company fails to comply with this section—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding fifty
thousand rupees ; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
Register of 105. (1) The Registrar shall keep with respect to each
charges to be company, a register in the prescribed form of all the charges
kept by
requiring registration under this Part, and shall on payment
Registrar.
of the prescribed fee enter in the register with respect to such
charges, the following particulars :—
(a) in the case of a charge to the benefit of which the
holders of a series of debentures are entitled, the
particulars specified in subsection (8) of
section102;
Companies Act, No. 07 of 2007 83
(b) in the case of any other charge—
(i) if it is a charge created by the company, the
date of its creation, and if it is a charge which
was existing on property acquired by the
company, the date of the acquisition of the
property ;
(ii) the amount secured by the charge ;
(iii) short particulars of the property charged ;
(iv) the persons entitled to the charge.
(2) The Registrar shall issue a certificate in the prescribed
form, of the registration of any charge registered under this
Part stating the amount secured by it. The certificate shall be
conclusive evidence that the requirements of this Part as to
registration have been complied with.
(3) Registration of a charge under this Part shall constitute
notice to all persons of the particulars of the charge entered
on the register of charges under this section, but not of the
contents of the instrument which creates or is evidence of the
charge.
106. (1) The company shall cause a copy of every Endorsement of
certificate of
certificate of registration given under provision of section
registration on
105 to be endorsed on every debenture or certificate of debentures.
debenture stock which is issued by the company, and the
payment of which is secured by the charge so registered.
(2) Nothing in subsection (1) shall be construed as
requiring a company to cause a certificate of registration of
any charge to be endorsed on any debenture or certificate of
debenture stock issued by the company, before the charge
was created.
84 Companies Act, No. 07 of 2007
(3) Where any person knowingly and willfully authorises
or permits the delivery of any debenture or certificate of
debenture stock, which under the provisions of this section
is required to have endorsed on it a copy of a certificate of
registration without the copy being so endorsed upon it, he
shall without prejudice to any other liability, be guilty of an
offence and liable on conviction to a fine not exceeding two
hundred thousand rupees.
Entries of 107. Where the Registrar is satisfied that—
satisfaction and
release.
(a) the debt for which any registered charge was given
has been paid or satisfied in whole or in part ; or
(b) any part of the property or undertaking charged has
been released from the charge or has ceased to form
part of a company’s property or undertaking,
he may enter on the register a memorandum of satisfaction in
whole or in part or of the fact that part of the property or
undertaking has been released from the charge or has ceased
to form part of the company’s property or undertaking, as the
case may be.
Rectification of 108. If the court is satisfied that—
register of
charges.
(a) the omission to register a charge within the time
required by this Act ; or
(b) the omission or mis-statement of any particular with
respect to any such charge or in a memorandum of
satisfaction,
was accidental or due to inadvertence or to some other
sufficient cause or is not of a nature to prejudice the position
of creditors or shareholders of the company or it is otherwise
just and equitable to grant relief, the court may on the
application of the company or any person interested and on
Companies Act, No. 07 of 2007 85
such terms and conditions as seem to the court just and
expedient, order that the time for registration shall be
extended, or that the omission or misstatement shall be
rectified, as the case may be.
PROVISIONS AS TO COMPANY’S REGISTER OF CHARGES AND AS TO
COPIES OF INSTRUMENTS CREATING CHARGES
109. Every company shall keep a copy of every Copies of
instrument creating any charge requiring registration under instruments
creating charges
this Part at its registered office or at such other place as may to be kept by
be notified to the Registrar under section 116. In the case of company.
a series of uniform debentures, a copy of one debenture of the
series shall be sufficient.
110. (1) Every limited company shall— Company’s
register of
charges.
(a) keep at its registered office or at such other place as
may be notified to the Registrar under section 116,
a register of charges ; and
(b) enter in that register all charges specifically affecting
property of the company and all floating charges on
the undertaking or any property of the company,
specifying in each case —
(i) a short description of the property charged ;
(ii) the amount of the charge ;
(iii) except in the case of securities to bearer, the
names of the persons entitled to the charge.
(2) Any officer of the company who knowingly and
willfully authorises or permits the omission of any entry
required to be made under the provisions of this section,
shall be guilty of an offence and be liable on conviction to a
fine not exceeding two hundred thousand rupees.
86 Companies Act, No. 07 of 2007
REVIEW OF REGISTER OF CHARGES
Review of 111. (1) The Registrar may from time to time by notice
Register of in writing issued to a company, require that company to deliver
charges.
to him within fifteen working days of the receipt of such
notice—
(a) the particulars required to be provided under section
102 in respect of all charges which have been
registered under this Part or under Part III of the
Companies Act, No. 17 of 1982 or Part III of the
Companies Ordinance (Cap. 145), in relation to the
property or undertaking of the company, and which
have not been satisfied in whole or otherwise ceased
to apply to any property of the company ;
(b) a certified copy of the instrument, if any, by which
each such charge is created or evidenced ;
(c) a copy of the certificate issued by the Registrar on
the registration of each such charge ;
(d) an affidavit sworn or affirmed by a director or the
secretary of the company, verifying that the
information provided under this section is to the
best of his knowledge, complete and accurate in
every particular.
(2) Following receipt from a company of the documents
required to be provided under subsection (1), the Registrar
shall review the register of charges kept by him, and shall
make such entries in the register as may be required to ensure
the accuracy of the register.
(3) The Registrar shall not enter a memorandum of
satisfaction of a charge in whole or in part or of the fact that
part of the property or undertaking has been released from a
charge or has ceased to form part of the company’s property
or undertaking, pursuant to a review under this section.
Companies Act, No. 07 of 2007 87
(4) Where a company fails to compaly with a notice given
under subsection (1)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding fifty
thousand rupees ; and
(b) every officer of the company who is in default shall
be guilty of an offence, and be liable on conviction
to a fine not exceeding fifty thousand rupees.
APPLICATION OF THIS PART TO OVERSEAS COMPANIES
112. The provisions of this Part of this Act shall apply in Application of
relation to charges on property in Sri Lanka which are created this Part to
charges and
and to charges on property in Sri Lanka which is acquired, by
property to be
an overseas company. acquired by an
overseas
PART VII company.
MANAGEMENT ANDADMINISTRATION
REGISTERED OFFICE
113. (1) Every company shall have a registered office Registered office
in Sri Lanka to which all communications and notices may of a company.
be addressed.
(2) Subject to section 114, the registered office of a
company at a particular time is the place that is described in
the register as its registered office at that time.
(3) If the registered office of a company is at the office of
any chartered accountant, attorney-at-law, or any other
person, the description of the registered office shall state—
(a) that the registered office of the company is at the
office of the chartered accountant, attorney-at-law,
or any other person ; and
(b) particulars of the location of those offices.
88 Companies Act, No. 07 of 2007
Change of 114. (1) Subject to the company’s articles and to the
registered provisions of subsection (2), the board of a company may
office.
change the registered office of the company at any time.
(2) Notice in the prescribed form of the change shall be
given to the Registrar for registration, and the change shall
take effect five working days after the notice is received by
the Registrar or on such later date as may be specified in the
notice.
Requirement 115. (1) The Registrar may require a company to change
to change its registered office by notice in writing delivered or sent—
registered
office.
(a) to the company at its registered office ; and
(b) to each person who appears from the documents
delivered to the Registrar to be a director of the
company, at his latest address as shown in those
documents.
(2) The notice which shall be dated and signed by the
Registrar, shall—
(a) state that the company is required to change its
registered office by a date specified in the notice,
not being a date that is earlier than twenty working
days after the date of receipt of the notice ;
(b) state the reasons for requiring the change ; and
(c) state that the company has the right to appeal against
such requirement to court under section 472 ;
(3) The company shall change its registered office—
(a) by the date stated in the notice ; or
Companies Act, No. 07 of 2007 89
(b) if it appeals to court and the appeal is dismissed,
within five working days after the decision of the
court.
(4) Where a company fails to comply with this section—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding fifty
thousand rupees ; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceedting fifty thousand rupees.
COMPANY RECORDS
116. (1) Subject to the provisions of subsection (3), a Location of
company shall keep the following documents at its registered company
records.
office :—
(a) the certificate of incorporation and the articles of
the company ;
(b) minutes of all meetings and resolutions of
shareholders passed within the last ten years ;
(c) an interests register, unless it is a private company
which is dispensed with the need to keep such a
register ;
(d) minutes of all meetings held and resolutions of
directors passed and directors’ committees held
within the last ten years ;
(e) certificates required to be given by the directors
under this Act within the last ten years ;
(f) the register of directors and secretaries required to
be kept under section 223 ;
90 Companies Act, No. 07 of 2007
(g) copies of all written communications to all
shareholders or all holders of the same class of shares
during the last ten years, including annual reports
prepared under section 166 ;
(h) copies of all financial statements and group financial
statements required to be completed under this Act
for the last ten completed accounting periods of the
company ;
(i) the copies of instruments creating or evidencing
charges and the register of charges required to be
kept under sections 109 and 110 ;
(j) the share register required to be kept under section
123 ; and
(k) the accounting records required to be kept under
section 148 for the current accounting period and
for the last ten completed accounting periods of the
company.
(2) Notwithstanding the provisions of subsection (1), the
references in paragraphs (b), (d), (e), and (g) of subsection (1)
to the period of ten years and the refereces is paragraph (h)
and (k) of that subsection to ten completed accounting
periods, may be reduced to such lesser period by the Registrar,
where he considers it necessary and appropriate.
(3) The documents referred to in—
(a) paragraphs (a) to (i) of subsection (1) may be kept at
a place in Sri Lanka other than in the registered
office, notice of which is given to the Registrar in
accordance with subsection (4) ;
(b) paragraph (j) of subsection (1) may be kept at a place
other than the registered office, in accordance with
section 124 ;
Companies Act, No. 07 of 2007 91
(c) paragraph (k) of subsection (1) may be kept at a
place other than the registered office, in accordance
with section 149.
(4) If any records are not kept at the registered office of
the company or the place at which they are kept is changed,
the company shall ensure that within ten working days of
their first being kept elsewhere or moved, as the case may be,
notice is given to the Registrar of the place or places where
the records are kept.
(5) If a company fails to comply with the requirements in
subsection (1) or subsection (4)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding two
hundred thousand rupees ; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding one hundred thousand
rupees.
117. (1) The records of a company shall be kept in Form of records.
written form or in a form or in a manner that allows the
documents and information that comprise the records to be
easily accessible and convertible into written form.
(2) A company shall ensure that adequate measures exist
to prevent the records being falsified and detect any
falsification of them.
(3) Where a company fails to comply with the
requirements of subsection (2)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding two
hundred thousand rupees ; and
92 Companies Act, No. 07 of 2007
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding one hundred thousand
rupees.
INSPECTION OF COMPANY RECORDS
Inspection of 118. (1) Subject to the provisions of subsection (2),
records by every director of a company is entitled on giving reasonable
directors.
notice, to inspect the written records of the company without
a charge, at a reasonable time specified by the director.
(2) A court may on application made in that behalf by the
company, if it is satisfied that—
(a) it would not be in the company’s interests for a
director to inspect the records ; or
(b) the proposed inspection is for a purpose that is not
properly connected with the director’s duties,
direct that the records be not made available for inspection
or limit the inspection of them in any manner it thinks fit.
Inspection of 119. (1) In addition to the records being made available
company for public inspection under section 120, a company shall
records by
keep the following records available for inspection in the
shareholders.
manner prescribed in section 121 by a shareholder of the
company or by a person authorised in writing by a shareholder
for that purpose, who serves a written notice of such intention
to inspect the company,:—
(a) minutes of all meetings and resolutions of
shareholders ;
(b) copies of written communications to all sharehloders
or to all holders of a class of shares during the
preceding ten years, including annual reports,
financial statements, and group financial
statements;
Companies Act, No. 07 of 2007 93
(c) certificates issued by directors under this Act ; and
(d) the interests register of the company.
(2) Where a company fails to comply with the
requirements of subsection (1)—
(a) the company shall guilty of an offence and be liable
on conviction to a fine not exceeding two hundred
thousand rupees ; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding one hundred thousand
rupees.
120. (1) A company shall keep the following records Public inspection
available for inspection in the manner described in section of company
121 by any person who serves written notice of such intention records.
to inspect on the company, :—
(a) the certificate of incorporation of the company ;
(b) the articles of the company, if they are not the model
articles ;
(c) the share register ;
(d) the register of directors and secretaries ;
(e) particulars of the registered office of the company ;
(f) copies of the instruments creating or evidencing
charges and the register of charges kept under
sections 109 and 110.
(2) Where a company fails to comply with the
requirements of subsection (1)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding two
hundred thousand rupees ; and
94 Companies Act, No. 07 of 2007
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding one hundred thousand
rupees.
Manner of 121. (1) Documents which may be inspected under
inspection. section 119 or section 120 shall be available for inspection
at the place at which the company’s records are kept, between
the hours of 9.00 a.m. and 4.00 p.m. on each working day
during the inspection period.
(2) A document need not be made available for inspection
in the manner specified in subsection (1), if a certified copy
of the document has been provided to the person or
shareholder concerned without a charge.
(3) In this section, the term “inspection period” means
the period commencing on the third working day after the
day on which notice of intention to inspect is served on the
company by the person or shareholder concerned and ending
on the eighth working day after the day of service.
Copies of 122. (1) A person may require a copy of or extract from
documents. a document which is made available for inspection by him
under section 119 or section 120 to be sent to him within five
working days after he has made a request in writing for such
copy or extract and has paid a reasonable copying and
administration fee as may be determined by the company.
(2) Where a company fails to provide a copy of or extract
from a document in compliance with a request under
subsection (1)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding one
hundred thousand rupees ; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
Companies Act, No. 07 of 2007 95
SHARE REGISTER
123. (1) Every company which has issued shares shall Company to
maintain a share register that records the shares issued by the maintain share
register.
company, and which includes—
(a) the name and the latest known address of each
person who is or has within the last ten years been a
shareholder ;
(b) the number of shares of each class held by each
shareholder within the last ten years ; and
(c) the date of any—
(i) issue of shares to ;
(ii) repurchase or redemption of shares from ; or
(iii) transfer of shares by or to,
each shareholder within the last ten years, and in relation to
the transfer, the name of the person to or from whom the
shares were transferred.
(2) Where a company fails to comply with the requirements
of subsection (1)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding two
hundred thousand rupees ; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding one hundred thousand
rupees.
124. (1) The share register of a company may, if expressly Place of share
permitted by the articles, be divided into two or more registers register.
kept in different places.
96 Companies Act, No. 07 of 2007
(2) The principal register shall be kept in Sri Lanka.
(3) Where a share register is divided into two or more
registers kept in different places—
(a) notice of the place where each register is kept shall
be delivered to the Registrar within ten working
days after the share register is so divided, or the
place where a register is kept is altered ;
(b) a copy of every register shall be kept at the place
where the principal register is kept ; and
(c) if an entry is made in a register other than in the
principal register, a corresponding entry shall be
made within ten working days in the copy of that
register kept with the principal register.
(4) Where the share register is not divided and the
principal register is not kept at the registered office of the
company, notice of the place where it is kept shall be delivered
to the Registrar within ten working days after it ceases to be
kept there or after the place at which it is kept is altered.
(5) In this section, “principal register” in relation to a
company, means—
(a) if the share register is not divided into two or more
registers, the share register ;
(b) if the share register is divided into two or more
registers, the register described as the principal
registers in the last notice sent to the Registrar.
(6) Where a company fails to comply with the
requirements of subsection (3) or subsection (4)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding one
hundred thousand rupees ; and
Companies Act, No. 07 of 2007 97
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
125. An instrument of transfer of a share registered in a Stamp duties in
register kept outside Sri Lanka shall be deemed to be a transfer case of shares
registered in a
of property situated out side of Sri Lanka, and unless executed register outside
in Sri Lanka, shall be exempt from stamp duty chargeable in Sri Lanka.
Sri Lanka.
126. (1) Every company having more than fifty Index of
shareholders shall, (unless the share register is in such a form shareholders.
as to constitute in itself an index) keep an index of the names
of the shareholders of the company and shall within ten
working days from the date on which any alteration is made
in the share register, make any necessary alteration in the
index.
(2) The index shall in respect of each shareholder, contain
sufficient indication enabling the account of that shareholder
in the register to be readily found.
(3) Where an index kept under this section contains the
name of a company to which subsection (2) of section 129
applies, there shall be annexed to the index all written notices
given by that company relating to the person or persons for
whose benefit the shares registered in the name of that
company are held in trust.
(4) Where a company fails to comply with subsection (1),
subsection (2) or subsection (3)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding one
hundred thousand rupees ; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
98 Companies Act, No. 07 of 2007
Power to close 127. A company may, after notice published in the
register. Gazette and in any nawspaper circulating in the district in
which the registered office of the company is situated and in
which the share register is kept, close the share register for
any time or times not exceeding in the whole thirty working
days in each year.
Power of court 128. (1) Where—
to rectify
register.
(a) the name of any person is without sufficient cause
entered in or omitted from the share register of a
company ; or
(b) default is made or unnecessary delay takes place in
entering on the register the fact of any person having
ceased to be a shareholder,
the person aggrieved or the company or any shareholder of
the company, may make an application to the court for
rectification of the register.
(2) Where an application is made under this section, the
court may order rectification of the register and payment by
the company of any damages sustained by any party
aggrieved.
(3) On an application made under this section, the court
may decide—
(a) any question relating to the title of any person who
is a party to the application to have his name entered
in or omitted from the register, whether the question
arises between shareholders or alleged shareholders
or between shareholders or alleged shareholders on
the one hand and the company on the other hand ;
and
(b) any other question necessary or expedient to be
decided for rectification of the register.
Companies Act, No. 07 of 2007 99
(4) If the court makes an order directing the rectification
of the register, the company shall within ten working days of
the making of the order, deliver a copy of the order to the
Registrar.
(5) Where a company fails to comply with the requirements
of subsection (4)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding one
hundred thousand rupees ; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
129. (1) Subject to the provisions of subsection (2), no Trusts not to be
entered on share
notice of any trust, expressed, implied or constructive, shall
register.
be entered on the shareregister or be receivable by the Registrar
in the case of companies registered in Sri Lanka.
(2) A company shall enter in its register and the Registrar
shall receive notice of any trust, the trustee of which is a
company and—
(a) the principal business of which is to act as a central
depository to a stock exchange licensed under the
Securities and Exchange Commission of Sri Lanka
Act, No. 36 of 1987 ; and
(b) which has been approved by the Minister in
consultation with the Securities and Exchange
Commission of Sri Lanka, established by that Act.
130. (1) The entry of the name of a person in the share Share register to
register as holder of a share shall be prima facie evidence be evidence.
that title to the share is vested in that person.
100 Companies Act, No. 07 of 2007
(2) Subject to the provisions of subsections (2) and (3) of
section 86, a company may treat the registered holder of a
share as the only person entitled to—
(a) exercise the right to vote attaching to the share ;
(b) receive notices ;
(c) receive a distribution in respect of the share ; and
(d) exercise any other rights and powers attaching to
the share.
ANNUALRETURN
Annual return. 131. (1) Subject to the provisions of subsection (3),
every company shall at least once in every year deliver to the
Registrar an annual return in the prescribed form, containing
the matters specified in the Fifth Schedule hereto.
(2) The annual return shall be completed within thirty
working days from the date of the Annual General Meeting
for the year, whether or not that meeting is the first or only
meeting of the shareholders in the year. The company shall
forthwith forward to the Registrar a copy of the return, signed
both by a director and the secretary of the company.
(3) The provisions of this section shall not apply to a
company in the year of its incorporation.
(4) Where a company fails to comply with the
requirements of subsection (1) or subsection (2)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding one
hundred thousand rupees ; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
Companies Act, No. 07 of 2007 101
132. Every private company shall send to the Registrar Declaration and
with its annual return— certificate to be
sent by private
company with
(a) a declaration signed by the directors of the company annual return.
to the effect that to the best of their knowledge and
belief, they have done all things required to be done
by them by or under this Act ;
(b) a certificate signed by a director and by the secretary
of the company—
(i) that the company has not since the date of
the last return or in the case of a first return,
since the date of the incorporation of the
company, issued any invitation to the public
to subscribe for any shares or debentures of
the company ;
(ii) where the annual return discloses the fact that
the number of shareholders of the company
exceeds fifty, that the excess consists wholly
of persons who under section 27, are not to
be taken into account in relation to that limit.
MEETINGSAND PROCEEDINGS
133. (1) Subject to the provisions of subsection (2) and Annual general
of section 144, the board of a company shall call an annual meeting.
general meeting of shareholders to be held once in each
calendar year—
(a) not later than six months after the balance sheet date
of the company ; and
(b) not later than fifteen months after the previous
annual general meeting.
(2) A company is not required to hold its first annual
general meeting in the calendar year of its incorporation, but
shall hold that meeting within eighteen months of its
incorporation.
102 Companies Act, No. 07 of 2007
(3) Where default is made in holding a meeting of the
company in accordance with the provisions of this section,
the Registrar may on the application of any shareholder of
the company, call or direct the calling of an annual general
meeting of the company and give such ancillary or
consequential directions as the Registrar thinks expedient,
including any direction modifying or supplementing in
relation to the calling, holding and conducting of the meeting,
the operation of the company’s articles and a direction to the
effect that one shareholder of the company present in person
or by proxy shall be deemed to constitute a meeting.
(4) An annual general meeting held in pursuance of the
provisions of subsection (3) shall, subject to any direction of
the Registrar, be deemed to be an annual general meeting of
the company, but where a meeting so held is not held in the
year in which the default in holding the company’s annual
general meeting occurred, the meeting so held shall not be
treated as the annual general meeting for the year in which it
is held, unless at that meeting the company resolves that it
shall be so treated.
(5) Where a company resolves that a meeting be treated
in the manner referred to in subsection (4), a copy of the
resolution shall within ten working days from the date of
passing thereof, be forwarded to the Registrar and recorded
by him.
(6) Where default is made in holding a meeting of the
company in accordance with the provisions of subsection (1)
or in complying with any directions of the Registrar under
the provisions of subsection (3) or in complying with the
provisions of subsection (4)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding one
hundred thousand rupees ; and
Companies Act, No. 07 of 2007 103
(b) every officer of the company who is in default shall
be guilty of an offence, and be liable on conviction
to a fine not exceeding fifty thousand rupees.
134. (1) Notwithstanding anything in its articles, the Convening of
directors of a company shall on the requisition of extraordinary
shareholders holding at the date of the deposit of the general meeting
on requisition.
requisition shares which carry not less than ten per centum
of the votes which may be cast on an issue, forthwith proceed
duly to convene an extraordinary general meeting of the
company to consider and vote on that issue. The meeting
shall be convened not later than fifteen working days after
the date of the deposit of the requisition and held not later
than thirty working days after the date of the deposit of the
requisition.
(2) The requisition shall state the issue or issues to be
considered and voted on at the meeting and shall be signed
by the requisitionists and deposited at the registered office
of the company, and may consist of several documents in
like form each signed by one or more requisitionists.
(3) Where the directors do not within fifteen working days
from the date of the deposit of the requisition duly proceed
to convene a meeting, the requisitionists or any of them
representing more than one-half of the total voting rights of
all of them may themselves convene a meeting, but any
meeting so convened shall not be held after the expiration of
three months from the said date.
(4) A meeting convened under the provisions of this
section by the requisitionists shall be convened in the same
manner and as nearly as possible as that in which meetings
are to be convened by the directors.
(5) Any reasonable expenses incurred by the
requisitionists by reason of the failure of the directors to duly
convene a meeting shall be repaid to the requisitionists by
the company, and any sum so repaid shall be retained by the
104 Companies Act, No. 07 of 2007
company out of any sums due or to become due from the
company by way of fees or other remuneration, in respect of
their services to such of the directors as were in default.
(6) For the purposes of this section the directors shall, in
the case of a meeting at which a resolution is to be proposed
as a special resolution, be deemed not to have duly convened
the meeting, if they do not give such notice thereof as is
required by the provisions of section 145.
Length of notice 135. (1) Any provision of a company’s articles shall be
for calling void in so far as it provides for the calling of a meeting of the
meetings.
company (other than an adjourned meeting) by a shorter
notice than—
(a) in the case of the annual general meeting, fifteen
working days’ notice in writing ; and
(b) in the case of a meeting other than an annual general
meeting or a meeting for the passing of a special
resolution, ten working days’ notice in writing in
the case of a company other than a private or an
unlimited company and five working days’ notice
in writing in the case of a private or an unlimited
company.
(2) Subject to the provisions of subsection (1), save in so
far as the articles of a company make other provisions in that
behalf, a meeting of the company (other than an adjourned
meeting) may be called—
(a) in the case of the annual general meeting, by fifteen
working days’ notice in writing ; and
(b) in the case of a meeting, other than an annual general
meeting or a meeting for the passing of a special
resolution, by ten days notice in writing in the case
of a company other than a private or unlimited
company and by five working days’ notice in writing
in the case of a private or an unlimited company.
Companies Act, No. 07 of 2007 105
(3) A meeting of the company shall, notwithstanding that
it is called by shorter notice than that specified in the
preceding subsection or in the company’s articles, as the case
may be, be deemed to have been duly called, if it is so agreed—
(a) in the case of the meeting called as the annual
general meeting, by all the shareholders entitled to
attend and vote at such meeting ; and
(b) in the case of any other meeting, by the shareholders
having a right to attend and vote at the meeting,
being shareholders together holding shares which
carry not less than ninety-five per centum of the
voting rights, on each issue to be considered and
voted on at that meeting.
136. The following provisions shall have effect in so far Provisions as to
as the articles of the company do not make other provisions meetings and
votes.
in that behalf—
(a) notice of the meeting of a company shall be served
on every shareholder of the company in the manner
in which notices are required to be served under the
provisions of the model articles ;
(b) two or more shareholders holding shares which carry
not less than ten per centum of the votes which may
be cast on an issue, may call a meeting to consider
and vote on that issue ;
(c) in the case of a private company two shareholders,
and in the case of any other company three
shareholders, present in person or by an authorised
representative under the provisions of paragraph (a)
of subsection (1) of section 138 shall be a quorum ;
(d) any shareholder elected by the shareholders present
at a meeting may be chairman thereof ;
106 Companies Act, No. 07 of 2007
(e) no shareholder shall be entitled to vote at any
general meeting, unless all calls or other sums then
payable by him in respect of shares in the company
have been paid ;
(f) where voting is by show of hands, each shareholder
shall have one vote and on a poll every shareholder
shall have one vote in respect of each share held by
him.
Power of court 137. (1) Where for any reason it is impracticable to call
to order a meeting of a company in any manner in which meetings of
meeting.
that company may be called, or to conduct the meeting of the
company in the manner specified by the company’s articles
or this Act, the court may either of its own motion or on the
application of any director of the company or of any
shareholder of the company who would be entitled to vote at
the meeting, order a meeting of the company to be called,
held and conducted in such manner as the court thinks fit,
and where any such order is made, may give such ancillary or
consequential direction as it thinks expedient, and any
meeting called, held and conducted in accordance with any
such order shall for all purposes be deemed to be a meeting of
the company duly called, held and conducted and any such
direction may include a direction that one shareholder of the
company present in person or by proxy shall be deemed to
constitute a meeting.
(2) A copy of each notice calling a meeting under the
provisions of this section, shall be sent to the Registrar at the
same time as such notice is required to be sent to the
shareholders.
(3) Where default is made in complying with the
provisions of subsection (2)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding one
hundred thousand rupees ; and
Companies Act, No. 07 of 2007 107
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
138. (1) A corporation, whether a company within the Representation
meaning of this Act or not, may— of companies at
meetings of
other companies
(a) where it is a shareholder of another corporation, and of creditors.
being a company within the meaning of this Act, by
resolution of its directors or other governing body,
authorise such a person as it thinks fit to act as its
representative at any meeting of the company or at
any meeting of any class of shareholders of the
company ;
(b) where it is a creditor (including a holder of
debentures) of another corporation being a company
within the meaning of this Act, by resolution of its
directors or other governing body authorise such
person as it thinks fit to act as its representative at
any meeting of any creditors of the company, held
in pursuance of this Act or any rules made thereunder,
or in pursuance of the provisions contained in any
debenture or trust deed, as the case may be.
(2) A person authorised as aforesaid shall be entitled to
exercise the same power on behalf of the corporation which
he represents as that corporation could exercise if it were an
individual shareholder, creditor or holder of debentures, of
that other company.
139. (1) Any shareholder of a company entitled to Proxies.
attend and vote at a meeting of the company shall be entitled
to appoint another person (whether a shareholder or not) as
his proxy to attend and vote instead of him. A proxy so
appointed shall have the same right as the shareholder to
vote on a show of hands or on a poll and to speak at the
meeting :
108 Companies Act, No. 07 of 2007
Provided that unless the articles otherwise provide, a
shareholder shall not be entitled to appoint more than one
proxy to attend on the same occasion.
(2) Notwithstanding anything in this Act, where the
Secretary to the Treasury is the holder of more than ten per
centum of the shares, the Secretary to the Treasury shall be
entitled to appoint another person as his proxy for every ten
per centum or part thereof of the shares held by the Secretary
to the Treasury :
Provided where the Secretary to the Treasury is a holder of
a golden share in a company in terms of its articles,
notwithstanding anything in this Act, the Secretary to the
Treasury as the golden shareholder thereof shall be entitled
to appoint not more than three other persons as his proxies to
attend on the same occasion.
(3) In every notice calling a meeting of a company, there
shall appear with reasonable prominence a statement that a
shareholder entitled to attend and vote is entitled to appoint
a proxy to attend and vote instead of him and that a proxy
need not also be a shareholder. Where default is made in
complying with the provisions of this subsection as respects
any meeting, every officer of the company who is in default
shall be guilty of an offence and be liable on conviction to a
fine not exceeding fifty thousand rupees.
(4) Any provisions contained in a company’s articles shall
be void in so far as it would have the effect of requiring the
instrument appointing a proxy or any other document
necessary to show the validity of or otherwise relating to the
appointment of a proxy, to be received by the company or
any other person more than forty-eight hours before a meeting
or adjourned meeting, in order that the appointment may be
effective thereat.
(5) Where for the purpose of any meeting of a company,
invitations to appoint as proxy a person or one of a number of
Companies Act, No. 07 of 2007 109
persons specified in the invitations are issued at the company’s
expense to some only of the shareholders entitled to be sent
a notice of the meeting and to vote thereat by proxy, every
officer of the company who knowingly and wilfully
authorises and permits their issue as aforesaid, shall be guilty
of an offence and be liable on conviction to a fine not
exceeding two hundred thousand rupees :
Provided that an officer shall not be liable under the
provisions of this subsection by reason only of the issue to a
shareholder at his request in writing of a form of appointment
naming the proxy or of a list of persons willing to act as
proxy, if the form or list is available on request in writing to
every shareholder entitled to vote at the meeting by proxy.
(6) The provisions of this section shall apply to meetings
of any class of shareholders of a company as it applies to
general meetings of the company.
(7) Every shareholder of the company or a proxy holder,
shall be entitled to inspect the proxies received under the
provisions of this section at least three hours before the
commencement of the meeting or adjourned meeting at which
the proxy is to be used.
140. (1) Any provision contained in a company’s articles Right to demand
shall be void, in so far as it would have the effect either — a poll.
(a) of excluding the right to demand a poll at a general
meeting on any question, other than the election of
the chairman of the meeting or the adjournment of
the meeting; or
(b) of making ineffective a demand for a poll on any
such question which is made either —
(i) by not less than five shareholders having the
right to vote at the meeting; or
110 Companies Act, No. 07 of 2007
(ii) by a shareholder or shareholders representing
not less than one-tenth of the total voting
rights of all the shareholders having the right
to vote at the meeting.
(2) The instrument appointing a proxy to vote at a meeting
of a company shall be deemed also to confer authority to
demand or join in demanding a poll, and for the purposes of
the provisions of subsection (1), a demand by a person as
proxy for a share holder shall be the same as a demand by the
shareholder.
Voting on a poll. 141. On a poll taken at a meeting of a company or a
meeting of any class of shareholders of a company, a
shareholder entitled to more than one vote need not if he
votes, use or cast all his votes in the same way.
Circulation of 142. (1) It shall be the duty of a company on the
shareholder’s requisition in writing of such number of shareholders as is
resolutions on
hereinafter specified and (unless the company otherwise
requisition.
resolves) at the expense of the requisitionists—
(a) to give to shareholders of the company entitled to
receive notice of the next annual general meeting,
notice of any resolution which may properly be
moved and is intended to be moved at that meeting;
(b) to circulate to shareholders entitled to have notice
of any general meeting sent to them, any statement
with respect to the matter referred to in any proposed
resolution or the business to be dealt with at that
meeting.
(2) The number of shareholders necessary for a requisition
under the provisions of subsection (1) shall be—
(a) any number of shareholders representing not less
than one-twentieth of the total voting rights of all
the shareholders having at the date of the requisition
Companies Act, No. 07 of 2007 111
a right to vote at the meeting to which the requisition
relates; or
(b) not less than fifty shareholders.
(3) Notice of any such resolution shall be given and any
such statement shall be circulated to shareholders of the
company entitled to have notice of the meeting sent to them,
by serving a copy of the resolution or statement on each such
shareholder in any manner permitted for service of notice of
the meeting, and notice of any such resolution shall be given
to any other shareholder of the company by giving notice of
the general effect of the resolution, in any manner permitted
for giving him notice of meetings of the company :
Provided that the copy shall be served or notice of the
effect of the resolution shall be given, as the case may be, in
the same manner and as far as practicable at the same time as
notice of the meeting, and where it is not practicable for it to
be served or given at that time, it shall be served or given as
soon as practicable thereafter.
(4) A company shall not be bound under the provisions
of this section to give notice of any resolution or to circulate
any statement unless—
(a) a copy of the resolution signed by the requisitionists
(or two or more copies which between them contain
the signatures of all the requisitionists) is deposited
at the registered office of the company —
(i) in the case of a requisition requiring notice
of a resolution, not less than six weeks before
the date of the meeting; and
(ii) in the case of any other requisition, not less
than one week before the meeting; and
112 Companies Act, No. 07 of 2007
(b) there is deposited or tendered with the requisition, a
sum reasonably sufficient to meet the company’s
expenses in giving effect thereto :
Provided that where after a copy of a requisition requiring
notice of a resolution has been deposited at the registered
office of the company, an annual general meeting is called
for a date six weeks or less from the date on which the copy
has been so deposited, the copy though not deposited within
the time required by this subsection, shall be deemed to have
been properly deposited for the purposes thereof.
(5) The company shall not be bound under the provisions
of this section to circulate any statement, if on the application
either of the company or of any other person who claims to
be aggrieved, the court is satisfied that the rights conferred
by the provisions of this section are being abused to secure
unnecessary publicity for defamatory matter and the court
may order the company’s costs on an applicaiton made under
the provisions of this section, to be paid in whole or in part
by the requisitionists, notwithstanding that they are not
parties to the application.
(6) Notwithstanding anything in the company’s articles,
the business which may be dealt with at an annual general
meeting shall include any resolution, of which notice is given
in accordance with the provisions of this section, and for the
purpose of this subsection notice shall be deemed to have
been so given notwithstanding the accidental omission of
giving such notice to one or more shareholders.
(7) Where any default is made in complying with the
provisions of this section, every officer of the company who
is in default shall be guilty of an offence and be liable on
conviction to a fine not exceeding one hundred thousand
rupees.
Companies Act, No. 07 of 2007 113
143. (1) A resolution shall be a special resolution when Special
it has been passed— resolutions.
(a) by a majority of seventy-five per centum of those
shareholders entitled to vote and voting on the
question;
(b) at a general meeting of which not less than fifteen
working days’ notice, specifying the intention to
propose the resolution as a special resolution has
been duly given :
Provided that, where it is so agreed by the shareholders
having the right to attend and vote at any such meeting,
being shareholders together representing not less than eighty-
five per centum of the total voting rights at that meeting, a
resolution may be proposed and passed as a special resolution
at a meeting of which less than fifteen working days’ notice
has been given.
(2) At any meeting at which a special resolution is
submitted to be passed, a declaration of the chairman that the
resolution is carried shall, unless a poll is demanded, be
conclusive evidence of that fact without proof of the number
or proportion of the votes recorded in favour of or against the
resolution.
(3) In computing the majority on a poll demanded on the
question that a special resolution be passed, reference shall
be had to the number of votes cast for and against the
resolution.
(4) For the purposes of this section notice of a meeting
shall be deemed to be duly given and the meeting to be
duly held, when the notice is given and the meeting is held
in the manner provided for by the company’s articles or by
this Act.
114 Companies Act, No. 07 of 2007
Resolution in 144. (1) Subject to the provisions contained in the
lieu of meeting. company’s articles, a resolution in writing signed by not less
than eighty-five per centum of the shareholders who would
be entitled to vote on that resolution at a meeting of
shareholders, who together hold not less than eighty-five per
centum of the votes entitled to be cast on that resolution,
shall be as valid as if it had been passed at a meeting of those
shareholders.
(2) Subject to the provisions contained in the company’s
articles, a resolution in writing that—
(a) relates to a matter that is required by this Act or by
the articles to be decided at a meeting of the
shareholders of a company; and
(b) is signed by the shareholders specified in
subsection(1),
is deemed to be made in accordance with the provisions of
this Act or the articles of the company.
(3) It shall not be necessary for a company to hold an
annual general meeting of shareholders under section 133, if
everything required to be done at that meeting (by resolution
or otherwise) is done by resolution in accordance with this
section.
(4) Within five working days of a resolution being passed
under this section, the company shall send a copy of the
resolution to every shareholder who did not sign the
resolution.
(5) A resolution may be signed under subsection (1) or
subsection (2) without any prior notice being given to
shareholders.
(6) Where a company fails to comply with the
requirements of subsection (4) —
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding one
hundred thousand rupees; and
Companies Act, No. 07 of 2007 115
(b) every officer who is in default shall be guilty of an
offence and be liable on conviction to a fine not
exceeding fifty thousand rupees.
(7) A person who is registered as the holder of parcels of
shares having different beneficial owners, may expressly sign
a resolution under this section in respect of shares having
one beneficial owner and refrain from signing the resolution
in respect of shares having another beneficial owner.
(8) Notwithstanding any provision in this Act, where the
Secretary to the Treasury is the holder of a share of a company,
any resolution referred to in this section shall not be valid
unless the consent in writing of the Secretary to the Treasury
as a holder of the share is also obtained in favour of such
resolution.
145. Where by any provision hereafter contained in this Resolutions
Act, special notice is required of a resolution, the resolution requiring special
notice.
shall not be effective unless notice of the intention to move
it has been given to the company not less than twenty-eight
days before the date of the meeting at which it is to be moved,
and the company shall give its shareholders notice of any
such resolution at the same time and in the same manner as it
gives notice of the meeting, or if that is not practicable, shall
give them notice thereof either by advertisement in a
newspaper having an appropriate circulation or in any other
manner allowed by the company’s articles, not less than fifteen
working days before the date of the meeting:
Provided that, where after notice of the intention to move
such a resolution has been given to the company a meeting is
called for a date twenty-eight days or less from the date of the
notice, the notice though not given within the time required
by this section, shall be deemed to have been properly given
for the purposes thereof.
116 Companies Act, No. 07 of 2007
Resolutions 146. Where after the appointed date, a resolution is
passed at passed at an adjourned meeting of—
adjourned
meetings.
(a) a company ;
(b) the holders of any class of shares in a company;
(c) the directors of a company,
the resolution shall for all purposes be treated as having been
passed on the date on which it was in fact passed, and shall
not be deemed to have been passed on any earlier date.
Minutes of 147. (1) Every company shall cause minutes of all
proceedings of proceedings of general meetings and meetings of its directors
meetings of to be entered in books kept for that purpose.
shareholders and
directors.
(2) Any such minutes purporting to be signed by the
chairman of the meeting at which the proceedings were had,
or by the chairman of the next succeeding meeting, shall be
evidence of such proceedings.
(3) Where minutes have been made in accordance with
the provisions of this section of the proceedings at any general
meeting, or a meeting of directors of the company, as the case
may be, then until the contrary is proved, the meeting shall
be deemed to have been duly held and convened and all
appointments of directors, managers or liquidators, made at
the meeting, shall be deemed to be valid.
(4) Every director and former director of a company shall
be entitled to receive from the company secretary, certified
copies of the minutes of all the meetings of the board of
directors of such company held during the period when he is
or he was a director of that company.
(5) Where a company fails to comply with the provisions
of subsection (1)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding one
hundred thousand rupees; and
Companies Act, No. 07 of 2007 117
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
ACCOUNTING RECORDS
148. (1) Every company shall keep accounting records Duty to keep
which correctly record and explain the company’s accounting
records.
transactions, and will—
(a) at any time enable the financial positions of the
company to be determined with reasonable accuracy;
(b) enable the directors to prepare financial statements
in accordance with this Act; and
(c) enable the financial statements of the company to
be readily and properly audited.
(2) Without limiting the provisions contained in
subsection (1), the accounting records shall contain—
(a) entries of money received and expended each day
by the company and the matters in respect of which
such money was spent;
(b) a record of the assets and liabilities of the company;
(c) if the company’s business involves dealing in
goods—
(i) a record of goods bought and sold, except
goods sold for cash in the ordinary course of
carrying on a retail business that identifies
both the goods and buyers and sellers and
the relevant invoices;
(ii) a record of stock held at the end of the
financial year together with records of any
stock takings during the year;
118 Companies Act, No. 07 of 2007
(d) if the company’s business involves providing
services, a record of services provided and relevant
invoices.
(3) Where a company fails to comply with the
requirements of this section—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding two
hundred thousand rupees; and
(b) every officer of the company who is in default shall
be guilty of an offence, and be liable on conviction
to a fine not exceeding two hundred thousand
rupees.
Place where 149. (1) A company shall keep its accounting records
accounting in Sri Lanka. However, where the Registrar considers it not
records are kept.
prejudicial to the national economy or to the interests of
shareholders of the company, he may permit a company to
keep its accounting records outside Sri Lanka.
(2) If the records are not kept in Sri Lanka—
(a) the company shall ensure that the accounts and
returns of the operations of the company—
(i) disclose with reasonable accuracy the
financial position of the company at intervals
not exceeding periods of six months; and
(ii) will enable the preparation in accordance
with this Act of the company’s financial
statements and any group financial statements
and any other document required to be
maintained under this Act,
are sent to and kept at a place in Sri Lanka; and
Companies Act, No. 07 of 2007 119
(b) notice of the place where the accounting records
and the accounts and returns required under
paragraph (a) are kept, shall be given to the Registrar.
(3) Where a company fails to comply with the
requirements of subsection (2)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding two
hundred thousand rupees; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding two hundred thousand rupees.
DUTYTO PREPARE FINANCIAL STATEMENTS
150. (1) The board of every company shall ensure that Obligation to
within six months or within such extended period as may be prepare financial
determined by the Registrar after the balance sheet date of statements.
the company, financial statements that comply with the
requirements of section 151 are—
(a) completed in relation to the company and that
balance sheet date;
(b) certified by the person responsible for the
preparation of the financial statements that it is in
compliance with the requirements of this Act; and
(c) dated and signed on behalf of the board by two
directors of the company or if the company has only
one director, by that director.
(2) Where the board fails to comply with the requirements
specified in subsection (1), every director of the company
who is in default shall be guilty of an offence and be liable on
conviction to a fine not exceeding one hundred thousand
rupees.
120 Companies Act, No. 07 of 2007
Contents and 151. (1) The financial statements of a company shall
form of give a true and fair view of—
financial
statements.
(a) the state of affairs of the company as at the balance
sheet date; and
(b) the profit or loss or income and expenditure, as the
case may be, of the company for the accounting
period ending on that balance sheet date.
(2) Without limiting the provisions contained in
subsection (1), the financial statements of a company shall
comply with—
(a) any regulations made under this Act which specifies
the form and content of financial statements; and
(b) any requirements which apply to the company’s
financial statements under any other law.
Obligation to 152. (1) Subject to the provisions of subsection (2), the
prepare group board of a company that has on the balance sheet date of the
financial company one or more subsidiaries, shall, in addition to
statements.
complying with section 150, ensure that within the time
specified in that section, group financial statements that
comply with section 153 are—
(a) completed in relation to that group and that balance
sheet date;
(b) certified by the person responsible for the
preparation of the financial statements that it is in
compliance with the requirements of this Act; and
(c) dated and signed on behlaf of the directors by two
directors of the company or if the company has only
one director, by that director.
Companies Act, No. 07 of 2007 121
(2) Group financial statements and a balance sheet date
shall not be required in relation to a company, if the company
is at that balance sheet date the wholly owned subsidiary of
another company.
(3) Where the board fails to comply with the requirements
specified in subsection (1), every director of the company
who is in default shall be guilty of an offence, and be liable
on conviction to a fine not exceeding one hundred thousand
rupees.
153. (1) The financial statements of a group shall give Contents and
a true and fair view of — form of group
financial
statements.
(a) the state of affairs of the company and its
subsidiaries as at the balance sheet date; and
(b) the profit or loss or income and expenditure, as the
case may be, of the company and its subsidiaries for
the accounting period ending on that balance sheet
date.
(2) Without limiting the provisions contained in
subsection (1), the financial statements of a group shall
comply with —
(a) any regulations made under this Act which specifies
the form and content of group financial statements;
and
(b) any requirements which apply to the group financial
statements under any other law.
(3) Where a subsidiary became a subsidiary of a company
during the accounting period to which the group financial
statements relate, the consolidated profit and loss statement
or the consolidated income and expenditure statement for
the group, shall relate to the profit or loss of the subsidiary
for each part of that accounting period during which it was a
subsidiary, and not to any other part of that accounting period.
122 Companies Act, No. 07 of 2007
(4) Subject to the provisions of subsection (3), where the
balance sheet date of a subsidiary of a company is not the
same as that of the company, the group financial statements
shall —
(a) if the balance sheet date of the subsidiary does not
precede that of the company by more than three
months, incorporate the financial statements of the
subsidiary for the accounting period ending on that
date, or incorporate interim financial statements of
the subsidiary completed in respect of a period that
is the same as the accounting period of the company;
or
(b) in any other case, incorporate interim financial
statements of the subsidiary completed in respect of
a period that is the same as the accounting period of
the company.
(5) Subject to the provisions of subsections (3) and (6),
group financial statements shall incorporate the financial
statements prepared in accordance with section 151, of every
subsidiary of the company.
(6) Subject to the provisions of subsection (7), group
financial statements prepared by a company need not
incorporate the financial statements of a subsidiary of that
company, where the board of the company is of the opinion
that—
(a) it is impracticable to do so or would be of no real
value to the shareholders of the company in view of
the insignificant amounts involved, or would involve
expense or delay out of proportion to the value to
shareholders;
(b) the result would be misleading or harmful to the
business of the company or any of its subsidiaries;
or
Companies Act, No. 07 of 2007 123
(c) the business of the company and that of the
subsidiary are so different, that they cannot
reasonably be treated as a single undertaking.
(7) Group financial statement prepared by a company
may not omit the financial statements of a subsidiary of that
company under subsection (6), without the prior approval in
writing of the Registrar, which may be given on such terms or
conditions as the Registrar thinks fit.
AUDITORS
154. (1) A company shall at each annual general meeting, Appointment of
appoint an auditor to— auditor.
(a) hold office from the conclusion of that meeting until
the conclusion of the next annual general meeting;
and
(b) audit the financial statements of the company and if
the company is required to complete group financial
statements, those group financial statement for the
accounting period next after the balance sheet date
for which financial statements were audited.
(2) The board of a company may fill any casual vacancy
in the office of auditor, but while the vacancy remains the
surviving or continuing auditor, if any, may continue to act
as auditor.
(3) Where —
(a) at an annual general meeting of a company no
auditor is appointed or re-appointed and no
resolution has been passed under subsection (2); or
(b) a casual vacancy in the office of auditor is not filled
within one month of the occurring of such vacancy,
the Registrar may appoint an auditor.
124 Companies Act, No. 07 of 2007
(4) A company shall within five working days of the power
becoming exercisable, give written notice to the Registrar of
the fact that the Registrar is entitled to appoint an auditor
under subsection (3).
(5) Where a company fails to comply with the
requirements of subsection (4)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding two
hundred thousand rupees; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding one hundred thousand
rupees.
Auditor’s fees 155. The fees and expenses of an auditor of a company
and expenses. shall be fixed —
(a) if the auditor is appointed at a meeting of the
company, by the company at such meeting or in
such manner as the company determines at the
meeting;
(b) if the auditor is appointed by the directors, by the
directors; or
(c) if the auditor is appointed by the Registrar, by the
Registrar.
Appointment of 156. (1) A partnership may be appointed by the firm’s
partnership as name to be the auditor of a company, if the partners are persons
auditor. who are qualified to be appointed as auditors of the company.
(2) The appointment of a partnership by the firm’s name
to be the auditor of a company is deemed, subject to the
provisions of section 157, to be the appointment of all the
persons who are partners in the firm, from time to time.
Companies Act, No. 07 of 2007 125
157. (1) A person shall not be appointed or act as auditor Qualifications of
auditors.
of a company, unless that person—
(a) is a member of the Institute of Chartered Accountants
of Sri Lanka; or
(b) is a registered auditor.
(2) Notwithstanding the provisions of subsection (1), a
person shall not be appointed or act as auditor of a company
other than a private company or a company limited by
guarantee, unless that person is a member of the Institute of
Chartered Accountants of Sri Lanka.
(3) None of the following persons may be appointed or
act as an auditor of a company :—
(a) a director or employee of the company;
(b) a person who is a partner or in the employment of a
director or employee of the company;
(c) a liquidator or an administrator or a person who is a
receiver in respect of the property of the company;
(d) a body corporate ;
(e) a person who, by virtue of paragraph (a), (b) or (c),
may not be appointed or act as auditor of a related
company.
(4) A person who holds any office referred to in paragraph
(a), (b) or (c) of subsection (3), may not be appointed or act as
an auditor of a company for a period of two years after such
person has ceased to hold that office.
126 Companies Act, No. 07 of 2007
(5) Regulations may be made providing for —
(a) the qualifications necessary to become a registered
auditor;
(b) the procedure for the registration of auditors;
(c) the fees payable for such registration.
Automatic re- 158. (1) An auditor of a company, other than an auditor
appointment. appointed under subsection (1) of section 159, shall be
deemed to be re-appointed at an annual general meeting of
the company, unless—
(a) he is not qualified for appointment;
(b) the company passes a resolution at the meeting
appointing another person to replace him as auditor;
or
(c) the auditor has given notice to the company that he
does not wish to be re-appointed.
(2) An auditor is not automatically re-appointed if the
person who it is proposed to replace him, dies or is or becomes
incapable of or disqualified from being so appointment.
Appointment of 159. (1) The first auditor of a company may be appointed
first auditor.
by the board of the company before the first annual general
meeting, and if so appointed, will hold office until the
conclusion of that meeting.
(2) If the board does not appoint an auditor under
subsection (1), the company shall appoint the first auditor at
a meeting of the company.
Companies Act, No. 07 of 2007 127
(3) Neither the board nor the company shall be required
to appoint an auditor in accordance with the provisions of
this section, if a unanimous resolution is passed by the
shareholders that no auditor be appointed. Such a resolution
ceases to have effect at the commencement of the first annual
general meeting.
160. (1) A company shall not appoint a new auditor in Replacement
place of an auditor who is qualified for re-appointment, of auditor.
unless—
(a) at least twenty working days’ written notice of a
proposal to do so has been given to the auditor; and
(b) the auditor has been given a reasonable opportunity
to make representations to the shareholders on the
appointment of another person, either in writing or
by the auditor or his representative speaking at a
shareholders’ meeting (whichever the auditor may
choose).
(2) An auditor is entitled to be paid reasonable fees and
expenses by the company for making representations to
shareholders under this section.
161. (1) If an auditor resigns or ceases for any other Statement by
reason to hold office, he shall deliver to the company a person ceasing
to hold office as
statement of any circumstances connected with his ceasing auditor.
to hold office which he considers should be brought to the
attention of the shareholders or creditors of the company, or
if he considers that there are no such circumstances, a
statement that there are none.
(2) The statement required under subsection (1) shall be
delivered by the auditor —
(a) if he resigns, with the notice of resignation;
128 Companies Act, No. 07 of 2007
(b) if he gives notice that he does not wish to be re-
appointed, with that notice;
(c) if he ceases to hold office for any other reason, within
ten working days of ceasing to hold office.
(3) If the auditor has stated circumstances which he
believes ought to be brought to the attention of the
shareholders or creditors, the company shall —
(a) send a copy of the statement to each shareholder;
and
(b) deliver a copy of the statement to the Registrar:
Provided that the company may with permission of court
(obtained by an order, the costs of which is to be paid by the
auditor) refrain from sending copies to shareholders or
reading the representations at the meeting so convened.
(4) Where an auditor fails to comply with subsection (1),
he shall be guilty of an offence and be liable on conviction to
a fine not exceeding two hundred thousand rupees.
(5) If a company fails to comply with subsection (3)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding two
hundred thousand rupees; and
(b) every officer of the company who is in default shall
be guilty of an offence, and be liable on conviction
to a fine not exceeding one hundred thousand
rupees.
Auditor to avoid 162. An auditor of a company shall in carrying out the
conflict of duties of an auditor under this Act, ensure that his judgment
interest.
is not impaired by reason of any relationship with or interest
in the company or any of its subsidiaries.
Companies Act, No. 07 of 2007 129
163. (1) The auditor of a company shall make a report Auditor’s report.
to the shareholders on the financial statements audited by
him.
(2) The auditor’s report shall state—
(a) the basis of opinion;
(b) the scope and limitations of the audit;
(c) whether the auditor has obtained all information
and explanations that was required;
(d) whether in the auditor’s opinion as far as appears
from an examination of them, proper accounting
records have been kept by the company;
(e) whether in the auditor’s opinion the financial
statements and any group financial statements give
a true and fair view of the matters to which they
relate and if they do not, the respects in which they
fail to do so; and
(f) whether in the auditor’s opinion the financial
statements and any group financial statements
comply with the requirements of section 151 or
section 153, as the case may be, and if they do not,
the respects in which they fail to do so.
(3) The auditor of a company shall at the same time as he
delivers his report to the company, deliver to the company a
statement of—
(a) the existence of any relationship (other than that of
auditor) which the auditor has with, or any interests
which the auditor has in, the company or any of its
subsidiaries; and
130 Companies Act, No. 07 of 2007
(b) the amounts payable by the company to the person
or firm holding office as auditor of the company as
audit fees and expenses and as a separate item, any
fees and expenses payable by the company for other
services provided by that person or firm.
Auditor’s 164. (1) The board of a company shall ensure that an
access to auditor of a company has access at all times to the accounting
information. records and other documents of the company.
(2) An auditor of a company is entitled to require from a
director or employee of the company, such information and
explanations as he thinks necessary for the performance of
his duties as auditor.
(3) Where the board of a company fails to comply with
subsection (1), every director of the company who is in default
shall be guilty of an offence and be liable on conviction to a
fine not exceeding one hundred thousand rupees.
(4) A director or employee who fails to comply with
subsection (2) or provides false information, shall be guilty
of an offence and be liable on conviction to a fine not
exceeding one hundred thousand rupees.
(5) It is a defence to an employee charged with an offence
under subsection (4), if he proves that—
(a) he did not have the information required in his
possession or under his control; or
(b) by reason of the position occupied by him or the
duties assigned to him, he was unable to give the
explanations required.
Auditor’s 165. (1) The board of a company shall ensure that an
attendance at auditor of the company—
shareholders’
meeting.
(a) is permitted to attend every meeting of shareholders
of the company;
Companies Act, No. 07 of 2007 131
(b) receives the notices and communications that a
shareholder is entitled to receive relating to a
meeting of shareholders; and
(c) may be heard at a meeting of shareholders which he
attends on any part of the business of the meeting
which concerns him as auditor.
(2) Where the board of a company fails to comply with
subsection (1), every director of the company who is in default
shall be guilty of an offence and be liable on conviction to a
fine not exceeding one hundred thousand rupees.
ANNUAL REPORT TO SHARE HOLDERS
166. (1) The board of every company shall within six Obligation to
months after the balance sheet date of the company, prepare prepare annual
an annual report on the affairs of the company during the report.
accounting period ending on that date.
(2) Where the board of a company fails to comply with
subsection (1), every director of the company who is in default
shall be guilty of an offence and be liable on conviction to a
fine not exceeding one hundred thousand rupees.
167. (1) The board of a company shall cause a copy of Sending of
the annual general meeting report to be sent to every annual report to
shareholders.
shareholder of the company not less than fifteen working
days before the date fixed for holding the annual general
meeting of shareholders :
Provided that a company may in the first instance, send
every shareholder the financial statement in the summarised
form as may be prescribed, in consultation with Institute of
Chartered Accountants of Sri Lanka, together with the annual
report:
Provided further the company shall inform each
shareholder that he is entitled to receive full financial
statement if he so requires, within a stipulated period of time.
132 Companies Act, No. 07 of 2007
(2) Where the board of a company fails to comply with
subsection (1), every director of the company shall be guilty
of an offence and be liable on conviction to a fine not
exceeding one hundred thousand rupees.
Contents of 168. (1) The annual report of the board shall be in
annual report. writing and be dated, and subject to subsection (2), shall—
(a) describe so far as the board believes is material for
the shareholders to have an appreciation of the state
of the company’s affairs and will not be harmful to
the business of the company or of any of its
subsidiaries, any change during the accounting
period in—
(i) the nature of the business of the company or
any of its subsidiaries ; or
(ii) the classes of business in which the company
has an interest, whether as a shareholder of
another company or otherwise ;
(b) include financial statements for the accounting
period completed and signed in accordance with
section 151, and any group financial statements for
the accounting period completed and signed in
accordance with section 152 ;
(c) where an auditor has been appointed by the
company, include that auditor’s report on the
financial statements and any group financial
statements ;
(d) describe any change in accounting policies made
during the accounting period ;
(e) state particulars of entries in the interests register
made during the accounting period ;
Companies Act, No. 07 of 2007 133
(f) state the remuneration and other benefits of directors
during the accounting period ;
(g) state the total amount of donations made by the
company during the accounting period ;
(h) state the names of the persons holding office as
directors of the company as at the end of the
accounting period and the names of any persons
who ceased to hold office as directors of the company
during the accounting period ;
(i) state the amounts payable by the company to the
person or firm holding office as auditor of the
company as audit fees and as a separate item, fees
payable by the company for other services provided
by that person or firm ;
(j) state the particulars of any relationship (other than
that of auditor) which the auditor has with or any
interests which the auditor has in, the company or
any of its subsidaries ; and
(k) be signed on behalf of the board by-
(i) two directors of the company or if the
company has only one director, by that
director ; and
(ii) the secretary of the company.
(2) A company that is required to include group financial
statements in its annual report shall include in relation to its
subsidiaries, the information specified in paragraphs (b) to
(j) of subsection (1).
(3) The annual report of a company need not comply
with of paragraph (a) and paragraphs (d) to (j) of subsection
(1), if all shareholders agree in writing that it need not do so.
Any such agreement shall be noted in the annual report.
134 Companies Act, No. 07 of 2007
Failure to 169. Subject to the provisions contained in the articles
send reports
of a company, the failure to send an annual report, notice, or
&.
other document to a shareholder in accordance with any
requirement under this Act, shall not affect the validity of
proceedings at a meeting of the shareholders of the company,
if the failure to do so was accidental.
REGISTRATION OF FINANCIAL STATEMENTS
Registration 170. (1) Every company that is not a private company,
of financial shall ensure that within twenty working days after the financial
statements.
statements of the company and any group financial statements
are required to be signed, copies of those statements together
with a copy of the auditor’s report on those statements are
delivered to the Registrar for registration.
(2) The Registrar may by notice in writing require a private
company to deliver to him within twenty working days, the
financial statements of the company and any group financial
statements in respect of such accounting periods as may be
specified in the notice, together with copies of any auditor’s
report on those statements.
(3) The copies delivered to the Registrar under this section
shall be certified to be correct copies by two directors of the
company or where the company has only one director, by
that director.
INTERPRETATION
.
Balance sheet 171. (1) Subject to the provisions of subsections (2)
date. and (3), a company shall have a balance sheet date in each
calendar year.
(2) A company shall not be required to have a balance
sheet date in the calendar year in which it is incorporated, if
its first balance sheet date is in the following calendar year
and is not later than fifteen months after the date of its
formation or incorporation.
Companies Act, No. 07 of 2007 135
(3) Where a company changes its balance sheet date, it
shall be required to have a balance sheet date in a calendar
year if—
(a) the period between any two balance sheet dates does
not exceed fifteen months ; and
(b) the Registrar approves the change of balance sheet
date before it is made.
(4) The Registrar may approve a change of balance sheet
date for the purposes of subsection (3), with or without
conditions.
(5) Where a company changes its balance sheet date, the
period between any two balance sheet dates shall not exceed
fifteen months.
(6) The adoption or change of a balance sheet date shall
have effect upon receipt of a notice by the Registrar to that
effect.
(7) The board of a company shall ensure that, unless in
the board’s opinion there are good reasons against it, the
balance sheet date of each subsidiary of the company is the
same as the balance sheet date of the company.
(8) Where the balance sheet date of a subsidiary of a
company is not the same as that of the company, the balance
sheet date of the subsidiary for the purposes of any particular
group financial statements, shall be that preceding the balance
sheet date of the company.
INVESTIGATION OF COMPANY’SAFFAIRS
172. (1) The Registrar may appoint one or more Investigation of
competent inspectors to investigate the affairs of a company company’s
and to report on them in such manner as the Registrar affairs on
application of
directs—
shareholders.
(a) on the application of the company, approved by
special resolution ;
136 Companies Act, No. 07 of 2007
(b) in the case of a company which has issued shares,
on the application either of not less than fifty
shareholders or of shareholders holding not less than
one-fifth of the shares issued ;
(c) in the case of a company which has not issued shares,
on the application of not less than one-fifth in
number of the persons on the company’s register of
members.
(2) An application under subsection (1) shall be supported
by such evidence as the Registrar may require, for the purpose
of showing that the applicant or applicants have good reason
for requiring the investigation.
(3) The Registrar may before appointing such inspector
and from time to time as he considers it necessary, require the
applicant or applicants to give security for payment of the
costs of the investigation.
(4) Where a person fails to furnish any amount by way of
security as and when required so to do under subsection (3),
the Registrar may in his absolute discretion direct that any
security already paid shall be forfeited, and terminate the
investigation.
Investigation 173. (1) Without prejudice to the provisions of section
of 172, the Registrar—
company’s
affairs in
other cases. (a) shall appoint one or more competent inspectors to
investigate the affairs of a company and to report
thereon in such manner as the Registrar directs,
where the court by order declares that the company’s
affairs ought to be investigated by a person
appointed by the Registrar ;
(b) may appoint one or more competent inspectors to
investigate the affairs of a company and to report
Companies Act, No. 07 of 2007 137
thereon to the Registrar, if it appears to him that
there are circumstances suggesting that—
(i) its business is being conducted with intent to
defraud its creditors or the creditors of any
other person, or otherwise for a fraudulent or
unlawful purpose, or in a manner which is
unfairly prejudicial to any part of its
shareholders ;
(ii) it was formed for any fraudulent or unlawful
purpose ;
(iii) persons concerned with its formation or the
management of its affairs have in connection
therewith been guilty of fraud, misfeasance
or other misconduct towards it or towards its
shareholders ;
(iv) its shareholders have not been given all the
information with respect to its affairs which
they might reasonably expect ; or
(v) it is necessary to do so for any of the purposes
of this Act.
(2) An inspector may be appointed under this section on
the condition that any report that he makes is not for
publication, and in any such case subsection (3) of section
176 shall not apply to such reports.
174. Where an inspector appointed under section 172 Power of
or section 173 to investigate the affairs of a company, considers inspectors to
carry out
it necessary for the purposes of this investigation to investigate investigation
also the affairs of any other body corporate which is or has at into affairs of
any relevant time been the company’s subsidiary or holding related
company or a subsidiary of its holding company, he shall companies.
with the prior written approval of the Registrar have power to
do so, and shall report on the affairs of the other body corporate
138 Companies Act, No. 07 of 2007
so far as he thinks the results of his investigation of its affairs
are relevant to the investigation of the affairs of the first-
mentioned company.
Production of 175. (1) Where an inspector is appointed under section
documents and 172 or section 173, it shall be the duty of all directors, officers
evidence at
and agents of the company and of all directors, officers and
investigation.
agents of any other body corporate whose affairs are
investigated by virtue of section 174 to —
(a) produce to the inspector all books and documents
of or relating to the company or, as the case may be,
the other body corporate, which are in their custody
or power ;
(b) attend before the inspector when required to do so ;
and
(c) give to the inspector all assistance in connection
with the investigation which they are reasonably
able to give.
(2) An inspector may examine on oath or affirmation the
officers and agents of the company or other body corporate
in relation to its business, and may administer an oath to or
take the affirmation of any such person.
(3) Where any officer or agent of the company or other
body corporate refuses to produce to the inspector any book
or document which it is his duty under this section to produce,
or refuses to answer any question which is put to him by the
inspector with respect to the affairs of the company or other
body corporate, as the case may be, the inspector may certify
the refusal in writing to the court, and the court may inquire
into the case and after hearing any witnesses who may be
produced against or on behalf of the alleged offender and
after hearing any statement which may be offered in defence,
punish the offender as if he had been guilty of contempt of
court.
Companies Act, No. 07 of 2007 139
(4) Where an inspector thinks it necessary for the purpose
of his investigation that a person whom he has no power to
examine on oath or affirmation should be so examined, he
may apply to the court and the court may if it thinks fit, order
that person to attend and be examined on oath or affirmation
before it on any matter relevant to the investigation. On any
such examination—
(a) the inspector may appear either personally or be
represented by an attorney-at-law ;
(b) the court may put such questions to the persons
examined as the court thinks fit ;
(c) the person examined shall answer all such questions
as the court may put or allow to be put to him ;
(d) the person examined may at his own cost be
represented by an attorney-at-law who may put
questions to him for the purpose of enabling him to
explain or qualify any answers given by him ;
(e) the examination shall be recorded in writing and
the person examined shall sign the record ; and
(f) subject to any directions by the court, the record of
an examination under this section shall be
admissible in evidence in any proceedings under
this Act.
(5) Notwithstansing anything contained in paragraph (d)
of subsection (4), the court may allow the person examined
such costs as it thinks fit. Any costs so allowed shall be paid
as part of the expenses of the investigation.
(6) In this section, any reference to officers or to agents
shall include past as well as present officers or agents, as the
case may be, and the expression “agents” in relation to a
company or other body corporate, shall include its bankers
140 Companies Act, No. 07 of 2007
and attorneys-at-law and any persons employed by it as
auditors, whether those persons are or are not officers of the
company or other body corporate.
Inspector’s 176. (1) An inspector—
report.
(a) may and if so directed by the Registrar shall, make
interim reports to the Registrar in the course of an
investigation ;
(b) shall on the conclusion of an investigation, make a
final report in writing to the Registrar.
(2) Where an inspector was appointed under section 173
in pursuance of an order of court, the Registrar shall furnish a
copy of any report made by such inspector to the court.
(3) The Registrar may if he thinks fit—
(a) forward a copy of any report made by the inspector
to the registered office of the company ;
(b) furnish a copy of any report on request and on
payment of the prescribed fee to—
(i) any shareholder of the company or of any
other body corporate dealt with in the report
by virtue of section 174 ;
(ii) any person whose conduct is referred to in
the report ;
(iii) the auditors of the company or body
corporate;
(iv) the applicants for the investigation ;
(v) any other person whose financial interests
appear to the Registrar to be affected by the
Companies Act, No. 07 of 2007 141
matters dealt with in the report, whether as a
creditor of the company or body corporate or
otherwise ;
(c) cause the report to be printed and published.
177. (1) Where from any report made under section 176 Proceedings on
it appears to the Registrar that any person has in relation to inspector’s
report.
the company or to any other body corporate whose affairs
have been investigated under section 174, been guilty of any
offence for which he is criminally liable, the Registrar shall,
if it appears to him that the case is one in which the prosecution
ought to be undertaken by the Attorney-General, refer the
matter to the Attorney-General.
(2) Where in any matter referred to the Attorney-General
under subsection (1) the Attorney-General considers that the
case is one in which a prosecution ought to be instituted, he
shall institute proceedings accordingly and it shall be the
duty of all officers and agents of the company or other body
corporate, as the case may be, (other than the defendant in
the proceedings) to give him all assistance in connection
with the prosecution which they are reasonably able to give.
The provisions of subsection (6) of section 175 shall apply
for the purposes of this subsection as they apply for the
purposes of that section.
(3) Where in the case of any body corporate a liquidator
of which may be appointed under this Act, it appears to the
Registrar from any report made under the provisions of section
176 that it is expedient so to do by reason of any such
circumstances as are referred to in sub-paragraph (i) or sub-
paragraph (ii) of paragraph (b) of subsection (1) of section
173, the Registrar may apply to the court to appoint a
liquidator.
(4) Where from any report made under section 176 it
appears to the Registrar that proceedings ought in the public
interest to be brought by any body corporate, he may bring
such proceedings in the name and on behalf of the body
corporate.
142 Companies Act, No. 07 of 2007
(5) The Registrar shall indemnify the body corporate
against any costs or expenses incurred by it in or in connection
with any proceedings brought under subsection (4).
Expenses of 178. (1) The expenses of and incidental to an
investigation
investigation by an inspector appointed by the Registrar
of
company’s under section 172 or section 173 shall be met in the first
affairs. instance by the Registrar.
(2) The following person shall, to the extent specified, be
liable to repay the Registrar—
(a) any person who is convicted on a prosecution
instituted as a result of the investigation by the
Attorney-General, or who is ordered to pay the whole
or any part of the costs of proceedings brought under
subsection (4) of section 177, may in the same
proceedings be ordered to pay the said expenses to
such extent as may be specified in the order ;
(b) any body corporate in whose name proceedings are
brought under subsection (4) of section 177 shall
be liable to the amount or value of any sum or
property recovered by it as a result of those
proceedings and the amount for which the body
corporate is liable shall be a first charge on the sum
or property recovered ; and
(c) unless as a result of the investigation a prosecution
is instituted by the Attorney-General—
(i) any body corporate dealt with by the report
where the inspector was appointed otherwise
than of the Registrar’s own motion, shall be
liable except so far as the Registrar otherwise
directs ; and
(ii) any person making an application for the
investigation where the inspector was
Companies Act, No. 07 of 2007 143
appointed under section 172, shall be liable
to such extent, if any, as the Registrar may
direct.
(3) The report of an inspector appointed otherwise than
of the Registrar’s own motion may if he thinks fit, and shall if
the Registrar so directs, include a recommendation as to the
directions (if any) which the inspector thinks appropriate to
be given under the provisions of paragraph (c) of subsection
(2) .
(4) For the purposes of this section, any costs or expenses
incurred by the Registrar in or in connection with proceedings
brought under subsection (4) of section 177 (including
expenses incurred under subsection (5) of that section) shall
be treated as expenses of the investigation giving rise to the
proceedings.
(5) Any liability to repay the Registrar imposed by the
provisions of paragraphs (a) and (b) of subsection (2) shall,
subject to satisfaction of the Registrar’s right to repayment,
be a liability also to indemnify all persons against liability
under the provisions of paragraph (c) of subsection (2), and
any such liability imposed by the provisions of paragraph
(a) shall, subject to as aforesaid, be a liability also to
indemnify all persons against liability under the provisions
of paragraph (b).
(6) Any person liable under the provisions of paragraph
(a) or paragraph (b) or sub-paragraph (i) or sub-paragraph (ii)
of paragraph (c) of subsection (2), shall be entitled to
contribution from any other person liable under the same
paragraph or sub-paragraph, as the case may be, according to
the amount of their respective liabilities under it.
(7) The expenses to be met by the Registrar under this
section shall so far as not recovered by him under it, be paid
out of moneys provided by Parliament for the purpose.
144 Companies Act, No. 07 of 2007
Inspector’s 179. A copy of any report of an inspector appointed
report to be under section 172 or section 173 shall be admissible in any
evidence.
legal proceedings as evidence of the opinion of the inspector
in relation to any matter contained in the report.
Appointment 180. (1) Where it appears to the Registrar that there is
and powers of good reason so to do, he may appoint one or more inspectors
inspectors to
to investigate and report on the ownership of the shares of the
investigate
ownership of company and otherwise with respect to the company, for the
company. purpose of determining the true persons who are or have
been financially interested in the success or failure (real or
apparent) of the company or able to control or materially to
influence its policy.
(2) The appointment of an inspector under this section
may define the scope of his investigation whether as respects
the matters or the period to which it is to extend or otherwise,
and in particular may limit the investigation to matters
connected with particular shares or debentures.
(3) Subject to the terms of appointment of an inspector,
his powers shall extend to the investigation of any
circumstances suggesting the existence of an arrangement or
understanding which, though not legally binding, is or was
observed or likely to be observed in practice and which is
relevant to the purposes of his investigation.
(4) Where an application for an investigation under the
provisions of this section with respect to particular shares or
debentures of a company is made to the Registrar by
shareholders of the company, and the number of applicants
or the amount of the shares held by them is not less than that
which is required for an application for the appointment of
an inspector under sub-paragraph (b) or (c) of subsection (1)
of section 172, the Registrar shall subject to the provisions
of subsections (5) and (6) appoint an inspector to conduct
the investigation. Where an inspector is appinted his terms of
appointment shall exclude any matter which the Registrar is
satisfied it is unreasonable to investigate.
Companies Act, No. 07 of 2007 145
(5) The Registrar shall not appoint an inspector under
subsection (4) if he considers that the application is
vexatious.
(6) Where on an application under subsection (4) it
appears to the Registrar that the powers conferred by section
181 are sufficient for the purpose of investigating the matters
which it is sought to have investigated, he may instead
conduct the investigation under that section.
(7) For the purposes of an investigation under the
provisions of this section, the provisions of sections 174,
175 and 176 shall apply with the necessary modifications of
references to the affairs of the company or to those of any
other body corporate, subject to the provisions of subsections
(8) and (9).
(8) Sections 174, 175 and 176 shall apply in relation to
all persons who are or have been or whom the inspector has
reasonable cause to believe to be or have been, financially
interested in the success or failure or the apparent success or
failure of the company or any other body corporate whose
ownership is investigated with that of the company, or able to
control or materially to influence its policy including persons
concerned only on behalf of others, as they apply in relation
to the officers and agents of the company or of the other body
corporate, as the case may be.
(9) Where the Registrar considers that there is good reason
not to divulge any part of a report made under this section, he
may disclose the report under section 176 with the omission
of that part.
(10) The expenses of an investigation made under this
section shall be met by the Registrar out of moneys provided
by Parliament for the purpose.
146 Companies Act, No. 07 of 2007
Power to 181. (1) Where it appears to the Registrar that there is
require
good reason to investigate the ownership of any shares in or
information
as to persons debentures of a company and that it is unnecessary to appoint
interested in an inspector for the purpose, the Registrar may require any
shares or
person whom he has reasonable cause to believe—
debentures.
(a) to be or to have been interested in those shares or
debentures; or
(b) to act or to have acted in relation to those shares or
debentures as the attorney or agent of any person
interested in them,
to give the Registrar any information which he has or can
reasonably be expected to obtain, as to the present and past
interests in those shares or debentures and the names and
addresses of the persons interested, and of any person who
act or have acted on their behalf in relation to the shares or
debentures.
(2) For the purposes of this section a person shall be
deemed to have an interest in shares or debentures, if he has
any right to acquire or dispose of them or of any interest in
them or to vote in respect of them, or if his consent is necessary
for the exercise of any rights of other persons interested in
them, or if other persons interested in them can be required
or are accustomed to exercise their rights in accordance with
his instructions.
(3) Any person who fails to give information required of
him under subsection (1), or who in giving any such
information makes any statement which he knows to be false
in a material particular, or recklessly makes any statement
which is false in a material particular, shall be guilty of an
offence and be liable on conviction to a fine not exceeding
one million rupees or to an imprisonment for a term not
exceeding five years or to both such fine and imprisonment.
Companies Act, No. 07 of 2007 147
182. (1) Where in connection with an investigation Power to impose
under the provisions of section 180 or section 181, it appears restrictions on
shares or
to the Registrar that there is difficulty in finding out the debentures.
relevant facts about any shares (whether issued or to be issued),
and that the difficulty is due wholly or mainly to the
unwillingness of the persons concerned or any of them to
assist the investigation as required by the Registrar, the
Registrar may by order direct that the shares shall until further
order, be subject to the restrictions imposed by this section.
(2) So long as any shares are directed to be subject to the
restrictions imposed by this section —
(a) any transfer of those shares or in the case of unissued
shares any transfer of the right to be issued with
them and any issued of them, shall be void;
(b) no voting rights shall be exercisable in respect of
those shares;
(c) no further shares shall be issued in right of those
shares or pursuant to any offer made to the holder of
them;
(d) except in a liquidation, no payment shall be made
on any sums due from the company on those shares,
whether in respect of capital or otherwise.
(3) Where the Registrar makes an order directing that
shares shall be subject to the restriction set out in subsection
(2), or refuses to make an order directing that shares shall
cease to be subject to those restrictions, any person aggrieved
by the order may appeal to the court against the order under
section 472. The court may, if it thinks fit, direct that the
shares shall cease to be subject to those restrictions.
(4) Any order made by the Registrar or the court directing
that shares shall cease to be subject to the restrictions set out
in subsection (2) which is expressed to be made with a view
148 Companies Act, No. 07 of 2007
to permitting a transfer of those shares, may continue the
restrictions specified in paragraphs (c) and (d) of subsection
(2) either in whole or in part, so far as they relate to any right
acquired or offer made before the transfer.
(5) Any person who—
(a) exercises or purports to exercise any right to dispose
of any shares which, to his knowledge, are for the
time being subject to the restrictions specified in
subsection (2) or of any right to be issued with any
such shares;
(b) votes in respect of any such shares whether as holder
or proxy, or appoints a proxy to vote in respect of
them; or
(c) being the holder of any such shares fails to notify of
the restrictions to any person whom he does not
know to be aware of them but does know to be
entitled, apart from the restrictions to vote in respect
of those shares, whether as holder or proxy,
shall be guilty of an offence and be liable on conviction to a
fine not exceeding five hundred thousand rupees or to a term
of imprisonment of a term not exceeding two years or to both
such fine and imprisonment.
(6) Where shares in any company are issued in
contravention of the restrictions specified in subsection (2)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding two
hundred thousand rupees; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding one hundred thousand
rupees.
Companies Act, No. 07 of 2007 149
(7) A prosecution shall not be instituted under this section
except by or with the consent of the Registrar.
(8) The provisions of this section shall apply in relation
to debentures as it applies in relation to shares.
183. The Registrar shall have the power to verify the assets Registrar’s
and liabilities of any company. powers to verify
assets and
liabilities.
POWERS OF MANAGEMENT
184. Subject to the provisions contained in the articles Management of
of a company— company.
(a) the business and affairs of a company shall be
managed by or under the direction or supervision of
the board of the company;
(b) the board of a company shall have all the powers
necessary for managing and for directing and
supervising the management of, the business and
affairs of the company.
185. (1) A company shall not enter into any major Major
transaction, unless such transaction is— transactions.
(a) approved by special resolution;
(b) contingent on approval by special resolution;
(c) consented to in writing by all the shareholders of
the company; or
(d) a transaction which the company is expressly
authorised to enter into by a provision in its articles,
which was included in it at the time the company
was incorporated.
150 Companies Act, No. 07 of 2007
(2) In this section the reference to—
“assets” includes property of any kind, whether
corporal or incorporeal;
“major transaction”, means—
(a) the acquisition of or an agreement to acquire
whether contingent or not, assets of a value
which is greater than half the value of the assets
of the company before the acquisition;
(b) the disposition of an agreement to dispose of,
whether contingent or not, the whole or more
than half by value of the assets of the company;
(c) a transaction which has or is likely to have the
effect of the company acquiring rights or
interests or incurring obligations or liabilities
of a value which is greater than half the value
of the assets before the acquisition; or
(d) a transaction or series of related transactions
which have the purpose or effect of substantially
altering the nature of the business carried on by
the company.
(3) Nothing in this section shall apply to—
(a) a transaction under which a company gives or agrees
to give a floating charge over all or any part of the
property of the company;
(b) a transaction entered into by a receiver appointed
pursuant to an instrument creating a floating charge
over all or any part of the property of a company;
(c) a transaction entered into by an administrator or
liquidator of a company.
Companies Act, No. 07 of 2007 151
186. (1) Subject to any restrictions contained in the Delegation of
provisions of the articles of the company, the board of a powers.
company may delegate to a committee of directors, a director
or employee of the company or any other person, any one or
more of its powers other than its powers under any of the
sections of this Act specified in the Sixth Schedule.
(2) A board that delegates a power under subsection (1)
shall be responsible for the exercise of the power by the
delegate as if the power had been exercised by the board,
where—
(a) the board had reason to believe before the exercise
of the power, that the delegate would not exercise
the power in conformity with the duties imposed on
directors of the company by this Act and the
company’s articles; or
(b) the board has failed to monitor by means of
reasonable methods properly used, the exercise of
the power by the delegate.
DIRECTORS’ DUTIES
187. (1) A person exercising powers or performing duties Duty of directors
as a director of a company shall act in good faith, and subject to act in good
to subsection (2), in what that person believes to be in the faith and in the
interests of
interests of the company. company.
(2) A director of a company which is a wholly owned
subsidiary of another company may, if expressly permitted
to do so by the company’s articles, act in a manner which he
believes is in the interest of that other company even though
it may not be in the interests of the company of which he is a
director.
188. A director of a company shall not act or agree to the Directors to
company acting, in a manner that contravenes any provisions comply with Act
and company’s
of this Act, or the provisions contained in the articles of the
articles.
company.
152 Companies Act, No. 07 of 2007
Directors 189. A person exercising powers or performing duties
standard of care. as a director of a company—
(a) shall not act in a manner which is reckless or grossly
negligent; and
(b) shall exercise the degree of skill and care that may
reasonably be expected of a person of his knowledge
and experience.
Use of 190. (1) Subject to the provisions of subsection (2), a
information and director of a company may rely on reports, statements, and
advice. financial data and other information prepared or supplied,
and on professional or expert advice given by any of the
following persons :—
(a) an employee of the company;
(b) a professional adviser or expert in relation to matters
which the director believes to be within the person’s
professional or expert competence;
(c) any other director or committee of directors in which
the director did not serve, in relation to matters
within the directors or committee’s designated
authority.
(2) Provisions of subsection (1) shall apply to a director,
if, and only if, the director—
(a) acts in good faith;
(b) makes proper inquiry where the need for inquiry is
indicated by the circumstances; and
(c) has no knowledge that such reliance is unwarranted.
(3) The provisions contained in this Act are in addition
to and not in derogation of any provisions contained in any
other law relating to the duty or liability of directors or officers
of a company.
Companies Act, No. 07 of 2007 153
TRANSACTIONS IN WHICH ADIRECTOR IS INTERESTED
191. (1) Subject to the provisions of subsection (2), for Meaning of
the purposes of this Act a director of a company is interested “interested”.
in a transaction to which the company is a party if, and only
if, the director—
(a) is a party to or will or may derive a material financial
benefit from the transaction.;
(b) has a material financial interest in another party to,
the transaction;
(c) is a director, officer or trustee of another party to or
person who will or may derive a material financial
benefit from the transaction, not being a party or
person that is—
(i) the company’s holding company being a
holding company of which the company is a
wholly-owned subsidiary;
(ii) a wholly owned subsidiary of the company;
or
(iii) a wholly-owned subsidiary of a holding
company of which the company is also a
wholly-owned subsidiary;
(d) is the parent, child, or spouse of another party to or
person who will or may derive a material financial
benefit from the transaction; or
(e) is otherwise directly or indirectly materially
interested in the transaction.
(2) A director of a company is not deemed to be interested
in a transaction to which the company is a party, if the
transaction comprises only of the giving by the company of
154 Companies Act, No. 07 of 2007
security to a third party which has no connection with the
director at the request of the third party, in respect of a debt or
obligation of the company for which the director or another
person has personally assumed responsibility in whole or in
part under a guarantee, indemnity or by the deposit of a
security.
Disclosure of 192. (1) A director of a company shall, forthwith after
interest. becoming aware of the fact that he is interested in a transaction
or proposed transaction with the company, cause to be entered
in the interests register and if the company has more than one
director, disclosed to the board of the company, the nature
and extent of that interest.
(2) For the purposes of subsection (1), a general notice
entered in the interests register or disclosed to the board to
the effect that a director is a shareholder, director, officer or
trustee of another named company or other person or is
otherwise connected with another named company or other
person, and is to be regarded as interested in any transaction
which may after the date of the entry or disclosure be entered
into with that company or person, shall be a sufficient
disclosure of interest in relation to any transaction with that
company or person.
(3) A failure by a director to comply with the requirements
of subsection (1) shall not affect the validity of a transaction
entered into by the company or the director.
(4) Every director who fails to comply with the
requirements of subsection (1) shall be guilty of an offence,
and be liable on conviction to a fine not exceeding two
hundred thousand rupees.
Avoidance of 193. (1) A transaction entered into by the company in
transaction. which a director of the company is interested, may be avoided
by the company at any time before the expiration of six months
after the transaction, and the director’s interest in it have
been disclosed to all the shareholders (whether by means of
the company’s annual report or otherwise).
Companies Act, No. 07 of 2007 155
(2) A transaction shall not be avoided under this section
if the company receives fair value under it.
(3) For the purposes of subsection (2), the question
whether a company receives fair value under a transaction
shall be determined on the basis of the information known to
the company and to the interested director, at the time the
transaction is entered into.
(4) If a transaction is entered into by the company in the
ordinary course of its business and on usual terms and
conditions, the company shall be presumed to have received
fair value under the transaction.
(5) For the purposes of this section —
(a) a person seeking to uphold a transaction and who
knew or ought to have known of the director’s
interest at the time the transaction was entered into,
shall have the burden of establishing fair value; and
(b) in any other case, the company shall have the burden
of establishing that it did not receive fair value.
(6) A transaction in which a director is interested shall
not be avoided on the ground of the director’s interest, other
than pursuant to this section or the company’s articles.
194. The avoidance of a transaction under section 193 Effect on third
shall not affect the title or interest of a person in or to property parties.
which that person has acquired, if the property was acquired—
(a) from a person other than the company;
(b) for valuable consideration; and
(c) in good faith without notice of the circumstances as
a consequence of which the transaction becomes
voidable.
156 Companies Act, No. 07 of 2007
Non- application 195. Nothing contained in sections 192 and 193 shall
of sections 192
apply in relation to—
and 193 in
certain cases.
(a) remuneration or any other benefit given to a director
in accordance with section 216; or
(b) an indemnity given or insurance provided in
accordance with section 218.
Interested 196. Subject to the provisions contained in the articles
director may of the company, a director of a company who is interested in
vote.
a transaction entered into or to be entered into by the
company, may—
(a) vote on a matter relating to the transaction;
(b) attend a meeting of directors at which a matter
relating to the transaction arises and be included
among the directors present at the meeting for the
purpose of a quorum;
(c) sign a document relating to the transaction on behalf
of the company; and
(d) do any other thing in his capacity as a director in
relation to the transaction,
as if the director were not a party interested in that transaction.
Use of company 197. (1) A director of a company who has information
information. in his capacity as a director or employee of the company
which would not otherwise be available to him, shall not
disclose that information to any person or make use of or act
on the information, except—
(a) for the purposes of the company;
(b) as required by law;
Companies Act, No. 07 of 2007 157
(c) in accordance with subsection (2); or
(d) in any other circumstances in which the company’s
articles authorise the director to do so.
(2) A director of a company may disclose, make use of or
act on information, if—
(a) the director is first authorised to do so by the board
under subsection (3); and
(b) particulars of the authorisation are entered in the
interests register.
(3) The board authorise a director to disclose, make use
of or act on information, if it is satisfied that to do so will not
be likely to prejudice the company.
DISCLOSURE OF DIRECTORS’ INTERESTS IN SHARES
198. (1) For the purposes of section 200, a director of a Meaning of
company has a relevant interest in a share issued by a “relevant
interest”.
company (whether or not the director is registered in the
share register as the holder of it) if the director—
(a) is a beneficial owner of the share;
(b) has the power to exercise any right to vote attached
to the share;
(c) has the power to control the exercise of any right to
vote attached to the share;
(d) has the power to acquire or dispose of the share;
(e) has the power to control the acquisition or
disposition of the share by another person; or
158 Companies Act, No. 07 of 2007
(f) under or by virtue of any trust, agreement,
arrangement or understanding relating to the share
(whether or not that person is a party to it) may at
any time have the power to—
(i) exercise any right to vote attached to the
share;
(ii) control the exercise of any right to vote
attached to the share;
(iii) acquire or dispose of the share; or
(iv) control the acquisition or disposition of the
share by another person.
(2) Where a person (whether or not a director of the
company) has a relevant interest in a share by virtue of
subsection (1), and—
(a) that person or its directors are accustomed or under
an obligation, whether legally enforceable or not,
to act in accordance with the directors, instructions,
or wishes of a director of the company in relation
to—
(i) the exercise of the right to vote attached to
the share;
(ii) the control of the exercise of any right to
vote attached to the share;
(iii) the acquisition or disposition of the share; or
(iv) the exercise of the power to control the
acquisition or disposition of the share by
another person;
Companies Act, No. 07 of 2007 159
(b) a director of the company has the power to exercise
the right to vote attached to twenty per centum or
more of the shares of that person;
(c) a director of the company has the power to control
the exercise of the right to vote attached to twenty
per centum or more of the shares of that person;
(d) a director of the company has the power to acquire
or dispose of twenty per centum or more of the shares
of that person; or
(e) a director of the company has the power to control
the acquisition or disposition of twenty per centum
or more of the shares of that person,
that director has a relevant interest in the share.
(3) A person who has or may have a power referred to in
paragraphs (b) to (f) of subsection (1), has a relevant interest
in a share, regardless of whether the power is—
(a) expressed or implied;
(b) direct or indirect ;
(c) legally enforceable or not ;
(d) related to a particular share or not;
(e) subject to restraint or restriction or is capable of
being made subject to restraint or restriction ;
(f) exercisable presently or in the future;
(g) exercisable only on the fulfillment of a condition;
(h) exercisable along or jointly with another person or
persons.
160 Companies Act, No. 07 of 2007
(4) A power referred to in subsection (1) exercisable
jointly with another person or persons, is deemed to be
exercisable by either or any of those persons.
(5) A reference to a power in this section includes a
reference to a power that arises from or is capable of being
exercised as the result of a breach of any trust, agreement,
arrangement or understanding or any of them, whether or not
it is legally enforceable.
Relevant 199. (1) For the purposes of section 200, no account
interests to be shall be taken of a relevant interest of a person in a share, if—
disregarded in
certain cases.
(a) the ordinary business of the person who has the
relevant interest consists of or includes the lending
of money or the provision of financial services or
both, and that person has the relevant interest only
as security given for the purposes of a transaction
entered into in the ordinary course of the business
of that person;
(b) that person has the relevant interest by reason only
of acting for another person to acquire or dispose of
that share on behalf of the other person;
(c) that person has the relevant interest solely by reason
of being appointed as a proxy to vote at a particular
meeting of members or of a class of members, of the
company;
(d) that person—
(i) is a trustee corporation or a nominee
company; and
(ii) has the relevant interest by reason only of
acting for another person in the ordinary
course of business of that trustee corporation
or nominee company; or
Companies Act, No. 07 of 2007 161
(e) the person has the relevant interest by reason only
of the fact that the person is a trustee of a trust to
which the share is subject.
(2) For the purposes of paragraph (e) of the subsection
(1), a person may be a trustee notwithstanding that he is
entitled as a trustee to be remunerated out of the income or
property of the trust.
200. (1) A person who— Disclosure of
share dealing by
directors.
(a) is a director of a company on the appointed date; or
(b) becomes a director of a company thereafter,
and who has a relevant interest in any shares issued by the
company, shall forthwith—
(c) disclose to the board the number and class of shares
in which the relevant interest is held and the nature
of the relevant interest; and
(d) ensure that the particulars disclosed to the board
under paragraph (c) are entered in the interests
register.
(2) A director of a company who acquires or disposes of a
relevant interest in shares issued by the company shall,
forthwith after the acquisition or disposition—
(a) disclose to the board—
(i) the number and class of shares in which the
relevant interest has been acquired or the
number and class of shares in which the
relevant interest was disposed of, as the case
may be;
162 Companies Act, No. 07 of 2007
(ii) the nature of the relevant interest;
(iii) the consideration paid or received; and
(iv) the date of the acquisition or disposition; and
(b) ensure that the particulars disclosed to the board
under paragraph (a) are entered in the interests
register.
APPOINTMENT AND REMOVAL OF DIRECTORS
Number of 201. A company shall have at least one director, except
directors.
a public company which should have at least two directors.
Qualification of 202. (1) Any person who is not disqualified under
directors. subsection (2) of this section, may be appointed as a director
of a company.
(2) The following persons shall be disqualified from being
appointed or holding office as director of a company—
(a) a person who is under eighteen years of age;
(b) a person who is an undischarged insolvent;
(c) a person who is or would be prohibited from being a
director of or being concerned or taking part in the
promotion, formation or management of a company,
under the Companies Act, No. 17 of 1982, but for
the repeal of that Act;
(d) a person who is prohibited from being a director or
promoter of or being concerned or taking part in the
management of a company under section 213 or
section 214 of this Act;
(e) a person who has been adjudged to be of unsound
mind;
Companies Act, No. 07 of 2007 163
(f) a person that is not a natural person;
(g) in relation to any particular company, a person who
does not comply with any qualifications for directors
contained in the articles of that company.
(3) A person who is disqualified from being a director but
who acts as a director, shall be treated as a director for the
purposes of any provision of this Act that imposes a duty or
any obligation on a director of a company.
203. A person shall not be appointed as director of a Director’s
company unless he has, in the prescribed form— consent required.
(a) consented to be a director; and
(b) certified that he is not disqualified from being
appointed or holding office as a director of a
company.
204. (1) A person named as a director in an application Appointment of
for incorporation or in an amalgamation proposal, shall hold first and
subsequent
office as a director from the date of incorporation or from the
directors.
date the amalgamation proposal becomes effective, as the
case may be, until that person ceases to hold office as a director
in accordance with the provisions of this Act.
(2) All subsequent directors of a company shall, unless
the articles of the company otherwise provide, be appointed
by ordinary resolution.
205. (1) Subject to the provisions contained in the Appointment of
articles of the company, the shareholders of a company that directors to be
voted on
is not a private company may vote on a resolution to appoint individually.
a director of the company, only if—
(a) the resolution is for the appointment of one director;
or
164 Companies Act, No. 07 of 2007
(b) the resolution is a single resolution for the
appointment of two or more persons as directors of
the company, and a separate resolution that it be so
voted on has first been passed without a vote being
cast against it.
(2) A resolution moved in contravention of the provisions
of subsection (1) shall be void, even if the moving of it was
not objected to at the time.
(3) The provisions of subsection (2) shall not limit the
operation of the provisions contained in section 209 of this
Act.
(4) No provision for the automatic reappointment of
retiring directors in default of another appointment, shall
apply on the passing of a resolution in contravention of
subsection (1).
(5) Nothing in this section shall prevent the election of
two or more directors by ballot or poll.
Removal of 206. (1) Subject to the provisions contained in the articles
directors. of a company, a director may be removed form office by ordinary
resolution passed at a meeting called for the purpose or for
purposes that include the removal of the director.
(2) The notice calling the meeting shall state that the
purpose or a purpose of the meeting is the removal of the
director.
(3) Where notice is given of an intended resolution to
remove a director and the director concerned makes
representations within a period of fourteen days of such notice
with a request to send copies to all shareholders, the company
shall send copies of the said representations to all shareholders.
If the representations are not sent due to the company’s default,
the director concerned may require that the representations
be read at the meeting :
Companies Act, No. 07 of 2007 165
Provided that the company may with permission of court
obtained on an order for costs to be paid by the director
concerned, refrain from either sending such representations
to the shareholders or reading the said representations at the
meeting, where the company is able to satisfy court that the
provisions of this section are being abused by the director
concerned to secure unnecessary publicity for a defamatory
matter.
207. (1) The office of director of a company shall be Director ceasing
vacated if the director— to hold office.
(a) resigns from his office in accordance with subsection
(2);
(b) is removed from office in accordance with the
provisions of this Act or the articles of the company;
(c) becomes disqualified from being a director in terms
of the provisions of section 202;
(d) dies;
(e) vacates office pursuant to subsection (2) of section
210; or
(f) otherwise vacates office in accordance with the
articles of the company.
(2) A director of a company may resign by signing a
written notice of resignation and delivering it to the registered
office of the company. Subject to the provisions of section
208, the notice is effective when it is received at the registered
office or at a later time specified in the notice.
208. (1) Where a company has only one director, that Resignation of
director may not resign office until that director has called a last remaining
meeting of shareholders to receive notice of the resignation, director.
and to appoint one or more new directors.
166 Companies Act, No. 07 of 2007
(2) Notwithstanding its terms, a notice of resignation
given by the sole director of a company shall not take effect
until the date of the meeting of shareholders, called in
accordance with subsection (1).
Validity of 209. The acts of a person as a director shall be valid
director’s notwithstanding the fact that —
acts.
(a) the person’s appointment was defective; or
(b) the person is not qualified for such appointment.
RETIRING AGE OF DIRECTORS.
Age limit for 210. (1) Subject to the provisions of section 211, no
directors. person shall be capable of being appointed a director of a
public company or of a private company which is a subsidiary
of a public company, if he has attained the age of seventy
years.
(2) Subject to the provisions of section 211, a director of
a public company or of a private company which is a
subsidiary of a public company, shall vacate office —
(a) at the conclusion of the annual general meeting
commencing next after he attains the age of seventy
years;
(b) if he is reappointed as a director after attaining the
age of seventy years, at the annual general meeting
following that reappointment.
(3) Where a person retires from office under the provisions
of subsection (2), no provision for the automatic
reappointment of retiring directors in default of another
appointment shall apply and if at the meeting at the
conclusions of which he retires the vacancy is not filled, it
may be filled as a casual vacancy.
(4) In this section “public company” means a limited
company which is not a private company.
Companies Act, No. 07 of 2007 167
211. (1) Nothing in section 210 shall prevent the
appointment of a director who has attained the age of
seventy years, or require a director who has attained that
age to retire, if his appointment is or was made or approved
by a resolution passed by the company at a general meeting
which declares that the age limit referred to in section 210
shall not apply to that director, However, any resolution
approved at a general meeting will be valid only for one
year from his appointment.
(2) A notice of any resolution referred to in subsection
(1) which is given to the company or by the company to its
shareholders, shall state the age of the person to whom it
relates.
212. (1) Any person who is appointed or to his
knowledge is proposed to be appointed director of a company
at a time when he has attained the age of seventy years or
such lower age, if any, as may be specified in the company’s
articles, shall give notice of his age to the company.
(2) Provisions of subsection (1) shall not apply in relation
to a person’s reappointment on the termination of a previous
appointment as a director of the company, where notice has
been given by that person under subsection (1) on any
previous occasion.
(3) Any person who—
(a) fails to give notice of his age as required by the
provisions of subsection (1); or
(b) acts as director under any appointment which is
invalid or which has terminated by reason of his
age,
shall be guilty of an offence and be liable on conviction to a
fine not exceeding fifty thousand rupees.
168 Companies Act, No. 07 of 2007
(4) For the purposes of paragraph (b) of subsection (3), a
person who has acted as a director under an appointment
which is invalid or has terminated, shall be deemed to have
continued so to act throughout the period from the date of
the invalid appointment or the date on which the appointment
terminated, as the case may be, until the last day on which he
acted thereunder.
DISQUALIFICATION OF DIRECTORS
Persons 213. (1) Where a person—
prohibited from
managing
companies. (a) has been convicted of any offence under this Act
which is punishable by imprisonment;
(b) has been convicted of an offence involving dishonest
or fraudulent acts;
(c) is adjudged insolvent under the Insolvency
Ordinance (Cap. 97); or
(d) adjudged to be of unsound mind,
such person shall not, during the period of five years after the
conviction or adjudication, as the case may be, be a director
or promoter of or in any way, whether directly or indirectly,
be concerned or take part in the management of a company,
unless that person first makes an application to obtain the
leave of the court. Leave may be given on such terms and
conditions as the court thinks fit.
(2) A person intending to apply for the leave of court
under this section, shall give to the Registrar not less than
ten days’ notice of his intention to apply for such leave.
(3) The Registrar and such other persons as the court thinks
fit, may attend and be heard at the hearing of any application
under this section.
Companies Act, No. 07 of 2007 169
(4) A person who acts in contravention of this section or
of any order made under this section, shall be guilty of an
offence and be liable on conviction to a fine not exceeding
one million rupees or to a term of imprisonment not exceeding
five years or to both such fine and imprisonment.
(5) In this section, the term “company” includes an
overseas company which carries on business in Sri Lanka.
214. (1) Where a person— Court may
disqualify
directors.
(a) is prohibited from being a director of company under
section 213;
(b) while a director of a company, has persistently failed
to comply with the provisions of this Act;
(c) has been convicted of an offence of involving
dishonest or fraudulent acts in a country other than
Sri Lanka; or
(d) was a director of a company which became insolvent
and that person’s conduct as a director of that
company or of any other company makes that person
unfit to be a director of a company,
the court may make an order that the person shall not, without
leave of court, be a director or promoter of or in any way
whether directly or indirectly be concerned or take part in
the management of a company, for such period not exceeding
ten years as may be specified in the order.
(2) A person intending to apply for an order under this
section shall give not less than ten working days’ notice of
that intention to the person against whom the order is sought.
On the hearing of the application the person against whom
the order is sought, may appear and give evidence or call
witnesses.
170 Companies Act, No. 07 of 2007
(3) An application for an order under this section may be
made by the Registrar or by a liquidator or an administrator
of a company of which the person against whom the order is
sought was a director, or by a person who is or has been a
shareholder or creditor of any such company.
(4) An order may be made under this section even though
the person concerned may be criminally liable in respect of
the matters on the ground of which the order is to be made.
(5) The Registrar of the court shall as soon as practicable
after the making of an order under this section, give notice to
the Registrar that the order has been made and the Registrar—
(a) shall cause to be published in the Gazette the name
of the person against whom the order is made; and
(b) may give such further notice of the making of the
order as he thinks fit.
(6) Every person who acts in contravention of an order
made under this section shall be guilty of an offence and be
liable on conviction to a fine not exceeding one million
rupees or to a term of imprisonment not exceeding five years
or to both such fine and imprisonment.
(7) In this section “company” includes an overseas
company which carries on business in Sri Lanka.
MISCELLANEOUS PROVISIONS RELATING TO DIRECTORS.
Proceedings 215. The articles of a company shall govern the
of board. proceedings of the board of a company.
Remuneration 216. (1) Subject to the provisions of section 217, the
and other board of a company may, if authorised to do so by the articles
benefits.
or by an ordinary resolution, approve—
(a) the payment of any remuneration or the provision
of other benefits by the company to a director for
services as a director or in any other capacity;
Companies Act, No. 07 of 2007 171
(b) the payment by the company to a director or former
director, of compensation for loss of office;
(c) the entering into of a contract to do any one of the
things referred to in paragraphs (a) or (b),
if the board is satisfied that to do so is fair to the company.
(2) The board shall ensure that forthwith after approving
the making of the payment or the provision of the benefit or
the entering into of the contract, as the case may be, particulars
of the payment or benefit or contract are entered in the interests
register.
(3) The payment of remuneration or the giving of any
other benefit to a director in accordance with a contract
authorised under subsection (1), shall not be required to be
separately authorised under that subsection.
(4) The directors who vote in favour of approving a
payment, benefit, or contact under subsection (1), shall sign
a certificate stating that in their opinion, the making of the
payment or the provision of the benefit or the entering into
of the contract is fair to the company, and the reasons for
reaching that opinion.
(5) Where a payment is made or other benefit provided to
which subsection (1) applies, and either—
(a) the provision of subsections (1) and (4) have not
been complied with ; or
(b) reasonable grounds did not exist for the opinion set
out in the certificate given under subsection (4),
the director or former director to whom the payment is made
or the benefit is provided, shall be personally liable to the
company for the amount of the payment or the monetary
172 Companies Act, No. 07 of 2007
value of the benefit, except to the extent to which he proves
that the payment or benefit was fair to the company at the
time it was made or provided.
(6) Nothing in this section shall prevent the articles of a
company from providing for the authorisation by shareholders
of payment of remuneration or the giving of other benefits to
directors, and the provisions of subsections (1) to (5) of this
section shall not apply to the payment of remuneration or the
giving of any other benefit approved by shareholders
pursuant to such a provision in the company’s articles.
Restrictions on 217. (1) Subject to the provisions of section 31, and
loans to subsection (2) of this section, a company shall not—
directors.
(a) give a loan to a director of the company or of a
related company; or
(b) enter into any guarantee or provide any security in
connection with a loan made by any person to a
director of the company or of a related company.
(2) The provisions of subsection (1) shall not prevent a
company from—
(a) giving a loan to a director, where the aggregate of
the amounts advanced to the director by the
company does not exceed twenty-five thousand
rupees or such higher sum as may be prescribed by
the Minister from time to time, on the
recommendation of the Advisory Commission
constituted under Part XIX of this Act;
(b) giving a loan to a related company or entering into
a guarantee or providing security in connection with
a loan given by any person to a related company;
(c) providing a director with funds to meet expenditure
incurred or to be incurred by him for the purposes of
Companies Act, No. 07 of 2007 173
the company or for the purpose of enabling him to
perform his duties as an officer of the company; or
(d) giving a loan in the ordinary course of the business
of lending money, where that business is carried on
by the company.
(3) Where any loan is given in contravention of the
provisions of subsection (1), the loan shall be voidable at the
option of the company and the loan shall be immediately
repayable upon being avoided by the company,
notwithstanding the terms of any agreement relating to the
loan.
(4) Where a transaction other than giving a loan to a
director is entered into by a company in contravention of
subsection (1)—
(a) the director shall be liable to indemnify the company
for any loss or damage resulting from the transaction;
and
(b) the transaction shall be voidable at the option of
the company, unless —
(i) the company has been indemnified under
paragraph (a) for any loss or damage suffered
by it; or
(ii) any rights acquired by a person other than the
director in good faith and for value, without
actual notice of the circumstances giving rise
to the breach of this section, would be affected
by its avoidance.
(5) Where a company fails to comply with the provisions
of subsection (1) —
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding two
hundred thousand rupees; and
174 Companies Act, No. 07 of 2007
(b) every director of the company who authorises or
permits the company to enter into the relevant
transaction, shall be guilty of an offence and be
liable on conviction to a fine not exceeding one
hundred thousand rupees.
Indemnity and 218. (1) Except as provided for in this section, a
insurance. company shall not indemnify or directly or indirectly effect
insurance for a director or employee of the company or a
related company, in respect of any—
(a) liability for any act or omission in his capacity as a
director or employee; or
(b) costs incurred by that director or employee in
defending or settling any claim or proceeding
relating to any such liability.
(2) A company may if expressly authorised by its articles,
indemnify a director or employee of the company or a related
company, for any costs incurred by him in any proceeding —
(a) that relates to liability for any act or omission in his
capacity as a director or employee; and
(b) in which judgment is given in his favour or in which
he is acquitted or which is discontinued or in which
he is granted relief under section 526.
(3) A company may if expressly authorised by its articles,
indemnify a director or employee of the company or a related
company in respect of—
(a) liability to any person other than the company or a
related company, for any act or omission in his
capacity as a director or employee; or
(b) cost incurred by that director or employee in
defending or settling any claim or proceeding
relating to any such liability,
Companies Act, No. 07 of 2007 175
not being criminal liability or in the case of a director, liability
in respect of a breach of the duty specified in section 187.
(4) A company may if expressly authorised by its articles
and with the prior approval of the board, effect insurance for
a director or employee of the company or a related company
in respect of—
(a) liability not being criminal liability, for any act or
omission in his capacity as a director or employee;
(b) costs incurred by that director or employee in
defending or settling any claim or proceeding
relating to any such liability; or
(c) costs incurred by that director or employee in
defending any criminal proceedings in which he is
acquitted.
(5) The board of a company shall ensure that particulars
of any indemnity given to or insurance effected for any
director or employee of the company or a related company,
are forthwith entered in the interests register.
(6) An indemnity given in breach of this section shall be
void.
(7) Where insurance is effected for a director or employee
of a company or a related company and the provisions of
either subsection (4) or subsection (5) have not been complied
with, the director or employee shall be personally liable to
the company for the cost of effecting the insurance, except to
the extent that he proves that it was fair to the company at the
time the insurance was effected.
(8) In this section —
“director” includes a former director;
176 Companies Act, No. 07 of 2007
“effect insurance” includes the payment, whether
directly or indirectly, the costs of the insurance;
“employee” includes a former employee;
“indemnify” includes relieve or excuse from liability,
whether before or after the liability arises and
“indemnity” has a corresponding meaning.
Duty of 219. (1) A director of a company who believes that the
directors on company is unable to pay its debts as they fall due, shall
insolvency.
forthwith call a meeting of the board to consider whether the
board should apply to court for the winding up of the
company and the appointment of a liquidator or an
administrator or carry on further the business of the company.
(2) Where a director referred to in subsection (1) fails to
comply with the requirement of that subsection and at the
time of that failure the company was unable to pay its debts
as they fell due, and the company is subsequently placed in
liquidation, the court may on the application of the liquidator
or of a creditor of the company, make and order that the
director shall be liable for the whole or any part of any loss
suffered by creditors of the company as a result of the company
continuing to carry on its business.
(3) If—
(a) at a meeting called under subsection (1) the board
does not resolve to apply to court for the winding
up of the company and for the appointment of a
liquidator or an administrator;
(b) at the time of that meeting there were no reasonable
grounds for believing that the company was able to
pay its debts as they fell due; and
(c) the company is subsequently placed in liquidation,
Companies Act, No. 07 of 2007 177
the court may, on the application of the liquidator or of a
creditor of the company, make an order that the directors,
other than those directors who attended the meeting and voted
in favour of applying to court for the winding up of the
company and for the appointment of the liquidator or an
administrator, shall be liable for the whole or any part of any
loss suffered by creditor of the company as a result of the
company continuing to carry on its business.
220. (1) If at any time it appears to a director of a Duty of directors
company that the net assets of the company are less than half on serious loss of
capital.
of its stated capital, the board shall within twenty working
days of that fact becoming known to the director, call an
extraordinary general meeting of shareholders of the company
for the purposes of this section, to be held not later than forty
working days form that date of calling of such meeting.
(2) The notice calling a meeting under this section shall
be accompanied by a report prepared by the board, which
advises shareholders of—
(a) the nature and extent of the losses incurred by the
company;
(b) the cause or causes of the losses incurred by the
company;
(c) the steps, if any, which are being taken by the board
to prevent further such losses or to recoup the losses
incurred.
(3) The business of a meeting called under this section
shall be to discuss the report prepared by the directors and
the financial position of the company. The chairperson of the
meeting shall ensure that shareholders have a reasonable
opportunity to ask questions in relation to and to discuss and
comment on the report and the management of the company
generally.
178 Companies Act, No. 07 of 2007
(4) Where the board of a company fails to comply with
subsection (1), every director who knowingly and willfully
auothorises or permits the failure or permits the failure to
continue, shall be guilty of an offence and be liable on
conviction to a fine not exceeding two hundred thousand
rupees.
SECRETARIES
Secretary. 221. (1) Every company shall have a secretary.
(2) No person shall be appointed as a secretary of a
company unless such person has, in the prescribed form—
(a) consented to be the secretary of such company; and
(b) certified that such person has such qualifications as
may be prescribed in relation that company, under
section 222.
(3) A person named as the secretary of a company in an
application for incorporation or in an amalgamation proposal,
shall hold office as a secretary from the date of the
incorporation of the company or the date the amalgamation
proposal becomes effective, as the case may be, until that
person ceases to hold office under any provisions of this Act
or any provisions contained in the articles of the company.
(4) Unless the articles of the company otherwise provides,
the board shall have the power to appoint or remove a secretary
of the company.
Qualifications of 222. The secretary of every company having a turnover
secretary to be or stated capital of an amount prescribed under this Act, shall
prescribed.
have such qualifications as may be prescribed, having regard
to the nature of the duties the secretary will be called upon to
discharge.
Companies Act, No. 07 of 2007 179
REGISTER OF DIRECTORS AND SECRETARIES
223. (1) Every company shall keep at its registered Register of
office or at such other place as may be notified to the Registrar directors and
secretaries.
under section 116, a register of its directors and secretaries
containing with respect to each of them, the following
particulars :—
(a) in the case of an individual, the present name and
surname, any former name or surname, usual
residential address and business occupation;
(b) in the case of a secretary which is a corporation, its
corporate name and registered or principal office.
(2) The company shall ensure that notice in the prescribed
form of—
(a) a change in the directors or the secretary of the
company; or
(b) a change in the particulars contained in the register
in respect of a director or secretary of the company,
is delivered to the Registrar for registration.
(3) A notice under subsection (2) shall—
(a) specify the date of the change;
(b) in the case of the appointment of a new director or
secretary, have annexed to the notice the form of
consent and certificate required under section 203
or subsection (2) of section 211, as the case may be;
and
(c) be delivered to the Registrar within twenty working
days of—
(i) the change occurring, in the case of the
appointment or resignation of a director or
secretary; or
180 Companies Act, No. 07 of 2007
(ii) the company first becoming aware of the
change, in the case of the death of a director
or secretary or a change in the particulars
contained in the register in respect of a
director or secretary.
(4) Where a company fails to comply with this section—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding one
hundred thousand rupees; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
PREVENTION OF OPPRESSION AND MISMANAGEMENT
Oppression. 224. (1) Subject to the provisions of section 226, any
shareholder or shareholders of a company who has a complaint
against the company that the affairs of such company are
being conducted in a manner oppressive to any shareholder
or shareholders (including the shareholder or shareholders
with such complaint) may make an application to court, for
an order under the provisions of this section.
(2) Where on any application made under the provisions
of subsection (1), the court is of the opinion that the affairs of
a company are being conducted in a manner oppressive to
any shareholder or shareholders of the company, the court
may with a view to remedying the matters complained of,
make such order as it thinks fit.
(3) Pending the making by it of a final order, the court may
on the application of a party to the proceedings, make an
interim order which it thinks is necessary for regulating the
conduct of the company’s affairs, upon such terms and
conditions as appear to it to be just and equitable. The
provisions of section 521 shall apply to any interim order
made hereunder.
Companies Act, No. 07 of 2007 181
225. (1) Subject to the provisions of section 226, any Mis-
management.
shareholder or shareholders of a company, having a
complaint—
(a) that the affairs of the company are being conducted
in a manner prejudicial to the interests of the
company; or
(b) that a material change (not being a change brought
about by or in the interest of any creditors, including
debenture holders or any class of shareholders of
the company) has taken place in the management or
control of the company, whether by an alteration in
its board of directors or of its agent or secretary or in
the constitution or control of the firm or body
corporate acting as its agent or secretary or in the
ownership of the shares of the company or in any
other manner whatsoever, and that by reason of such
change it is likely that the affairs of the company
may be conducted in a manner prejudicial to the
interests of the company,
may make an application to court for an order under the
provisions of this section.
(2) Where, on any application made under the provisions
of subsection (1), the court is of opinion that the affairs of the
company are being conducted as referred to in subsection (1)
or that by reason of any material change that is referred to in
that subsection in the management or control of the company,
it is likely that the affairs of the company will be conducted
as aforesaid, the court may with a view to remedying or
preventing the matters complained of or apprehended, make
such order as it thinks fit.
(3) Pending the making by it of a final order, the court
may on the application of a party to the proceedings make an
interim order which it thinks is necessary, for regulating the
182 Companies Act, No. 07 of 2007
conduct of the company’s affairs upon such terms and
conditions as appear to it to be just and equitable. The
provisions of section 521 shall apply to any interim order
made hereunder.
Who may make 226. (1) An application under section 224 or section
an application. 225 may only be made by a shareholder or shareholders, who
at any time during the six months prior to the making of the
application—
(a) constituted not less than five per centum of the total
number of shareholders; or
(b) held shares which together carried not less than five
per centum of the voting rights at a general meeting
of the company.
(2) For the purposes of subsection (1), where any shares
are held by two or more persons jointly, such persons shall be
counted only as one shareholder.
(3) Where several shareholders of a company are entitled
to make an application under subsection (1), any one or more
of them having obtained the consent in writing of the
remaining shareholders, may make the application on behalf
and for the benefit of all of them.
(4) Where at the conclusion of an inquiry under the
provisions of section 224 or section 225, the court holds that
the shareholder or shareholders of the company making the
application has or have done so vexatiously or without reason
or probable cause, the court may in addition to any award of
costs against such shareholder or shareholders, direct that
such shareholder or shareholders be disqualified from being
appointed as a director or agent or secretary or manager of
the company for a period not exceeding five years from the
date of the order to be fixed by court, or direct that the
shareholder or shareholders shall not have the right to convene
Companies Act, No. 07 of 2007 183
or requisition any meeting of the company or have the right
to be present in person or by proxy at any meeting of the
company within the aforesaid period, or to vote upon a show
of hands or at a poll by person or by proxy at such meeting.
227. Notwithstanding the provisions of Part XII, at any Power of court
stage of the winding up proceedings in respect of a company, to act under
section 224 or
where a court is of the opinion that to wind up the company
section 225
would be prejudicial to the interests of a shareholder of the during winding
company, it shall be lawful for the court to act under the up proceedings.
provisions of section 224 or section 225 in like manner, as if
an application had been made to the court under the
provisions of either of those two sections.
228. Without prejudice to the generality of the powers Powers of court
conferred on the court by section 224 or section 225, any on application
order made under either of such sections,may provide for— under section
224 or section
225.
(a) the regulation of the conduct of the company’s
affairs in the future;
(b) the purchase of the shares or interests of any
shareholders of the company by other shareholders
thereof or by the company;
(c) the termination, setting aside or modification of any
agreement, however arrived at, between the company
on the one hand and any of the following persons
on the other, namely—
(i) the managing director;
(ii) any other director;
(iiii) the board of directors;
(iv) the agent or secretary; or
(v) the manager;
184 Companies Act, No. 07 of 2007
upon such terms and conditions as may, in the opinion
of the court, be just and equitable in all the
circumstances of the case;
(d) the termination, setting aside or modification of any
agreement between the company and any person
not referred to in paragraph (c), upon such terms and
conditions as may, in the opinion of the court, be
just and equitable in all the circumstances of the
case, but always so that no such agreement shall be
terminated, set aside or modified, except after due
notice to the party concerned and after giving such
person an opportunity of being heard;
(e) the setting aside of any transfer, delivery of goods,
payment, execution or other act relating to property
made or done by or against the company within the
three months immediately prior to the date of the
application or the commencement of winding up
proceedings, as the case may be, which would, if
made or done by or against an individual, be deemed
in a case of his insolvency, to be fraudulent
preference; and
(f) any other matter for which in the opinion of the
court it is just and equitable that provision should
be made.
Effect of 229. (1) Where an order under section 224 or section
alteration of 225 makes any alteration in the articles of the company, then,
articles of notwithstanding anything to the contrary contained in any
company by
other provision of this Act, the company shall not have power,
order under
section 224 or except to the extent if any permitted in the order, to make
225. without the leave of the court, any alteration whatsoever in
the articles which is inconsistent with the order.
(2) Subject to the provisions of subsection (1), the
alteration made by the order shall in all respects, have the
same effect as if they had been duly made by the company in
accordance with the provisions of this Act, and the said
provisions shall apply accordingly to the articles so altered.
Companies Act, No. 07 of 2007 185
(3) A certified copy of every order altering or giving leave
to alter a company’s articles shall, within ten working days
after the making of such order, be filed by the company with
the Registrar who shall register the same.
(4) Where default is made in complying with the
provisions of subsection (3)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding one
hundred thousand rupees;
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
230. Where the managing director or any other director, Addition of
the agent or secretary or the manager of a company or any respondents to
application
other person who has not been named as a respondent to any
under section
application made under the provisions of section 224 or 224 or section
section 225, applies to be added as a respondent to such 225.
application, the Court shall where at is satisfied that there is
sufficient cause for doing so, direct that he may be added as
a respondent accordingly.
231. (1) Where an order of a court made under section Consequences of
224 or section 225 terminates, sets aside or modifies an termination or
agreement such as is referred to in paragraph (d) or paragraph modification of
certain
(e) of section 228—
agreements.
(a) the order shall not give rise to any claim whatsoever
against the company by any person for damages or
for compensation for loss of office or in any other
respect, either in pursuance of the agreement or
otherwise; and
(b) no managing director or other director, agent,
secretary or manager whose agreement is so
terminated or set aside and no person who, at the
date of the order terminating or setting aside the
agreement was or subsequently becomes an
186 Companies Act, No. 07 of 2007
associate of such agent or secretary shall, for a period
of five years from the date of the order terminating
the agreement, be appointed or act as the managing
director or other director, agent, secretary or manager
of the company, unless with the leave of the court.
(2) (a) Any person who knowingly acts as a managing
director or other director, agent or secretary or manager of a
company in contravention of the provisions of paragraph (b)
of section (1), shall be guilty of an offence and be liable on
conviction to a fine not exceeding one million rupees.
(b) Where an offence under the provisions of this section
is committed by a body of persons—
(i) if the body of person is a body corporate, every
director and officer of that body corporate; or
(ii) if the body of person is a firm, every partner of the
firm,
shall be deemed to be guilty of such offence:
Provided that no such person shall be deemed to be guilty
of such offence, if he proves that the offence was committed
without his knowledge or that he exercised all due diligence
to prevent the commission of such offence.
Extended 232. A reference in sections 224 to 228 to a “shareholder”,
meaning of shall also include a reference to —
“shareholder”.
(a) a person on whom shares have devolved through
the death of a shareholder;
(b) the executor or administrator of a deceased
shareholder; or
(c) a person who was a shareholder at any time within
six months prior to the making of an application
under section 224 or section 225.
Companies Act, No. 07 of 2007 187
RESTRAINING ORDERS
233. (1) The court may on an application made under Restraining
this section, make an order restraining a company that, or a orders.
director of a company who, proposes to engage in a conduct
that would contravene the articles of the company or any
provision of this Act, from engaging in that conduct.
(2) An application may be made by —
(a) the company; or
(b) a director or shareholder of the company.
(3) Where the court makes an order under subsection (1),
it may also grant such consequential relief as it thinks fit.
(4) An order may not be made under this section in relation
to a conduct or a course of conduct that has been completed.
(5) The court may at any time before the final
determination of an application under subsection (1), make
as an interim order, any order that it is empowered to make
under that subsection. Such order may at the discretion of the
court, be made ex parte or after notice to the respondent. The
respondent may make an application for an order of revocation
or variation of the exparte order with notice to the petitioner.
(6) The provision of section 521 shall not apply to any
interim order made under this section.
DERIVATIVEACTIONS
234. (1) Subject to the provisions of subsections (3) Derivative
and (4) of this section, the court may, on the application of a actions.
shareholder or director of a company, grant leave to that
shareholder or director to—
(a) bring proceedings in the name and on behalf of the
company or any subsidiary of that company; or
188 Companies Act, No. 07 of 2007
(b) intervene in proceedings to which the company or
any subsidiary is a party, for the purpose of
continuing, defending, or discontinuing the
proceedings on behalf of the company or subsidiary,
as the case may be.
(2) Without limiting the powers given to a court under
subsection (1), in determining whether to grant or not grant
leave under that subsection, the court shall have regard to—
(a) the likelihood of the proceedings succeeding;
(b) the costs of the proceedings in relation to the relief
likely to be obtained;
(c) any action already taken by the company or
subsidiary to obtain relief;
(d) the interests of the company or subsidiary in the
proceedings being commenced, continued,
defended or discontinued, as the case may be.
(3) Leave to bring proceedings or intervene in
proceedings may be granted under subsection (1), only if the
court is satisfied that either—
(a) the company or subsidiary does not intend to bring,
diligently continue, defend or discontinue the
proceedings, as the case may be; or
(b) it is in the interests of the company or subsidiary,
that the conduct of the proceedings should not be
left to the directors or to the determination of the
shareholders as a whole.
(4) Notice of the application shall be served on the
company or subsidiary as the case may be.
Companies Act, No. 07 of 2007 189
(5) The company or subsidiary may appear and be heard
and shall inform the court whether or not it intends to bring,
continue, defend, or discontinue the proceedings, as the case
may be.
(6) Except as provided for in this section, a shareholder
or director of a company is not entitled to bring or intervene
in any proceedings in the name of or on behalf of the company
or a subsidiary of the company.
235. The court may on the application of a shareholder Costs of
or a director to whom leave is granted under section 234 to derivative action
bring or intervene in proceedings, order that the whole or to be met by
part of the reasonable costs of bringing or intervening in the company.
proceeding, including any costs relating to any settlement,
compromise or discontinuance approved under section 237,
shall be met by the company.
236. The court may at any time, make any order it thinks Powers of court
fit in relation to any proceedings brought by a shareholder or where leave is
a director or in which a shareholder or director intervenes, as granted.
the case may be, with leave of the court under section 234,
and without limiting the generality of the powers conferred
under this section, may—
(a) make an order authorising the shareholder or any
other person to control the conduct of the
proceedings;
(b) give directions for the conduct of the proceedings;
(c) make an order requiring the company or the directors
to provide information or assistance in relation to
the proceedings; or
(d) make an order directing that any amount ordered to
be paid by a defendant in the proceedings shall be
paid, in whole or in part, to the former and present
shareholders of the company or subsidiary, instead
of to the company or to the subsidiary, as the case
may be.
190 Companies Act, No. 07 of 2007
Compromise, 237. No proceedings brought by a shareholder or a
settlement or director or in which a shareholder or a director intervenes, as
continuance of
derivative the case may be, with leave of the court under section 234,
action. may be settled or compromised or discontinued without the
approval of the court.
RATIFICATION
Ratification of 238. (1) The purported exercise by a director or the
certain actions of board of directors of a company or of a power vested in the
directors.
shareholders or any other person, may be ratified or approved
by those shareholders or that person, in the same manner in
which the power may be exercised.
(2) The purported exercise of a power that is ratified under
subsection (1) is deemed to be and always to have been, a
proper and valid exercise of that power.
(3) The ratification or approval under this section of the
purported exercise of a power by director or the board of
directors does not prevent the court from exercising a power
which might, apart from the ratification or approval, be
exercised in relation to the action of the director or the board.
PART VIII
AMALGAMATIONS
Amalgamations. 239. Two or more companies may amalgamate and
continue as one company, which may be one of the
amalgamating companies or may be a new company. Public
notice of such amalgamation shall be given in accordance
with the provisions of this Act.
Amalgamation 240. (1) Every company which proposes to amalgamate
proposal. shall approve in accordance with the provisions of section
Companies Act, No. 07 of 2007 191
241 an amalgamation proposal setting out the terms of the
amalgamation, and in particular —
(a) the name of the amalgamated company, if it is the
same as the name of one of the amalgamating
companies;
(b) the registered office of the amalgamated company;
(c) the full name and residential address of each of the
directors of the amalgamated company;
(d) the full name and address of the secretary of the
amalgamated company;
(e) the share structure of the amalgamated company,
specifying—
(i) the number of shares of the company;
(ii) the rights, privileges, limitations, and
conditions attached to each share of the
company, if different from those set out in
subsection (2) of section 49;
(f) the manner in which the shares of each amalgamating
company are to be converted into shares of the
amalgamated company;
(g) if shares of an amalgamating company are not to be
converted into shares of the amalgamated company,
any consideration that the holders of those shares
are to receive in place of shares of the amalgamated
company;
(h) any payment to be made to a shareholder or director
of an amalgamating company, other than a payment
of the kind described in paragraph (g);
192 Companies Act, No. 07 of 2007
(i) details of any arrangement necessary to complete
the amalgamation and to provide for the subsequent
management and operation of the amalgamated
company;
(j) the date on which the amalgamation is intended to
become effective.
(2) If the proposed articles of the amalgamated company
are different from the model articles, a copy of the proposed
articles shall be attached to and shall form part of the
amalgamation proposal.
(3) Where shares of one of the amalgamating companies
are held by or on behalf of another of the amalgamating
companies, the amalgamation proposal—
(a) shall provide for the cancellation of those shares
without payment or the provisions of other
consideration when the amalgamation becomes
effective ;
(b) shall not provide for the conversion of those shares
into shares of the amalgamated company.
Approval of 241. (1) Before an amalgamation proposal is put to the
amalgamation shareholders, the board of an amalgamating company shall
proposal. resolve that—
(a) in its opinion the amalgamation is in the best
interests of the company ; and
(b) it is satisfied that the amalgamated company will
immediately after the amalgamation becomes
effective, satisfy the solvency test.
(2) The directors who vote in favour of a resolution
required under subsection (1) shall sign a certificate stating
that in their opinion, the conditions set out in that subsection
are satisfied and setting out the reasons for reaching that
opinion.
Companies Act, No. 07 of 2007 193
(3) The board of each amalgamating company shall send
to each shareholder of the company, not less than twenty
working days before the amalgamation is proposed to take
effect—
(a) a copy of the amalgamation proposal ;
(b) copies of the certificates given by the directors of
each board ;
(c) a statement setting out the rights of shareholders
under section 93 ;
(d) a statement of any material interests of any director
in the proposal, whether in that capacity or
otherwise;
(e) such further information and explanation as may be
necessary to enble a reasonable shareholder to
understand the nature and implications for the
company and its shareholders of the proposed
amalgamation.
(4) The board of each amalgamating company shall, not
less than twenty working days before the date on which
amalgamation is intended to become effective—
(a) send a copy of the amalgamation proposal to every
secured creditor of the company ; and
(b) give public notice of the proposed amalgamation,
including a statement to the effect that—
(i) copies of the amalgamation proposal are
available for inspection by any shareholder
or creditor of an amalgamating company, or
any person to whom an amalgamating
company is under an obligation, at the
registered offices of the amalgamating
194 Companies Act, No. 07 of 2007
companies and at such other places as may
be specified, during normal business hours ;
and
(ii) a shareholder or creditor of an amalgamating
company or any person to whom an
amalgamating company is under an
obligation, is entitled to be supplied free of
charge with a copy of the amalgamation
proposal upon request made to an
amalgamating company.
(5) An amalgamation may be effected if the amalgamation
proposal is approved—
(a) by a special resolution of the shareholders of each
amalgamating company, in accordance with the
provisions of section 92 ; and
(b) if a provision in the amalgamation proposal would,
if contained in an amendment to an amalgamating
company’s articles or otherwise proposed in relation
to that company, require the approval of an interest
group, by a special resolution of that interest group.
(6) For the purposes of this section, the solvency test shall
be applied without taking into account the stated capital of
the amalgamated company.
(7) A director who fails to comply with the requirements
of subsection (2) shall be guilty of an offence and be liable
on conviction to a fine not exceeding two hundred thousand
rupees.
(8) If the court is satisfied that giving effect to an
amalgamation proposal would unfairly prejudice a creditor
of an amalgamating company or a person to whom an
amalgamating company is under an obligation, it may on
application made in that behalf by that person made at any
Companies Act, No. 07 of 2007 195
time before the date on which the amalgamation becomes
affective, make any order as it thinks fit in relation to the
proposal, and may without limiting the generality of this
subsection, make an order—
(a) directing that effect shall not be given to the
proposal ;
(b) directing the company or its board to reconsider the
proposal or any part of it.
(9) An order under subsection (8) may be made on such
terms and conditions as the court thinks fit.
242. (1) A company and one or more other companies Short form
that are directly or indirectly wholly owned by it, may amalgamation.
amalgamate and continue as one company (being the
company first referred to) without complying with the
provisions of section 240 and section 241, if—
(a) the amalgamation is approved by a resolution of
the board of each amalgamating company ; and
(b) each resolution provides that—
(i) the shares of each amalgamating company,
other than the amalgamated company, will
be cancelled without payment or other
consideration ;
(ii) the articles of the amalgamated company will
be the same as the articles of the company
first referred to ;
(iii) the board is satified that the amalgamated
company will immediately after the
amalgamation becomes effective, satisfy the
solvency test ; and
196 Companies Act, No. 07 of 2007
(iv) the person or persons named in the resolution
will be the director or directors of the new
company.
(2) Two or more companies each of which is directly or
indirectly wholly owned by the same company, may
amalgamate and continue as one company without complying
with the provisions of section 240 or section 241 if—
(a) the amalgamation is approved by a resolution of
the board of each amalgamating company ;
(b) each resolution provides that—
(i) the shares of all but one of the amalgamating
companies will be cancelled without
payment or other consideration ;
(ii) the articles of the amalgamated company will
be the same as the articles of the
amalgamating company whose shares are not
cancelled ;
(iii) the board is satisfied that the amalgamated
company will immediately after the
amalgamation becomes affective, satisfy the
solvency test ; and
(iv) the person or persons named in the resolution
will be the director or directors of the new
company.
(3) The board of each amalgamating company shall, not
less than twenty working days before the date on which the
amalgamation is intended to become effective—
(a) give written notice of the proposed amalgamation
to every secured creditors of the company ; and
Companies Act, No. 07 of 2007 197
(b) give public notice of the proposed amalgamation.
(4) The resolutions approving an amalgamation under
this section shall, taken together, be deemed to constitute an
amalgamation proposal that has been approved.
(5) The directors who vote in favour of a resolution
required under subsection (1) or subsection (2), as the case
may be, shall sign a cerificate stating that in their opinion,
the conditions set out in subsection (1) or subsection (2) are
satisfied, and setting out the reasons for reaching that opinion.
(6) For the purposes of this section, the solvency test shall
be applied without taking into account the stated capital of
the amalgamated company.
(7) A director who fails to comply with subsection (5)
shall be guilty of an offence and be liable on conviction to a
fine not exceeding two hundred thousand rupees.
243. For the purpose of effecting an amalgamation, the Registration of
following documents shall be delivered to the Registrar for amalgamation
proposal.
registration :—
(a) the approved amalgamation proposal ;
(b) any certificates required under subsection (2) of
section 241 or subsection (5) of section 242 ;
(c) a certificate signed by the board of each
amalgamating company stating that the
amalgamation has been approved in accordance with
the provisions of this Act and the articles of the
company ;
(d) a consent from each of the persons named in the
amalgamation proposal as a director of the
amalgamated company, to act as a director of that
company, as required by section 203 ; and
198 Companies Act, No. 07 of 2007
(e) a consent from each of the persons named in the
amalgamation proposal as secretary of the
amalgamated company, to act as secretary of that
company, as required by subsection (2) section 221.
Certificate of 244. (1) The Registrar shall forthwith after receipt of
amalgamation. the documents required under section 243—
(a) if the amalgamated company is the same as one of
the amalgamating companies, issue a certificate of
amalgamation in the prescribed form ; or
(b) if the amalgamated company is a new company—
(i) enter particulars of the company on the
Register ; and
(ii) issue a certificate of amalgamation in the
prescribed form together with a certificate of
incorporation in the prescribed form.
(2) If an amalgamation proposal specifies a date on which
the amalgamation is intended to become effective, and that
date is the same as or later than the date on which the Registrar
receives the documents, the certificate of amalgamation, and
any certificate of incorporation shall be deemed to have affect
on the date specified in the amalgamation proposal.
(3) Notice of completion of such amalgamation shall be
given to the public by the company.
Effect of 245 On the date shown in a certificate of amalgamation—
certificate of
amalgamation.
(a) the amalgamation becomes effective ;
(b) if it has the same name as of one of the amalgamating
companies, the amalgamated company shall have
the name specified in the amalgamation proposal ;
Companies Act, No. 07 of 2007 199
(c) the Registrar shall remove all particulars relating to
the amalgamating companies, other than the
amalgamated company, from the Register ;
(d) the amalgamated company succeeds to all the
property, rights, powers, and privileges of each of
the amalgamating companies ;
(e) the amalgamated company succeeds to all the
liabilities and obligations of each of the
amalgamating companies ;
(f) proceedings pending by or against an amagamating
company may be continued by or against the
amalgamated company ;
(g) a conviction, ruling, order, or judgment in favour of
or against an amalgamating company, may be
enforced by or against the amalgamated company ;
(h) the stated capital of the amalgamated company shall
be the sum certified by the auditor of the
amalgamated company ; and
(i) any provisions of the amalgamation proposal that
provide for the conversion of shares or rights of
shareholders in the amalgamating companies, shall
have effect according to their tenor.
246. (1) Where any person pursuant to an offer made to Power to acquire
the holders of voting rights of a company acquires not less shares of
shareholders
than ninety per centum of the voting rights of such company, dissenting from
such person may within three months of such acquisition scheme or
give notice in the prescribed manner to all the shareholders contract
approved by
holding the outstanding shares carrying voting rights, the
majority.
desire to acquire such shares, and unless the court thinks fit
to order otherwise, upon an application made by any
shareholder to the court within fourteen days of the receipt of
200 Companies Act, No. 07 of 2007
such notice for the acquisition of his shares, shall be entitled
to acquire such shares on terms not less favourable than the
terms made under the aforementioned offer.
(2) A copy of the notice in relation to the acquisition
referred to in subsection (1) shall be forwarded to the company,
the shares of which are to be so acquired.
(3) Where any person has given notice under the
provisions of subsection (1), on the expiration of one month
from the date on which such notice was given, such person
shall forward the due consideration to the company, the shares
of whcih are to be so acquired and the company secretary of
such company shall register such acquirer as the holder of all
such shares.
(4) Any consideration received by the company shall be
held by the company on trust for the person or persons entitled
to the shares in respect of which the sum or other consideration
was received. The company secretary of such company shall
forward such consideration due, to all shareholders without
any undue delay.
(5) Where after reasonable inquiry is made at such
intervals and the publication of notices in all three languages
in daily newspapers, the person entitled to any consideration
cannot be found and six years have elapsed since the
consideration has been received or the company is wound
up, the consideration together with any interest, dividend or
other benefit that has accrued from it, shall be paid by the
company to the Public Trustee.
(6) In the case where the company is wound up—
(a) the trust shall terminate ;
(b) the company or, as the case may be, the
liquidator shall sell the consideration other
than cash and any benefit other than cash
that has accrued from the consideration ; and
Companies Act, No. 07 of 2007 201
(c) a sum representing ;
(i) the consideration so far as it is cash,
(ii) the proceeds of any sale under sub-
paragraph (b) above; and
(iii) any interest, dividend or other benefit
that has accrued from the consideration,
shall be deposited in the name of the Public Trustee.
(7) The expenses of any such inquiry and press notices as
is mentioned above shall be defrayed out of the money or
other property held in trust referred to in subsection (4) above.
PART IX
COMPROMISES WITH CREDITORS
247. In this Part of this Act, unless the context otherwise Interpretation.
requires—
“compromise” means a compromise between a
company and its creditors, including a
compromise—
(a) cancelling all or part of any debt of the
company ;
(b) varying the rights of its creditors or the terms
of a debt ;
(c) relating to an alteration of a company’s articles
that affects the likelihood of the company’s
ability to pay a debt;
“creditor” includes a person who in a liquidation,
would be entitled to claim in accordance with the
provisions of section 357, that a debt is owing to
that person by the company ; and
202 Companies Act, No. 07 of 2007
“proponent” means a person referred to in section 248
who proposed a compromise in accordance with
the provisions of this Part of this Act.
Compromise 248. (1) Any of the following persons may propose a
proposal. compromise under this Part, if that person has reason to believe
that a company is or is likely to become unable to pay its
debts as they fall due:—
(a) the board of the company ;
(b) a receiver appointed in relation to the property and
undertakings of the company ;
(c) an administrator of the company appointed under
Part XIII ;
(d) a liquidator of the company ; or
(e) with the leave of the court, any creditor or shareholder
of the company.
(2) Where the court grants leave to a creditor or shareholder
under paragraph (d) of subsection (1), the court may make an
order directing the company to supply to the creditor or
shareholder within such time as may be specified, a list of the
names and addresses of the company’s creditors, showing the
amounts owed to each of them or such other information as
may be specified, to enable the creditor or shareholder to
propose a compromise.
Notice of 249. (1) The proponent shall compile, in relation to each
proposed class of creditors of the company, a list of creditors known to
compromise.
the proponent who would be affected by the proposed
compromise, and setting out—
(a) the amount owing or estimated to be owing to each
of them ; and
Companies Act, No. 07 of 2007 203
(b) the number of votes which each of them is entitled
to cast on a resolution approving the compromise.
(2) The proponent shall give to each known creditor, the
company, any receiver or administrator or liquidator
respectively, and deliver to the Registrar—
(a) a notice in accordance with the requirements
specified in the Seventh Schedule hereto, of the
intention to hold a meeting of creditors, or any two
or more classes of creditors, for the purpose of voting
on the resolution ; and
(b) a statement—
(i) containing the name and address of the
proponent and the capacity in which the
proponent is acting ;
(ii) containing the address and telephone number
to which inquiries may be directed during
normal business hours ;
(iii) setting out the terms of the proposed
compromise and the reasons for it ;
(iv) setting out the reasonably foreseeable
consequences for creditors of the company
of the compromise being approved ;
(v) setting out the extent of any interest of a
director in the proposed compromise ;
(vi) explaining that the proposed compromise and
any amendment to it proposed at a meeting
of creditors or any classes of creditors, will
be binding on all creditors or on all creditors
of that class, if approved in accordance with
the provisions of section 250 ; and
204 Companies Act, No. 07 of 2007
(vii) containing detalis of any procedure proposed
as part of the proposed compromise for
varying the compromise following its
approval ; and
(c) a copy of the list or lists of creditors referred to in
subsection (1).
Effect of 250. (1) A compromise including any amendment
compromise. proposed at the meeting, is deemed to be approved by
creditors or a class of creditors, if at a meeting of creditors or
that class of creditors conducted in accordance with the
requirements specified in the Seventh Schedule hereto, the
compromise, including any amendment is adopted in
accordance with paragraph 5 of that Schedule.
(2) A compromise including any amendment approved
by creditors or a class of creditors of a company in accordance
with the provisions of this Part, is binding on the company
and on—
(a) all creditors ; or
(b) if there is more than one class of creditors, on all
creditors of that class,
to whom notice of the proposal was given under section 249.
(3) Where a resolution proposing a compromise including
any amendment is put to the vote of more than one class of
creditors, it shall be presumed unless the contrary is expressly
stated in the resolution, that the approval of the compromise,
including any amendment by each class, is conditional on
the approval of the compromise, including any amendment
by every other class voting on the resolution.
(4) The proponent shall give written notice of the result of
the voting to each known creditor, the company, any receiver
or administrator or liquidator and the Registrar, respectively.
Companies Act, No. 07 of 2007 205
251. (1) A compromise approved under section 250 Variation of
may be varied either— compromise
(a) in accordance with any procedure for variation
incorporated in the compromise as approved; or
(b) by the approval of a variation of the compromise in
accordance with the requirements provided for in
this Part which, for that purpose, shall apply with
such modifications as may be necessary, as if any
proposed variation were a proposed compromise.
(2) The provisions of this Part shall apply to any
compromise that is varied in accordance with this section.
252. (1) On the application of the proponent or the Powers of court.
company, the court may—
(a) give directions in relation to a procedural
requirement imposed under provisions of this Part
or waive or vary any such requirement, if the court
is satisfied that it would be just to do so; or
(b) order that during a period specified in the order,
beginning not earlier than the date on which notice
was given of the proposed compromise and ending
not later than ten working days after the date on
which notice was given of the result of the voting
on it—
(i) proceedings in relation to a debt owning by
the company be stayed; or
(ii) a creditor should refrain from taking any other
measure to enforce payment of a debt owing
by the company.
(2) Nothing in paragraph (b) of subsection (1) shall affect
the right of a secured creditor during that period to seize,
realise, appoint a receiver in respect of or otherwise deal with
property of the company, over which that creditor has a
charge.
206 Companies Act, No. 07 of 2007
(3) Where the court is satisfied on the application of a
creditor of a company who was entitled to vote on a
compromise, that —
(a) insufficient notice of the meeting or of the matters
required to be notified under section 249 was given
to that creditor;
(b) there was some other material irregularity in
obtaining approval of the compromise; or
(c) in the case of a creditor who voted against the
compromise, the compromise is unfairly prejudicial
to that creditor or to the class of creditors to which
that creditor belongs,
the court may make an order that such creditor is not bound
by the compromise, or make such other order as it thinks fit.
(4) An application under subsection (3) shall be made
not later than ten working days after the date on which notice
of the result of the voting was given to the creditor.
Effect of 253. (1) Where a compromise is approved under section
compromise in 250, the court may on the application of—
liquidation of a
company.
(a) the company ;
(b) a receiver appointed in relation to property of the
company;
(c) an administrator; or
(d) with the leave of the court, any creditor or shareholder
of the company,
make such order as the court thinks fit with respect to the
extent, if any, to which the compromise will, if the company
is put into liquidation, continue in effect and be binding on
the liquidator of the company.
Companies Act, No. 07 of 2007 207
(2) Where a compromise is approved under section 250
and the company is subsequently put into liquidation, the
court may on the application of—
(a) the liquidator;
(b) a receiver appointed in relation to property of the
company; or
(c) with the leave of the court, any creditor or shareholder
of the company,
make such order as the court thinks fit with respect to the
extent, if any, to which the compromise will continue in effect
and be binding on the liquidator of the company.
254. Unless the court orders otherwise, the costs incurred Costs of
in organising and conducting a meeting of creditors for the compromise.
purpose of voting on a proposed compromise—
(a) shall be met by the company;
(b) if incurred by a receiver or a liquidator, shall be
deemed to be a cost of the receivership or
liquidation;
(c) if incurred by an administrator, shall be deemed to
be a cost of the administration; or
(d) if incurred by any other person, shall be deemed to
be a debt due to that person from the company and,
if the company is put into liquidation, are payable
in the order of priority specified in the Ninth
Schedule.
208 Companies Act, No. 07 of 2007
PART X
APPROVAL OFARRANGEMENTS, AMALGAMATIONS, AND
COMPROMISES BY COURT
Interpretation. 255. In this Part of this Act, unless the context otherwise
requires—
“arrangement” includes a re-organisation, of the shares
and the stated capital of a company;
“company” includes a registered overseas company;
or of the shares or the stated capital of the
company; and
“creditor” includes a person who in a liquidation, would
be entitled to claim in accordance with the
provision of section 357 that a debt is owing to
that person by the company.
Court approval 256. (1) Notwithstanding the provisions of this Act or
of arrangements, the provisions contained in the articles of a company, the
amalgamation
court may on the application of —
and
compromises.
(a) a company;
(b) an administrator appointed under Part XIII; or
(c) with the leave of the court, any shareholder or creditor
of a company,
order that an arrangement or amalgamation or compromise
shall be binding on the company and on such other persons
or classes of persons as the court may specify. Any such order
may be made on such terms and conditions as the court thinks
fit.
(2) Before making an order under subsection (1), the court
may, on the application of the company or the administrator
Companies Act, No. 07 of 2007 209
or any shareholder or creditor or other person who appears to
the court to be interested or of its own motion, make any one
or more of the following orders :—
(a) an order that notice of the application together with
such information relating to it as the court thinks
fit, be given in such form and in such manner and to
such persons or classes of persons as the court may
specify;
(b) an order directing the holding of a meeting or
meetings of shareholders or any class of shareholders
or creditors or any class of creditors of a company,
to consider and if determined fit, to approve in such
manner as the court may specify, the proposed
arrangement or amalgamation or compromise. The
court may for that purpose determine the
shareholders or creditors that constitute a class of
shareholders or creditors of a company;
(c) an order requiring that report on the proposed
arrangement or amalgamation or compromise be
prepared for the court by a person specified by the
court, and if the court thinks fit, be supplied to the
shareholders or any class of shareholders or creditors
or any class of creditors of a company or to any
other person who appears to the court to be
interested;
(d) an order as to the payment of the costs incurred in
the preparation of any such report;
(e) an order specifying the persons who shall be entitled
to appear and be heard on the application to approve
the arrangement or amalgamation or compromise.
(3) An order made under this section shall have effect on
and from the date specified in the order.
210 Companies Act, No. 07 of 2007
(4) Within ten working days of an order being made by
the court under this section, the company shall ensure that a
copy of the order is delivered to the Registrar.
(5) Where a company fails to comply with the
requirements of subsection (4)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding one
hundred thousand rupees; and
(b) every officer of the company who is in default shall
be guilty of an offence and liable on conviction to a
fine not exceeding fifty thousand rupees.
Court may make 257. (1) Without limiting the powers conferred under
additional section 256, the court may for the purpose of giving effect to
orders.
any arrangement or amalgamation or compromise approved
under that section, either by the order approving the
arrangement or amalgamation or compromise or by any
subsequent order, provide for and prescribe terms and
conditions relating to —
(a) the transfer or vesting of movable or immovable
property, assets, rights, powers, interests, liabilities,
contracts and engagements;
(b) the issue of shares, securities or policies of any kind;
(c) the continuation of legal proceedings;
(d) the liquidation or the removal from the Register
without liquidation, name and particulars of any
company;
(e) the provision to be made for persons who voted
against the arrangement or amalgamation or
compromise at any meeting called in accordance
with an order made under paragraph (b) of subsection
(2) of section 256, or who appeared before the court
Companies Act, No. 07 of 2007 211
in opposition to the application, to approve the
arrangement or amalgamation or compromise;
(f) such other matters as are necessary or desirable to
give effect to the arrangement or amalgamation or
compromise.
(2) An order made by the court under subsection (1) shall
have effect according to its tenor.
(3) Within ten working days of an order being made by
the court under this section, the company shall ensure that a
copy of the order is delivered to the Registrar.
(4) Where a company fails to comply with the
requirements of subsection (3)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding one
hundred thousand rupees; and
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
258. The court shall not approve an arrangement or Application of
amalgamation or compromise under section 256 if it could Part VIII.
be effected under Part VIII or this Part or under any other
provisions of this Act, unless it is satisfied that it is not
reasonably practicable to do so.
259. The provisions of section 253 shall apply with such Application of
modifications as may be necessary, in relation to any section 253 to
compromise approved under section 256. compromise
approved under
this Part.
212 Companies Act, No. 07 of 2007
PART XI
PROVISIONS RELATING TO OFFSHORE COMPANIES
Interpretation. 260. In this Part of this Act, “company” includes a
company or a body corporate incorporated under the laws of
any foreign country.
Company 261. (1) Any company may make an application to the
incorporated for Registrar in accordance with the provisions of this Part of
business outside this Act to be registered in Sri Lanka as an off-shore company
Sri Lanka.
and to be so referred to, and in the case of a company
incorporated abroad, to be deemed to be incorporated in
Sri Lanka, as if it had been incorporated under the provisions
of this Act.
(2) An application for registration under subsection (1)
shall have annexed thereto the following documents :—
(a) a certified copy of the charter, statute or
memorandum and articles of association of the
company or other instrument constituting or
defining the constitution of the company, and where
such instrument is not in an official language or in
English, a translation of the instrument in such
language as may be specified by the Registrar;
(b) a list of the directors or those managing the affairs of
the company, containing their full names, addresses,
occupations and the offices they hold in the
company;
(c) the names and addresses of one or more persons who
are resident in and are citizens of Sri Lanka, who is
or are authorised to represent the company;
(d) a statement containing the full address of—
(i) the registered or principal office of the
company in the country of incorporation; and
(ii) the office of the company in Sri Lanka;
Companies Act, No. 07 of 2007 213
(e) a certified copy (certified of recent date of the
incorporation of the company).
(3) The company shall notify the Registrar of any
amendments or alterations in respect of any of the aforesaid
particulars within the prescribed time, and in the prescribed
form.
262. (1) Subject to the provisions of subsections (3) Grant of
and (4), the Registrar may, having regard to the national certificate of
registration to
interest or in the interest of the national economy, issue a off-shore
certificate of registration to an off-shore company for the company.
carrying on of its business outside Sri Lanka, where that off-
shore company—
(a) makes payment of the prescribed fee; and
(b) produces to the Registrar a certificate from a bank,
that the prescribed sum to defray the expenses of
the off-shore company for the purposes of its office
in Sri Lanka, has been deposited to the credit of an
account at that bank in the name of the off-shore
company.
(2) A certificate of registration issued to an off-shore
company under this Part of this Act, shall exempt the
company from complying with any other provision of this
Act.
(3) No certificate of registration shall be granted to a
company under this section, where —
(a) the winding up or liquidation of such company has
commenced;
(b) a receiver of the property of such company has been
appointed;
(c) there is any scheme or order in force in relation to
such company under which the rights of creditors
are suspended or restricted.
214 Companies Act, No. 07 of 2007
(4) Before the Registrar issues a certificate of registration
to an off-shore company under this section, he shall satisfy
himself that—
(a) in the case of a company incorporated abroad, there
is no legal impediment in the country of
incorporation to the company engaging in the
business of an off-shore company;
(b) the issue of such certificate does not render defective
any legal or other proceedings instituted or to be
instituted by or against the company,
and shall embody in the certificate such conditions as he
may deem necessary in the national interest or in the interest
of the national economy.
(5) The Registrar may for good cause cancel the
registration of an off-shore company under this Part of this
Act. Upon such cancellation, the off-shore company shall
cease to enjoy the privileges and benefits granted under this
Part of this Act or under any other written law relating to off-
shore companies.
Continuation of 263. An off-shore company which intends to continue its
business of off- business as an off-shore company under this Act shall in every
shore company.
calendar year—
(a) produce to the Registrar proof of payment of the
prescribed fee in the prescribed manner at the
commencement of that year and not later than the
thirty first day of January of that year ; and
(b) produce to the Registrar not later than the thirty-
first day of January of that year, or such later date as
the Registrar may approve, a bank certificate as
required under paragraph (b) of subsection (1) of
section 262 in regard to defraying of the expenses
of the off-shore company for that year.
Companies Act, No. 07 of 2007 215
264. (1) An off-shore company shall have power to carry Prohibition on
carrying on
on any business outside Sri Lanka; but shall not be entitled
business in Sri
to carry on any business within Sri Lanka. Lanka.
(2) Nothing in subsection (1) shall preclude an off-shore
company securing in Sri Lanka any benefits or advantages
available under any written law which may be applicable to
it.
265. An off-shore company may cease carrying on Cessation of
business as an off-shore company by giving notice to the business as an
Registrar in the prescribed form of its intention to do so. off-shore
company.
PART XII
WINDING UP
(1) PRELIMINARY
Modes of winding up
266. In this Part of this Act, the expression “contributory” Definition of
means every shareholder of the company and every other contributory.
person liable to contribute to the assets of a company in the
event of its being wound up, and for the purposes of all
proceedings for determining and all proceedings prior to the
final determination of, the persons who are to be deemed
contributories and includes any person alleged to be a
contributory.
267. (1) The winding up of a company may be either — Modes of
winding up.
(a) by the court;
(b) voluntary; or
(c) subject to the supervision of the court.
(2) The provisions of this Act with respect to winding up
shall apply unless the contrary appears, to the winding up of
a company in any manner set out in subsection (1).
216 Companies Act, No. 07 of 2007
CONTRIBUTORIES
Power of 268. (1) The liquidator may—
liquidator to
enforce liability
(a) if a shareholder is liable to calls, make calls on the
of share holders
and former shares held by that shareholder;
shareholders.
(b) if a shareholder or former shareholder is otherwise
liable to the company, enforce that liability.
(2) A call under paragraph (a) of subsection (1) shall be
make in writing.
Liability of 269. (1) Subject to the provisions of subsection (2), if a
former shareholder of a company in liquidation fails to pay any
shareholders for amount due in respect of a share, that amount shall be payable
unpaid calls.
by and may be recovered by the liquidator from any other
person who was registered as the holder of the share at any
time, within—
(a) the period of one year before the commencement of
the liquidation; or
(b) in the case of a company that was put into
liquidation by the court, the period of one year
before the making of the application to the court
together with the period commencing on the date of
the making of that application and ending on the
date on which the order of the court was made.
(2) A former shareholder shall not be liable under
subsection (1), if at all times that he was registered as the
holder of the share during the period referred to in subsection
(1), the company was able to pay its debts as they fell due.
(3) Where the liability attached to a share has increased
after the time at which the former shareholder was registered
as the holder of the share, he shall be liable only for the
amount of any liability attached to the share at the time at
which it was held by him.
Companies Act, No. 07 of 2007 217
(II) WINDING UP BY THE COURT
CASES IN WHICH COMPANY MAY BE WOUND UP BY THE COURT
270. A company may be wound up by the court, if— Circumstance in
which a
(a) the company has by special resolution resolved that company may be
wound up by the
the company be wound up by the court; court.
(b) the company does not commence its business within
a year from its incorporation or suspends it business
for one year;
(c) if the number of the members falls below the
minimum number required under subsection (2) of
section 4 of this Act;
(d) the company has no directors;
(e) the company is unable to pay its debts; or
(f) the court is of opinion that it is just and equitable
that the company should be wound up.
271. A company shall be deemed to be unable to pay its Definition of
debts where— inability to pay
debts.
(a) a creditor by assignment or otherwise, to whom the
company is indebted in a sum exceeding fifty
thousand rupees then due, has served on the
company by leaving it at the registered office of the
company, a demand under his hand requiring the
company to pay the sum so due and the company
has for three weeks from the date of so leaving,
neglected to pay the sum or to secure or compound
for it to the reasonable satisfaction of the creditor;
(b) execution or other process issued on a judgment,
decree or order of any court in favour of a creditor of
the company, is returned unsatisfied in whole or in
part; or
218 Companies Act, No. 07 of 2007
(c) it is proved to the satisfaction of the court that the
company is unable to pay its debts, and in
determining whether a company is unable to pay its
debts, the court shall take into account the
contingent and prospective liabilities of the
company.
PETITION FOR WINDING UP AND EFFECTS THEREOF
Application for 272. (1) An application to the court for the winding up
winding up. of a company shall be by petition presented subject to the
provisions of this section, either by the company or by any
creditor or creditors (including any contingent or prospective
creditor or creditors), contributory or contributories, or by all
or any of those parties, jointly or separately:
Provided that—
(a) a contributory shall not be entitled to present a
winding-up petition unless—
(i) the number of members falls below the
minimum number required under subsection
(2) of section 4 of this Act ; or
(ii) the shares in respect of which he is a
contributory or some of them, either were
originally allotted to him or have been held
by him and registered in his name, for at least
six months during the eighteen months
immediately preceding the date of
commencement of the winding up or have
devolved on him through the death of a
former holder ;
(b) the court shall not give a hearing to a winding-up
petition presented by a contingent or prospective
creditor until such security for costs has been given
as the court thinks reasonable, and until a prima
facie case for winding up has been established to
the satisfaction of the court ; and
Companies Act, No. 07 of 2007 219
(c) the Registrar may present a winding-up petition in
the case of a company referred to in subsection (3)
of section 177.
(2) Where a company is being wound up voluntarily or
subject to supervision, a winding-up petition may be
presented by the official receiver attached to the court as
well as by any other person authorised in that behalf under
the provisions of this section, but the court shall not make a
winding up order on the petition, unless it is satisfied that the
voluntary winding up or winding up subject to supervision
cannot be continued with due regard to the interests of the
creditors or contributories.
273. (1) On hearing a winding-up prtition, the court Powers of court
may dismiss it or adjourn the hearing conditionally or on hearing
petition.
unconditionally or make any interim order or any other order
that it thinks fit, but the court shall not refuse to make a
winding up order on the ground that the assets of the company
have been mortgaged to an amount equal to or in excess of
those assets, or that the company has no assets.
(2) Where a winding-up petition is presented by
shareholders of the company as contributories on the ground
that it is just and equitable that the company should be wound
up, the court shall where it is of opinion that—
(a) the petitioners are entitled to relief either by
winding-up the company or by some other means ;
and
(b) in the absence of any other remedy it would be just
and equitable that the company should be wound
up,
make a winding-up order, unless it is of the opinion that
some other remedy is available to the petitioners and that
they are acting unreasonably in seeking to have the company
wound up instead of pursuing that other remedy.
220 Companies Act, No. 07 of 2007
Power to stay or 274. At any time after the presentation of a winding-up
restrain petition, and before a winding-up order has been made, the
proceedings
company or any creditor or contributory may-
against a
company.
(a) where any action or proceeding against the company
is pending in any court in Sri Lanka, make an
application to the court in which such action or
proceeding is pending for a stay of proceedings
therein ; and
(b) where any other action or proceeding is pending
against the company, make an application to the
court having jurisdiction to wind up the company,
to restrain further peoceedings in such action or
proceeding, and the court to which application is so
made may, as the case may be, stay or restrain the
proceedings accordingly on such terms as it thinks
fit.
Avoidance of 275. In a winding up by the court, any disposition of the
disposition of property of the company, including things in action and any
property &c.
after transfer of shares or alteration in the status of the members of
commencement the company made after the commencement of the winding
of winding-up. up, shall unless the court otherwise orders, be void.
Avoidance of 276. (1) Where any company is being wound up by the
attachments &c. court, subject to the provisions of subsection (2) any
attachment, sequestration, or execution put in force against
the estate or effects of the company after the time of the
presentation of the petition for the winding up, shall be void
to all intents.
(2) Nothing in this section shall apply to an execution
process or attachment against any property by or for the
benefit of a creditor, who is entitled to a charge in respect of
that property.
Companies Act, No. 07 of 2007 221
COMMENCEMENT OF WINDING UP
277. (1) Where before the presentation of a petition for Commencement
the winding up of a company by the court, a resolution has of winding up
by the court.
been passed by the company for voluntary winding up, the
winding up of the company shall be deemed to have
commenced at the time of the passing of the resolution and
unless the court, on proof of fraud or mistake thinks fit
otherwise to direct, all proceedings taken in the voluntary
winding up shall be deemed to have been validly taken.
(2) In any other case, the winding up of a company by the
court shall be deemed to commence at the time of the
presentation of the petition for the winding up.
CONSEQUENCES OF WINDING UP ORDER
278. On the making of a winding up order, a copy of the Copy of order to
order shall forthwith be forwarded by the company or be forwarded to
Registrar.
otherwise as may be prescribed, to the Registrar who shall
make a minute thereof in his books relating to the company.
279. (1) When a winding up order has been made or a Actions stayed
provisional liquidator has been appointed, subject to the on winding up.
provisions of subsection (2), no action or proceeding shall
be proceeded with or commenced against the company except
by leave of the court, and subject to such terms as the court
may impose.
(2) Nothing in this section shall apply to an execution
process or attachment against any property by or for the
benefit of a creditor, who is entitled to a charge in respect of
that property.
280. An order for winding up a company shall operate Effect of
in favour of all the creditors and of all the contributories of winding up
order.
the company, as if made on the joint petition of a creditor and
of a contributory.
222 Companies Act, No. 07 of 2007
OFFICIAL RECEIVER IN WINDING UP
Official 281. For the purposes of this Act, the expression “official
receiver. receiver” so far as it relates to the winding up of a company
by the court, means the official receiver if any, attached to
the court for insolvency purposes, or if there is no such official
receiver so attached, such person as the Minister may appoint
as official receiver to that court.
Appointment 282. If in the case of the winding up of any company by
of official court it appears to the court desirable with a view to securing
receiver by
a more convenient and economical conduct of such winding
court in
certain cases. up, that some officer, other than the person who would by
virtue of the provisions of section 281 be the official receiver
should be the official receiver for the purposes of that winding
up, the court may appoint that other officer to act as official
receiver in that winding up, and the person so appointed
shall be deemed to be the official receiver in that winding up
for all purposes of this Act.
Statement of 283. (1) Where the court has made a winding up order
company’s or appointed a provisional liquidator, there shall, unless the
affairs to be court thinks fit to order otherwise and so orders, be made out
submitted to
and submitted to the official receiver a statement in the
official
receiver. prescribed form of the affairs of the company, verified by
affidavit and showing the particulars of its assets, debts and
liabilities, the names, residences and occupations of its
creditors, the securities held by them respectively, the dates
when the securites were respectively given and such further
or other information as may be prescribed or as the official
receiver may require.
(2) The statement referred to in subsection (1) shall be
submitted and verified by one or more of the persons who are
at the relevant date the directors and by the person who is at
that date the secretary of the company or by such of the
persons referred to below, who may be appointed by court as
the official receiver, subject to the direction of the court —
(a) who are or have been officers of the company ;
Companies Act, No. 07 of 2007 223
(b) who have taken part in the formation of the company
at any time within one year before the relevant date;
(c) who are in the employment of the company or have
been in the employment of the company within the
said year and are in the opinion of the official
receiver, capable of giving the information required;
(d) who are or have been within the said year officers of
or in the employment of a company which is or
within the said year was, an officer of the company
to which the statement relates.
(3) The statement referred to in subsection (1) shall be
submitted within fourteen days from the relevant date, or
within such extended time as the official receiver or the court
may, for special reasons appoint.
(4) Any person making or concurring in making the
statement and affidavit required by the provisions of this
section, shall be allowed and shall be paid by the official
receiver or provisional liquidator, as the case may be, out of
assets of the company, such costs and expenses incurred in
and about the preparation and making of the statement and
affidavit as the official receiver may consider reasonable,
subject to an appeal to the court.
(5) Where any person without reasonable excuse fails to
comply with the requirements of this section, he shall be
guilty of an offence and be liable on conviction to a fine not
exceeding two hundred thousand rupees.
(6) Any person claiming in writing to be a creditor or
contributory of the company shall be entitled by himself or
by his agent at all reasonable times, on payment of the
prescribed fee to inspect the statement submitted in pursuance
of the provisions of this section and to a copy of or extract
from such statement.
224 Companies Act, No. 07 of 2007
(7) Any person claiming to be a creditor or contributory
knowing it to be false shall be guilty of a contempt of court
and shall on the application of the liquidator or of the official
receiver, be punishable for such contempt.
(8) In this section the expression “the relevant date”
means, in a case where a provisional liquidator is appointed,
the date of his appointment and in case where no such
appointment is made, the date of the winding up order.
Report by 284. (1) In any case where a windingup order is made,
official receiver. the official receiver shall, as soon as practicable after receipt
of the statement to be submitted under the provisions of
section 283 or in any case where the court orders that no such
statement shall be submitted, as soon as practicable after the
date of the order, submit a preliminary report to the court—
(a) as to the number and types of shares issued, the
stated capital and the estimated amount of assets
and liabilities ;
(b) where the company has failed, as to the causes of
the failure ; and
(c) whether in his opinion further inquiry is desirable
as to any matter relating to the promotion,
formation, or failure of the company or the conduct
of the business thereof.
(2) The official receiver may also if he thinks fit, make a
further report or further reports stating the manner in which
the company was formed and whether in his opinion any
fraud has been committed by any person in its promotion or
formation or by any officer of the company in relation to the
company since the formation of such company, and any other
matters which in his opinion it is desirable to bring to the
notice of the court.
Companies Act, No. 07 of 2007 225
(3) Where the official receiver states in any such further
report as is referred to in subsection (2) that in his opinion a
fraud has been committed, the court shall exercise the powers
set out in section 311 in dealing with such report.
LIQUIDATORS
285. For the purposes of conducting the proceedings in Power of court
winding up a company and performing such duties in reference to appoint
liquidators.
thereto as the court may impose, the court may appoint a
liquidator or liquidators.
286. (1) The court may appoint a liquidator Appointment
provisionally at any time after the presentation of a winding and powers of
provisional
up petition and before the making of a winding up order and
liquidator.
either the official receiver or any other fit person, may be so
appointed.
(2) Where a liquidator is provisionally appointed by the
court, the court may limit and restrict his powers by the order
appointing him.
287. The following provisions with respect to liquidators Appointment
shall have affact on a winding up order being made— style, &c. of
liquidators.
(a) the official receiver shall by virtue of his office
become the provisional liquidator and shall continue
to act as such until he or another person becomes
liquidator and is capable of acting as such ;
(b) the official receiver shall summon separate meetings
of the creditors and contributories of the company,
for the purposes of determining whether or not an
application is to be made to the court for appointing
a liquidator in place of the official receiver ;
(c) the court may make any appointment and make any
order required to give effect to any such
determination, and if there is a difference between
226 Companies Act, No. 07 of 2007
the determinations of the meetings of the creditors
and contributories in respect of the matter aforesaid,
the court shall decide the difference and make such
order thereon as the court may think fit ;
(d) in a case where the liquidator is not appointed by
the court, the official receiver shall be the liquidator
of the company ;
(e) the official receiver shall by virtue of his office be
the liquidator during any vacancy in the office of
liquidator ;
(f) a liquidator shall be described where a person other
than the official receiver is the liquidator, by the
style of “the liquidator”, and where the official
receiver is liquidator, by the style of “the official
receiver and liquidator” of the particular company
in respect of which he is appointed and not by his
individual name.
Provisions where 288. Where in the winding up of a company by the court,
person other a person other than the official receiver is appointed
than official
receiver is liquidator, that person—
appointed a
liquidator. (a) shall not be capable of acting as liquidator until he
has been notified of such appointment and given
security in the prescribed manner to the Registrar ;
(b) shall give the official receiver such information and
such access to and facilities for inspecting the books
and documents of the company, and generally such
aid as may be required for enabling that officer to
perform his duties under this Act.
General 289. (1) A liquidator appointed by the court may resign
provisions as to or on cause shown, be removed by the court.
liquidators.
Companies Act, No. 07 of 2007 227
(2) Where a person other than the official receiver is
appointed liquidator, he shall receive such salary or
remuneration by way of percentage or otherwise as the court
may direct, and where more than one such persons are
appointed liquidators, their remuneration shall be distributed
among them in such proportions as the court directs.
(3) A vacancy in the office of a liquidator appointed by
the court shall be filled by the court.
(4) Where more than one liquidator is appointed by the
court, the court shall declare whether any act required or
authorised to be done under the provisions of this Act by the
liquidator, is to be done by all or any one or more of the
persons so appointed.
(5) No act of a liquidator shall be or shall be deemed to be
invalid by reason only of any defect in the appointment or
qualification of such liquidator.
290. Where a windingup order has been made or where Custody of
a provisional liquidator has been appointed, the liquidator company’s
or the provisional liquidator, as the case may be, shall take property.
into his custody or under his control all the property and
things in action to which the company is or appears to be
entitled.
291. Where a company is being wound up by the court, Vesting of
the court may on the application of the liquidator by order property of
company in
direct that that all or any part of the property of whatever
liquidator.
description belonging to the company or held by trustees on
its behalf, shall vest in the liquidator by his official name,
and thereupon the property to which the order relates shall
vest accordingly and the liquidator may, after giving such
indemnity, if any, as the court may direct, bring or defend in
his official name any action or other legal proceedings which
relates to that property or which it is necessary to bring or
defend for the purpose of effectually winding up the company
and recovering its property.
228 Companies Act, No. 07 of 2007
Powers of 292. (1) The liquidator in a winding up by the court
liquidator. shall have power, with the sanction either of the court or of
the committee of inspection—
(a) to bring or defend any action or other legal
proceeding in the name and on behalf of the
company ;
(b) to carry on the business of the company so far as
may be necessary for the beneficial winding up of
such company ;
(c) to appoint an attorney-at-law to assist him in the
performance of his duties ;
(d) to pay any classes of creditors in full ;
(e) to make any compromise or arrangement with
creditors or persons claiming to be creditors or
having or alleging themselves to have any claim,
present or future, certain or contingent, ascertained
or sounding only in damages against the company
or whereby the company may be rendered liable ;
(f) to compromise all calls and liabilities to calls, debts,
and liabilities capable of resulting in debts and all
claims, present or future, certain or contingent,
ascertained or sounding only in damages, subsisting
or alleged to subsist between the company and a
contributory or alleged contributory or other debtor
or person apprehending liability to the company,
and all questions in any way relating to or affecting
the assets or the winding up of the company, on
such terms as may be agreed and take any security
for the discharge of any such call, debt, liability or
claim and give a complete discharge in respect
thereof.
Companies Act, No. 07 of 2007 229
(2) The liquidator in a winding up by the court shall have
power—
(a) to sell the movable and immovable property and
things in action of the company by public auction
or private contract, with power to transfer the whole
thereof to any person or company or to sell the same
in parcels;
(b) to do all acts and to execute in the name and on
behalf of the company, all deeds, receipts, and other
documents and for that purpose to use when
necessary, the seal of the company, if any ;
(c) to prove, rank and claim in the bankruptcy,
insolvency or sequestration of any contributory for
any balance against his estate, and to receive
dividends in the bankruptcy, insolvency or
sequsetration in respect of that balance as a separate
debt due from the bankrupt or insolvent, and rateably
with the other seperate creditors ;
(d) to draw, accept, make and endorse any bills of
exchange or promissory note or like instruments in
the name and on behalf of the company, with the
same effect with respect to the liability of the company
as if the bill or note or such instrument had been
drawn, accepted, made, or endorsed by or on behalf
of the company in the course of its business;
(e) to raise on the security of the assets of the company
any money required ;
(f) to take out in his official name letters of
administration to any deceased contributory, and to
do in his official name any other act necessary for
obtaining payment of any money due from a
contributory or his estate which cannot be
conveniently done in the name of the company, and
230 Companies Act, No. 07 of 2007
in all such cases the money due shall, for the purpose
of enabling the liquidator to take out the letters of
administration or recover the money, be deemed to
be due to the liquidator himself :
Provided that nothing herein empowered shall
be deemed to affect the rights, duties, and privileges
of the Public Trustee appointed under the Public
Trustee Ordinance (Cap. 88) ;
(g) to appoint an agent to do any business on behalf of
such liquidator ;
(h) to do all such other things as may be necessary for
windingup the affairs of the company and
distributing its assets.
(3) The exercise by the liquidator in a winding up by the
court of the powers conferred by the provisions of this section,
shall be subject to the control of the court and any creditor or
contributory may make an application to the court for the
exercise or proposed exercise of any of those powers.
Exercise and 293. (1) Subject to the provisions of this Act, the
control of liquidator of a company which is being wound up by the
liquidator’s
court shall, in the administration of the assets of the company
powers.
and in the distribution thereof among its creditors, have regard
to any directions that may be given by resolution of creditors
or contributories at any general meeting or by the committee
of inspection, and any directions given by the creditors or
contributories at any general meeting shall in case of conflict,
be deemed to prevail over any directions given by the
committee of inspection.
(2) The liquidator may summon general meetings of the
creditors or contributories for the purpose of ascertaining
their wishes, and it shall be his duty to summon meetings at
such times as the creditors or contributories, by resolution,
either at the meeting appointing the liquidator or otherwise
Companies Act, No. 07 of 2007 231
may direct, or whenever requested in writing to do so by one-
tenth of the total number of creditors or contributories, as the
case may be.
(3) The liquidator may make an application to court in
the prescribed manner for directions in relation to any
particular matter arising under the winding up.
(4) Subject to the provisions of this Act, the liquidator
shall use his own discretion in the management of the estate
and its distribution among the creditors.
(5) Where any person is aggrieved by any act or decision
of the liquidator, that person may appeal to the court against
such act or decision, and the court may confirm, reverse, or
modify the act or decision complained of and make such
order as it thinks just.
294. Every liquidator of a company which is being Books to be kept
wound up by the court shall keep in the prescribed manner, by liquidators.
proper books in which he shall cause to be made entries or
minutes of proceedings at meetings and of such other matters
as may be prescribed, and any creditor or contributory may
subject to the control of the court, personally or by his agent
inspect any such books.
295. (1) Every liquidator of a company which is being Payments by
wound up by the court shall pay the money received by him liquidator into
into an account or accounts established for the purpose at bank.
one or more licenced commercial banks.
(2) A liquidator of a company which is being wound up
by the court shall not pay any sums received by him as
liquidator into his private banking account.
296. (1) Every liquidator of a company which is being Audit of
wound up by the court shall, at such times as may be liquidator’s
accounts.
prescribed but not less than twice in each year during his
tenure of office, send to the Registrar an account of his receipts
and payments as liquidator.
232 Companies Act, No. 07 of 2007
(2) The account shall be in the prescribed form, shall be
made in duplicate and shall be certified by a statutory
declaration in the prescribed form.
(3) The Registrar shall cause the account to be audited
and for the purpose of the audit the liquidator shall furnish
the Registrar with such vouchers and information as the
Registrar may require and the Registrar may at any time
require the production of and inspect any books or accounts
kept by the liquidator.
(4) When the account has been audited, one copy thereof
shall be filed and kept by the Registrar and the other copy
shall be delivered to the court for filing, and each copy shall
be open to the inspection of any person on payment of the
prescrihed fee.
(5) The liquidator shall send a copy of the account or
summary by post to every creditor and contributory, unless
he considers that it is not practicable to do so, having regard
to the cost of so doing and the value of the assets of the
company.
Control of 297. (1) The Registrar shall take cognizance of the
Registrar over conduct of liquidators of companies which are being wound
liquidator. up by the court, and where a liquidator does not faithfully
perform his duties and duly observe all requirements imposed
on him by any written law or otherwise with respect to the
performance of his duties, or where any complaint is made to
the Registrar by any creditor or contributory in regard thereto,
the Registrar shall inquire into the matter and if necessary,
report to the court.
(2) The Registrar may at any time require any liquidator
of a company which is being wound up by the court to answer
any inquiry in relation to any winding up in which he is
engaged, and may where the Registrar thinks fit so to do,
make an application to court to examine him or any other
person on oath on any matter concerning the winding up.
Companies Act, No. 07 of 2007 233
(3) The Registrar may also direct a local investigation to
be made of the books and vouchers of the liquidator.
298. (1) When the liquidator of a company which is Release of
being wound up by the court has realized all the property of liquidators.
the company or so much thereof as can in his opinion, be
realized without needlessly protracting the liquidation, has
distributed a final dividend, if any, to the creditors and
adjusted the rights of the contributories among themselves
and made a final retuen if any to the contributories, or has
resigned or has been removed from his office, the court shall,
on his application for a release from the office of the
liquidator, cause a report on the accounts to be prepared, and
on his complying with all the requirements of the court, shall
take into consideration the report and any objection which
may be urged by any creditor or contributory or person
interested against the release of the liquidator, and shall either
grant or withhold such release accordingly.
(2) Where the release of a liquidator is withheld, the court
may on the application of any creditor or contributory or
person interested, make such order as it thinks just, charging
the liquidator with the consequences of any act done or
default made by him in the administration of the affairs of the
company.
(3) An order of the court releasing the liquidator shall
discharge him form all liability in respect of any act done or
default made by him in the administration of the affairs of the
company or otherwise in relation to his conduct as liquidator,
but any such order may be revoked on proof that it was
obtained by fraud or by suppression or concealment of any
material fact.
(4) Where the liquidator has not previously resigned or
been removed from office, his release shall have the effect of
a removal of a liquidator from his office.
234 Companies Act, No. 07 of 2007
COMMITTEE OF INSPECTION
Meetings of 299. (1) When a winding up order has been made by
creditors and the court, it shall be the business of the seperate meetings of
contributories
to determine creditors and contributories summoned for the purpose of
whether determining whether or not an application should be made
committee of to the court for appointing a liquidator in place of the official
inspections
shall be receiver, to determine further, whether or not an application
appointed. shall be made to the court for the appointment of a committee
of inspection to act with the liquidator and the persons who
shall be members of such committee, if appointed.
(2) The court may make any appointment or order
required to give effect to any such determination, and where
there is any difference between the determinations of the
meetings of the creditors and contributories in respect of
the matters referred to in subsection (1), the court shall
decide the difference and make such order thereon as the
court may think fit.
Constitution 300. (1) A committee of inspection appointed in
and pursuance of the provisions of this Act shall consist of
proceedings
of committee creditors and contributories of the company or persons
of holding general powers of attorney from creditors or
inspection. contributories in such proportions as may be agreed on at the
meetings of creditors and contributories, or in case of any
difference, as may be determined by the court.
(2) The committee shall meet at such times as they from
time to time appoint, provided that a meeting is held at least
once in every three months. The liquidator or any member of
the committee may also call a meeting of the committee as
and when such liquidator or member, as the case may be,
thinks necessary.
(3) The committee shall not act unless a majority of the
members of the committee are present at the meeting.
Companies Act, No. 07 of 2007 235
(4) A member of the committee may resign by notice in
writing signed by him and delivered to the liquidator.
(5) Where a member of the committee becomes insolvent
or bankrupt or compounds or arranges with his creditors or is
absent from three consecutive meetings of the committee
without the leave of those members who together with himself
represent the creditors or contributories, as the case may be,
his office shall become vacant.
(6) A member of the committee may be removed by an
ordinary resolution at a meeting of creditors if he represents
creditors or of contributories if he represents contributories,
notice of such meeting being given seven days prior to the
date and also stating the objects of such meeting.
(7) On a vacancy occurring in the committee, the
liquidator shall forthwith summon a meeting of creditors or
of contributories, as the case may be, to fill the vacancy and
the meeting may by resolution, re-appoint the same or appoint
another creditor or contributory to fill the vacancy:
Provided that where the liquidator having regard to the
state of the winding up, is of the opinion that it is unnecessary
for the vacancy to be filled, he may make an application to
the court for an order that the vacancy shall not be filled and
the court may make such an order or an order that such
vacancy shall not be filled except in such circumstances as
may be specified in the order.
301. Where in the case of a winding up there is no Powers of court
committee of inspection, the court may on the application of where there is no
committee of
the liquidator, do any act or give any direction or permission inspection.
which by this Act is authorised or required to be done or
given, by the committee.
236 Companies Act, No. 07 of 2007
GENERAL POWERS OF COURT IN CASE OF WINDING UP BY COURT
Power to stay 302. (1) The court may at any time after an order for
winding up. winding up is made, on the application either of the liquidator
or the official receiver or any creditor or contributory, and on
proof to the satisfaction of the court that all proceedings in
relation to the winding up ought to be stayed, make an order
staying the proceedings either altogether or for a limited
time, on such terms and conditions as the court thinks fit.
(2) On any application made under the provisions of
subsection (1), the court may before making an order require
the official receiver to furnish to the court a report with respect
to any facts or matters which are in his opinion relevant to
the application.
(3) A copy of every order made under the provisions of
this section shall forthwith be forwarded by the company or
otherwise as may be prescribed to the Registrar, who shall
forthwith make a minute of the order in his books relating to
the company.
Settlement of list 303. (1) As soon as may be after making a winding up
of contributories order, the court shall settle a list of contributories, with power
and application
of assets. to rectify the share register in all cases where rectification is
required in pursuance of this Act and shall cause the assets of
the company to be collected and applied in discharge of its
liabilities:
Provided that where it appears to the court that it will not
be necessary to make calls on or adjust the rights of
contributories, the court may dispense with the settlement of
a list of contributories.
(2) In settling the list of contributories, the court shall
distinguish between persons who are contributories in their
own right and persons who are contributories as being
representatives of or liable for the debts of others.
Companies Act, No. 07 of 2007 237
304. The court may, at any time after making a winding Delivery of
up order, require any contributory for the time being on the property to
liquidator.
list of contributories, and any trustee, receiver, banker, agent
or officer of the company to pay, deliver, convey, surrender or
transfer forthwith or within such time as the court directs, to
the liquidator any money, property, or books and papers in
his hand to which the company is prima facie entitled.
305. (1) The court may at any time after making a Payment of debts
winding up order, make an order on any contributory for the due by
time being on the list of contributories, to pay in the manner contributory to
company and
directed by the order, any money due from him or from the
extent to which
estate of the person whom he represents to the company, set off is
exclusive of any money payable by him or such estate by allowed.
virtue of any call in pursuance of this Act.
(2) The court in making such an order may in the case of
an unlimited company, allow to the contributory by way of
set-off any money due to him or to the estate which he
represents from the company, on any independent dealing or
contract with the company, but not any money due to him as
a member of the company in respect of any dividend or profit.
(3) In the case of any company whether limited or
unlimited, when all the creditors are paid in full, any money
due on any account whatever to a contributory from the
company may be allowed to him by way of set-off against
any subsequent call.
306. (1) The court may order any contributory, purchaser Payment into
or other person from whom money is due to the company, to bank of moneys
pay the amount due into a specified bank or any branch due to company.
thereof to the account of the liquidator instead of to the
liquidator, and any such order may be endorsed in the same
manner as if it had directed payment to the liquidator.
(2) All moneys and securities paid or delivered into a
specified bank or any branch thereof in the event of a winding
up by the court shall be subject in all respects to the orders of
the court.
238 Companies Act, No. 07 of 2007
Appointment of 307. (1) Where the official receiver becomes the
special manager. liquidator of a company whether provisionally or otherwise,
he may where satisfied that the nature of the estate or business
of the company or the interests of the creditors or
contributories generally, require the appointment of a special
manager of the estate or business of the company other than
himself, make an application to court for the appointment of
a special manager of the estate or business of the company,
and the court may on such application appoint a special
manager of the said estate or business to act during such time
as the court may direct, with such powers including any of
the powers of a receiver or manager, as may be entrusted to
him by the court.
(2) The special manager appointed under the provisions
of subsection (1), shall give such security and account in
such manner as the court directs.
(3) The special manager appointed under the provisions
of subsection (1) shall receive such remuneration as may be
fixed by the court.
Inspection of 308. The court may at any time after making a winding
books by up order, make such order for inspection of the books and
creditors and
contributories. papers of the company by creditors and contributories as the
court thinks just, and any books and papers in the possession
of the company may be inspected by creditors or
contributories accordingly.
Power to order 309. The court may in the event of the assets being
costs of winding insufficient to satisfy the liabilities, make an order as to the
up to be paid out payment out of the assets of the costs, charges, and expenses
of assets.
incurred in the winding up, in such order of priority as the
court thinks just.
Power to 310. (1) The court may at any time after the appointment
summon persons of a provisional liquidator or the making of a winding up
suspected of
having property order, summon before it any officer of the company or person
of company. known or suspected to have in his possession any property of
the company or alleged to be indebted to the company, or
Companies Act, No. 07 of 2007 239
any person whom the court deems capable of giving
information concerning the promotion, formation, trade,
dealings, affairs or property of the company.
(2) The court may examine on oath any officer or person
summoned under the provisions of subsection (1) on any
matter referred to in that subsection, either orally or on written
interrogatories, and may where such examination is conducted
orally, reduce the answers to writing and require such officer
or person to sign it.
(3) The court may require any officer or person summoned
under the provisions of subsection (1), to produce any books
and papers in his custody or power relating to the company,
but where such officer or person claims any lien on such
books or papers produced by him, the production shall be
without prejudice to that lien, and the court shall have
jurisdiction in the winding up to determine all questions
relating to that lien.
(4) Any officer or person summoned under the provisions
of subsection (1) who refuses or fails without reasonable cause,
to appear before court or to produce any books or papers
required to be produced by him at the time and on the date
specified in the summons, shall be liable to be arrested and
produced before court for examination.
311. (1) Where an order has been made by the court for Power to order
the winding up of a company and the official receiver has public
examination of
made a further report under the provisions of this Act, stating
promoters,
that in his opinion a fraud has been committed by any person directors &c.
in the promotion or formation of the company or by any
officer of the company in relation to the company since its
formation, the court may after consideration of such report,
direct that such person or officer shall attend before the court
on a day appointed by the court for that purpose, and be
publicly examined as to the promotion or formation or the
conduct of the business of the company or as to his conduct
and dealing as officer thereof.
240 Companies Act, No. 07 of 2007
(2) The official receiver may make representations at the
examination referred to in subsection (1), and for that purpose
may be represented by an attorney at-law.
(3) The liquidator, where the official receiver is not the
liquidator, and any creditor or contributory may also take
part in the examination either personally or by an attorney-
at-law.
(4) The person or officer examined under the provisions
of this section shall be examined on oath or affirmation and
shall answer all such questions as the court may put or allow
to be put to him
Person or officer 312. (1) A person or officer directed to be examined
being examined under the provisions of section 311 shall at his own cost,
to be represented
before being so examined, be furnished with a copy of the
by an attorney-
at-law, &c,. report of the official receiver and may at his own cost be
represented by an attorney-at-law, who shall be at liberty to
put to such person or officer such questions as the court may
deem just for the purpose of enabling him to explain or qualify
any answers given by him:
Provided that, where any such person or officer makes an
application to court to be exculpated from any charges made
or alleged against him, it shall be the duty of the official
receiver to appear at the hearing of the application and draw
the attention of the court to any matters which appear to the
official receiver to be relevant, and where the court after
hearing any evidence given or witnesses called by the official
receiver, grants the application, the court may allow the
applicant such costs as it may in its discretion, thinks fit.
(2) Proceedings of the examination held under section
311 shall be reduced to writing and shall be read over to or
by, and signed by the person or officer examined, and may
thereafter be used in evidence against him and shall be open
to the inspection of any creditor or contributory at all
reasonable times.
Companies Act, No. 07 of 2007 241
(3) The court may if it thinks fit, adjourn the examination
from time to time.
313. The court may at any time either before or after Power to arrest
making a winding up order, on reasonable cause being shown absconding
for believing that a contributory is about to leave Sri Lanka contributory.
or otherwise to abscond or to remove or conceal any of his
property for the purpose of evading payment of calls, or for
avoiding examination with respect to the affairs of the
company, may cause the contributory to be arrested, and his
books and papers and movable personal property to be seized
and kept in safe custody until such time, as the court may
specify.
314. Any powers by this Act conferred on the court shall Powers of court
be in addition to and not in restriction of any existing powers cumulative.
of instituting proceedings against any contributory or debtor
of the company or the estate of any contributory or debtor,
for the recovery of any call or other sums.
315. The Minister may make rules for enabling or Delegation to
requiring all or any of the powers and duties conferred and liquidator of
certain powers of
imposed on the court by this Act, in respect of—
court.
(a) the holding and conducting of meetings to ascertain
the wishes of creditors and contributories;
(b) the settling of lists of contributories and the
rectifying of the register of members where required,
and the collecting and applying of the assets;
(c) the paying, delivery, conveyance, surrender or
transfer of money, property, books or papers to the
liquidator;
(d) the fixing of a time within which debts and claims
shall be proved,
to be exercised or performed by the liquidator as an officer of
the court and subject to the control of the court:
242 Companies Act, No. 07 of 2007
Provided that the liquidator shall not without the special
leave of the court, rectify the register of members and shall
not make any call without either the special leave of the
court or the sanction of the committee of inspection.
Dissolution of a 316. (1) Where the affairs of a company have been
company. completely wound up, the court shall where the liquidator
makes an application in that behalf, make an order that the
company be dissolved from the date of such order and the
company shall be dissolved accordingly.
(2) A copy of the order made under the provisions of
subsection (1) shall, within fifteen days from the date of such
order, be forwarded by the liquidator to the Registrar who
shall make in his books a minute of the dissolution of the
company.
(3) Where the liquidator fails to comply with the
requirements of this section, he shall be guilty of an offence
and be liable on conviction to a fine not exceeding one
hundred thousand rupees.
Manner of 317. Any order made by a court under this Act may be
enforcing order enforced in the same manner in which a decree of such court
of court.
made in any suit pending therein may be enforced.
Enforcement of 318. Where any order made by one court is required to
winding up be enforced by any other court, a certified copy of the order
order in another
court. shall be produced to the court required to enforce the same,
and the production of a certified copy shall be sufficient
evidence of the order, and thereupon such other court shall
take the requisite steps in the matter for enforcing the order,
in the same manner as if it had been made by that court.
Companies Act, No. 07 of 2007 243
(III) VOLUNTARYWINDING UP
RESOLUTION FOR AND COMMENCEMENT OF VOLUNTARY WINDING UP
319. (1) A company may be wound up voluntarily— Circumstances in
which a
company may be
(a) when the period if any, fixed for the duration of the wound up
company by the articles expires or the event if any, voluntarily.
occurs on the occurrence of which the articles
provide that the company is to be dissolved, and
the company at a general meeting has passed a
resolution requiring the company to be wound up
voluntarily;
(b) where the company resolves by special resolution
that the company be wound up voluntarily;
(c) where the company resolves by special resolution
to the effect that it cannot by reason of its liabilities
continue its business and that it is advisable to wind
up.
(2) In this Act the expression “a resolution for voluntary
winding up” means a resolution passed under the provisions
of subsection (1).
320. (1) When the company has passed a resolution for Notice of
voluntary winding up, it shall within fourteen days from the resolution to
wind up
date of the passing of the resolution, give notice of the voluntarily.
resolution by publication in the Gazette.
(2) Where the company fails to comply with the provisions
of this section —
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding one
hundred thousand rupees; and
244 Companies Act, No. 07 of 2007
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a penalty not exceeding fifty thousand rupees.
(3) For the purposes of this section, the liquidator of
company shall be deemed to be an officer of the company.
Commencement 321. A voluntary winding up shall be deemed to
of voluntary commence at the time of the passing of the resolution for
winding up.
voluntary winding up.
CONSEQUENCES OFVOLUNTARYWINDING UP
Effect of 322. In the case of a voluntary winding up, the company
voluntary shall from the date of commencement of the winding up,
winding up on
cease to carry on its business except so far as may be required
business and
status of for the beneficial winding up thereof:
company.
Provided that the corporate state and corporate powers of
the company shall, notwithstanding anything to the contrary
in its articles, continue until such company is dissolved.
Avoidance of 323. Any transfer of shares, not being a transfer made to
transfers,&c., or with the sanction of the liquidator and any alteration in
after the status of the shareholders of the company made after the
commencement
of voluntary date of commencement of a voluntary winding up, shall be
void.
DECLARATION OFSOLVENCY
Statutory 324. (1) Where it is proposed to wind up a company
declaration voluntarily, the directors of the company or in the case of a
of solvency company having more than two directors the majority of the
in case of
proposal to directors may at a meeting of the directors, make a statutory
wind up declaration to the effect that they have made a full inquiry
voluntarily. into the affairs of the company and that they are of the opinion
that the company will be able to pay its debts in full within
Companies Act, No. 07 of 2007 245
such period not exceeding twelve moths, from the date of
commencement of the winding up as may be specified in the
declaration.
(2) A declaration made under the provisions of subsection
(1) shall have no effect for the purposes of this Act, unless—
(a) it is made within the five weeks immediately
preceding the date of the passing of the resolution
for winding up of the company and is delivered to
the Registrar for registration by that date; and
(b) it embodies a statement of the company’s assets and
liabilities as at the latest practicable date before the
making of such declaration.
(3) A winding up in the case of which a declaration has
been made and delivered in accordance with the provisions
of this section, is in this Act referred to as “a shareholders’
voluntary winding up”, and a winding up in the case of which
a declaration has not been so made and delivered, is in this
Act referred to as “a creditors’ voluntary winding up”.
PROVISIONSAPPLICABLETOASHAREHOLDERS’ VOLUNTARYWINDING UP
325. The provisions of sections 326 to 332 (both Provisions
inclusive) shall, subject to the provisions of section 326, relating to a
shareholders’
apply in relation to a shareholders’ voluntary winding up. voluntary
winding up.
326. (1) The company at a general meeting shall Power of
appoint one or more liquidators for the purpose of winding company to
appoint and fix
up the affairs and distributing the assets of the company and
remuneration of
may fix the remuneration to be paid to each such liquidator.
liquidators.
(2) On the appointment of a liquidator, all the powers of
the directors shall cease, execpt so far as the company in
general meeting or the liquidator sanctions the continuance
thereof.
246 Companies Act, No. 07 of 2007
Power to fill 327. (1) Where a vacancy occurs by death, resignation,
vacancy in or otherwise in the office of liquidator appointed by the
office of
liquidator. company, the company at a general meeting may, subject to
any arrangement with its creditors, fill the vacancy.
(2) For the purpose of filing a vacancy in the office of
liquidator, a general meeting of the company may be
convened by any contributory or where there are more
liquidators than one, by the continuing liquidators.
(3) The meeting referred to in subsection (2) shall be held
in the manner provided by this Act or by the articles or in
such manner as may on application by any contributory or
by the continuing liquidators, be determined by the court.
Power of 328. (1) Where a company is proposed to be or is in the
liquidator to course of being, wound up voluntarily, and the whole or part
accept shares
of its business or property is proposed to be transferred or
&c. in
consideration sold to another company, whether a company within the
for sale of meaning of this Act or not (in this section called “the transferee
property of
company”) the liquidator of the first-mentioned company
company.
(in this section called “the transferor company”) may with
the sanction of a special resolution of that company conferring
either a general authority on the liquidator or an anthority in
respect of any particular arrangement, receive in
compensation or part compensation for the transfer or sale,
shares, policies or other like interests in the transferee
company for distribution among the shareholders of the
transferor company, or may enter into any other arrangement
whereby the shareholders of the transferor company may, in
lieu of receiving cash, shares, policies, or other like interest,
or in addition thereto, participate in the profits of or receive
any other benefit from the transferee company.
(2) Any sale or arrangement in pursuance of the provisions
of this section shall be binding on the shareholders of the
transferor company.
Companies Act, No. 07 of 2007 247
(3) Where any shareholder of the transferor company who
did not vote in favour of the special resolution expresses his
dissent therefrom in writing addressed to the liquidator and
is left at the registered office of the company within seven
days from the date of the passing of the resolution, he may
require the liquidator either to abstain from carrying the
resolution into effect or to purchase his interest at a price to
be determined by agreement or by court, upon application
made to court by the shareholder or the liquidator in the
manner provided for by this section.
(4) Where the liquidator elects to purchase the
shareholder’s interest, the purchase money shall be paid
before the company is dissolved and be raised by the
liquidator in such manner as may be determined by special
resolution.
(5) A special resolution shall not be invalid for the
purposes of this section by reason that it is passed before or
concurrently with a resolution for voluntary winding up or
for appointing liquidators, but where an order is made within
a year of the date of passing of the resolution for winding up
the company, by or subject to the supervision of the court,
the special resolution shall not be valid unless sanctioned by
the court.
329. (1) Where the liquidator at any time is of opinion Duty of
that the company will not be able to pay its debts in full liquidators to call
creditiors’
within the period stated in the declaration made under the meeting in case
provisions of section 324, he shall forthwith summon a of insolvency.
meeting of the creditors and shall lay before the meeting a
statement of the assets and liabilities of the company.
(2) Where the liquidator fails to comply with the
provisions of this section, he shall be guilty of an offence
and be liable on conviction to a fine not exceeding fifty
thousand rupees.
248 Companies Act, No. 07 of 2007
Duty of 330. (1) Subject to the provisions of section 332, in the
liquidator to
event of the winding up continuing for more than one year,
call general
meeting at the liquidator shall summon a general meeting of the
end of each company at the end of the first year from the date of
year. commencement of the winding up, and of each succeeding
year or at the first convenient date within three months from
the end of the year or such longer period as the Registrar may
allow, and shall lay before the meeting an account of his acts
and dealings and of the conduct of the winding up during the
preceding year.
(2) Where the liquidator fails to comply with the
provisions of this section, he shall be guilty of an offence
and be liable on conviction to a fine not exceeding fifty
thousand rupees.
Final 331. (1) Subject to the provisions of section 332, as
meeting and soon as the affairs of the company are fully wound up, the
dissolution.
liquidator shall make up an account of the winding up
showing how the winding up has been conducted and the
property of the company has been disposed of, and thereupon
shall call a general meeting of the company for the purpose
of laying before it the account and giving an explanation
thereof.
(2) The meeting referred to in subsection (1) shall be called
by a notice published in the Gazette, specifying the date,
time, place, and object thereof and published at least one
month before such date.
(3) Within one week after the meeting referred to in
subsection (1), the liquidator shall send to the Registrar a
copy of the account and shall make a return to him of the
holding of the meeting and of its date, and where the copy is
not sent or the return is not made in accordance with the
provisions of this subsection, the liquidator shall be guilty
of an offence and be liable on conviction to a fine not
exceeding fifty thousand rupees :
Companies Act, No. 07 of 2007 249
Provided that where a quorum is not present at the meeting,
the liquidator shall in lieu of the return referred to in the
preceding provisions, make a return that the meeting was
duly summoned and that no quorum was present thereat, and
upon such a return being made the provisions of this
subsection as to the making of the return shall be deemed to
have been complied with.
(4) The Registrar on receiving the account and either of
the returns referred to in subsection (3), shall forthwith register
them and on the expiration of three months from the date of
the registration of the return, the company shall be deemed
to be dissolved :
Provided that the court may on the application of the
liquidator or of any other person who appears to the court to
be interested, make an order deferring the date at which the
dissolution of the company is to take effect, for such time as
the court thinks fit.
(5) It shall be the duty of the person on whose application
an order of the court under the provisions of this section is
made, within seven days from the date of making of the order
to deliver to the Registrar a certified copy of such order for
registration, and where such person fails so to do, he shall be
guilty of an offence and be liable on conviction to a fine not
exceeding fifty thousand rupees.
(6) Where a liquidator fails to call a general meeting of
the company as required by the provisions of this section, he
shall be guilty of an offence and be liable on conviction to a
fine not exceeding fifty thousand rupees.
332. In any case where the provisions of section 329 Alternative
have effect, the provisions of sections 340 and 341 shall provision as to
annual and final
apply to the winding up to the exclusion of the provisions of meetings in case
sections 330 and 331, as if the winding up were a creditors’ of insolvency.
voluntary winding up and not a members’ voluntary winding
up :
250 Companies Act, No. 07 of 2007
Provided that the liquidator shall not be required to
summon a meeting of creditors under the provisions of section
340 at the end of the first year from the date of the
commencement of the winding up, unless the meeting held
under the provisions of section 329 is held more than three
months before the end of that year.
PROVISIONSAPPLICABLE TO ACREDITOR’SVOLUNTARYWINDING UP
Provisions 333. The provisions of sections 334 to 341 (both
applicable to a
inclusive) shall apply in relation to a creditor’s voluntary
creditors’
winding up. winding up.
Meeting of 334. (1) The company shall cause a meeting of the
creditors. creditors of the company to be summoned for the day or the
day next following the day, on which there is to be held the
meeting at which the resolution for voluntary winding up is
to be proposed, and shall cause the notices of such meeting
of creditors to be sent by post to the creditors, simultaneously
with the sending of the notices of the said meeting of the
company.
(2) The company shall cause notice of the meeting of the
creditors to be published in the Gazette and at least in two
local newspapers circulating in the district where the
registered office or principal place of business of the company
is situated.
(3) The directors of the company shall—
(a) cause a full statement of the position of the
company’s affairs together with a list of creditors of
the company and the estimated amount of their
claims are to be laid before the meeting of creditors
to be held, as referred to in subsection (1) ; and
(b) appoint one of their number to preside at such
meeting.
Companies Act, No. 07 of 2007 251
(4) It shall be the duty of the director appointed to preside
at the meeting of creditors to attend the meeting and preside
thereat.
(5) Where the meeting of the company at which the
resolution for voluntary winding up is to be proposed is
adjourned and the resolution is passed at an adjourned
meeting, any resolution passed at the meeting of the creditors
held in pursuance of the provisions of subsection (1), shall
have effect as if it had been passed immediately after the
passing of the resolution for winding up of the company.
(6) Where default is made—
(a) by the company in complying with the provisions
of subsections (1) and (2) ;
(b) by the directors of the company in complying with
the provisions of subsection (3) ;
(c) by any director of the company in complying with
the provisions of subsection (4),
such company or any such director, as the case may be, shall
be guilty of an offence and be liable on conviction to a fine
not exceeding two hundred thousand rupees and in the case
of default by the company, every officer of the company who
is in default shall be guilty of an offence and be liable on
conviction to a penalty not exceeding one hundred thousand
rupees.
335. The creditors and the company at their respective Appointment of
meetings referred to in section 334, may nominate a person liquidator.
to be liquidator for the purpose of winding up the affairs and
distributing the assets of the company and where the creditors
and the company nominate different persons, the person
nominated by the creditors shall be the liquidator, and where
252 Companies Act, No. 07 of 2007
no person is nominated by the creditors, the person if any,
nominated by the company shall be the liquidator :
Provided that, in the case of different persons being
nominated, any director, shareholder or creditor of the
company may, within seven days from the date on which the
nomination was made by the creditors, make an application
to court for an order, either directing that the person nominated
as liquidator by the company shall be liquidator instead of or
jointly with the person nominated by the creditors or
appointing some other person to be liquidator instead of the
person appointed by the creditors.
Appointment of 336. (1) The creditors at the meeting held in pursuance
committee of of the provisions of section 334 or at any subsequent meeting
inspection.
may, if they think fit, appoint a committee of inspection
consisting of not more than five person, and where such a
committee is appointed the company may either at the
meeting at which the resolution for voluntary winding up is
passed or at any time subsequently at a general meeting,
appoint such number of persons not exceeding five as they
think fit, to act as members of the committee :
Provided that the creditors may if they think fit, resolve
that all or any of the persons so appointed by the company
ought not to be members of the committee of inspection, and
where the creditors so resolve the persons specified in the
resolution shall not, unless the court otherwise directs, be
qualified to act as members of the committee and on any
application to the court under the provisions of this section
the court may, if it thinks fit, appoint other persons to act as
such members in place of the persons specified in the
resolution.
(2) Subject to the provisions of any rule made under this
Act, the provisions of section 300, other than the provisions
of subsection (1) of that section, shall apply with respect to a
Companies Act, No. 07 of 2007 253
committee of inspection appointed under the provisions of
this section, as they apply with respect to a committee of
inspection appointed in a winding up by the court.
337. (1) The committee of inspection or where there is Fixing of
no such committee the creditors, may fix the remuneration to liquidators’
remuneration
be paid to the liquidator or liquidators.
and ceasing of
directors’
(2) On the appointment of a liquidator, all the powers of powers.
the directors shall cease, except so far as the committee of
inspection, or where there is no such committee the creditors,
sanction the continuance thereof.
338. Where a vacancy occurs by death, resignation or Power to fill
otherwise in the office of a liquidator, other than a liquidator vacancy in office
of liquidator.
appointed by or by the direction of the court, the creditors
may fill the vacancy.
339. The provisions of section 328 shall apply in the Application of
case of a creditors’ voluntary winding up as in the case of a section 328 to a
creditors’
members’ voluntary winding up, with the modification that
voluntary
the powers of the liquidator under that section shall not be winding up.
exercised except with the sanction either of the court or of
the committee of inspection.
340. (1) In the event of the winding up continuing for Duty of
more than one year, the liquidator shall summon a general liquidator to call
meetings of
meeting of the company and a meeting of the creditors at the
company and of
end of the first year from the commencement of the winding creditors at end
up and each succeeding year or at the first convenient date of each year.
within three months from the end of the year or such longer
period as the Registrar may allow, and shall lay before the
meeting an account of his acts and dealings and of the conduct
of the winding up during the preceding year.
(2) Where the liquidator fails to comply with the
provisions of this section, he shall be guilty of an offence
and be liable on conviction to a fine not exceeding fifty
thousand rupees.
254 Companies Act, No. 07 of 2007
Final meeting 341. (1) As soon as the affairs of the company are fully
and dissolution. wound up, the liquidator shall make up an account of the
winding up showing how the winding up has been conducted
and the property of the company has been disposed of, and
thereupon shall call a general meeting of the company and a
meeting of the creditors, for the purpose of laying the account
before the meetings and giving an explanation thereof.
(2) Every meeting referred to in subsection (1) shall be
called by notice published in the Gazette, specifying the
date, time, place, and object thereof and published at least
one month before such date.
(3) Within one week form the date of the meetings referred
to in subsection (1), or where such meetings are not held on
the same date, from the date of the later meeting, the liquidator
shall send to the Registrar a copy of the account and shall
make a return to him of the holding of the meetings and of
their dates, and where the copy is not sent or the return is not
made in accrodance with the provisions of this subsection,
the liquidator shall be guilty of an offence and be liable on
conviction to a fine not exceeding fifty thousand rupees :
Provided that, where a quorum is not present at either
such meeting, the liquidator shall in lieu of the return referred
to in the preceding provisions, make a return that the meeting
was duly summoned and that no quorum was present thereat,
and upon such a return being made the provisions of this
subsection as to the making of the return shall, in respect of
that meeting, be deemed to have been complied with.
(4) The Registrar on receiving the account in respect of
each meeting referred to in subsection (1) and either of the
returns referred to in subsection (3), shall forthwith register
them and on the expiration of three months from the date of
registration thereof, the company shall be deemed to be
dissolved :
Provided that the court may on the application of the
liquidator or of any other person who appears to the court to
Companies Act, No. 07 of 2007 255
be interested, make an order deferring the date at which the
dissolution of the company is to take effect for such time as
the court thinks fit.
(5) It shall be the duty of the person on whose application
an order of the court under the provisions of this section is
made, within seven days from the date of the making of the
order, to deliver to the Registrar a certified copy of the order
for registration and where that person fails so to do, he shall
be guilty of an offence and be liable on conviction to a fine
not exceeding fifty thousand rupees.
(6) Where a liquidator fails to call a general meeting of
the company or a meeting of the creditors as required by the
provisions of this section, he shall be guilty of an offence
and be liable on conviction to a fine not exceeding fifty
thousand rupees.
PROVISIONSAPPLICABLE TO EVERYVOLUNTARYWINDING UP.
342. The provisions of sections 343 to 350 (both Provisions
inclusive) shall apply to every voluntary winding up, whether applicable to
every voluntary
a shareholders’ or a creditors’ winding up.
winding up.
343. Subject to the provisions of this Act as to preferential Distribution of
payments, the property of a company shall on its winding up property of
company.
be applied in satisfaction of it liabilities pari passu, and
subject to such application, shall, unless the articles otherwise
provide, be distributed among the shareholders according to
their rights and interests in the company.
344. (1) The liquidator may— Powers and
duties of
liquidator in
(a) in the case of a shareholders’ voluntary winding up
voluntary
with the sanction of a special resolution of the winding up.
company, and in the case of a creditors’ voluntary
winding up with the sanction of either the court or
the committee of inspection or (if there is no such
256 Companies Act, No. 07 of 2007
committee) a meeting of creditors, exercise any of
the powers specified in the provisions of paragraphs
(d), (e) and (f) of subsection (1) of section 292 in
relation to a liquidator in a winding up by the court;
(b) without sanction exercise any power other than
those referred to in paragraph (a), given by this Act
to the liquidator in a winding up by the court ;
(c) exercise the power of the court under the provisions
of this Act of setting of list of contributories, and the
list of contributories shall be prima facie evidence
of the liability of the persons named therein to be
contributories ;
(d) exercise the power of the court of making calls ;
(e) summon general meetings of the company for the
purpose of obtaining the sanction of the company
by special resolution or for any other purpose the
liquidator may think fit.
(2) The liquidator shall pay the debts of the company
and shall adjust the rights of the contributories among
themselves.
(3) When several liquidators are appointed, any power
given by this Act may be exercised by such one or more of
them as may be determined at the time of their appointment,
or in default of such determination, by any number not less
than two.
Power of court 345. (1) Where for any cause whatever, there is no
to appoint and liquidator acting, the court may appoint a liquidator.
remove
liquidator in
voluntary (2) The court may on cause shown, remove a liquidator
winding up. and appoint another liquidator.
Companies Act, No. 07 of 2007 257
346. (1) A liquidator appointed under any of the Notice by
provisions of this Act shall, within fourteen days from the liquidator of his
appointment.
date of his appointment, publish in the Gazette and deliver
to the Registrar for registration, a notice of his appointment
in the prescribed form.
(2) Where the liquidator fails to comply with the
requirements of subsection (1), he shall be guilty of an offence
and be liable on conviction to a fine not exceeding fifty
thousand rupees.
347. (1) Any arrangement entered into between a Arrangement
company about to be or in the course of being wound up, and when binding on
creditors.
its creditors shall, subject to the right of appeal under the
provisions of this section, be binding on the company where
sanctioned by a special resolution, and on the creditors where
acceded to by three-fourths the number and value of the
creditors.
(2) Any creditor or contributory may within three weeks
from the completion of the arrangement appeal to the court
against such arrangement, and the court may thereupon as it
thinks just, amend, vary or confirm the arrangement.
348. (1) The liquidator or any contributory or creditor Power to apply
may make an application to court to determine any question to court to have
arising in the winding up of a company or to exercise, as question
determined or
respects the enforcing of calls or any other matter, all or any powers
of the powers which the court might exercise if the company exercised.
were being wound up by the court.
(2) The court if satisfied that the determination of the
question or the required exercise of power will be just and
beneficial, may accede wholly or partially to the application
on such terms and conditions as it thinks fit or may make
such other order on the application as it thinks just.
(3) A copy of an order made by virtue of the provisions of
subsection (2) staying the proceedings in the winding up,
258 Companies Act, No. 07 of 2007
shall forthwith be forwarded by the company or otherwise as
may be prescribed, to the Registrar who shall make a minute
of the order in his books relating to the company.
Costs of 349. All costs, charges, and expenses properly incurred
voluntary
winding up. in the winding up including the remuneration of the liquidator,
shall be payable out of the assets of the company in priority
to all other claims.
Saving for rights 350. The winding up of a company shall not bar the right
of creditors and
of any creditor or contributory to have it wound up by the
contributories.
court, but where an application for winding up is made by a
contributory, the court shall be satisfied that the rights of the
contributories will be prejudiced by a voluntary winding up.
(IV) WINDING UP SUBJECT TO SUPERVISION OF COURT
Power to order 351. When a company has passed a resolution for
winding up voluntary winding up, the court may make an order that the
subject to
voluntary winding up shall continue but subject to such
supervision.
supervision of the court, and with such liberty for creditors,
contributories or others to apply to the court, and generally
on such terms and conditions as the court thinks just.
Effect of 352. A petition for the continuance of a voluntary
petition for winding up subject to the supervision of the court shall, for
winding up
the prupose of giving jurisdiction to the court over actions,
subject to
supervision. be deemed to be a petition for winding up by the court.
Applications of 353. A winding up subject to the supervision of the court
section 275 and
shall for the purposes of sections 275 and 276 be deemed to
276 to winding
up subject to be a winding up by the court.
supervision.
Power of 354. (1) Where an order is made by court for a winding
court to up subject to supervision, the court may by that or any
appoint or
subsequent order, appoint an additional liquidator.
remove
liquidators.
Companies Act, No. 07 of 2007 259
(2) A liquidator appointed by the court under the
provisions of subsection (1) shall have the same powers, be
subject to the same obligations, and in all respects have the
same position, as if he had been duly appointed in accordance
with the provisions of this Act with respect to the appointment
of liquidators in a voluntary winding up.
(3) The court may remove any liquidator appointed under
the provisions of subsection (1), or any liquidator in a winding
up continued under the supervision of court and fill any
vacancy occasioned by such removal, or by death or
resignation of any liquidator.
355. (1) When an order is made under the provisions of Effect of
section 351 for a winding up subject to supervision, the supervision
order.
liquidator may subject to any restrictions imposed by the
court, exercise all his powers without the sanction or
intervention of the court, in the same manner as if the
company were being wound up voluntarily :
Provided that the powers specified in the provisions of
paragraphs (d), (e) and (f) of subsection (1) of section 292
shall not be exercised by the liquidator, except with the
sanction of the court or in a case where before the order the
winding up was a creditor’s voluntary winding up, with the
sanction of either the court or the committee of inspection or
where there is no such committee, a meeting of the creditors.
(2) A winding up subject to the supervision of the court
shall not constitute a winding up by the court for the purpose
of the provisions of this Act which are set out in the Eighth
Schedule hereto, but subject as aforesaid, an order for a
winding up subject to supervision shall for all purposes, be
deemed to be an order for winding up by the court:
Provided that, where the order for winding up subject to
supervision was made in relation to a creditors’ voluntary
winding up in which a committee of inspection had been
appointed, the order shall be deemed to be an order for
260 Companies Act, No. 07 of 2007
winding up by the court for the purposes of the provisions of
section 300, other than the provisions of subsection (1) of
that section, except in so far as the operation of that section
is excluded in a voluntary winding up by rules made under
this Act.
PROOF AND RANKING OF CLAIMS
Admissible 356. A debt or liability present or future, certain or
claims. contingent, whether it is an ascertained debt or liability or a
liability for damages, may be admitted as a claim against a
company in liquidation.
Claims by 357. (1) A claim by an unsecured creditor against a
unsecured company in a winding up shall be made in the prescribed
creditors.
form and shall —
(a) contain full particulars of the claim; and
(b) identify any documents that evidence or
substantiate the claim.
(2) The liquidator may—
(a) require the production of a document referred to in
paragraph (b) of subsection (1); and
(b) require a claim to be verified by affidavit.
(3) The liquidator shall as soon as practicable, either admit
or reject a claim in whole or in part. If the liquidator
subsequently considers that a claim has been wrongly
admitted or rejected in whole or in part, he may revoke or
amend that decision.
(4) If a liquidator rejects a claim whether in whole or in
part, he shall forthwith give notice in writting of the rejection
to the creditor.
Companies Act, No. 07 of 2007 261
(5) The costs of making a claim under subsection (1) or
producing a document under subsection (2), shall be met by
the creditor making the claim.
(6) Every person who—
(a) makes or authorises the making of a claim under
this section that is false or misleading in a material
particular knowing it to be false or misleading; or
(b) omits or authorises the omission from a claim under
this section, of any matter knowing that the omission
makes the claim false or misleading in a material
particular,
shall be guilty of an offence and be liable on conviction to a
fine not exceeding one million rupees or to imprisonment for
a term not exceeding five years or to both such fine and
imprisonment.
358. (1) A secured creditor may— Rights and duties
of secured
creditors.
(a) seize, attach and realise, issue execution against or
appoint a receiver in respect of property subject to a
charge, if entitled to do so;
(b) value the property subject to the charge and claim
in the liquidation—
(i) as a secured creditor for the amount of his
claim, up to the value of the security; and
(ii) as an unsecured creditor for the balance due,
if any; or
(c) surrender the charge to the liquidator for the general
benefit of creditors, and claim in the liquidation as
an unsecured creditor for the whole debt.
262 Companies Act, No. 07 of 2007
(2) A secured creditor may exercise the power referred to
in paragraph (a) of subsection (1) whether or not the secured
creditor has exercised the power referred to in paragraph (b)
of subsection (1).
(3) A secured creditor who realises property subject to a
charge—
(a) may claim as an unsecured creditor for any balance
due after deducting the net amount realised;
(b) shall account to the liquidator for any surplus
remaining from the net amount realised after
satisfaction of the debt, including interest payable
in respect of that debt up to the time of its satisfaction
and after making any proper payments to the holder
of any other charge over the property subject to the
charge.
(4) If a secured creditor values the security and claims as
a secured creditor, the valuation and claim shall be made in
the prescribed form and shall—
(a) contain full particulars of the valuation and claim;
(b) contain full particulars of the charge including the
date on which it was given; and
(c) identify any documents that substantiate the claim
and the charge,
and the provisions of sections 359, 360 and 362 shall apply
to any claim as a secured creditor.
(5) The liquidator may—
(a) require production of any document referred to in
paragraph (c) of subsection (4); and
Companies Act, No. 07 of 2007 263
(b) require a claim under subsection (4) to be verified
by affidavit.
(6) Where a claim is made by a secured creditor under
subsection (4), the liquidator shall either—
(a) accept the valuation and claim; or
(b) reject the valuation and claim in whole or in part,
but—
(i) where a valuation and claim is rejected in
whole or in part, the creditor may make a
revised valuation and claim within ten
working days of receiving notice of the
rejection; and
(ii) the liquidator may if he subsequently
considers that a valuation and claim was
wrongly rejected in whole or in part, revoke
or amend that decision.
(7) Where the liquidator—
(a) accepts a valuation and claim under paragraph (a)
of subsection (6);
(b) accepts a revised valuation and claim under sub-
paragraph (i) of paragraph (b) of subsection (6); or
(c) accepts a valuation and claim on revoking or
amending a decision to reject a claim under sub-
paragraph (ii) of paragraph (b) of subsection (6),
the liquidator shall unless the secured creditor has realised
the property, redeem the security on payment of the amount
of the claim or the assessed value, whichever is the less.
264 Companies Act, No. 07 of 2007
(8) The liquidator may at any time by notice in writing,
require a secured creditor within twenty working days after
receipt of the notice—
(a) to elect which of the powers referred to in subsection
(1) the creditor whishes to exercise; and
(b) if the creditor elects to exercise the power referred to
in paragraph (b) or paragraph (c) of that subsection,
to exercise the power within that period.
(9) A secured creditor on whom notice has been served
under subsection (8) and who fails to comply with the notice
shall be taken to have surrendered the charge to the liquidator
under paragraph (c) of subsection (1) for the general benefit
of creditors, and may claim in the liquidation as an unsecured
creditor for the whole debt.
(10) A secured creditor who has surrendered a charge
under paragraph (c) of subsection (1) or who is deemed to
have surrendered a charge under subsection (9) may, with the
leave of the court or the liquidator and subject to such terms
and conditions as the court or the liquidator thinks fit, at any
time before the liquidator has realised the property charged—
(a) withdraw the surrender and rely on the charge; or
(b) submit a new claim under this section.
(11) Every person who—
(a) makes or authourises the making of a claim under
subsection (4) that is false or misleading in a material
particular knowing it to be false or misleading; or
(b) omits or authorises the omission from a claim under
subsection (4) of any matter knowing that the
omission makes the claim false or misleading in a
material particular,
Companies Act, No. 07 of 2007 265
shall be guilty of an offence and be liable on conviction to a
fine not exceeding one million rupees or to a term of
imprisonment not exceeding five years or to both such fine
and imprisonment.
359. (1) The amount of a claim shall be ascertained as Ascertainment of
at the date of commencement of the winding up of the amount of claim.
company.
(2) The amount of a claim based on debt or liability
denominated in a currency other than Sri Lankan currency,
shall be converted into Sri Lankan currency at the rate of
exchange applicable at the close of the date of commencement
of the winding up of the company.
360. (1) If a claim is subject to a contingency or is for Claim not of an
damages or, if for some other reason the amount of the claim ascertained
is not certain, the liquidator shall make an estimate of the amount.
amount of the claim and give notice of that estimate to the
creditor.
(2) On the application of a claimant who is aggrieved by
an estimate made by the liquidator, the court shall determine
the amount of the claim.
361. Nothing in this Part of this Act shall limit or affect Fines, penalties,
the recovery of— or recoveries.
(a) a fine imposed on a company whether before or after
the commencement of the winding up of the
company, for the commission of an offence;
(b) a monetary penalty payable to the State imposed on
a company by a court whether before or after the
commencement of the winding up of the company,
for the breach of any enactment;
(c) costs ordered to be paid by the company in relation
to proceedings for the offence or breach; or
(d) all provident fund dues, employees trust fund dues
and gratuity payments accrued due, prior the
securing of any assets from the sale proceeds of such
secured assets.
266 Companies Act, No. 07 of 2007
Claims relating 362. (1) A claim in respect of a debt that but for the
to debts payable winding up, would not be payable until a date that is more
after
commencement than six months after the commencement of the winding up,
of winding up. shall be treated for the purposes of this Part of this Act, as a
claim for the present value of the debt.
(2) For the purposes of subsection (1), the present value
of a debt shall be determined by deducting from the amount
of the debt, interest at the prescribe rate for the period from
the date of commencement of the winding up to the date
when the debt is due.
Mutual credit 363. (1) Where there have been mutual credits, mutual
and set-off. debts or other mutual dealing between a company and a
person who seeks or but for the operation of this section,
would seek to have a claim admitted in the winding up of the
company—
(a) an account shall be taken of what is due from one
party to the other in respect of those credits, debts,
or dealings;
(b) an amount due from one party shall be set-off against
an amount due from the other party; and
(c) only the balance of the account shall be claimed in
the winding up or be payable to the company, as the
case may be.
(2) This section shall not apply to an amount paid or
payable by a shareholder—
(a) as the consideration or part of the consideration for
the issue of a share; or
(b) in satisfaction of a call in respect of an outstanding
liability of the shareholder, made by the board or by
the liquidator.
Companies Act, No. 07 of 2007 267
364. (1) The amount of a claim may include interest up Interest on
claims.
to the commencement of the winding up—
(a) at such rate as may be specified or contained in any
contract that makes provision for the payment of
interest on that amount; or
(b) in the case of a judgment debt, at such rate as is
payable on the judgment debt.
(2) If any surplus assets remain after the payment of all
admitted claims, interest shall be paid at the prescribed rate
on those claims from the date of commencement of the
winding up to the date on which each claim is paid. If the
amount of the surplus assets is insufficient to pay interest in
full on all claims, payment shall abate rateably among all
claims.
(3) If any surplus assets remain after the payment of interest
in accordance with subsection (2), interest shall be paid on
all admitted claims referred to in subsection (1), from the
commencement of the winding up to the date on which the
claim is paid, at the difference between the rate referred to in
paragraph (a) or paragraph (b) of that subsection, as the case
may be, and the prescribed rate. If the amount of the surplus
assets is insufficient to pay interest in full on all claims,
payment shall abate rateably among all claims.
365. (1) The liquidator shall pay out of the assets of the Preferential
company the expenses, fees, and claims set out in the Ninth claims.
Schedule to the extent and in the order of priority specified
in that Schedule and that Schedule shall apply to the payment
of those expenses, fees, and claims according to its tenor.
(2) Without limiting paragraph 7(b) of the Ninth Schedule,
the terms “assets” in subsection (1) shall not include assets
subject to a charge, unless—
(a) the charge is surrendered or taken to be surrendered
or redeemed under section 358; or
268 Companies Act, No. 07 of 2007
(b) the charge was when created, a floating charge in
respect of those assets.
Claims of other 366. (1) After paying preferential claims in accordance
creditors and with section 365, the liquidator shall apply the assets of the
distribution of company in satisfaction of all other claims.
surplus assets.
(2) The claims referred to in subsection (1) shall rank
equally among themselves and shall be paid in full, unless
the assets are insufficient to meet them, in which case payment
shall abate rateably among all claims.
(3) Where before the commencement of the winding up,
a creditor agrees to accept a lower priority in respect of a debt
than that which it would otherwise have under this section,
nothing in this section shall prevent the agreement from
having effect according to its terms.
(4) Subject to section 364, after paying the claims referred
to in subsection (1), the liquidator shall distribute the
company’s surplus assets—
(a) in accordance with the provisions contained in the
company’s articles; or
(b) if the company’s articles do not contain provisions
for the distribution of surplus assets, in accordance
with the provisions of this Act.
(5) The provisions of the Tenth Schedule shall apply in
relation to the payment of claims referred to in
subsection (1).
VOIDABLE TRANSACTIONS
Transactions 367. (1) A transaction by a company is voidable on the
having application of the liquidator, if the transaction —
preferential
effect.
(a) took place—
(i) at a time when the company was unable to
pay its debts as they fell due; and
Companies Act, No. 07 of 2007 269
(ii) within the specified period; and
(b) enabled another person to receive more towards
satisfaction of a debt than the person would otherwise
have received or be likely to have received in the
liquidation.
(2) Unless the contrary is proved, for the purposes of
subsection (1), a transaction that took place within the restricted
period is presumed to have been made at a time when the
company was unable to pay its debts as they fell due.
(3) A transaction with a person shall not be set aside under
this section, unless the company was influenced in entering
into the transaction by a desire to produce in relation to that
person, the effect mentioned in paragraph (b) of subsection(1).
(4) A company which has entered into a transaction with
any connected person is presumed, unless the contrary is
shown, to have been influenced by a desire to produce in
relation to that person, the effect mentioned in paragraph (b)
of subsection (1).
368. (1) A charge over any property or undertaking of a Voidable charge.
company is voidable on the application of the liquidator, if
the charge was given within the specified period, unless—
(a) the charge secures—
(i) money actually advanced or paid, or the actual
price or value of property sold or supplied to
the company, or any other valuable
consideration given in good faith by the
grantee of the charge at the time of, or at any
time after the giving of the charge; and
(ii) any interest payable on an amount referred
to in sub-paragraph (i);
(b) immediately after the charge was given, the company
was able to pay its debts as they fell due; or
270 Companies Act, No. 07 of 2007
(c) the charge is in substitution for a charge given before
the specified period.
(2) Unless the contrary is proved, a company giving a
charge within the restricted period is presumed to have been
unable to pay its debts as they fell due immediately after
giving the charge.
(3) The provisions of paragraph (c) of subsection (1) shall
not apply to the extent that —
(a) the amount secured by the substituted charge
exceeds the amount secured by the existing charge;
or
(b) the value of the property subject to the substituted
charge at the date of the substitution, exceeds the
value of the property subject to the existing charge
at that date.
(4) Nothing in subsection (1) shall apply to a charge given
by a company that secures the unpaid purchase price of
property and any interest payable on that amount, whether or
not the charge is given over that property, if the instrument
creating the charge is executed not later than thirty days after
the sale of the property or in the case of the sale of an estate or
interest in land, not later than thirty days after the final
settlement of the sale.
(5) For the purposes of paragraph (a) of subsection (1)
and subsection (4), where any charge was given by the
company within the period specified in subsection (1), all
payments received by the grantee of the charge after it was
given shall be deemed to have been appropriated so far as
may be necessary—
(a) towards repayment of money actually advanced or
paid by the grantee to the company on or after the
giving of the charge;
Companies Act, No. 07 of 2007 271
(b) towards payment of the actual price or value of
property sold by the grantee to the company on or
after the giving of the charge;
(c) towards payment of any other liability of the
company to the grantee in respect of any other
valuable consideration given in good faith on or
after the giving of the charge; or
(d) towards interest payable on any amount referred to
in paragraphs (a), (b) or (c).
369. (1) A transaction by a company is voidable on the Uncommercial
application of the liquidator, if — transactions.
(a) the transaction took place within the specified
period;
(b) the transaction was an uncommercial transaction;
(c) when the transaction took place, the company—
(i) was unable to pay its due debts;
(ii) was engaged or about to engage in business
for which its financial resources were grossly
inadequate; or
(iii) incurred an obligation knowing that the
company would not be able to perform the
obligation when required to do so.
(2) A transaction by a company is an “uncommercial
transaction” if, and only if, a reasonable person in the
company’s circumstances would not have entered into the
transaction having regard to—
(a) the benefits (if any) to the company of entering into
the transaction;
272 Companies Act, No. 07 of 2007
(b) the detriment to the company of entering to the
transaction;
(c) the respective benefits to the other parties to the
transaction; and
(d) any other relevant matters.
(3) A transaction may be an uncommercial transaction
for the purposes of this section—
(a) whether or not a creditor of the company is a party
to the transaction; and
(b) even if the transaction is given effect to or is required
to be given effect to, because of an order made by a
court.
(4) Unless the contrary is proved for the purposes of
subsection (1), a transaction that took place within the
restricted period is presumed to have been made at a time
when the company was unable to pay its debts as they fell
due.
Procedure 370. (1) A liquidator who wishes to set aside a
for setting transaction that is voidable under section 367 or section 369
aside or a charge that is voidable under section 368 shall—
voidable
transactions
and charges. (a) file in the court a notice by way of a motion to that
effect specifying the transaction or charge to be set
aside and, in the case of a transaction, the property
or value which the liquidator whishes to recover,
and setting out the effect of subsections (2), (3) and
(4) of this section ; and
(b) serve a copy of the notice as filed in court under
paragraph (a), on the other party to the transaction
or the grantee of the charge and or every other person
from whom the liquidator wishes to recover the
property or value.
Companies Act, No. 07 of 2007 273
(2) A person —
(a) who would be affected by the setting aside of the
transaction or charge specified in the notice; and
(b) who considers that the transaction or charge is not
voidable,
may apply to the court for an order that the transaction or
charge, be not set aside.
(3) Unless a person on whom the notice was served has
applied to the court under subsection (2), the transaction or
charge shall be deemed to be set aside on the twentieth
working day after the date of service of the notice.
(4) If one or more persons have applied to the court under
subsection (2), the transaction or charge shall be deemed to
be set aside on the day on which the last application is finally
determined, unless the court orders otherwise.
371. If a transaction or charge is set aside under section Other orders.
370, the court may make one or more of the following orders:–
(a) an order requiring a person to pay to the liquidator
in respect of benefits received by that person as a
result of the transaction or charge, such sums as
fairly represent those benefits;
(b) an order requiring property transferred to a person
as part of the transaction to be restored to the
company;
(c) an order requiring property to be vested in the
company if that property represents the application
either of the proceeds of sale of property or of money
so transferred;
(d) an order releasing in whole or in part a debt incurred
or a guarantee or charge given by the company;
274 Companies Act, No. 07 of 2007
(e) an order declaring an agreement constituting,
forming part of or relating to the transaction or
charge or specified provisions of such an agreement,
to have been void at and after the time when the
agreement was made or at and after a specified later
time;
(f) an order varying such an agreement in the manner
specified in the order and if the court thinks fit,
declaring the agreement to have had effect as so
varied at and after the time when the agreement was
made or at and after a specified later time;
(g) an order declaring such an agreement or specified
provisions of such an agreement to be unenforceable;
(h) an order requiring security to be given for the
discharge of an order made under this section;
(i) an order specifying the extent to which a person
affected by the setting aside of a transaction or by
an order made under this section, is entitled to claim
as a creditor in the liquidation.
Additional 372. (1) The setting aside of a transaction or an order
provisions made under section 371 shall not affect the title or interest of
relating to
setting aside a person in property, which that person has acquired—
of
transactions (a) from a person other than the company;
and charges.
(b) for valuable consideration ; and
(c) in good faith.
(2) The setting aside of a charge or an order made under
section 371 shall not affect the title or interest of a person in
property which that person has acquired—
(a) as the result of the exercise of a power of sale by the
grantee of the charge;
Companies Act, No. 07 of 2007 275
(b) for valuable consideration; and
(c) in good faith.
(3) Recovery by the liquidator of property or its
equivalent value, whether under section 371 or any other
section of this Act or under any other enactment or in equity
or otherwise, may be denied wholly or in part if—
(a) the person from whom recovery is sought received
the property in good faith and has altered his
position in the reasonably held belief that the
transfer to that person was validly made; and
(b) in the opinion of the court, it is inequitable to order
recovery or recovery in full.
373. (1) In sections 367 and 369 “transaction” in relation Interpretation in
to a company, includes— relation to
preferences &.
(a) a conveyance or transfer or any other disposition of
property by the company;
(b) the giving of a security or charge over the property
of the company;
(c) the incurring of an obligation by the company;
(d) the acceptance by the company of execution under
a judicial proceeding;
(e) the payment of money by the company including
the payment of money under a judgment or order of
a court.
(2) For the purposes of sections 367, 368 and 369
“specified period” means—
(a) in the case of a transaction entered into with or a
charge granted to a connected person—
(i) the period of two years before the
commencement of the winding up; and
276 Companies Act, No. 07 of 2007
(ii) in the case of a company that is being wound
up by the court, the period of two years before
the filing of the petition in the court, together
with the period commencing on the date of
the filing of that petition and ending on the
date on which the order of the court was made;
(b) in any other case—
(i) the period of one year before the
commencement of the winding up; and
(ii) in the case of a company that is being wound
up by the court, the period of one year before
the filing of the petition in the court, together
with the period commencing on the date of
the filing of that petition and ending on the
date on which the order of the court was made.
(3) For purposes of subsection (4) and of section 367, a
person is a “connected person”, if that person is—
(a) a person who was at the time of the transaction, a
director of the company or a nominee or relative of
or a trustee for, or a trustee for a relative of, a director
of the company;
(b) a person or a relative of a person, who at the time of
the transaction, had control of the company;
(c) another company that was at the time of the
transaction, controlled by a director of the company
or a nominee or relative of or a trustee for, or a trustee
for a relative of, a director of the company;
(d) another company that was at the time of the
transaction, a related company.
Companies Act, No. 07 of 2007 277
(4) For the purposes of sections 367, 368 and 369
“restricted period” means—
(a) the period of one moth before the commencement
of the winding up; and
(b) in the case of a company that is being wound up by
the court, the period of one month before the filing
of the petition in the court together with the period
commencing on the date of the filing of that petition
and ending on the date on which the order of the
court was made.
MALPRACTICE BEFORE WINDING UP AND LIABILITY OF OFFICERS
374. (1) When a company is wound up, a person who is Fraud &c. in
a past or present officer of the company is deemed to have anticipation of
winding up.
committed an offence if, within the two years preceding the
commencement of the winding up, he has—
(a) concealed any part of the company’s property to the
value of ten thousand rupees or more or concealed
any debt due to or from the company;
(b) fraudulently removed any part of the company’s
property to the value of ten thousand rupees or more;
(c) concealed, destroyed, mutilated or falsified any book
or document affecting or relating to the company’s
property or affairs;
(d) made any false entry in any book or document
affecting or relating to the company’s property or
affairs;
(e) fraudulently parted with, altered or made any
omission in any document affecting or relating to
the company’s property or affairs;
278 Companies Act, No. 07 of 2007
(f) pawned, pledged or disposed of any property of the
company which has been obtained on credit and
has not been paid for, unless the pawning, pledging
or disposal was in the ordinary course of the
company’s business;
(g) made or caused to be made any gift or transfer of or
charge on, or has caused or connived at the levying
of any execution against the company’s property,
with the intent of defrauding the company’s
creditors; or
(h) concealed or removed any part of the company’s
property since or within two months before the date
of any unsatisfied judgment or order for the payment
of money obtained against the company, with the
intent of defrauding the company’s creditors.
(2) It is a defence—
(a) for a person charged under paragraph (a) or (f) of
subsection (1), to prove that he had no intent to
defraud;
(b) for a person charged under paragraph (c) or (d) of
subsection (1), to prove that he had no intent to
conceal the state of affairs of the company or to
defeat the law.
(3) A person who commits an offence under subsection
(1) shall be liable on conviction to a fine not exceeding one
million rupees or to imprisonment for a term not exceeding
five years or to both such fine and imprisonment.
Fraudulent 375. (1) Where any business of a company that has been
trading. wound up has been carried on with intent to defraud creditors
of the company or creditors of any other person or for any
fraudulent purpose, every person who was knowingly a party
to the carrying on of the business in that manner, shall be
Companies Act, No. 07 of 2007 279
deemed to have committed an offence and shall be liable on
conviction to a fine not exceeding one million rupees or to
imprisonment for a term not exceeding five years or to both
such fine and imprisonment.
(2) Where in the course of the winding up of a company it
appears that any business of the company has been carried on
with intent to defraud creditors of the company or creditors of
any other person or for any fraudulent purpose, the court may,
on the application of the liquidator or any creditor of the
company, declare that any persons who were knowingly parties
to the carrying on of the business in that manner, shall be—
(a) liable to make such contribution to the company’s
assets; or
(b) personally responsible for such debts or other
liabilities of the company,
as the court may think fit.
376. (1) Where in the course of the winding up of a Power of court
company it appears to the court that a person who has taken to require
part in the formation or promotion of the company or a past persons to repay
money or return
or present director, manager, liquidator or receiver of the property.
company, has misapplied or retained or become liable or
accountable for money or property of the company, or been
guilty of negligence, default or breach of duty or trust in
relation to the company, the court may, on the application of
the liquidator or a creditor or shareholder—
(a) inquire into the conduct of the promoter, director,
manager, liquidator, or receiver; and
(b) order that person—
(i) to repay or restore the money or property or
any part of it with interest at a rate the court
thinks just; or
280 Companies Act, No. 07 of 2007
(ii) to contribute such sum to the assets of the
company by way of compensation as the court
thinks just; or
(c) where the application is made by a creditor, order
that person to pay or transfer the money or property
or any part of it with interest at a rate the court thinks
just, to the creditor.
(2) The provisions of this section shall have effect even
though the conduct may constitute an offence under this
Act.
(3) Where an order for payment of money is made under
this section, it shall for the purposes of the Insolvency
Ordinance (Cap. 97), be deemed to be a judgment for the
recovery of a debt or money demand referred to in section 12
of that Ordinance.
Disclaimer of 377. (1) Where any part of the property of a company
onerous which is being wound up consists of land of any tenure
property.
burdened with onerous covenants of shares or stock in
companies, unprofitable contracts or of any other property
that is unsaleable or not readily saleable, by reason of its
binding the possessor thereof to the performance of any
onerous act, or to the payment of any sum of money, the
liquidator of the company, notwithstanding that he has
endeavoured to sell or has taken possession of the property,
or exercised any act of ownership in relation thereto, may,
with the leave of the court and subject to the provisions of
this section, by writing signed by him at any time within
twelve months from the date of commencement of the winding
up or such extended period as may be allowed by the court,
disclaim the property:
Provided that, where any such property has not come to
the knowledge of the liquidator within one month from the
date of commencement of the winding up, the power of
disclaiming the property under the provisions of this section
Companies Act, No. 07 of 2007 281
may be exercised at any time within twelve months from the
date he has become aware thereof, or such extended period as
may be allowed by the court.
(2) The disclaimer shall operate to determine as from the
date of the disclaimer, the rights, interest, and liabilities of
the company and the property of the company, in or in respect
of the property disclaimed, but shall not, except so far as is
necessary for the purpose of releasing the company and the
property of the company from liability, affect the rights or
liabilities of any other person.
(3) The court before or on granting leave to disclaim,
may require such notices to be given to persons interested
and impose such terms as a condition of granting such leave
and make such other order in the matter, as the court thinks
just.
(4) The liquidator shall not be entitled to disclaim any
property under the provisions of this section, in any case
where an application in writing has been made to him by any
person interested in the property requiring him to decide
whether he will or will not disclaim, and the liquidator has
not, within a period of twenty-eight days from the date of
receipt of the application or such further period as may be
allowed by the court, given notice to the applicant that he
intends to make an application to the court for leave to
disclaim, and in the case of a contract, where the liquidator
upon receipt of an application as aforesaid, does not within
the said period or further period, disclaim the contract, the
company shall be deemed to have adopted it.
(5) The court may on the application of any person, who
is, as against the liquidator, entitled to the benefit or subject
to the burden of a contract made with the company, make an
order rescinding the contract on such terms as to payment by
or to either party of damages for the non performance of the
contract, or otherwise as the court thinks just, and any
damages payable under such order to any such person may
be proved by him as a debt in the winding up.
282 Companies Act, No. 07 of 2007
(6) The court may, on an application by any person who
either claims any interest in any disclaimed property or is
under any liability not discharged by this Act in respect of
any disclaimed property and on hearing any such person as it
thinks fit, make an order for the vesting of the property in or
the delivery of the property to any persons entitled thereto,
or to whom it may seem just that the property should be
delivered by way of compensation for such liability as
aforesaid or a trustee for him, and on such terms as the court
thinks just, and on any such vesting order being made, the
property comprised therein shall vest accordingly in the
person therein named in that behalf without any conveyance
or assignment for the purpose:
Provided that, where the property disclaimed is of a
leasehold nature, the court shall not make a vesting order in
favour of any person claiming under the company, whether
as sub-lessee or as mortgagee, except upon the terms of making
that person—
(a) subject to the same liabilities and obligations as
those to which the company was subject under the
lease in respect of the property at the date of
commencement of the winding up; or
(b) where the court thinks fit, subject only to the same
liabilities and obligations, as if the lease had been
assigned to that person at that date,
and in either event (if the case so requires) as if the lease had
comprised only the property comprised in the vesting order,
and any sub-lessee or mortgagee declining to accept a vesting
order upon such terms shall be excluded from all interest in
and security upon, the property, and where there is no person
claiming under the company who is willing to accept an
order upon such terms, the court shall have power to vest the
estate and interest of the company in the property in any
person liable either personally or in a representative character,
and either by himself or jointly with the company to perform
Companies Act, No. 07 of 2007 283
the lessor’s convenants in the lease, freed and discharged
from all estates, encumbrances and interests created therein
by the company.
(7) Any person injured by the operation of a disclaimer
under the provisions of this section shall be deemed to be a
creditor of the company to the amount of the injury, and may
accordingly prove the amount as a debt in the winding up.
378. (1) Where a creditor has issued execution against Restriction of
the goods or lands of a company or has attached any debt due rights of creditor
as to execution
to the company and the company is subsequently wound up,
or attachment in
he shall not be entitled to retain the benefit of the execution case of company.
of the company, unless he has completed the execution or
attachment before the date of commencement of the winding
up:
Provided that—
(a) where any creditor has had notice of a meeting
having been called at which a resolution for
voluntary winding up is to be proposed, the date on
which the creditor so had notice shall for the
purposes of the preceding provisions, be substituted
for the date of commencement of the winding up;
(b) a person who purchases in good faith under a sale
by order of court any goods of a company on which
an execution has been levied, shall in all cases
acquire a good title to them against the liquidator;
(c) the rights conferred by the provisions of this
subsection on the liquidator may be set aside by the
court in favour of the creditor, to such extent and
subject to such terms as the court may think fit.
(2) For the purposes of this section, an execution against
goods shall be taken to be completed by seizure and sale,
and an attachment of a debt shall be deemed to be completed
284 Companies Act, No. 07 of 2007
by receipt of the debts, and an execution against land shall
be deemed to be completed by seizure, and in the case of an
equitable interest, by the appointment of a receiver.
(3) In this section the expression “goods” includes all
movable property.
(4) Nothing this section shall apply to an execution
process or attachment against any property by or for the
benefit of a creditor, who is entitled to a charge in respect of
that property.
Duty of fiscal as 379. (1) Subject to the provisions of subsection (3),
to goods taken in where any goods of a company are taken in execution and
execution.
before the sale thereof or the completion of the execution, by
receipt or recovery of the full amount of the levy, notice is
served on the Fiscal that a provisional liquidator has been
appointed or that a winding up order has been made or that a
resolution for voluntary winding up has been passed, the
Fiscal shall on being so required, deliver the goods and any
money seized or received in part satisfaction of the execution
to the liquidator, but the costs of the execution shall be a first
charge on the goods or money so delivered, and the liquidator
may sell the goods or a sufficient part thereof for the purpose
of satisfying that charge.
(2) Subject to the provisions of subsection (3), where
under an execution in respect of a judgment for a sum
exceeding two hundred and fifty rupees, the goods of a
company are sold or money is paid in order to avoid the sale,
the Fiscal shall deduct the costs of the execution from the
proceeds of the sale or the money paid and retain the balance
for fourteen days, and if within that time notice is served on
him of a petition for the winding up of the company having
been presented or of a meeting having been called at which
there is to be proposed a resolution for voluntary winding up
of the company and an order is made or a resolution is passed,
as the case may be, for the winding up of the company, the
Fiscal shall pay the balance to the liquidator who shall be
entitled to retain it as against the execution creditor.
Companies Act, No. 07 of 2007 285
(3) The rights conferred by the provisions of this section
on the liquidator may be set aside by the court in favour of
the creditor, to such extent and subject to such terms as the
court may think fit.
(4) In this section the expression “goods” includes all
movable property and the expression “Fiscal” includes any
officer charged with the execution of a writ or other process.
(5) Nothing in this section shall apply to an execution
process or attachment against any property by or for the
benefit of a creditor, who is entitled to a charge in respect of
that property.
OFFENCESANTECEDENT TO OR IN THE COURSE OFWINDING UP
380. (1) Where any person being a past or present officer Offences by
of a company which at the time of the commission of the officers of
companies in
alleged offence is being wound up whether by or under the
liquidation.
supervision of the court or voluntarily, or is subsequently
ordered to be wound up by the court or subsequently passes
a resolution for voluntary winding up—
(a) does not to the best of his knowledge and belief
fully and truly make known to the liquidator all the
property, movable and immovable, of the company,
and how and to whom and for what consideration
and when the company disposed of any part thereof,
except such part as has been disposed of in the
ordinary course of the business of the company;
(b) does not deliver to the liquidator or as he directs, all
such part of the movable and immovable property
of the company as in his custody or under his control,
and which he is required by law to deliver;
(c) does not deliver to the liquidator or as he directs, all
books and papers in his custody or under his control
belonging to the company and which he is required
by law to deliver;
286 Companies Act, No. 07 of 2007
(d) makes any material omission in any statement
relating to the affairs of the company;
(e) knowing or believing that a false debt has been
proved by any person under the winding up, fails
for the period of one month to inform the liquidator
thereof;
(f) after the date of commencement of the winding up,
prevents the production of any book or paper
affecting or relating to the property or affairs of the
company;
(g) after the date of commencement of the winding up
or at any meeting of the creditors of the company
within the twelve months immediately prior to the
date of commencement of the winding up, attempts
to account for any part of the property of the
company by fictious losses or expenses;
(h) has within the twelve months immediately prior to
the date of commencement of the winding up or at
any time thereafter, by any false representation or
other fraud, obtained any property for or on behalf
of the company on credit which the company does
not subsequently pay for;
(i) within the twelve months immediately prior to the
date of commencement of the winding up or at any
time thereafter, under the false pretense that the
company is carrying on its business, obtains on credit
for or on behalf of the company, any property which
the company does not subsequently pay for; or
(j) is guilty of any false representation or other fraud
for the purpose of obtaining the consent of the
creditors of the company or any of them, to an
agreement with reference to the affairs of the
company or to the winding up,
Companies Act, No. 07 of 2007 287
shall be guilty of an offence and shall on conviction, in the
case of the offences referred to in paragraphs (h), (i) and (j), be
liable to a fine not exceeding one million rupees or to
imprisonment for a term not exceeding five years or to both
such fine and imprisonment, and in the case of any other
offence under the provisions of this subsection, be liable to a
fine not exceeding five hundred thousand rupees or to
imprisonment for a term not exceeding two years or to both
such fine and imprisonment:
Provided that it shall be a good defence to a charge under
the provisions of paragraphs (a), (b), (c), (d) and (i), for the
accused to prove that he had no intent to defraud, and to a
charge under the provisions of paragraph (f), to prove that he
had no intent to conceal the state of affairs of the company or
to defeat the law.
(2) For the purposes of this section, the expression
“officer” shall include any person in accordance with whose
directions or instructions the directors of a company have
been accustomed to act.
381. (1) Where in the course of winding up of a Liability where
company it is shown that proper books of accounts were not proper accounts
are not kept.
kept by the company throughout the period of two years
immediately preceding the date of commencement of the
winding up, or the period between the incorporation of the
company and the date of commencement of the winding up,
whichever is the shorter, every officer of the company who is
in default shall, unless he shows that he acted honestly and
that in the circumstances in which the business of the company
was carried on the default was inevitable, be guilty of an
offence and shall be liable on conviction to a fine not
exceeding one hundred thousand rupees.
(2) For the purposes of this section, proper books of
accounts shall be deemed not to have been kept in the case of
any company, if there have not been kept such books or
accounts as are necessary to exhibit and explain the
transactions and financial position of the trade or business of
288 Companies Act, No. 07 of 2007
the company, including books containing entries from day
to day in sufficient detail of all cash received and cash paid,
and where the trade or business has involved dealing in goods,
statement or annual stock-takings and (except in the case of
goods sold by way of ordinary retail trade) of all goods sold
and purchased, showing the goods and the buyers and sellers
thereof in sufficient detail to enable those goods and those
buyers and sellers to be identified.
Prosecution of 382. (1) Where it appears to the court in the course of a
delinquent winding up by or subject to the supervision of the court, that
officers and
any past or present officer or any shareholder of the company
members of the
company. has been guilty of any offence in relation to the company for
which he is criminally liable, the court may, either on the
application of any person interested in the winding up or of
its own motion, direct the liquidator either himself to
prosecute the offender or to refer the matter to the Attorney-
General.
(2) Where it appears to the liquidator in the course of a
voluntary winding up that any past or present office or any
shareholder of the company has been guilty of any offence in
relation to the company for which he is criminally liable, he
shall forthwith report the matter to the Attorney-General and
shall furnish to him such information and give to him such
access to and facilities for inspecting and taking copies of
any documents, being information or documents in
possession or under the control of the liquidator and relating
to the matter in question, as he may require.
(3) Where any report is made under the provisions of
subsection (2) to the Attorney-General, he may if he thinks
fit, refer the matter to the Registrar for inquiry, and the Registrar
shall thereupon investigate the matter and may where he
thinks it expedient, make an application to court for an order
conferring on him or any person designated by him for the
purpose with respect to the company concerned, all such
powers of investigating the affairs of the company as are
provided by this Act in the case of a winding up the court.
Companies Act, No. 07 of 2007 289
(4) Where on any report to the Attorney-General under
the provisions of subsection (2), it appears to the Attorney-
General that the case is not one in which proceedings ought
to be taken by him, he shall inform the liquidator accordingly
and thereupon, subject to the previous sanction of the court,
the liquidator may himself take proceedings against the
offender.
(5) Where it appears to the court in the course of voluntary
winding up that any past or present officer or any shareholder
of the company has been guilty as aforesaid, and that no
report with respect to the matter has been made by the
liquidator to the Attorney-General under the provisions of
subsection (2), the court may, on the application of any person
interested in the winding up or of its own motion, direct the
liquidator to make such report, and on a report being made
accordingly, the provisions of this section shall have effect
as though the report has been made in pursuance of the
provision of subsection (2).
(6) If where any matter is reported or referred to the
Attorney-General under the provisions of this section, the
Attorney-General considers that the case is one in which a
prosecution ought to be instituted, he shall institute
proceedings accordingly, and it shall be the duty of the
liquidator and of every officer and agent of the company past
and present (other than the accused in the proceedings) to
give him all assistance in connection with the prosecution
which he is reasonably able to give.
For the purposes of this subsection, the expression “agent”
in relation to a company shall be deemed to include any
banker or attorney-at-law of the company and any person
employed by the company as auditor, whether that person is
or is not an officer of the company.
(7) Where any person fails or neglects to give assistance
in the manner required by subsection (6), the court may on
the application of the Attorney-General, direct that person to
comply with the requirements of the said subsection, and
290 Companies Act, No. 07 of 2007
where any such application is made with respect to a
liquidator, the court may, unless it appears that the failure or
neglect to comply was due to the liquidator not having in his
hands sufficient assets of the company to enable him so to
do, direct that the costs of the application shall be borne by
the liquidator personally.
SUPPLEMENTARY PROVISIONS AS TO WINDING UP
Qualifications 383. (1) None of the following persons may be
of appointed or act as a liquidator of a company :—
liquidators.
(a) a person below eighteen years of age;
(b) a creditor of the company in liquidation;
(c) a person who has within the two years immediately
preceding the commencement of the winding up,
been a shareholder, director, auditor, or receiver of
the company or of a related company;
(d) an undischarged bankrupt;
(e) a person who has been adjudged to be of unsound
mind under the provision of the Mental Diseases
Ordinance (Cap. 227);
(f) a person in respect of whom an order has been made
under section 468;
(g) a person who is prohibited from being a director or
promoter of or being concerned or taking part in the
management of a company under section 186 of the
Companies Act, No. 17 of 1982, or who would be so
prohibited, but for the repeal of that Act; or
(h) a person who is prohibited from being a director or
promoter of or being concerned or taking part in the
management of a company under section 213 or
214.
Companies Act, No. 07 of 2007 291
(2) A body corporate shall not be appointed or act as a
liquidator.
(3) Every person who acts in contravention of the
provisions of subsection (1) or subsection (2) shall be guilty
of an offence and be liable on conviction to a fine not
exceeding two hundred thousand rupees.
384. Any person who gives or agrees or offers to give to Corrupt
any shareholder or creditor of a company any valuable inducement
affecting
consideration with a view to securing his own appointment appointment as
or nomination or to securing or preventing the appointment liquidator.
or nomination of some person other than himself as the
company’s liquidator, shall be guilty of an offence and be
liable on conviction to a fine not exceeding two hundred
thousand rupees.
385. (1) Where any liquidator, who has made any Enforcement of
default in filing, delivering or making any account, document duty of
liquidator to
or return, as the case may be, or in giving any notice which he make returns,
is by law required to file, deliver, make or give, fails to make &c.,
good the default within ten working days from the date of
service on him of a notice requiring him to do so, the court
may on an application made to the court by any contributory
or creditor of the company or by the Registrar, make an order
directing the liquidator to make good the default within such
time as may be specified in the order.
(2) Any order made under the provisions of subsection
(1), may provide that all costs of and incidental to the
application shall be borne by the liquidator.
(3) Nothing in this section shall be taken to prejudice the
operation of any written law imposing penalties on a
liquidator in respect of any such default as is referred to in
subsection (1).
292 Companies Act, No. 07 of 2007
Notification that 386. (1) Where a company is being wound up, whether
a company is in by or under the supervision of the court or voluntary, every
liquidation.
invoice, order for goods or business letter issued by or on behalf
of the company or a liquidator of the company or a receiver or
manager of the property of the company, being a document on
or in which the name of the company appears, shall contain a
statement that the company is being wound up.
(2) Where default is made in complying with the
provisions of this section, the company and any of the
following persons who knowingly and willfully authorises
or permits the default, namely, any officer of the company,
any liquidator of the company and any receiver or manager
shall be guilty of an offence and be liable on conviction to a
fine not exceeding fifty thousand rupees.
Exemption of 387. In the case of a winding up by the court or of a
certain creditors’ voluntary winding up of a company—
documents from
stamp duty on
winding up of (a) every deed relating solely to movable or immovable
companies. property or creating any mortgage, charge or other
encumbrance on, or any estate, right or interest in
any such property which forms part of the assets of
the company and which, after the execution of the
deed, is or remains part of the assets of the company;
and
(b) every power of attorney, proxy paper, writ, order,
certificate, affidavit, bond or other instrument of
writing relating solely to the property of any
company which is being so wound up or to any
proceeding under any such winding up,
shall be exempt form stamp duty.
Books of 388. Where a company is being wound up, all books
company to be and papers of the company and of the liquidators shall, as
evidence.
between contributories of the company, be prima facie
evidence of the truth of all matters purporting to be there in
recorded.
Companies Act, No. 07 of 2007 293
389. (1) Where a company has been wound up and is Disposal of
books and
about to be dissolved, the books of the company and of the
papers of the
liquidators may be disposed of as follows, that is to say— company.
(a) in the case of a winding up by or subject to the
supervision of the court, in such a way as the court
directs;
(b) in the case of a shareholders’ voluntary winding up,
in such a way as the company by special resolution
directs, and in the case of a creditors’ voluntary
winding up, in such a way as the committee of
inspection or where there is no such committee, as
the creditors of the company may direct.
(2) After five years from the date of dissolution of the
company no responsibility shall rest on the company, the
liquidators, or any person to whom the custody of the books
and papers has been committed, by reason of any book or
paper not being forthcoming to any person claiming to be
interested therein.
(3) Rules may be made for enabling the Registrar to
prevent, for such period (not exceeding five years from the
date of dissolution of the company) as he thinks fit, the
destruction of the books and papers of a company which has
been wound up, and for enabling any creditor or contributory
of the company to make representations to the Registrar and
to appeal to the Court of Appeal from any direction which
may be given by the Registrar in the matter.
(4) Where any person acts in contravention of any rule
made under the provisions of subsection (3) or of any direction
of the Registrar thereunder, he shall be guilty of an offence
and shall be liable on conviction to a fine not exceeding two
hundred thousand rupees.
294 Companies Act, No. 07 of 2007
Information as to 390. (1) Where the winding up of a company is not
pending
concluded within one year from the date of its
liquidation.
commencement, the liquidator shall at such intervals as may
be prescribed, until the winding up is concluded, send to the
Registrar a statement in the prescribed form and containing
the prescribed particulars with respect to the proceedings in
and position of the liquidation.
(2) Where a liquidator fails to comply with the provisions
of this section, he shall be guilty of an offence and be liable
on conviction to a fine not exceeding fifty thousand rupees.
Resolutions 391. Where a resolution is passed at an adjourned
passed at meeting of any creditors or contributories of a company, the
adjourned
meetings of resolution shall for all purposes be treated as having been
creditors and passed on the date on which it was in fact passed, and shall
contributories. not be deemed to have been passed on any earlier date.
SUPPLEMENTARY POWERS OF COURT
Meetings to 392. (1) The court may as to all matters relating to the
ascertain wishes winding up of a company, have regard to the wishes of the
of creditors or
creditors or contributories of the company as proved to it by
contributories.
any sufficient evidence, and may if it thinks fit for the purpose
of ascertaining those wishes, direct meetings of the creditors
or contributories to be called, held, and conducted in such
manner as the court directs, and may appoint a person to act
as chairman of any such meeting and to report the result
thereof to the court.
(2) In the case of creditors, regard shall be had to the
value of each creditor’s debt.
(3) In the case of contributories, regard shall be had to the
number of votes conferred on each contributory by this Act
or the company’s articles.
Companies Act, No. 07 of 2007 295
PROVISIONS AS TO DISSOLUTION
393. (1) Where a company has been dissolved, the court Power of court
to declare
may at any time within two years from the date of the
dissolution of
dissolution on an application being made for the purpose by company void.
the liquidator of the company, or by any other person who
appears to the court to be interested, make an order upon
such terms as the court thinks fit, declaring the dissolution to
have been void, and thereupon such proceedings may be
taken as might have been taken if the company had not been
dissolved.
(2) It shall be the duty of the person on whose application
the order under the provisions of subsection (1) was made,
within seven days from the date of the order or such further
time as the court may allow, to deliver to the Registrar for
registration a certified copy of such order, and where such
person fails to do so he shall be guilty of an offence and shall
be liable on conviction to a fine not exceeding fifty thousand
rupees.
394. (1) Where the Registrar has reasonable cause to Registrar may
believe that a company is not carrying on business or is in strike off defunct
company from
operation, he may send to the company by post a letter register.
inquiring whether the company is carrying on business or is
in operation.
(2) Where the Registrar does not within one month of the
date of sending the letter referred to in subsection (1) receive
any answer thereto, he shall within ten working days from
the date of expiry of the said period of one month, send to the
company a letter by registered post referring to the first letter,
and stating that no answer thereto has been received, and
that if an answer is not received to the second letter within
one month from the date thereof, a notice will be published
in the Gazette with a view to striking off the name of the
company from the register.
296 Companies Act, No. 07 of 2007
(3) Where the Registrar under the provisions of subsection
(2), either receives an answer to the effect that the company is
not carrying on business or in operation, or does not within
one month after sending the second letter receive an answer,
he may publish in the Gazette, and send to the company by
post, a notice that at the expiration of three months from the
date of that notice the name of the company specified therein
will, unless cause is shown to the contrary, be stuck off the
register and be dissolved.
(4) Where in the winding up of a company the Registrar
has reasonable cause to believe either that no liquidator is
acting, or that the affairs of the company are fully wound up,
and the returns required to be made by the liquidator under
the provisions of this Act have not been made for a period of
six consecutive months, the Registrar shall publish in the
Gazette and send to the company or the liquidator, if any, a
notice as is referred to in subsection (3).
(5) Upon the expiration of the period specified in the notice
given under the provisions of subsection (4), the Registrar
may, unless cause to the contrary is previously shown by the
company, strike off the name of the company form the register,
and shall publish notice thereof in the Gazette, and upon
such publication the company shall be dissolved:
Provided that—
(a) the liability, if any, of every director, manager and
shareholder of the company shall continue and may
be enforced as if the company had not been
dissolved; and
(b) nothing in the provisions of this subsection shall
affect the power of the court to wind up a company
the name of which has been struck off the register.
(6) Where a company or any shareholder or creditor
thereof is aggrieved by the company having been struck off
the register, the court on an application made by the company
Companies Act, No. 07 of 2007 297
or shareholder or creditor, as the case may be, before the
expiration of five years from the publication in the Gazette
of the notice referred to in subsection (5) may, if satisfied,
that the company was at the time of the striking off carrying
on business or in operation, or otherwise that it is just that the
name of the company should be restored to the register, order
the name of the company to be restored to the register, and
upon a certified copy of the order being delivered to the
Registrar for registration, the company shall be deemed to
have continued in existence as if its name had not been struck
off the register, and the court may by such order give such
directions and make such provisions as to it seems just for
placing the company and all other persons in the same
position as nearly as may be, as if the name of the company
had not been struck off the register.
(7) A notice to be sent under the provisions of this section
to a liquidator may be addressed to the liquidator at his last
known place of business, and a letter or notice to be sent
under the provisions of this section to a company may be
addressed to the company at its registered office, or where no
office has been registered, to the care of some officer of the
company at the most recent address recorded for that person
in the annual returns or any other documents sent to the
Registrar by the company.
395. Where a company is dissolved, all property and Property of
rights whatsover vested in or held on trust for the company dissolved
company to vest
immediately before the date of its dissolution (including
in the State.
leasehold property but not including property held by the
company on trust for any other person) shall, subject to and
without prejudice to any order which may at any time be
made by the court under the provisions of sections 393 and
394, vest in and be at the disposal of the State.
COMPANIESLIQUIDATIONACCOUNT
396. (1) An Account to be called the Companies Establishment of
Liquidation Account, shall be kept by the Registrar with Companies
such bank as may from time to time be approved by the Liquation
Account.
Minister in charge of the subject of Finance.
298 Companies Act, No. 07 of 2007
(2) Whenever the balance standing to the credit of the
Companies Liquidation Account is in the opinion of the
Registrar, in excess of the amount required for the time being
to meet claims under section 397, the Registrar shall notify
the Deputy Secretary to the Treasury of the excess and shall
pay to him, to such account as he may direct, the whole or
any part of that excess which he may require. The Deputy
Secretary to the Treasury may invest the sums paid to him or
any part of them in Government securities, to be held to the
credit of the Companies Liquidation Account.
(3) When any part of the money paid to the Deputy
Secretary to the Treasury under subsection (2) is in the
opinion of the Registrar, required to meet any claim under
section 397, the Registrar shall give notice of that requirement
to the Deputy Secretaty to the Treasury who shall repay the
amount required to the Registrar to the credit of the
Companies Liquidation Account, and may for that purpose
sell any of the securities referred to in subsection (2).
(4) The dividends on investments made under this section
shall be paid into the Companies Liquidation Account.
Payments into 397. (1) Money representing unclaimed assets of a
and out of company standing to the credit of a liquidator shall after
Companies
completion of the winding up, be paid to the Registrar to be
Liquidation
Account. credited to the Companies Liquidation Account.
(2) Money held in the Companies Liquidation Account
may be paid or distributed to any person who would have
been entitled to payment or distribution in the winding up of
a company of any money or surplus assets the proceeds of
which, have been credited to the Companies Liquidation
Account.
(3) Where any funds have been paid into the Companies
Liquidation Account in respect of any company, and that
company subsequently is dissolved, the provisions of section
395 shall apply to those funds.
Companies Act, No. 07 of 2007 299
398. (1) For the purposes of this section, an “essential Refusal to supply
essential services
service” means—
prohibited.
(a) the retail supply of electricity ;
(b) the supply of water ; and
(c) the supply of telecommunications services.
(2) Notwithstanding the provisions contained in any
written law to the contrary or any contract, a supplier of an
essential service shall not—
(a) refuse to supply the service to a liquidator or to a
company in liquidation, by reason of the company’s
default in paying charges due for the service in
relation to a period before the commencement of
the liquidation ; or
(b) make it a condition of the supply of the service to a
liquidator or to a company in liquidation, that
payment be made of outstanding charges due for
the service, in relation to a period before the
commencement of the liquidation.
(3) For the avoidance of doubt, nothing in this section
shall prevent the supplier of an essential service from
exercising any right or power under any contract or under
any written law in respect of a failure by a company to pay
charges due for the service, in relation to any period after the
commencement of the liquidation.
(4) The charges incurred by a liquidator for the supply of
an essential service shall be an expense incurred by the
liquidator, for the purposes of sub-paragraph (a) of paragraph
1 of the Ninth Schedule to this Act.
300 Companies Act, No. 07 of 2007
RULES AND FEES
Rules and fees 399. (1) Rules may be made by the Minister to provide
for winding up.
for the carrying into effect of the objects of this Act, so far as
it relates to the winding up of companies.
(2) There shall be paid in respect of proceedings under
this Act in relation to the winding up of companies, such
reasonable fees as the Minister may, by regulation, prescribe.
PART XIII
ADMINISTRATORS
APPOINTMENT OF ADMINISTRATOR
Interpretation. 400. In this Part of this Act, unless the context otherwise
requires —
(a) “initial period” means the period beginning from
the date of appointment of the administrator, until—
(i) the date on which a meeting is held under
section 404 ; or
(ii) a receiver is appointed in accordance with
the provisions of subsection (2) of section
402 ; or
(iii) the expiry of twenty working days, or such
longer period as court may allow,
whichever occurs first ; and
(b) references to hire-purchase agreements include
conditional sale agreements, chattel leasing
arrangements and retention of title agreements.
Companies Act, No. 07 of 2007 301
401. (1) Subject to the provisions of subsection (4) of Power of board
to appoint
this section, where the board of a company considers that—
administrator.
(a) the company is or is likely to become unable to pay
its debts as they fall due ; and
(b) the appointment of an administrator will be likely
to achieve one or more of the purposes referred to in
subsection (2),
the board may resolve to appoint an administrator of a
company.
(2) The purposes for which an administrator may be
appointed are —
(a) the survival of the company and the whole or any
part of its undertaking as a viable concern ;
(b) the preparation and approval of a compromise under
Part IX or a compromise or arrangement under
Part X ; or
(c) a more advantageous realisation of the company’s
assets than would be likely on a winding up.
(3) A resolution appointing an administrator shall specify
the purpose or purposes for which the appointment is being
made, and once passed may not be rescinded without the
leave of the court.
(4) A resolution shall not be passed by the board under
this section where—
(a) an order has been made for the winding up of the
company ;
(b) a receiver has been appointed in respect of the whole
of the property and undertaking of the company,
302 Companies Act, No. 07 of 2007
unless the person by whom or on whose behalf the
receiver was appointed has consented to the making
of the order ; or
(c) an administrator has been appointed by the company
on a previous occasion, unless the leave of the court
to make the further appointment is first obtained.
(5) A resolution passed in contravention of subsection
(4) shall be void and of no effect.
Notice to charge 402. (1) Where the board of a company appoints an
holders of administrator, the company shall forthwith give notice of the
appointment of
administrator. appointment and of the identity of the person who has been
appointed as administrator, to any person who is entitled to
appoint a receiver of the property and undertaking of the
company.
(2) At any time within ten working days from the date on
which notice has been given under subsection (1), a person
who is entitled to appoint a receiver of the property and
undertaking of the company may make such an appointment.
Upon the appointment of such a receiver, the administrator
shall immediately cease to hold office.
Effect of 403. (1) From and after the appointment of an
appointment of administrator, until the end of the initial period—
administrator.
(a) no resolution may be passed or order made for the
liquidation of the company ;
(b) subject to the provisions of subsection (2) of section
402, no steps be taken to enforce any security over
any property of the company or to repossess any
goods in the company’s use or possession under
any hire-purchase agreement, except with the
consent of the administrator or with the leave of the
court and subject to such terms as the court may
impose ;
Companies Act, No. 07 of 2007 303
(c) no other proceedings and no execution or other legal
process may be commenced or continued and no
distress may be levied against the company or its
property, except with the consent of the
administrator or with the leave of the court and
subject to such terms as the court may impose.
(2) Nothing in subsection (1) requires the leave of the
court, for—
(a) filing a petition to wind up the company ; or
(b) giving notice in relation to a default under a charge
over property of the company or under an agreement
relating to property in the use, possession or
occupation of the company.
INITIAL MEETING AND CONFIRMATION OF APPOINTMENT
404. (1) An administrator shall within ten working days Duty of
of being appointed, send a written notice to all creditors of administrator to
summon initial
the company so far as he is aware of their addresses— meeting.
(a) advising them of the appointment of an
administrator ; and
(b) calling a meeting of creditors to consider whether
the appointment should be confirmed.
(2) Where no meeting of creditors is held before the expiry
of the initial period, the administrator shall cease to hold
office at the expiry of that period.
(3) A meeting of creditors called under this section shall
be conducted in accordance with the procedures specified in
the Seventh Schedule, save that all creditors shall vote as
one class.
304 Companies Act, No. 07 of 2007
(4) Where a meeting of creditors under this section does
not confirm the appointment of the administrator, the
administrator shall cease to hold office with effect from the
close of the meeting.
(5) Where a meeting of creditors under this section
confirms the appointment of the administrator, the
administrator shall continue in office and shall prepare
proposals in accrodance with the provisions of section 406.
Effect of 405. (1) During the period for which an administrator
confirmation holds office after the expiry of the initial period—
of
administrator.
(a) no resolution may be passed or order made for the
winding up of the company ;
(b) no receiver of the property of the company may be
appointed ;
(c) no other steps may be taken to enforce any security
over any property of the company or to re-possess
any goods in the company’s use or possession under
any hire-purchase agreement, except with—
(i) the consent of the administrator ; or
(ii) the leave of the court and subject to such
terms as the court may impose ;
(d) no other proceedings and no execution or other legal
process may be commenced or continued and no
distress may be levied against the company or its
property, except with—
(i) the consent of the administrator ; or
(ii) the leave of the court and subject to such
terms as the court may impose ;
Companies Act, No. 07 of 2007 305
(2) Nothing in subsection (1) requires the consent of the
administrator or the leave of the court for—
(a) filing a petition to wind up the company ; or
(b) giving notice in relation to a default under a charge
over property of the company or under an agreement
relating to property in the use, possession, or
occupation of the company.
ADMINISTRATOR’S PROPOSALS
406. (1) Within two months after the end of the initial Statement of
period or such longer period as the court may allow, the proposals.
administrator shall—
(a) prepare a statement of his proposals for achieving
the purpose or purposes specified in the order
appointing him ;
(b) deliver a copy of the statement to the Registrar ;
(c) send a copy of the statement to all creditors of the
company so far as he is aware of their addresses.
(2) The administrator shall call a meeting of creditors to
consider the statement, not less than five and not more than
ten working days after the date on which copies of the
statement had been sent to creditors.
(3) The administrator shall also within two months of the
date of his appointment and before the date of the meeting of
creditors to consider the statement, either—
(a) send a copy of the statement to all shareholders of
the company ; or
(b) give public notice of an address at which
shareholders of the company can obtain a copy of
the statement free of charge.
306 Companies Act, No. 07 of 2007
(4) Where an administrator fails to comply with the
requirements of this section he shall be guilty of an offence
and be liable on conviction to a fine not exceeding fifty
thousand rupees.
Consideration of 407. (1) A meeting of creditors called under the
proposals by provisions of section 406 shall decide whether to approve
creditors’ the administrator’s proposals.
meeting.
(2) The meeting may approve the proposals with
modifications, if the administrator consents to the
modifications.
(3) The meeting shall be conducted in accordance with
the procedure specified in the Seventh Schedule and within
ten working days of such meeting the administrator shall
give notice of the result to the Registrar.
(4) Where the admininstrator’s proposals are approved,
the administrator shall continue in office if the proposals so
provide or shall cease to hold office in the circumstances set
out in the proposals.
(5) Where the administrator’s proposals are not approved,
the administrator shall cease to hold office five working days
after the date of the meeting.
(6) Where the administrator fails to comply with the
requirements of subsection (4) he shall be guilty of an offence
and be liable on conviction to a fine not exceeding fifty
thousand rupees.
Consequential 408. The court may on the application of a company or
orders where an administrator or former administrator, make such orders
administrator consequential upon the discharge of an administrator as it
cease to hold
office. thinks fit.
Approval of 409. (1) Where—
substantial
revisions to (a) the proposals of the administrator have been
proposals.
approved under section 407 ; and
Companies Act, No. 07 of 2007 307
(b) the administrator proposes to make substantial
revisions to those proposals,
the administrator shall send to all creditors of the company
so far as he is aware of their addresses, a written statement of
the proposed revisions.
(2) The administrator shall call a meeting of the creditors
to consider the revisions, not less than five and not more than
ten working days after the date on which copies of the
statement had been sent to the creditors.
(3) The administrator shall also before the date of the
scheduled meeting of the creditors to consider the statement,
either—
(a) send a copy of the statement to all shareholders of
the company ; or
(b) give public notice of an address at which
shareholders of the company can obtain a copy of
the statement free of charge.
(4) The meeting may approve the proposed revisions with
modifications, if the administrator consents to the
modifications.
(5) The meeting shall be conducted in accordance with
the procedure specified in the Seventh Schedule, and at the
conclusion of such meeting the administrator shall give notice
of the result of the meeting to the Registrar.
NOTICE OFADMINISTRATION
410. (1) An administrator shall forthwith after being Notice of
appointed— appointment of
administrator.
(a) give public notice of his appointment, including—
(i) his full name ;
308 Companies Act, No. 07 of 2007
(ii) the date of the appointment ;
(iii) his office address ; and
(b) send a copy of the public notice to the Registrar.
(2) Where the administrator fails to comply with the
requirements of this section he shall be guilty of an offence
and be liable on conviction to a fine not exceeding fifty
thousand rupees.
Notice of 411. (1) Where an administrator is appointed in respect
administration
of a company, every agreement entered into and every
document issued by or on behalf of the company or the
administrator and on which the name of the company appears,
shall state clearly that an administrator has been appointed.
(2) A failure to comply with the requirements of
subsection (1) shall not affect the validity of the agreement
or document.
(3) Every person who—
(a) contravenes the requirements of subsection (1); or
(b) knowingly or willfully authorises or permits a
contravention of subsection (1),
shall be guilty of an offence and be liable on conviction to a
fine not exceeding fifty thousand rupees.
THE ADMINISTRATOR
Qualifications of 412. (1) The following persons may not be appointed
administrator. or act as administrator of a company :—
(a) a person who is under eighteen years of age;
(b) a creditor of the company;
Companies Act, No. 07 of 2007 309
(c) a person who is or who has within the period of two
years immediately preceding the commencement
of the receivership, been an officer or employee of
the company;
(d) a person who has or who has had within the period
of two years preceding the commencement of the
administration, an interest whether direct or indirect,
in a share issued by the company;
(e) a person who is an undischarged insolvent;
(f) a person who has been adjudged to be of unsound
mind under the Mental Diseases Ordinance (Cap.
227);
(g) a person in respect of whom an order has been made
under subsection (5) of section 468;
(h) a person who was prohibited from being a director
of or being concerned or taking part in the
promotion, formation or management of a company
under section 188 of the Companies Act, No. 17 of
1982, or who would be so prohibited but for the
repeal of that Act; or
(i) a person who is prohibited from being a director or
promoter of or being concerned or taking part in the
management of a company under section 213 or
214.
(2) A body corporate shall not be appointed or act as an
administrator.
(3) A person who acts in contravention of subsection (1)
or subsection (2), shall be guilty of an offence and be liable
on conviction to a fine not exceeding two hundred thousand
rupees.
310 Companies Act, No. 07 of 2007
Validity of 413. Any act done by a person as an administrator shall
acts of be valid notwithstanding the fact that such person is not
administrator.
qualified to act as an administrator.
Consent to 414. The appointment of a person as an administrator
be shall be of no effect, unless that person consents in writing to
appointmented. being appointed as an administrator.
Vacancy in 415. (1) The office of administrator shall become vacant
office of if the person holding that office resigns, dies, is removed
administrator. from office by the court or becomes disqualified under section
412.
(2) A person may resign from the office of administrator
by appointing another person as his successor, and delivering
notice in writing of the appointment of his successor to the
company and to the Registrar.
(3) The court may on the application of the company or a
shareholder or a director or creditor of the company or the
Registrar, review the appointment of a successor to an
administrator and may if it thinks fit, appoint another person
to be the administrator of the company in his place.
(4) Where for any reason other than resignation a vacancy
occurs in the office of administrator, written notice of the
vacancy shall forthwith be delivered to the company and to
the Registrar by the person vacating office or, if that person is
unable to act, by his personal representative .
(5) If as the result of the vacation of office by an
administrator no person is appointed to act as administrator,
the board of the company may appoint a person to act as
administrator.
(6) Where a vacancy occurs in the office of administrator
or a person has been appointed to act as an administrator
under subsection (5), as the case may be, the court may on the
application of the company or a shareholder or director or
creditor of the company or the Registrar, appoint another
person to be the administrator of the company.
Companies Act, No. 07 of 2007 311
(7) An administrator appointed under subsection (5) or
subsection (6) shall, within ten working days of being
appointed deliver a notice of his appointment to the Registrar.
(8) An administrator may at any time be removed from
office by the court.
(9) A person vacating the office of administrator shall
where practicable, provide such information and give such
assistance to his successor as that person may reasonably
require.
(10) On the application of a person appointed to fill a
vacancy in the office of administrator, the court may make
any order that it considers necessary or desirable to facilitate
the performance of the administrator’s duties.
(11) Every person who fails without reasonable excuse
to comply with the requirements of subsection (4) or who
fails to comply with the provisions of subsection (7) shall be
guilty of an offence and be liable on conviction to a fine not
exceeding fifty thousand rupees.
POWERS OFADMINISTRATOR
416. (1) An administrator— Powers of
administrators.
(a) shall manage the affairs, business and property of
the company;
(b) may do all such things as may be necessary or
desirable for the management of the affairs, business
and property of the company;
(c) without limiting the powers specified in paragraphs
(a) and (b), shall have all the powers that could be
exercised by a receiver of the whole of the property
and undertaking of the company under sections 443,
445 and 446.
312 Companies Act, No. 07 of 2007
(2) The administrator may apply to the court for directions
in relation to any matter arising in connection with the
carrying out of his functions.
(3) Where the exercise of any power conferred on the
company or its board or officers by this Act or by the company’s
articles could interfere with the exercise by the administrator
of his powers, such power shall not be exercised by the
company, its board or officers, as the case may be, except
with the consent of the administrator, which may be given
generally or in relation to particular cases.
(4) Without limiting the generality of subsection (3), any
disposal or other dealing with the property of the company
without first obtaining the consent of the administrator, which
may be given generally or in relation to particular cases,
shall unless the court otherwise orders, be void.
(5) In exercising his powers the administrator is deemed
to act as the company’s agent, and a person dealing with the
administrator in good faith and for value, shall not be required
to inquire whether the administrator is acting within his
powers.
Power to deal 417. (1) The administrator of a company may dispose
with charged of or otherwise exercise his powers in relation to any property
property &c.,
of the company which is subject to a security to which this
subsection applies, as if the property were not subject to the
security.
(2) Provisions of subsection (1) shall apply to any security
which, when it was created, was a floating charge.
(3) Where on an application by the administrator, the court
is satisfied that the disposal (with or without other assets)
of—
(a) any property of the company subject to a security to
which subsection (1) does not apply; or
Companies Act, No. 07 of 2007 313
(b) any goods in the possession of the company under a
hire-purchase agreement,
would be likely to promote the purpose or one or more of the
purposes specified in the order appointing the administrator,
the court may by order authorise the administrator to—
(c) dispose of the property as if it were not subject to
the security; or
(d) dispose of the goods as if all rights of the owner
under the hire purchase agreement were vested in
the company.
(4) Where property is disposed of under subsection (1),
the holder of the security has the same priority in respect of
any property of the company directly or indirectly
representing the property disposed of, as he would have had
in respect of the property subject to the security.
(5) It shall be a condition of an order made by the court
under subsection (3) that—
(a) the net proceeds of the disposal; and
(b) where those proceeds are less than such amount as
may be determined by the court to be the net amount
that would be realised on a sale of the property or
goods in the open market, such sums as may be
required to make good the deficiency,
shall be applied towards discharging the sums secured by the
security, or payable under the hire purchase agreement.
(6) Where a condition imposed under subsection (5)
relates to two or more securities, that condition requires the
net proceeds of the disposal and any sum mentioned in
paragraph (b) of that subsection to be applied towards
discharging the sums secured by those securities, in the order
of their priorities.
314 Companies Act, No. 07 of 2007
(7) A copy of any order made under subsection (3) shall
within ten working days after the making of the order, be sent
by the administrator to the Registrar.
(8) Where the administrator fails to comply with the
requirements of subsection (7), he shall be guilty of an offence
and be liable on conviction to a fine not exceeding fifty
thousand rupees.
General duties 418. (1) The administrator on his appointment shall
of administrator.
take into his custody or control, all the property to which the
company is or appears to be entitled.
(2) The administrator shall manage the affairs, business
and property of the company—
(a) at any time before a proposal has been approved
under section 407 in accordance with any directions
of the court; and
(b) at any time after a proposal has been so approved, in
accordance with the proposal as from time to time
revised and with any directions of the court.
(3) The administrator shall summon a meeting of the
creditors of the company if—
(a) he is requested to do so in writing by one tenth in
value of the creditors; or
(b) he is directed to do so by the court.
Discharge of 419. (1) The administrator shall, where—
administrator or
variation of (a) it appears to him that the purpose or each of the
resolution
appointing purposes specified in the resolution appointing him
administrator. either have been achieved or is incapable of
achievement;
Companies Act, No. 07 of 2007 315
(b) he is required to do so by a meeting of the company’s
creditors summoned for the purpose,
may at any time, give notice to the company notifying that
the—
(c) administration ought to be terminated; or
(d) resolution appointing him as administrator ought
to be varied to specify an additional purpose.
(2) The administrator shall cease to hold office five
working days after giving a notice under paragraph (c) of
subsection (1), or on such later date as may be specified in
the notice, but in any event no more than ten working days
after the date on which the notice is given.
(3) Where the administrator gives notice under paragraph
(d) of subsection (1), the resolution shall be deemed to be
amended accordingly.
(4) Where a notice is given under subsection (1), the
administrator shall within ten working days after giving the
notice, deliver a copy of the notice to the Registrar.
(5) Where the administrator fails to comply with
subsection (4) he shall be guilty of an offence and be liable
on conviction to a fine not exceeding fifty thousand rupees.
420. (1) The remuneration to be paid to and expenses Remuneration
of the administrator and any indemnity to which he is entitled and expenses of
administrator.
under section 421, shall be paid out of the property of the
company, and shall have priority over any security which, as
created, was a floating charge.
(2) The court may on the application of the administrator
or the company or any creditor of the company, review or fix
the remuneration of the administrator in respect of any period
at a level which is reasonable in the circumstances.
316 Companies Act, No. 07 of 2007
Liability of 421. (1) Subject to the provisions of subsections (2)
administrator. and (3), an administrator is personally liable—
(a) on a contract entered into by the administrator in
the exercise of any of the administrator’s powers;
and
(b) for payment of wages or salary that during his
administration, accrue under a contract of
employment entered into before his appointment, if
notice of the termination of the contract is not
lawfully given within ten working days after the
date of appointment.
(2) The court may, on the application of an administrator,
extend the period within which notice of the termination of a
contract is required to be given under paragraph (b) of
subsection (1), on such terms and conditions as the court
thinks fit, provided that application is made before the expiry
of the period referred to in such paragraph.
(3) Subject to the provisions of subsection (6), an
administrator is personally liable to the extent specified in
subsection (4) for rent and any other payments becoming
due under an agreement subsisting at the date of his
appointment, relating to the use, possession, or occupation
of property by the company.
(4) The liability of an administrator under subsection (3)
is limited to that portion of the rent or other payments which
is attributable to the period, commencing ten working days
after the date of the appointment of the administrator and
ending on—
(a) the date on which the administration ends; or
(b) the date on which the company ceases to use,
possess, or occupy the property,
whichever is the earlier.
Companies Act, No. 07 of 2007 317
(5) The court may, on the application of an administrator—
(a) limit the liability of the administrator to a greater
extent than that specified in subsection (4); or
(b) exempt the administrator from liability under
subsection (3).
(6) Nothing in subsection (3) or subsection (4)—
(a) shall be taken as giving rise to an adoption by an
administrator of an agreement referred to in
subsection (3); or
(b) shall render an administrator liable to perform any
other obligation under such an agreement.
(7) An administrator is entitled to an indemnity out of
the property of the company in respect of his personal liability
under this section.
422. (1) The court may relieve a person who has acted Relief from
liability.
as an administrator from all or any personal liability incurred
in the course of the administration, if it is satisfied that—
(a) the liability was incurred solely by reason of a defect
in the appointment of the administrator or in the
order of the court under which the administrator
was appointed; and
(b) the administrator acted honestly and reasonably and
ought in the circumstances to be exempted.
(2) The court may exercise its powers under subsection (1)
subject to such terms and conditions as it thinks fit.
318 Companies Act, No. 07 of 2007
ASCERTAINMENT AND INVESTIGATION OF COMPANY’SAFFAIRS
Obligations of 423. (1) Where an administrator is appointed, the company
company and and every director of the company shall—
directors to
provide
information &c. (a) make available to the administrator all books,
documents, and information relating to the business,
affairs and property of the company in the
company’s possession or under its control;
(b) if required to do so by the administrator, verify by
affidavit that the books, documents, and information
are complete and correct;
(c) give the administrator such assistance as the
administrator may reasonably require;
(d) if the company has a common seal, make the
common seal available for use by the administrator.
(2) Where the company or a director fails to comply with
the requirements of subsection (1), the court may on the
application of the administrator, make an order requiring the
company or a director of the company to comply with the
same.
MISCELLANEOUS
Creditors’ 424. (1) Where a meeting of creditors has approved the
committee. administrator’s proposals, the meeting may if it thinks fit,
establish a committee (hereinafter referred to as the “creditors’
committee”), to exercise the functions conferred on it under
this Act.
(2) Where a creditors’ committee is established, it may on
giving not less than five working days notice, require the
administrator to attend before it at any reasonable time and
provide it with such information relating to the carrying out
of his functions as it may reasonably require.
Companies Act, No. 07 of 2007 319
425. (1) During any time at which an administrator holds Protection of
interests of
office, a creditor or shareholder of a company may apply to
creditors and
the court for an order under this section, on the ground that— share holders.
(a) the company’s affairs, business and property are
being or have been managed by the administrator
in a manner which is unfairly discriminatory or
unfairly prejudicial to the interests of the creditor or
shareholder; or
(b) any actual or proposed act or omission of the
administrator is or would be unfairly discriminatory
or unfairly prejudicial to the interests of such creditor
or shareholder.
(2) On an application being made to court under this
section, court may, where it considers it just and equitable to
do so and subject to the provisions of subsection (3), make
such order as it thinks fit including, without limiting the
generality of this subsection, and order—
(a) regulating the future management by the
administrator of the company’s affairs, business and
property;
(b) requiring the administrator to refrain from doing or
continuing an act complained of by the applicant
or to do an act which the applicant has complained
he has omitted to do;
(c) requiring the calling of a meeting of creditors or
shareholders for the purpose of considering such
matters as the court may direct;
(d) discharging the administrator and making such
consequential provisions as the court thinks fit.
320 Companies Act, No. 07 of 2007
(3) An order under this section shall not prejudice or
prevent—
(a) the implementation of a compromise or arrangement
approved under Part IX or Part X of this Act; or
(b) where the application for the order was made more
than twenty working days after the approval of any
proposals or any revised proposals under section
407 or section 409, as the case may be, the
implementation of those proposals or revised
proposals.
Application to 426. (1) The provisions contained in sections 453, 454,
administrator of 460, 468, 469 and 470 shall apply to an administrator and to
provisions
relating to a company under administration with all necessary
receivers. modifications, and in particular as if—
(a) the administrator were a receiver appointed by the
court ;
(b) references to the property in receivership were
references to the property and undertaking of the
company ; and
(c) references to the grantor were references to the
company.
PART XIV
FLOATING CHARGES
Company may 427. (1) A company may grant a charge to which this
grant floating Part of this Act applies (in this Act referred to as a “floating
charge. charge”) over the whole or any part of the property and
undertaking of the company, for the purpose of securing a
debt or any other obligation incurred or to be incurred by the
company or any other person.
Companies Act, No. 07 of 2007 321
(2) A floating charge may apply to any property of the
company whether held by the company at the time of creation
of the floating charge or acquired thereafter, including—
(a) movable and immovable property ;
(b) uncalled capital ;
(c) circulating assets, including cash, stock in trade,
raw materials, book debts and other receivables.
(3) A floating charge created under this Part of this Act
shall, notwithstanding the provisions contained in any other
law, have effect as a security over the property of the company
to which it is expressed to apply, in the manner and to the
extent specified in this Part—
(a) subject to the provisions of the Registration of
Documents Ordinance (Cap. 117) where applicable;
and
(b) subject to section 103 of the Mortgage Act (Cap.
89).
428. (1) A floating charge may be created by a company Instrument
only by the execution under the name of the company in creating floating
charge.
accordance with the provisions of paragraph (a) of subsection
(1) of section 19, of an instrument which is expressed to
create such a charge.
(2) An instrument which creates a floating charge over
property which includes land, shall be registrered under the
Registration of Documents Ordinance (Cap. 117) as an
instrument affecting that land.
(3) An instrument which creates a floating charge over
property which includes movable property, shall be registered
under the Registration of Documents Ordinance (Cap. 117)
as if it were a bill of sale. Where the floating charge also
322 Companies Act, No. 07 of 2007
includes land, the provisions of sections 16 to 22 of the
Registration of Decuments Ordinance (Cap. 117) shall not in
any way affect the instrument, in so far as it relates to land.
(4) The provisions of sections 17 and 20 of the
Registration of Documents Ordinance (Cap. 117) shall apply
in relation to a floating charge, as if registration of that
floating charge—
(a) under Chapter IV of that Ordinance in the district in
which the registered office of the company is
situated; and
(b) under Part VI of this Act,
were registration under Chapter IV of that Ordinance, in every
district in Sri Lanka.
(5) For the avoidance of doubt, nothing in section 63 of
the Mortgage Act (Cap. 89) shall apply to or in relation to
any instrument creating a floating charge.
Provisions of 429. (1) The terms specified in the Eleventh Schedule
instrument
hereto shall be implied terms of every instrument which
creating floating
charge. creates a floating charge, except to the extent that the terms
of any such instrument expressly exclude or are inconsistent
with those implied terms.
(2) An instrument creating a floating charge may contain—
(a) provisions prohibiting or restricting the creation of
any fixed security or any other floating charge
having priority over or ranking equally with the
floating charge ; or
(b) provisions regulating the order in which the floating
charge shall rank with any other subsisting or future
floating charges or fixed securities over that
property or any part of it.
Companies Act, No. 07 of 2007 323
430. (1) Subject to the terms of the instrument under Dealing with
which it is created, the creation of a floating charge in respect property subject
to floating
of any property shall not affect the ability of the company to
charge before
deal with that property in the normal course of business. attachment.
(2) Where—
(a) any property of a company is subject to a floating
charge which has not attached to that property ; and
(b) the company has sold or disposed of that property,
any person who receives that property from the company
shall be liable to account to the person entitled to the benefit
of the floating charge for the value of the property, in the
circumstances set out in subsection (3) or subsection (4).
(3) A person may be liable to account for the value of
property received by that person under subsection (2), if—
(a) the sale or disposal of the property did not take place
in the normal course of the company’s business ;
and
(b) that person knew or by reason of his relationship
with the company ought to have known, that the
sale or disposal did not take place in the normal
course of the company’s business.
(4) A person may be liable to account for the value of
property received by that person under subsection (2), if—
(a) the sale or disposal of the property is a breach of the
instrument creating the floating charge ; and
(b) that person knew or by reason of his relationship
with the company ought to have known, of the terms
of the instrument and the circumstances giving rise
to a breach of those terms.
324 Companies Act, No. 07 of 2007
Ranking of 431. (1) Where any property of a company is subject
floating both to a floating charge and to a fixed security arising by
charges.
operation of law, the fixed security shall have priority over
the floating charge.
(2) Where any property of a company is subject both to a
floating charge and to a fixed security granted by the company,
the fixed security shall have priority over the floating charge,
unless—
(a) the instrument creating the floating charge—
(i) prohibited the granting by the company of
that fixed security ; and
(ii) had been registered under Part VI of this Act
before the date on which the fixed security
was granted by the company ; or
(b) the instrument creating the floating charge is
expressed to take priority over the fixed security,
and the person entitled to the benefit of the fixed
security has consented in writing to that priority ; or
(c) before the date on which the fixed security was
granted by the company, the floating charge had
attached to the property pursuant to section 433
and either—
(i) a receiver had been appointed in respect of
the property and the person to whom the fixed
security was granted had notice of the
appointment of the receiver ; or
(ii) the person to whom the fixed security was
granted knew or by reason of his relationship
with the company ought to have known,
that—
(A) the floating charge had attached to that
property ;
Companies Act, No. 07 of 2007 325
(B) the grant of the fixed security was a
breach of the instrument creating the
floating charge ; or
(C) the grant of the fixed security did not
occur in the normal course of the
company’s business.
(3) Where any property of a company is subject to more
than one floating charge, those floating charges shall rank
among themselves according to the date of registration under
Part VI, subject to any provision to the contrary in an
instrument creating a floating charge which has been
consented to in writing by the person entitled to the benefit
of the floating charge, the priority of which is postponed by
that provision.
(4) For the avoidance of doubt and subject to the terms of
the instrument under which it is created, the priority of a
floating charge shall not be affected by the fact that all or any
part of the debts or obligations secured by that floating charge,
were incurred or arose after —
(a) the creation and registration by the company of a
subsequent floating charge ; or
(b) the grant by the company of any fixed security in
respect of the whole or any part of the property
comprised in the floating charge.
(5) A person shall be deemed to have received notice of
the appointment of a receiver for the purposes of subsection
(2), if—
(a) the person knows or ought by reason of his
relationship with the company to know that a
receiver has been appointed ; or
(b) public notice of the appointment of the receiver has
been given in accordance with paragraph (b) of
subsection (1) of section 440.
326 Companies Act, No. 07 of 2007
(6) Without limiting the provisions contained in
subsection (3) of section 427, where land owned by a company
is subject to a floating charge and to a fixed security which
has been registered under the Registration of Documents
Ordinance (Cap. 117), the fixed charge shall have priority
over the floating charge, unless the floating charge was
registered in repsect of that land under the Registration of
Documents Ordinance (Cap. 117) prior to the registration of
the fixed security.
Alteration and 432. (1) The terms of an instrument creating a floating
discharge of charge may be varied in the same manner in which an
floating charges.
instrument may be executed by the company.
(2) Subject to the modifications contained in subsection
(3) of this section subsections (1) and (3) of section 102,
sections 103 and 108 shall apply to an instrument of
alteration under this section, which—
(a) prohibits or restricts creation of any fixed security
or any other floating charge having priority over or
ranking equally with the floating charge ;
(b) varies or otherwise regulates the order of and the
ranking of the floating charge in relation to fixed
securities or to other floating charges ;
(c) releases property from the floating charge ; or
(d) where the floating charge secures a specified
obligation or a specified amount, alters that
obligation or increases that amount, as the case may
be.
(3) The provisions of subsections (1) and (3) of sections
102, 103 and 108 shall apply in respect of an instrument of
alteration to which subsection (2) applies, as if—
(a) references to a charge were references to an alteration
to a floating charge ; and
Companies Act, No. 07 of 2007 327
(b) references to the creation of a charge, were references
to the execution of the instrument of alteration.
(4) Where an alteration to the terms of an instrument
creating a floating charge has the effect of extending the
floating charge to property not previously comprised in the
floating charge, the priority of the floating charge in respect
of the additional property shall be determined, as if the
instrument by which the amendments were affected were an
instrument creating a new floating charge in respect of that
additional property.
(5) A floating charge may be released in respect of the
whole or any part of the property comprised in it, in the same
manner in which such a charge may be created.
433. (1) A floating charge shall attach to and constitute Circumstances in
a fixed charge in respect of all property comprised in the which floating
charge attaches
charge, on the occurrence of any of the following events :—
to property.
(a) the appointment of a receiver of the whole or any
part of the property or undertaking of the company,
whether under the terms of the instrument creating
the floating charge or otherwise ;
(b) the commencement of the winding up of the
company ;
(c) the disposal by the company of the whole or any
part of its undertaking, other than in the normal
course of its business ;
(d) the company ceasing to carry on business ;
(e) any other event the occurrence of which is expressed
in the instrument creating the floating charge to
have the effect of causing that charge to attach to
the property comprised in it.
328 Companies Act, No. 07 of 2007
(2) Where—
(a) a floating charge has attached to any property of a
company ; and
(b) the company sells or otherwise disposes of any
property to which the charge has attached,
the person to whom the property is sold or otherwise disposed
of, shall be liable to account to the person entitled to the
benefit of the floating charge for the value of the property,
if—
(c) a receiver had been appointed in respect of the
property and that person had notice of the
appointment of the receiver ; or
(d) that person knew or ought by reason of his
relationship with the company to have known
that—
(i) the floating charge had attached to that
property ;
(ii) the sale or disposal was a breach of the
instrument creating the floating charge ; or
(iii) the sale or disposal did not occur in the normal
course of the company’s business.
(3) Nothing in subsection (2) shall apply to a sale of
property—
(a) by or under the authority of a receiver appointed in
respect of the property, by the person entitled to the
benefit of the floating charge ;
Companies Act, No. 07 of 2007 329
(b) pursuant to a floating charge or other security in
respect of the property which ranks prior to the
floating charge, to the benefit of which the person
making the claim is entitled ; or
(c) by the court.
(4) A person who is liable to account to the holder of a
floating charge for the value of property disposed of by the
company, shall be given credit for the value of any
consideration provided to the company for that property
which has become available to the holder of the floating
charge, in substitution for that property.
(5) A person shall be deemed to have received notice of
the appointment of receiver for the purposes of subsection
(2), if—
(a) the person knows or ought by reason of his
relationship with the company to know, that a
receiver has been appointed ; or
(b) public notice of the appointment of the receiver has
been given is accordance with paragraph (b) of
subsection (1) of section 440.
(6) For the avoidance of doubt, where a floating charge
has become a fixed charge under this section, the grantee
may without prejudice to any right he may have to appoint a
receiver under Part XV, exercise any other remedy which is
available to the holder of a fixed charge under the Mortgage
Act (Cap. 89) or under any other written law.
330 Companies Act, No. 07 of 2007
PART XV
RECEIVERS AND MANAGERS
Interpretation. 434. (1) In this Part of this Act, unless the context
otherwise requires—
“creditor” includes a person to whom the grantor owes
a debt or is under a liability, whether present or
future, certain or contingent and whether an
ascertained debt or liability or a liability in
damages ;
“grantee” means in relation to an instrument which
creates a floating charge, the person entitled to the
benefit of the instrument ;
“grantor” means the person in respect of whose property
a receiver is or may be appointed ;
“liquidator” means a liquidator appointed under
Part XII ;
“mortgage” includes a charge on property for securing
money or money’s worth ;
“mortgagee” includes a person from time to time
deriving title under the original mortgagee, but
does not include a receiver ;
“preferential claims” means the claims referred to in
the Ninth Schedule (except paragraph 1 of that
Schedule) ;
“property” includes—
(a) movable and immovable property ;
(b) an interest in movable or immovable
property ;
Companies Act, No. 07 of 2007 331
(c) a debt ;
(d) any thing in action ;
(e) any other right or interest ;
“property in receivership” means property in respect
of which a receiver is appointed ;
“receiver” means a receiver or a manager or a receiver
and a manager in respect of any property,
appointed—
(a) under any instrument ; or
(b) by the court in the exercise of a power
conferred on the court by this Act,
whether or not the person appointed is empowered
to sell any of the property in receivership, but
does not include—
(c) a mortgagee who, whether personally or
through an agent, exercises a power to—
(i) receive income from mortgaged
property ;
(ii) enter into possession or assume control
of mortgaged property ; or
(iii) sell or otherwise alienate mortgaged
property ; or
(d) an agent of any such mortgagee.
POWER TO APPOINT RECEIVER
435. An instrument that creates a floating charge in Instrument may
respect of the whole of the property and undertaking of a confer power to
appoint receiver.
company, may confer on the grantee the power to appoint a
receiver of the property and undertaking of the company.
332 Companies Act, No. 07 of 2007
QUALIFICATIONS OF RECEIVERS
Qualifications 436. (1) The following persons may not be appointed
of receivers.
or act as a receiver :—
(a) a person who is under eighteen years of age ;
(b) a creditor of the grantor ;
(c) a person who is or who has within the period of two
years immediately preceding the commencement
of the receivership, been—
(i) an officer or employee of the grantor; or
(ii) an officer or employee of the mortgagee of
the property in receivership;
(d) a person who has or who has had within the period
of two years preceding the commencement of the
receivership, an interest, whether direct or indirect,
in a share issued by the grantor;
(e) a person who is an undischarged insolvent;
(f) a person who has been adjudged to be of unsound
mind under the Mental Diseases Ordinance (Cap.
227);
(g) a person in respect of whom an order has been made
under subsection (5) of section 468;
(h) a person who was prohibited from being a director
or promoter of or being concerned or taking part in
the management of a company under section 186 of
the Companies Act, No. 17 of 1982, or who would
be so prohibited but for the repeal of that Act;
Companies Act, No. 07 of 2007 333
(i) a person who is prohibited from being a director or
promoter of or being concerned or taking part in the
management of a company under section 213 or
214;
(j) a person who is disqualified from acting as a receiver
by the instrument that confers the power to appoint
a receiver.
(2) A body corporate shall not be appointed or act as a
receiver.
(3) A person who contravenes subsection (1) or subsection
(2), shall be guilty of an offence and be liable on conviction
to a fine not exceeding two hundred thousand rupees.
APPOINTMENT OF RECEIVER
437. (1) Where an instrument confers on the grantee Appointment of
the power to appoint a receiver of the property and receiver under
undertaking of a company, the grantee may appoint a receiver an instrument.
by an instrument in writing signed by or on behalf of the
grantee.
(2) A receiver appointed by or under a power conferred
by an instrument shall be the agent of the grantor, unless the
instrument expressly provides otherwise.
(3) A receiver may be appointed under this section —
(a) notwithstanding anything to the contrary contained
in any other law; and
(b) whether or not the property in respect of which the
receiver is appointed includes immovable property.
(4) For the avoidance of doubt—
(a) the appointment of a receiver under this section is
not a hypothecary action; and
334 Companies Act, No. 07 of 2007
(b) nothing in section 46 of the Mortgage Act (Cap. 89)
shall affect, or shall apply in relation to, the
appointment of a receiver under this section.
Extent of power 438. (1) A power conferred by an instrument to appoint
to appoint a a receiver includes the power to appoint—
receiver.
(a) two or more receivers;
(b) a receiver additional to one or more presently in
office;
(c) a receiver to succeed a receiver whose office has
become vacant,
unless the instrument expressly provides otherwise.
(2) Two or more receivers may act jointly or severally to
the extent that they have the same powers, unless the
instrument under which or the order of the court by which
they are appointed, expressly provides otherwise.
Court may 439. (1) Without limiting the inherent jurisdiction of
appoint a
the court under any other written law, the court may appoint
receiver.
a receiver of any property which is subject to a fixed security
or a floating charge granted by a company, on the application
of the grantee of that security or charge, where it is satisfied
that—
(a) the company has failed to pay a debt due to the
grantee or has otherwise failed to meet any
obligation to the grantee;
(b) the company proposes to sell or otherwise dispose
of the secured property in breach of the terms of any
instrument creating the security or charge; or
(c) it is necessary to do so to ensure the preservation of
the secured property for the benefit of the grantee.
Companies Act, No. 07 of 2007 335
(2) A receiver may be appointed under this section—
(a) notwithstanding anything to the contrary in any
other law; and
(b) whether or not the property in respect of which the
receiver is appointed, includes immovable property.
(3) For the avoidance of doubt—
(a) the appointment of a receiver under this section is
not a hypothecary action; and
(b) nothing in section 46 of the Mortgage Act (Cap.
89) shall affect, or shall apply in relation to the
appointment of a receiver under this section.
440. (1) A receiver shall forthwith after being appointed Notice of
appointment of
and in any event no later than ten working days after being
receiver.
appointed —
(a) give written notice of his or her appointment to the
grantor;
(b) give public notice of his or her appointment,
including —
(i) the receiver’s full name;
(ii) the date of the appointment;
(iii) the receiver’s office address; and
(iv) a brief description of the property in
receivership ; and
(c) send a copy of the public notice to the Registrar.
336 Companies Act, No. 07 of 2007
(2) Where the appointment of the receiver is in addition
to a receiver who already holds office or is in place of a
person who has vacated office as receiver, as the case may be,
every notice under this section shall state that fact.
(3) Every receiver who acts in contravention of this section
shall be guilty of an offence and be liable on conviction to a
fine not exceeding fifty thousand rupees.
Notice of 441. (1) Where a receiver is appointed in respect of the
receivership. property and undertaking of a company, every agreement
entered into and every document issued by or on behalf of
the grantor or the receiver and on which the name of the
grantor appears, shall state clearly that a receiver has been
appointed.
(2) Where a receiver is appointed in relation to a specific
asset or assets, every agreement entered into and every
document issued by or on behalf of the grantor or the receiver
that relates to the asset or assets, and on which the name of
the grantor appears, shall state clearly that a receiver has
been appointed.
(3) A failure to comply with subsection (1) or subsection
(2) shall not affect the validity of the agreement or document.
(4) Every person who—
(a) acts in contravention of subsection (1) or subsection
(2); or
(b) knowingly or willfully authorises or permits a
contravention of subsection (1) or subsection (2),
shall be guilty of an offence, and be liable on conviction to a
fine not exceeding fifty thousand rupees.
Vacancy in 442. (1) The office of receiver shall become vacant if the
office of person holding office resigns, dies, or becomes disqualified
receiver.
under section 436.
Companies Act, No. 07 of 2007 337
(2) A receiver appointed under a power conferred by an
instrument, may resign office by giving not less than five
working days’ written notice of his intention to resign, to the
person by whom the receiver was appointed.
(3) If, for any reason other than resignation, a vacancy
occurs in the office of receiver, written notice of the vacancy
shall forthwith be delivered to the Registrar by the person
vacating office or if that person is unable to act, by his legal
representative.
(4) A receiver appointed by the court shall not resign
office without prior leave of the court.
(5) A person vacating the office of receiver shall where
practicable, provide such information and give such
assistance in the conduct of the receivership to his or her
successor as that person may reasonably require.
(6) On the application of a person appointed to fill a
vacancy in the office of receiver, the court may make any
order that it considers necessary or desirable to facilitate the
performance of the receiver’s duties.
(7) Every person who fails without reasonable cause to
comply with subsection (3), shall be guilty of an offence and
be liable on conviction to a fine not exceeding fifty thousand
rupees.
POWERS OF RECEIVERS
443. (1) A receiver shall have the powers and authorities Powers of
expressly or impliedly conferred by the instrument or the receivers.
order of the court by or under which the appointment was
made.
(2) Subject to the instrument or the order of the court by
or under which the appointment was made, a receiver shall
have and may exercise the powers specified in the Twelfth
Schedule.
338 Companies Act, No. 07 of 2007
Precedence 444. (1) Where there are two or more floating charges
among subsisting over all or any part of the property of the company,
receivers.
a receiver may be appointed under this Part of this Act by
virtue of each such charge. A receiver appointed by or on the
application of the holder of a floating charge, which has
priority over any other floating charge by virtue of which a
receiver has been appointed, has the powers conferred on a
receiver by this Act, to the exclusion of any other receiver.
(2) Where two or more floating charges rank equally with
one another, and two or more receivers have been appointed
by virtue of such charges, the receivers so appointed are
deemed to have been appointed as joint receivers, and shall
act jointly, unless the instrument of appointment or each of
the respective instruments of appointment, otherwise provide.
(3) Subject to subsection (4), the powers of a receiver
appointed by or on the application of the holder of a floating
charge are suspended by, and as from the date of the
appointment of a receiver by or on the application of the
holder of a floating charge having priority over that charge,
to such extent as may be necessary to enable the receiver
second mentioned, to exercise his powers under this Act. Any
powers so suspended shall take effect again when the prior
floating charge ceases to attach to the property subject to the
charge, or when the appointment of a receiver under the prior
floating charge ceases in respect of that property, whichever
occurs first.
(4) The suspension of the powers of a receiver under
subsection (3) does not have the effect of requiring him to
release any part of the property (including any letters or
documents) of the company from his control, until he receives
from the receiver superceding him a valid indemnity (subject
to the limit of the value of such part of the property as is
subject to the charge, by virtue of which he was appointed)
in respect of any expenses, charges and liabilities he may
have incurred in the performance of his functions as receiver.
Companies Act, No. 07 of 2007 339
(5) The suspension of the powers of a receiver under this
section shall not cause the floating charge by virtue of which
he was appointed, to cease to attach to the property in respect
of which he was appointed.
(6) Nothing in this section shall prevent the same receiver
being appointed by virtue of two or more floating charges.
445. (1) A receiver has the same powers as the board of Power to make
calls on shares.
a company has or if the company is being wound up, as the
board would have had if it was not being wound up, to make
calls on the shareholders of the company in respect of
uncalled capital that is charged under the instrument by or
under which the receiver was appointed, and to charge interest
on and enforce payment of calls.
(2) For the purposes of subsection (1), the expression
“uncalled capital” includes any amount payable in respect
of the issue of shares or under the articles of the company.
(3) The making of a call or the exercise of a power under
subsection (1) is, as between the shareholders of the company
affected and the company, deemed to be a proper call or
power made or exercised by the directors of the company.
446. (1) A receiver may execute in the name and on Execution of
behalf of the company, all documents necessary or incidental documents.
to the exercise of the receiver’s powers.
(2) A document signed on behalf of a company by a
receiver, shall be deemed to have been properly signed on
behalf of the company for the purposes of section 19.
(3) Notwithstanding anything to the contrary in any other
law or the articles of association of a company, where the
340 Companies Act, No. 07 of 2007
instrument under which a receiver is appointed empowers
the receiver to execute documents and to use the company’s
common seal for that purpose, the receiver may executive
documents in the name and on behalf of the company by
affixing the company’s common seal to the documents, and
attesting the affixing of the common seal.
(4) Any document which is executed in the manner
prescribed in subsection (3), shall be deemed to have been
properly executed by the company.
Obligations 447. (1) Where a receiver is appointed in respect of the
of company whole or any part of the property of a company, the company
and
and every director of the company shall—
directors.
(a) make available to the receiver all books, documents,
and information relating to the property in
receivership in the company’s possession or under
the company’s control;
(b) if required to do so by the receiver, verify by affidavit
that the books, documents and information are
complete and correct;
(c) give the receiver such assistance as he or she may
reasonably require;
(d) if the company has a common seal, make the
common seal available for use by the receiver.
(2) On the application of the receiver, the court may make
an order requiring the company or a director of the company,
to comply with the requirements of subsection (1).
Validity of 448. (1) Subject to subsection (2), no act of a receiver
acts of shall be deemed to be invalid merely because the receiver
receivers.
was not validly appointed, or is disqualified from acting as a
receiver, or is not authorised to do the act.
Companies Act, No. 07 of 2007 341
(2) No transaction entered into by a receiver shall be
deemed to be invalid merely because the receiver was not
validly appointed or is not authorised to enter into the
transaction, unless the person dealing with the receiver has
or ought to have, by reason of his or her relationship with the
receiver or the person by whom the receiver was appointed,
knowledge that the receiver was not validly appointed or did
not have authority to enter into the transaction.
449. (1) Where the consent of a mortgagee is required Consent of
mortgagee to
for the sale of property in receivership and the receiver is
sale of property.
unable to obtain that consent, the receiver may apply to the
court for an order authorising the sale of the property, either
by itself or together with other assets.
(2) The court may on an application under subsection (1)
of this section, make such order as it thinks fit authorising
the sale of the property by the receiver, if satisfied that—
(a) the receiver has made reasonable efforts to obtain
the mortagee’s consent; and
(b) the sale—
(i) is in the interests of the grantor and the
grantor’s creditors; and
(ii) will not substantially prejudice the interests
of the mortgagee.
(3) An order under this section may be made subject to
such terms and conditions as the court thinks fit.
342 Companies Act, No. 07 of 2007
DUTIES OF RECEIVERS
General duties of 450. (1) A receiver shall exercise his or her powers in
receivers.
good faith.
(2) A receiver shall exercise his or her powers in a manner
he or she believes on reasonable grounds to be in the interest
of the person in whose interests he or she was appointed.
(3) Without prejudice to the provisions contained in
subsections (1) and (2), a receiver shall exercise his or her
powers having reasonable regard to the interests of —
(a) the grantor;
(b) persons claiming through the grantor, interests in
the property in receivership;
(c) unsecured creditors of the grantor; and
(d) sureties who may be called upon to fulfil obligations
of the grantor.
(4) Where a receiver appointed under an instrument acts
or refrains form acting in accordance with any directions
given by the person in whose interests he or she was appointed,
the receiver shall be deemed not to be in breach of the duty
referred to in subsection (2), but shall remain liable for any
breach of the duty referred to in subsection (1) or the duty
referred to in subsection (3).
(5) Nothing in this section shall limit or affect the
application of section 451.
Duty of receiver 451. A receiver who exercises a power of sale of property
selling property. in receivership, owes a duty to the grantor to obtain the best
price reasonably obtainable as at the time of sale.
Companies Act, No. 07 of 2007 343
452. Notwithstanding anything to the contrary in any No defence or
other law or anything contained in the instrument by or under indemnity.
which a receiver is appointed—
(a) it shall not be a defence to proceedings against a
receiver for a breach of the duty imposed by section
451, that the receiver was acting as the grantor’s
agent or under a power of attorney from the grantor;
(b) a receiver shall not be entitled to compensation or
indemnity from the property in receivership or the
grantor, in respect of any liability incurred by the
receiver arising from a breach of the duty imposed
by section 451.
453. A receiver shall keep money relating to the property Duty in relation
in receivership separate from other money received in the to money.
course of but not relating to the receivership, and from other
money held by or under the control of the receiver.
454. (1) A receiver shall at all times keep accounting Accounting
records that correctly record and explain all receipts, records.
expenditure, and other transactions relating to the property
in receivership.
(2) The accounting records shall be retained by the
receiver for not less than five years after the receivership
ends.
REPORTS OF RECEIVERS
455. (1) A receiver shall, not later than two months after First report by
his appointment, prepare a report on the state of affairs with receivers.
respect to the property in receivership, including —
(a) particulars of the assets comprising the property in
receivership;
(b) particulars of the debts and liabilities to be satisfied
from the property in receivership;
344 Companies Act, No. 07 of 2007
(c) the names and addresses of the creditors with an
interest in the property in receivership;
(d) particulars of any encumbrance over the property
in receivership held by any creditor, including the
date on which it was created;
(e) particulars of any default by the grantor in making
relevant information available; and
(f) such other information as may be prescribed.
(2) The report referred to in subsection (1) shall also
include details of—
(a) the events leading up to the appointment of the
receiver, so far as the receiver is aware of them ;
(b) property disposed of and any proposals for the
disposal of property in receivership ;
(c) amounts owing as at the date of appointment, to
any person in whose interest the receiver was
appointed ;
(d) amounts owing as at the date of appointment, to
creditors of the grantor having preferential claims ;
and
(e) amounts likely to be available for payment to
creditors, other than those referred to in paragraph
(c) or paragraph (d).
(3) A receiver may omit from the report details of any
proposals for disposal of the property in receivership, if he
considers that their inclusion would materially prejudice the
exercise of his functions.
Companies Act, No. 07 of 2007 345
(4) A receiver who fails to comply with this section shall
be guilty of an offence and be liable on conviction to a fine
not exceeding fifty thousand rupees.
456. (1) A receiver or a person who was a receiver at the Further reports
end of the receivership, as the case may be, shall not later by receiver.
than two months after—
(a) the end of each period of six months after his
appointment as receiver ; and
(b) the date on which the receivership ends,
prepare a further report summarising the state of affairs with
respect to the property in receivership as at those dates, and
the conduct of the receivership including all amounts
received and paid, during the period to which the report
relates.
(2) The report referred to in subsection (1) shall include
details of—
(a) property disposed of since the date of any previous
report and any proposals for the disposal of property
in receivership ;
(b) amounts owing as at the date of the report, to any
person in whose interest the receiver was appointed;
(c) amounts owing as at the date of the report, to
creditors of the grantor having preferential claims ;
and
(d) amounts likely to be available as at the date of the
report for payment to creditors, other than those
referred to in paragraph (b) or paragraph (c).
(3) A receiver may omit from the report required to be
prepared in accordance with paragraph (a) of subsection (1),
346 Companies Act, No. 07 of 2007
details of any proposals for disposal of property in
receivership, if he or she considers that their inclusion would
materially prejudice the exercise of his or her functions.
(4) Every person who fails to comply with the
requirements of this section shall be guilty of an offence and
be liable on conviction to a fine not exceeding fifty thousand
rupees.
Extension of 457. (1) A period of time within which a person is
time for rquired to prepare a report under section 455 or section 456
preparing
may be extended, on the application of that person, by-
reports.
(a) the court, where the person was appointed a receiver
by the court ; or
(b) the Registrar, where the person was appointed a
receiver by or under an instrument.
Persons entitled 458. (1) A copy of every report prepared under section
to receive 455 or section 456 shall be sent by the person required to
reports. prepare it, to —
(a) the grantor ; and
(b) every person in whose interest the receiver was
appointed.
(2) A person appointed as a receiver by the court shall
file a copy of every report prepared under section 455 or
section 456 in the office of the court.
(3) Not later than fifteen working days after receiving a
written request for a copy of any report prepared under section
455 or section 456 from —
(a) a creditor, director, or surety of the grantor ; or
(b) any other person with an interest in any of the
property in receivership,
Companies Act, No. 07 of 2007 347
and on payment of the reasonable costs of making and sending
the copy, the person who prepared the report shall send a
copy of the report to the person who requested for it.
(4) Within ten working days after preparing a report under
section 455 or section 456, the person who prepared the report
shall send or deliver a copy of the report to the Registrar.
(5) Every person who fails to comply with this section
shall be guilty of an offence and be liable on conviction to a
fine not exceeding fifty thousand rupees.
459. A person to whom a report must be sent in Persons entitled
accordance with the provisions of section 458 is entitled to to inspect
reports.
inspect the report during normal office hours at the office of
the person required to send it.
460. (1) A receiver of a company who considers that Duty to notify
the company or any director or officer of the company has breaches of any
committed an offence under this Act or the Securities and provisions of this
Act.
Exchange Commission of Sri Lanka Act, No. 36 of 1987,
shall report that fact to the Registrar.
(2) Nothing in subsection (1) shall impose any duty on a
receiver to investigate whether any offence of the kind referred
to in that subsection has been committed.
(3) A receiver who fails to comply with the provisions of
subsection (1) shall be guilty of an offence and be liable on
conviction to a fine not exceeding fifty thousand rupees.
461. (1) Not later than ten working days after the Notice of end of
receivership of a company ceases, the person who held office receivership.
as receiver at the end of the receivership shall send or deliver
to the Registrar, notice in writing of the fact that the
receivership has ceased.
(2) Every person who fails to comply with the
requirements of subsection (1) shall be guilty of an offence
and be liable on conviction to a fine not exceeding fifty
thousand rupees.
348 Companies Act, No. 07 of 2007
APPLICATION OF PROPERTY AND LIABILITY FORCOMPANY OBLIGATIONS
Preferential 462. (1) The provisions of this section applies to a
claims. receiver who was appointed under an instrument that created
a floating charge.
(2) Subject to the provisions of section 449 and to the
rights of any of the persons referred to in subsection (3), a
receiver to whom this section applies shall pay moneys
received by him to the grantee of the floating charge by
virtue of which the receiver was appointed, in or towards
satisfaction of the debt secured by the floating charge.
(3) The following persons shall be entitled to payment
out of the property of a company subject to a floating charge,
in priority to the grantee of the charge, and in the following
order of priority :—
(a) first, the holder of any fixed security, over any part
of the property that ranks prior to the floating
charge;
(b) second, the receiver, for his expenses and
remuneration and any indemnity to which he is
entitled out of the property of the company ; and
(c) third, persons entitled to preferential claims, to the
extent and in the order of priority specified in the
Ninth Schedule (except paragraphs 1 and sub-
paragraph (b) of paragraph 7).
(4) In the application of the provisions of the Ninth
Schedule in accordance with the provisions of
subsection(3)—
(a) references to a “liquidator” shall be read as references
to a “receiver” ;
(b) references to the “commencement of the winding
up” shall be read as references to the “appointment
of the receiver” ;
Companies Act, No. 07 of 2007 349
(c) references to “company being ordered to be wound
up” or to the “winding up of the company” shall be
read as references to the “company being put into or
being in receivership”.
463. (1) Subject to the provisions of subsection (2), a Powers of
receiver may be appointed or continue to act as a receiver receiver on
liquidation.
and exercise all the powers of a receiver in respect of property
of a company that is being wound up, unless the court orders
otherwise.
(2) A receiver holding office in respect of property referred
to in subsection (1) may act as the agent of the grantor, only
with the approval of the court or with the written consent of
the liquidator.
(3) A receiver who by reason of subsection (2) is not able
to act as the agent of the grantor, does not by reason only of
that fact, become the agent of a person by whom or in whose
interests the receiver was appointed.
(4) A debt or liability incurred by a grantor through the
acts of a receiver who is acting as the agent of the grantor in
accordance with subsection (2), is not a cost, charge or expense
of the liquidation.
464. (1) Subject to the provisions of subsections (2) Liability of
and (3), a receiver is personally liable – receiver.
(a) on a contract entered into by the receiver in the
exercise of any of the receiver’s powers ; and
(b) for payment of wages or salary that during the
receivership, accrue under a contract of employment
relating to the property in receivership and entered
into before his appointment, if notice of the
termination of the contract is not lawfully given
within ten working days after the date of
appointment.
350 Companies Act, No. 07 of 2007
(2) The terms of a contract referred to in paragraph (a) of
subsection (1) may exclude or limit the personal liability of
a receiver, other than a receiver appointed by the court.
(3) The court may on the application of a receiver, extend
the period within which notice of the termination of a contract
is required to be given under paragraph (b) of subsection (1),
and may extend that period on such terms and conditions as
the court thinks fit.
(4) Every application under subsection (3) shall be made
before the expiry of the period referred to.
(5) Subject to the provisions of subsection (7), a receiver
is personally liable, to the extent specified in subsection (6),
for rent and any other payments becoming due under an
agreement subsisting at the date of his appointment, relating
to the use, possession, or occupation by the grantor of property
in receivership.
(6) The liability of a receiver under subsection (5), is
limited to that portion of the rent or other payments which is
attributable to the period commencing ten working days after
the date of the appointment of the receiver, and ending on
the date on which the receivership ends or the date on which
the grantor ceases to use, possess, or occupy the property,
whichever is the earlier.
(7) The court may on the application of a receiver —
(a) limit the liability of the receiver to a greater extent
than that specified in subsection (6) ; or
(b) exempt the receiver from liability under
subsection(5).
(8) Nothing contained in subsection (5) or subsection (6)
shall —
(a) be taken as giving rise to an adoption by a receiver
of an agreement referred to in subsection (5) ; or
Companies Act, No. 07 of 2007 351
(b) render a receiver liable to perform any other
obligation under the agreement.
(9) A receiver is entitled to an indemnity out of the
property in receivership, in respect of his personal liability
under this section.
(10) Nothing contained in this section shall—
(a) limit any other right of indemnity to which a receiver
may be entitled ;
(b) limit the liability of a receiver on a contract entered
into without authority ; or
(c) confer on a receiver a right to an indemnity in respect
of liability on a contract entered into without
authority.
465. (1) The court may relieve a person who has acted Relief from
as a receiver from all or any personal liability incurred in the liability.
course of the receivership, if it is satisfied that :—
(a) the liability was incurred solely by reason of a defect
in the appointment of the receiver, or in the
instrument or order of the court by or under which
the receiver was appointed ; and
(b) the receiver acted honestly and reasonably and
ought in the circumstances to be exempted from
liability.
(2) The court may exercise its powers under subsection
(1) subject to such terms and conditions as it thinks fit.
(3) A person in whose interest a receiver was appointed is
liable, subject to such terms and conditions as the court thinks
fit, to the extent to which the receiver is relieved from liability
under subsection (1).
352 Companies Act, No. 07 of 2007
COURT SUPERVISION OF RECEIVERS
Court 466. The court may on the application of a receiver —
supervision of
receivers.
(a) give directions in relation to any matter arising in
connection with the performance of the functions
of the receiver ;
(b) revoke or vary, any such directions.
(2) The court may, on the application of any of the persons
referred to in subsection (3) —
(a) in respect of any period, review or fix the
remuneration of a receiver at a level which is
reasonable in the circumstances ;
(b) to the extent that an amount retained by a receiver
as remuneration is found by the court to be
unreasonable in the circumstances, order the receiver
to refund the amount ;
(c) declare whether or not a receiver was validly
appointed in respect of any property or validly
entered into possession or assumed control of any
property.
(3) Any of the following person may make an application
to the court under subsection (2) :—
(a) the receiver ;
(b) the grantor ;
(c) a creditor of the grantor ;
(d) a person claiming through the grantor an interest in
the property in receivership ;
(e) a liquidator.
Companies Act, No. 07 of 2007 353
(4) The powers conferred under subsections (1) and (2)
shall be —
(a) in addition to any other powers the court may
exercise under this Act, any other enactment or in
exercising its inherent jurisdiction ; and
(b) exercised whether or not the receiver has ceased to
act as receiver, when the application is made.
(5) The court may, on the application of a person referred
to in subsection (3), revoke or vary an order made under
subsection (2).
(6) Subject to the provisions of subsection (7), it would
be a defence to a claim against a receiver in relation to any
act or omission by the receiver, that such act or omission was
done or omitted to be done in compliance with a direction
given under subsection (1).
(7) The court may on the application of a person referred
to in subsection (3), order that by reason of the circumstances
in which a direction was obtained under subsection (1), a
receiver is not entitled to the protection given by subsection
(6).
467. (1) The court may subject to the provisions of Court may
subsection (2), on the application of the grantor or a liquidator terminate or
limit
of the grantor — receivership.
(a) order that a receiver shall cease to act as such as
from a specified date and prohibit the appointment
of any other receiver in respect of the property in
receivership ;
(b) order that a receiver shall as from a specified date,
act only in respect of specified assets forming part
of the property in receivership.
354 Companies Act, No. 07 of 2007
(2) An order under subsection (1) may be made only where
the court is satisfied that —
(a) the purpose of the receivership has been satisfied so
far as possible ; or
(b) circumstances no longer justify its continuation.
(3) Unless the court orders otherwise, a copy of an
application under this section shall be served on the receiver
not less than five working days before the hearing of the
application, and the receiver may appear and be heard at the
hearing.
(4) An order under subsection (1) may be made on such
terms and conditions as the court thinks fit.
(5) An order under this section shall not affect a security
or charge over the property, in respect of which the order is
made.
(6) The court may on the application of any person who
applied for or is affected by the order, rescind or amend an
order made under this section.
Orders to enforce 468. (1) An application for an order under this section
receiver’s duties. may be made by —
(a) the registrar ;
(b) a receiver ;
(c) a person seeking appointment as a receiver ;
(d) the grantor ;
(e) the grantee,
(f) a person with an interest in the property in
receivership ;
Companies Act, No. 07 of 2007 355
(g) a creditor of the grantor ;
(h) a guarantor of an obligation of the grantor ;
(i) a liquidator of the grantor;
(j) a receiver of the property of a grantor, in relation to
a failure to comply by another receiver of the
property of the grantor.
(2) No application may be made to the court under
paragraph (j) of subsection (1) in relation to a failure to
comply, unless notice of such failure to comply has been
served on the receiver not less than five working days before
the date of the application and , as at the date of the
application, there is a continuing failure to comply.
(3) Where the court is satisfied that there is or has been a
failure to comply, the court may —
(a) relieve the receiver of the duty to comply, wholly or
in part ; or
(b) without prejudice to any other remedy that may be
available in relation to a breach of duty by the
receiver, order the receiver to comply to the extent
specified in the order.
(4) The court may in respect of a person who fails to comply
with an order made under paragraph (b) of subsection (3), or
is or becomes disqualified under section 436 to become or
remain a receiver —
(a) remove the receiver from office ; or
(b) order that the person may be appointed to act or
may continue to act as a receiver, notwithstanding
the provisions of section 436.
356 Companies Act, No. 07 of 2007
(5) If it is shown to the satisfaction of the court that a
person is unfit to act as a receiver by reason of —
(a) persistent failures to comply ; or
(b) the seriousness of a failure to comply,
the court shall make in relation to that person, a prohibition
order for a period not exceeding five years.
(6) A person to whom a prohibition order applies shall
not—
(a) act as a receiver in any receivership ;
(b) act as a liquidator in any winding up ; or
(c) act as an administrator under Part XIII.
(7) In making an order under this section, the court may,
if it thinks fit —
(a) make an order extending the time for compliance ;
(b) impose any term or condition ;
(c) make any other ancillary order.
(8) A copy of every order made under subsection (5) shall,
within ten working days of the order being made, be delivered
by the applicant to the Registrar who shall keep it on a public
file indexed by reference to the name of the receiver concerned.
(9) Evidence that on two or more occasions within the
preceding five years —
(a) a court has made an order to comply under this
section in respect of the same person ; or
Companies Act, No. 07 of 2007 357
(b) an application for an order to comply under this
section has been made in respect of the same person,
and that in each case the person has complied after
the making of the application and before the hearing,
is, in the absence of special reasons to the contrary, evidence
of persistent failures to comply for the purposes of this
section.
(10) For the purpose of this section, “failure to comply”
in relation to a receiver means, a failure by a receiver to
comply with a relevant duty, arising—
(a) under the instrument or the order of the court by or
under which the receiver was appointed ; or
(b) under this or any other Act or rule of law or Rules of
Court ; or
(c) under any order or direction of the court, other than
an order to comply made under that section,
and “comply”, “compliance”, and “failed to comply” shall
have corresponding meanings.
469. The court may on making an order that removes or Orders
has the effect of removing a receiver from office, make such protecting
property in
orders as it thinks fit — receivership.
(a) for preserving the property in receivership ;
(b) requiring the receiver for that purpose to make
available to any person specified in the order, any
information and documents in the possession or
under the control of the receiver.
358 Companies Act, No. 07 of 2007
REFUSAL TO SUPPLY ESSENTIAL SERVICES
Refusal to 470. (1) For the pruposes of this section, an “essential
supply essential
service” means —
services
prohibited.
(a) the retail supply of electricity ;
(b) the supply of water ; and
(c) telecommunications services.
(2) Notwithstanding the provisions of any other written
law to the contrary or any contract, a supplier of an essential
service shall not —
(a) refuse to supply the service to a receiver or to the
owner of property in receivership, by reason of the
grantor’s default in paying charges due for the
service in relation to a period before the date of the
appointment of the receiver ; or
(b) make it a condition of the further supply of the
service to a receiver or to the owner of property in
receivership, that payment be made of outstanding
charges due for the service in relation to a period
before the date of the appointment of the receiver.
(3) For the avoidance of doubt, nothing in this section shall
prevent the supplier of an essential service from exercising
any right or power under any contract or under any written
law, in respect of a failure by a company to pay charges due
for the service in relation to any period, after the
commencement of the liquidation.
Companies Act, No. 07 of 2007 359
PART XVI
REGISTRAR-GENERAL OF COMPANIES AND REGISTRATION
APPOINTMENT OF OFFICERS
471. (1) There may be appointed— Appointment of
officers.
(a) a person by name or by office, to be or to act as the
Registrar-General of Companies ;
(b) persons by name or by office, to be or to act as Deputy
Registrar-Generals of Companies ;
(c) persons by name or by office, to be or to act as
Assistant Registrar-Generals of Companies ; and
(d) such other officers and servants as may from time to
time be required for the purposes of this Act.
(2) Any person appointed under subsection (1) as a Deputy
Registrar-General of Companies or an Assistant Registrar-
General of Companies may, subject to the general directions
of the Registrar, exercise all the powers, perform all the duties
and discharge all the functions of the Registrar under this
Act.
Appeals from
472. (1) A person who is aggrieved by an act or decision Registrar’s
decisions.
of the Registrar may appeal to the court within fifteen working
days after the date of receiving notice of the act or decision,
or such further time as the court may allow.
(2) The court may on an appeal made under this section,
confirm, revise, modify or set aside the act or decision against
which the appeal is made and make any order as the interest
of justice may require.
360 Companies Act, No. 07 of 2007
REGISTERS AND REGISTRATION OF DOCUMENTS
Registers to be 473. (1) The Registrar shall establish and maintain a
kept. Register containing a record—
(a) of companies registered or deemed to be registered
under this Act ; and
(b) of overseas companies registered or deemed to be
registered under this Act.
(2) The Register may be kept in such manner as the
Registrar thinks fit, including either wholly or partly by
means of a device or facility that—
(a) records or stores information electronically or by
other means ; and
(b) permits that information to be readily inspected or
reproduced in legible form.
(3) The Minister may make regulations—
(a) identifying or categorizing documents which may be
destroyed by the Registrar under subsection (4) ; and
(b) providing for all such matters as may become
necessary, to give effect to any device or facility
kept by the Registrar under subsection (2) for
recording information.
(4) The Registrar shall have the power to destroy all such
documents prescribed under paragraph (a) of subsection (3).
(5) Where the Registrar reproduces electronically or by
any other means any document prior to its destruction, such
reproduced document shall for all purposes, be treated as it
were the original document, notwithstanding anything in
any law to the contrary.
Companies Act, No. 07 of 2007 361
(6) Without prejudice to the above provisions of this
section, where any document filed with or in the custody of
the Registrar is damaged or is in danger of becoming illegible,
the Registrar may if he thinks fit, direct a copy to be made of
it, verified and certified in such manner as he may determine,
and that copy shall be substituted for, and shall for all
purposes of this Act be deemed to be, the document which is
damaged or in danger of becoming illegible.
474. The Registrar may direct a seal or seals to be Authentication
prepared for the authentication of documents required for or of documents by
seal.
connected with the authentication of documents required for
or connected with the registration of companies.
475. (1) The Registrar may, subject to the provisions of Registration of
subections (2) and (3), accept and register or record or file— documents,
copies of
documents,
(a) any doument which is by any provision of this Act notices &c.
required or authorised to be registered or recorded
by, or filed with, the Registrar ; and
(b) any document or copy of a document, and any return
or notice, which is by any provision of this Act
required or authorised to be sent, forwarded, given,
delivered, produced or in any way notified to the
Registrar.
(2) Where a document which is received by the Registrar
for registration under this Act—
(a) required to be submitted in the prescribed form is
not in such prescribed form ;
(b) does not comply with the provisions of this Act, or
any regulations made thereunder ;
(c) is not printed or typewritten ;
(d) has not been properly completed ; or
362 Companies Act, No. 07 of 2007
(e) contains material that is not clearly legible,
the Registrar may refuse to register such document, and in
that event shall request either—
(f) that the document be appropriately amended or
completed and submitted for registration again ; or
(g) that a fresh document be submitted in its place.
Translations of 476. (1) Where any document required to be delivered
documents filed. to the Registrar under this Act is in a language other than an
official language or English, the Registrar may request in
writing the delivery of a printed translation in such language
as may be decided by the Registrar, certified in the prescribed
manner to be a correct translation.
(2) Where a request under subsection (1) has not been
complied with, the Registrar shall take no further action on
such document.
Fees. 477. (1) Regulations may be made under this Act for
prescribing the fees payable to the Registrar for—
(a) the registration of a limited company ;
(b) the registration of an unlimited company ;
(c) the registration of a company limited by guarantee;
(d) the registration of any document required or
authorised to be registered or required to be
delivered, sent, given or forwarded to or filed with,
the Registrar, other than the notices and reports
required to be delivered to the Registrar by a receiver
or manager, an administrator or a liquidator ;
(e) the recording of any fact required or authorised by
this Act to be recorded by the Registrar ;
Companies Act, No. 07 of 2007 363
(f) the registration of off-shore companies under Part
XI ; and
(g) the registration of overseas companies under Part
XVIII.
(2) Where no special provision is made for the payment
of a fee in respect of the registration, recording or filing of
any document, the fee to be paid to the Registrar in respect of
that registration, recording or filing shall be the same as the
fee for making a record of any fact.
(3) The Registrar may refuse to exercise a power or perform
a function, until the prescribed fee in respect of such function
is paid.
478. Where any expenses or fees payable to the Registrar Recovery of
under this Act are not paid by the person liable to pay them expenses and
fees.
upon demand, the default may be reported to a Magistrate,
and the amount of those expenses or fees shall be recovered
in the same manner as if it were a fine imposed by the
Magistrate, who shall direct that the amount in default be
credited to the Fund.
FUND
479. (1) For the purposes of this Act, there shall be Fund.
established a Fund which shall be maintained in such manner
as the Secretary to the Ministry of the Minister, in
consultation with the Registrar may direct.
(2) There shall be paid into the Fund two-thirds of every
fee or charge prescribed, levied or recovered under this Act
by the Registrar.
(3) One-third of every fee or charge prescribed, levied or
recovered under this Act by the Registrar, shall be paid into
the Consolidated Fund.
364 Companies Act, No. 07 of 2007
(4) There shall be paid out of the Fund, all sums of money
required to defray any expenditure incurred by the Registrar-
General in the exercise, discharge and performance of his
powers, functions and duties under this Act, and all sums of
money as are required to be paid out of the Fund by or under
this Act or any regulation made thereunder.
(5) The Secretary to the Ministry of the Minister shall as
soon as possible after the end of each financial year, prepare
a report on the administration of the Fund and shall cause to
be maintained a full and appropriate account of the Fund in
respect of each financial year.
(6) The Auditor-General shall audit the accounts of the
Fund in accordance with Article 154 of the Constitution.
INSPECTION AND PRODUCTION OF DOCUMENTS, ENFORCEMENT OF DUTY
OF COMPANIES TO MAKE RETURNS AND THE PRODUCTION AND
INSPECTION OF BOOKS
Inspection, 480. (1) Any person may, on the payment of the
production prescribed fee, inspect—
and evidence
of
documents (a) any document which forms part of the register ; or
kept by
Registrar. (b) particulars of any registered document that have
been entered on any device or facility of the kind
referred to in subsection (2) of section 473.
(2) Any person may on the payment of the prescribed
fee, require the Registrar to provide and certify—
(a) a certificate of incorporation of a company;
(b) a copy of or extract from any other document which
forms part of the Register;
(c) particulars of any registered document that have
been entered on any device or facility of the kind
referred to in subsection (2) of section 473; or
Companies Act, No. 07 of 2007 365
(d) a copy of or extract from any registered document,
particulars of which have been entered on any device
or facility of the kind referred to in subsection (2) of
section 473.
(3) Nothing contained in the provisions of subsection (1)
or (2) shall apply to—
(a) any report of an inspector appointed under sections
172, 173 or 180, unless the Registrar directs
otherwise;
(b) any financial statements delivered to the Registrar
by a private company under subsection (2) of section
170 or under the Companies Act, No. 17 of 1982,
unless the person applying to inspect the document
or requiring a copy or extract of it, is a shareholder
or creditor of that company ;
(c) a report filed by a receiver or administrator of a
company, unless the person applying to inspect the
document or requiring a copy or extract of it, is a
shareholder or creditor of that company.
(4) No process for compelling the production of any
document kept by the Registrar shall issue from any court,
except with the leave of that court, and any such process
shall state that it is issued with the leave of the court.
(5) A copy of or extract from any document kept and
registered at any of the offices for the registration of companies
in Sri Lanka, certified to be a true copy or extract by the
Registrar, shall in all legal proceedings be admissible in
evidence as of equal validity with the original document.
(6) Any person untruthfully stating himself to be a
shareholder or creditor of a company for the purposes of
subsection (3), shall be guilty of an offence and be liable on
conviction to a fine not exceeding two hundred thousand
rupees.
366 Companies Act, No. 07 of 2007
Enforcement 481. (1) Where a company has failed to comply with
of duty of
any provision of this Act which requires it to file with, deliver
company to
make returns or send to the Registrar any document or to give notice to
to Registrar. him of any matter, and fails to make good the default within
ten working days from the date of service of a notice on the
company requiring it to do so, the court may on an application
made to the court by the Registrar or any creditor of the
company, make an order directing the company and any
officer of the company to make good the default within such
time as may be specified in the order.
(2) Any order made under subsection (1) may provide
that all costs of and incidental to the application, shall be
borne by the company or by any officer of the company
responsible for the default.
(3) Nothing in this section shall, rejudice the operation
of any enactment imposing penalties on a company or its
officers, in respect of any default to which subsection (1)
applies.
Unlawful 482. Any person who, being or having been employed
disclosure of
in the Department of the Registrar-General, communicates
information
relating to any information relating to any documents filed by a company
companies. under the provisions of this Act with the Registrar, or matters
connected therewith, obtained by him during the course of
his employment in or at the Department of the Registrar-
General, to any person not entitled or authorised to receive
such information, or who makes any other unlawful use of
such information, shall be guilty of an offence and be liable
on conviction to a fine not exceeding five hundred thousand
rupees or to imprisonment for a term not exceeding two years
or to both such fine and imprisonment.
Production 483. (1) Where on an application made to a Magistrate
and in chambers by the Attorney-General, the Registrar or any
inspection of
books where officer of police not below the rank of Assistant
an offence is Superintendent, there is shown to be reasonable cause to
suspected. believe that any person has while an officer of a company,
Companies Act, No. 07 of 2007 367
committed an offence in connection with the management of
the company’s affairs, and evidence of the commission of the
offence is to be found in any books or papers of or under the
control of the company, an order may be made—
(a) authorising any person named in it to inspect those
books or papers or any of them, for the purpose of
investigating and obtaining evidence of the offence;
or
(b) requiring the secretary of the company or such other
officer of the company as may be named in the order,
to produce those books or papers or any of them to a
person named in the order at a place so named.
(2) The provisions of subsection (1) shall apply in relation
to any books or papers of a person carrying on the business of
banking so far as they relate to the company’s affairs, as it
applies to any books or papers of or under the control of the
company, except that no order of the kind referred to in
paragraph (b) of that subsection, shall be made by virtue of
the provisions of this subsection.
(3) No appeal shall lie from a decision of a Magistrate on
an application made under this section.
484. (1) The Registrar may by written notice, direct any Registrar’s
company to furnish or produce before a date specified in the power to call for
information and
notice —
to inspect books,
registers and
(a) such information relating to the company as the documents.
Registrar may require for the purposes of this Act; or
(b) such information or explanations as the Registrar
may require in respect of any particulars stated in
any return, declaration or other document furnished
by the company—
(i) which have or should have been stated in
any return, declaration or other document
furnished by the company; or
368 Companies Act, No. 07 of 2007
(ii) which should have been stated in any return
or other document which should have, but
actually has not, been furnished by the
company,
as at the date or dates specified in the notice; and
(c) to produce before a date specified in the notice, any
book, register or other document kept or required to
be kept by the company, in connection with its
business or transactions.
(2) Where a company fails to comply with any direction
given by the Registrar under subsection (1)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding one
hundred thousand rupees;
(b) every officer of the company who is in default shall
be guilty of an offence and be liable on conviction
to a fine not exceeding fifty thousand rupees.
PART XVII
APPLICATION OFACT TO EXISTING COMPANIES
Application of 485. (1) In the application of the provisions of this Act
Act to existing to existing companies, it shall apply—
companies.
(a) in the case of a limited company other than a
company limited by guarantee, as if the company
has been formed and registered under the provisions
of this Act as a limited company;
(b) in the case of a company limited by guarantee, as if
the company had been formed and registered under
the provisions of this Act as a company limited by
guarantee;
Companies Act, No. 07 of 2007 369
(c) in the case of a company other than a limited
company, as if the company had been formed and
registered under the provisions of this Act as an
unlimited company; and
(d) in the case of a company which is a people’s company,
as if had been formed and registered under the
provisions of this Act as a limited company.
(2) An existing company which is a private company, shall
continue under this Act as a private company to which Part II
of this Act applies.
(3) An existing company which is an off-shore company,
shall continue under this Act as an off-shore company to
which Part XI of this Act applies.
(4) Any reference express or implied, to the date of
registration of an existing company, shall be construed as a
reference to the date on which the company was first
incorporated under any written law.
(5) An existing company—
(a) which is a private limited company formed and
registered under the Joint Stock Companies
Ordinance 1861, the Joint Stock Banking
Ordinance 1897, and the Companies Ordinance
(Cap. 145) shall be deemed to have changed its
name to include the suffix “ (Pvt) Limited” or the
abbreviation “(Pvt) Ltd.”; and
(b) which is a public listed company, shall be deemed
to have changed its name to include the suffix
“Public Limited Company” or the abbreviation
“PLC”.
(6) (a) The Registrar shall enter the new name on the
register in place of the former name, consequent to the deemed
change of name under the provisions of subsection (5), and
issue a fresh certificate of incorporation including the said
suffix or the said abbreviation, as the case may be, in such
certificate of incorporation.
370 Companies Act, No. 07 of 2007
(b) Such fresh certificate shall be issued after the Registrar
has assigned a new number in terms of the provisions of
section 487.
Provisions 486. (1) The model articles shall not apply to an existing
relating to company unless it resolves that they shall apply, under
articles of subsection (1) of paragraph (b) of section 15.
existing
companies.
(2) The memorandum of association of an existing
company shall be deemed to form part of the articles of the
company.
(3) The articles of an existing company shall continue to
be the articles of such company for the purposes of this Act,
and where such articles has adopted all or any of the rules set
out in Table A of the First Schedule to the Companies Act,
No. 17 of 1982, those rules shall be deemed to be
incorporated in such articles of the company, as if set out in
full in those articles.
Provisions 487. (1) Subject to the provisions of subsection (2), the
relating to number which an existing company has been assigned by
company
the Registrar for administrative purposes, shall be the
numbers of
existing company number of that company.
companies
&c. (2) Within a period of twelve months from the coming
into operation of this Act, all existing companies shall apply
to the Registrar to assign a new number as its company
number, in a form as may be prescribed by the Registrar. The
new number so assigned shall be entered in the register and
also on the fresh certificate of incorporation to be issued
under the provisions of subsection (6) of section 485.
(3) Where an existing company fails to comply with the
requirements imposed under subsection (2) of this section
within the time specified therein, the Registrar shall cause to
be published the name of such company in a daily newspaper
in the Sinhala, Tamil and English Language, and where such
company continues to fail to comply with those requirements
Companies Act, No. 07 of 2007 371
thereafter, the Registrar shall, within six months of the
publication of its name in the newspapers, strike off the name
of such company from the register maintained by him under
the provisions of section473.
(4) During the period of six months referred to in
subsection (3), in addition to a director of the company, a
shareholder of such company or a person who has registered
a charge under section 102 or a person who has a money
claim pending before a court or in arbitration proceedings,
shall also be entitled to apply to the Registrar to have a new
number assigned to such company under subsection (2).
(5) Where a company’s name is struck off from the register
under subsection (3), all property and rights whatsoever
vested in or held on trust for the company immediately before
the date on which the name is struck off, (including leasehold
property but not including property held by the company on
trust for any other person), shall vest in and be at the disposal
of the State.
PART XVIII
OVERSEAS COMPANIES
488. For the purposes of this Part of this Act, the Interpretation.
expressions —
“director” in relation to a company, includes any person
in accordance with whose directions or instructions
the directors of the company are accustomed to act;
“overseas company” means any company or body
corporate incorporated outside Sri Lanka, which —
(a) after the appointed date, established a place
of business within Sri Lanka; or
372 Companies Act, No. 07 of 2007
(b) has, before the appointed date, established a
place of business within Sri Lanka and
continues to have an established place of
business within Sri Lanka on the appointed
date;
“place of business” includes a share transfer or share
registration office;
“registered overseas company” means an overseas
company which has delivered or is deemed to have
delivered to the Registrar, the documents and
particulars required under section 489; and
“secretary” includes any person occupying the position
of secretary, by whatever name called.
Documents and 489. (1) Every company incorporated outside Sri Lanka
particulars to be which after the appointed date, establishes a place of business
delivered to within Sri Lanka, shall within one month from the date of
Registrar by
establishment of its place of business, deliver to the Registrar
overseas
companies. for purpose of registration—
(a) a certified copy of the charter, statues or
memorandum and articles of the company, or other
instrument constituting or defining the constitution
of the company, and where that instrument is not in
an official language of Sri Lanka or in English, a
translation of that instrument in such language as
may be specified by the Registrar;
(b) a list of the directors of the company, containing
such particulars with respect to the directors as are
by this Act required to be contained with respect to
directors, in the register of the directors of a
company;
(c) the names and addresses of one or more persons
resident in Sri Lanka authorized to accept on behalf
of the company, service of documents and of any
notices required to be served on the company;
Companies Act, No. 07 of 2007 373
(d) a statement containing the full address of—
(i) the registered or principal office of the
company; and
(ii) the principal place of business of the
company within Sri Lanka ;
(e) a certified copy, certified of recent date, of any
document effecting or evidencing the incorporation
of the company.
(2) The Registrar may upon sufficient cause being shown
by the defaulting company, extend the period of one month
specified in subsection (1).
(3) Every company incorporated outside Sri Lanka which,
on or before the appointed date, establishes or has established
a place of business within Sri Lanka shall, subject to
subsection (4), within a period of one month from that date,
deliver to the Registrar for registration, the documents and
particulars specified in subsection (1).
(4) Where an overseas company has established a place
of business within Sri Lanka before the appointed date, and
has complied with the requirements of Part XIII of the
Companies Act, No. 17 of 1982 in relation to the delivery to
the Registrar, of documents and particulars —
(a) such company shall be deemed to have complied
with subsection (3); and
(b) the Registrar shall enter on the register of overseas
companies, the documents and particulars delivered
under Part XIII of the Companies Act, No. 17 of
1982, and issue a certificate of registration to such
overseas company.
(5) The Registrar may upon receipt of the documents
referred to in subsections (1) or (3), as the case may be, register
the company as a registered overseas company and enter its
374 Companies Act, No. 07 of 2007
name in the register of overseas companies. A certificate of
registration shall be issued to every registered overseas
company, upon its registration.
(6) The Registrar may extend the period of one month
referred to in subsection (3), if it appears to him expedient to
do so having regard to the circumstances of any particular
case.
(7) A company incorporated outside Sri Lanka shall not
establish a place of business within Sri Lanka or be registered
as an overseas company, where the business being carried on
by that company does not conform to the stipulations made
by or under the Exchange Control Act.
Power of 490. A registered overseas company shall have the same
overseas power to hold lands in Sri Lanka, as if it were a company
companies to incorporated under this Act.
hold lands.
Return to be 491. Where in the case of a registered overseas company,
delivered to any alteration is made in—
Registrar where
documents &c.
altered. (a) the charter, statutes, or memorandum and articles of
the company or any other instrument constituting
or defining the constitution of the company;
(b) the directors of the company or the particulars
contained in the list of the directors;
(c) the names and addresses of the persons authorised
to accept service on behalf of the company; or
(d) the address of —
(i) the registered or principal office of the
company; or
(ii) the principal place of business of the
company within Sri Lanka,
Companies Act, No. 07 of 2007 375
the company shall, within the prescribed time, deliver to the
Registrar for registration, a return containing the prescribed
particulars of the alteration.
492. (1) Every registered overseas company shall in Financial
every calendar year prepare financial statements, and where statements of
overseas
the company is a holding company, group financial
company.
statements, in such form and containing such particulars and
including such documents, as under the provisions of this
Act (subject however to any prescribed exceptions) it would,
if it had been a company of the same description within the
meaning of this Act, have been required to prepare and deliver
certified copies of those documents to the Registrar for
registration.
(2) Where any document referred to in subsection (1) is
not in an official language of Sri Lanka or in English, there
shall be annexed to it a translation in a language specified by
the Registrar and certified in the prescribed manner.
493. (1) Where it appears to the Registrar that the Name of
corporate name of a registered overseas company is a name overseas
company.
by which the company, had it been formed under this Act,
would on the relevant date have been precluded from being
registered under section 7 of this Act, or in respect of which a
direction could have been given under subsection (1) of
section 10, the Registrar may serve a notice on that registered
overseas company stating why the name could not have been
registered, or the grounds on which such a direction could
have been given, as the case may be.
(2) No notice under subsection (1) may be served on a
company later than twelve months after the relevant date.
(3) The “relevant date” for the purposes of subsections (2)
and (3) is—
(a) the date on which the overseas company has
complied with the provisions of section 489; or
376 Companies Act, No. 07 of 2007
(b) if there has been a change in the corporate name of
the overseas company, the date on which notice of
that change was given under section 491.
(4) A registered overseas company on which a notice has
been served under subsection (1) —
(a) may deliver to the Registrar a notice in the prescribed
form, specifying a name approved by the Registrar,
other than its corporate name under which it proposes
to carry on business in Sri Lanka; and
(b) may after that name has been registered, at any time
deliver to the Registrar, a notice in the prescribed
form specifying a name approved by the Registrar,
other than its corporate name, in substitution for the
name previously registered.
(5) The name by which an overseas company is for the
time being registered under subsection (4), shall for all
purposes of the law of Sri Lanka, be deemed to be the name of
the company. The provisions of this subsection—
(a) shall not affect references to the corporate name of
the company in this section;
(b) shall not affect any rights or obligations of the
company or render defective any legal proceedings
by or against the company. Any legal proceedings
that might have been commenced or continued
against the company by its corporate name, may be
commenced or continued against it by the name by
which it is for the time being registered.
(6) The Registrar may withdraw a notice given under
subsection (1), if he is satisfied that it ought not to have been
given, or that the circumstances in which it was given have
changed, and at the time of withdrawal there would not be
any grounds on which such a notice could be given. The
provisions of subsection (7) shall not apply in respect of a
notice that has been withdrawn under this subsection.
Companies Act, No. 07 of 2007 377
(7) A registered overseas company on which a notice has
been served under subsection (1), shall not at any time after
the expiration of two months from the service of that notice,
(or such longer period as may be specified in the notice)
carry on business in Sri Lanka under its corporate name.
(8) Where a registered overseas company fails to comply
with the requirements of subsection (7)—
(a) the company shall be guilty of an offence and be
liable on conviction to a fine not exceeding two
hundred thousand rupees;
(b) every officer of the company who is in default shall
be guilty of an offence, and be liable on conviction
to a fine not exceeding one hundred thousand
rupees.
494. Every registered overseas company shall— Obligation to
state name and
(a) in every prospectus inviting subscriptions for its particulars of
shares or debentures in Sri Lanka, state the country company.
in which the company is incorporated;
(b) ensure that at every place where it carries on business
in Sri Lanka, the name of the company and the
country in which the company is incorporated are
clearly displayed;
(c) ensure that its name and the name of the country in
which it is incorporated, are clearly stated in—
(i) all business letters of the company;
(ii) all notices and other official publications of
the company;
(iii) all bills of exchange, promissory notes,
endorsements, cheques and orders for money
or goods signed on behalf of the company;
(iv) all invoices, receipts and letters of credit of
the company; and
378 Companies Act, No. 07 of 2007
(v) all other documents issued or signed by the
company which evidence or create a legal
obligation of the company; and
(d) where the liability of the members of the company
is limited, cause notice of that fact to be clearly
stated in every such prospectus and in all letters and
other documents referred to in paragraph (c), and to
be clearly displayed at every place where it carries
on its business.
Service on 495. (1) Any document or notice required to be served
overseas on a registered overseas company, shall be sufficiently served
company.
if addressed to any person whose name has been delivered to
the Registrar under this Part of this Act, and left at or sent by
post to the address which has been so delivered.
(2) Where—
(a) any registered overseas company has failed to
deliver to the Registrar the name and address of a
person resident in Sri Lanka, who is authorised to
accept on behalf of the company service of
documents or notices; or
(b) at any time, all the persons whose names and
addresses have been so delivered are dead or have
ceased to reside in Sri Lanka or refuse to accept
service on behalf of the company or for any reason
cannot be served,
a document may be served on the company by leaving it at or
sending it by post, to any place of business established by
the company in Sri Lanka.
Registrar to be 496. Where any registered overseas company ceases to
notified when have a place of business in Sri Lanka, it shall forthwith give
company ceases
notice of the fact to the Registrar. As from the date on which
to have place of
business in Sri notice is so given, the obligation of the company to deliver
Lanka. any document to the Registrar shall cease.
Companies Act, No. 07 of 2007 379
497. (1) An application may be made to the court for Liquidation of
assets in Sri
the winding up of the assets in Sri Lanka of an overseas
Lanka of
company in accordance with Part XII, subject to the overseas
modifications and exclusions set out in the Thirteenth company.
Schedule.
(2) An application may be made under subsection (1),
whether or not the overseas company—
(a) is a registered overseas company;
(b) has given notice under section 496 that it has ceased
to have a place of business in Sri Lanka ; or
(c) has been dissolved or otherwise ceased to exist as a
company, under or by virtue of the laws of any other
country.
498. Where any company to which this Part of this Act Penalties for
applies, fails to comply with any of the provisions of this Part non-compliance.
other than section 493, the company, and every officer or
agent of the company who knowingly and willfully authorises
or permits the default, shall be guilty of an offence and be
liable on conviction to a fine not exceeding fifty thousand
rupees.
499. (1) Where any overseas company has failed to Enforcement of
comply with any provision of this Part of this Act, and fails to duty to comply
make good the default within ten working days from the date with provisions
of this Part.
of service of a notice on the company requiring it to do so,
the court may on an application made to the court by the
Registrar or by any creditor of the company or by any other
person who appears to the court to be interested, make an
order directing the company and any officer of the company
to make good the default within such time as may be specified
in the order.
(2) Any order made under subsection (1) may provide
that, all costs of and incidental to the application, shall be
borne by the company or by any officer of the company
responsible for the default.
380 Companies Act, No. 07 of 2007
(3) Nothing in this section shall prejudice the operation
of any enactment imposing penalties on a company or its
officers ,in respect of any default referred to in subsection (1).
RESTRICTIONS ON SALE OF SHARES AND OFFER OF SHARE
FOR SALE
Dating of 500. (1) It shall not be lawful for any person to issue,
prospectus and circulate, or distribute in Sri Lanka any prospectus offering
particulars to be
for subscription any shares in or debentures of a company,
contained
therein. incorporated or to be incorporated outside Sri Lanka, whether
the company has or has not established or when formed will
or will not establish a place of business in Sri Lanka, unless
the prospectus is dated and—
(a) contains particulars with respect to the following
matters :—
(i) the instrument constituting or defining the
constitution of the company ;
(ii) the enactments or provisions having the force
of an enactment, by or under which the
incorporation of the company was effected ;
(iii) an address in Sri Lanka where the said
instrument, enactments, or provisions or
copies thereof and if the same are in a
language other than the official language of
Sri Lanka or in English, a translation thereof
in a language specified by the Registrar and
certified in the prescribed manner, can be
inspected ;
(iv) the date on which and the country in which
the company was incorporated ;
(v) whether the company has established a place
of business in Sri Lanka and, if so, the address
of its principal office in Sri Lanka ;
Companies Act, No. 07 of 2007 381
(b) states the matters specified in Part I of the Fourth
Schedule hereto, and subject to the provisions
contained in Part III, sets out the reports specified in
Part II, of that Schedule :
Provided that the provisions of subparagraphs (i),
(ii) and (iii) of paragraph (a) shall not apply in the
case of a prospectus issued more than two years from
the date on which the company is entitled to
commence business, and in the application of Part I
of the Fourth Schedule hereto for the purposes of this
subsection, paragraph 3 of Part I of such Schedule
shall have effect with the substitution for the reference
to the articles, of a reference to the constitution, of
the company.
(2) Any condition requiring or binding an applicant for
shares or debentures, to waive compliance with any
requirements imposed by virtue of paragraph (a) or paragraph
(b) of subsection (1), or purporting to affect him with notice
of any contract, document, or matter not specifically referred
to in the prospectus, shall be void.
(3) It shall not be lawful for any person to issue to any
person in Sri Lanka a form of application for shares in or
debentures of such a company or intended company as is
referred to in subsection (1), unless the form is issued with a
prospectus which complies with this Part and the issue thereof
in Sri Lanka, does not contravene the provisions of subsection
(1) of section 501 :
Provided that the provisions of this subsection shall not
apply, where it is shown that the form of application was
issued in connection with a bona fide invitation to a person
to enter into an underwriting agreement with respect to the
shares or debentures.
(4) In the event of non-compliance with or contravention
of any of the requirements imposed by paragraphs (a) and (b)
of subsection (1), a director or other person responsible for
382 Companies Act, No. 07 of 2007
the issue of the prospectus shall not incur any liability by
reason of such non-compliance or contravention, where—
(a) as regards any matter not disclosed, he proves he
was not cognizant thereof ;
(b) he proves that such non-compliance or
contravention arose from a bona fide mistake of
fact on his part ; or
(c) such non-compliance or contravention was in
respect of matters which in the opinion of the court
dealing with the case, were immaterial or were
otherwise such as ought, in the opinion of that court
having regard to all the circumstances of the case,
reasonably to be excused :
Provided that, in the event of failure to include in
a prospectus a statement with respect to the matters
contained in paragraph 17 of the Fourth Schedule
hereto, no director or other person shall incur any
liability in respect of the failure, unless it be proved
that he had knowledge of the matters not disclosed.
(5) The provisions of this section—
(a) shall not apply to the issue to existing members or
debenture holders of a company, of a prospectus or
form of application relating to shares in or debentures
of the company, whether an applicant for shares or
debentures has or does not have a right to renounce
in favour of other persons ; and
(b) except in so far as it requires a prospectus to be
dated, shall not apply to the issue of a prospectus
relating to shares or debentures which are or are to
be in all respects, uniform with the shares or
debentures previously issued,
Companies Act, No. 07 of 2007 383
but, subject as aforesaid, the provisions of this section shall
apply to a prospectus or form of application whether issued
on or with reference to, the formation of a company or
subsequently.
(6) Nothing in this section shall limit or diminish any
liability which any person may incur under the provisions of
this Act, other than this section.
501. (1) It shall not be lawful for any person to issue, Provisions as to
circulate or distribute in Sri Lanka, any prospectus offering expert’s consent
for subscription shares in or debentures of a company and allotment.
incorporated outside Sri Lanka, whether the company has or
has not established or when formed, will or will not be
established, a place of business in Sri Lanka—
(a) if, where the prospectus includes a statement
purporting to be made by an expert, he has not given
or has before delivery of the prospectus for
registration withdrawn his written consent to the
issue of the prospectus, with the statement included
in the form and context in which it is included, or
there does not appear in the prospectus a statement
that he has given and has not withdrawn his consent
as aforesaid ; or
(b) if the prospectus does not have the effect, where an
application is made in pursuance thereof, of
rendering all persons concerned bound by all the
provisions other than penal provisions of section
47, so far as applicable thereto.
(2) In this section the expression “expert” includes an
engineer, a valuer, an accountant and any other person whose
profession gives authority to a statement made by him, and
for the purposes of this section, a statement shall be deemed
to be included in a prospectus, if it is contained in or in any
report or memorandum appearing on the face of or by reference
incorporated in or issued with, such prospectus.
384 Companies Act, No. 07 of 2007
Registration of 502. It shall not be lawful for any person to issue, circulate
prospectus. or distribute in Sri Lanka, any prospectus offering for
subscription shares in or debentures of a company
incorporated or to be incorporated outside Sri Lanka, whether
the company has or has not established or when formed will
not estabilsh a place of business in Sri Lanka, unless before
the issue, circulation or distribution of the prospectus in Sri
Lanka, a copy thereof certified by the Chairman of the
company as having been approved by resolution of the
managing body, has been so delivered and there is endorsed
on or attached to the copy—
(a) any consent to the issue of the prospectus required
by the provisions of section 501 ; and
(b) where the person making any report in accordance
with Part II of the Fourth Schedule hereto, have made
therein or have without giving reasons indicated
therein, any such adjustments as are mentioned in
paragraph 30 of that Schedule, a written statement
signed by those persons setting out the adjustments
and giving the reasons therefor.
Penalty for 503. Any person who is knowingly responsible for the
contravention of issue, circulation or distribution of prospectus or for the issue
section 500,
section 501 or of a form of application for shares or debentures in
section 502. contravention of any of the provisions of section 500, section
501, or section 502, shall be guilty of an offence and shall on
conviction be liable to a fine not exceeding fifty thousand
rupees.
Civil liability for 504. The provisions of section 41 shall extend to every
misstatements in prospectus offering for subscription shares in or debentures
prospectus.
of a company incorporated or to be incorporated outside Sri
Lanka, whether the company has or has not established or
when formed will or will not establish a place of business in
Sri Lanka, with the substitution for any reference to section
38, of the reference to section 501.
Companies Act, No. 07 of 2007 385
505. (1) Where any document by which shares in or Interpretation of
debentures of a company incorporated outside Sri Lanka are provisions as to
prospectuses.
offered for sale to the public would, where the company
concerned had been a company within the meaning of this
Act, have been deemed by virtue of the provisions of section
43 to be a prospectus issued by the company, that document
shall be deemed to be for the purposes of this Part of this Act,
a prospectus issued by the company.
(2) An offer of shares or debentures for subscription or
sale to any person, whose ordinary business it is to buy or sell
shares or debentures, whether as principal or agent, shall not
be deemed to be an offer to the public for the purposes of this
Part.
(3) In this Part, the expressions “prospectus”, “shares” and
“debentures” shall have the same meanings as and when used
in relation to a company incorporated under this Act.
PART XIX
ADVISORY COMMISSION
506. (1) For the purposes of advising the Minister on Appointment
any matters in relation to the law relating to companies, the &c. of Advisory
Commission.
Minister may—
(a) constitute a Commission (hereinafter referred to as
the “Advisory Commission”) consisting of not less
than five and not more than ten persons with suitable
qualifications ; and
(b) appoint one of such persons to be Chairman of the
said Advisory Commission.
(2) It shall be the duty of the Advisory Commission—
(a) to inquire into and report to the Minister on any
matter or question relating to companies and the
386 Companies Act, No. 07 of 2007
law applicable to companies, which may be referred
to it from time to time by the Minister ;
(b) to review the law relating to companies from time to
time and to make proposals to the Minister for the
alteration, modification or addition to such law ;
(c) in making the recommendations referred to in
paragraph (a) or (b), to consult and take into
consideration where the Advisory Commission
deems necessary, the views of trade chambers,
professional organisations, monetary institutions,
governmental authorities and the general public.
(3) The Registrar shall be an ex-officio member of the
Advisory Commission, and shall also function as its Convener
and Secretary.
(4) Subject to the provisions of subsections (6), (7) and
(8), the term of office of the members of the Advisory
Commission shall be three years :
Provided that a member appointed in place of a member
who resigns or is removed or otherwise vacates office, shall
hold office for the unexpired part of the term of office of the
member whom he succeeds.
(5) Any member of the Advisory Commission who vacates
office by effluxion of time, shall be eligible for re-
appointment.
(6) A member of the Advisory Commission may resign
from office by letter to that effect addressed to the Minister.
(7) All members of the Advisory Commission shall hold
office during good behaviour, and may be removed from
office by the Minister.
Companies Act, No. 07 of 2007 387
(8) Where a member is temporarily unable to discharge
the duties of his or her office on account of ill-health, absence
from Sri Lanka or any other cause, the Minister may appoint
some other person to act as a member in his or her place.
(9) The Advisory Commission may, with the approval of
the Minister, appoint such officers and servants as it thinks
fit to assist the Advisory Commission in carrying out its duties
under this Part of this Act.
(10) The members of the Advisory Commission, its
Secretary and other officers and servants may be paid such
remuneration out of the Fund, as may be determined by the
Minister.
PART XX
COMPANIES DISPUTES BOARD
507. (1) The Minister may constitute a board (in this Companies
Act referred to as the “Companies Disputes Board”) for the Disputes Board.
purposes of carrying out the functions conferred on such
Board by the provisions of this Part of this Act.
(2) The Companies Disputes Board shall consist of not
less than three and not more than five persons appointed by
the Minister, with substantial experience in relation to the
law relating to companies or the administration of companies.
(3) The Minister may appoint one of the members of the
Companies Disputes Board to be the President of the Board.
(4) Subject to the provisions of subsections (6), (7) and
(8), the term of office of the members of the Companies
Disputes Board shall be five years :
Provided that a member appointed in place of a member
who resigns or is removed or otherwise vacates office, shall
hold office for the unexpired part of the term of office of the
member whom he succeeds.
388 Companies Act, No. 07 of 2007
(5) Any member of the Companies Disputes Board who
vacates office by effluxion of time, shall be eligible for re-
appointment.
(6) A member of the Companies Disputes Board may
resign from office by letter to that effect addressed to the
Minister.
(7) A member of the Companies Disputes Board shall hold
office during good behaviour, and may be removed from office
by the Minister.
(8) Where a member is temporarily unable to discharge
the duties of his office on account of ill-health, absence from
Sri Lanka or any other cause, the Minister may appoint some
other person to act as a member in his place.
(9) The Companies Disputes Board may, with the approval
of the Minister, appoint such officers and servants as it thinks
fit to assist the Companies Disputes Board in carrying out its
duties under this Part of this Act.
(10) The members of the Companies Disputes Board and
its officers and servants may be paid such remuneration out
of the Fund, as may be determined by the Minister.
Board members 508. (1) The parties to a dispute—
may mediate
disputes.
(a) arising in giving effect to the provisions of this Act;
or
(b) which relates to the affairs or management of any
company,
may, with the approval of the President of the Companies
Disputes Board, refer the dispute for mediation before a
member of the Board.
Companies Act, No. 07 of 2007 389
(2) A court may if it thinks fit, refer any proceeding
pending before such court to mediation before a member of
the Companies Disputes Board, with the consent of all parties
to that proceeding. The proceedings shall be stayed until
either a settlement is reached or a notice is given to the court
by such Board, that the mediation has not resulted in a
settlement.
(3) Where the parties to a dispute or proceeding referred
to mediation under this section agree to settle that dispute or
proceeding—
(a) the settlement agreement shall be recorded in writing
and signed by the parties and by the member of the
Board who acted as mediator ; and
(b) a certified copy of the settlement agreement shall
be filed in the court, and shall have effect as if it
were a judgment of the court.
(4) Regulations may be made prescribing the procedure
for the conduct of proceedings in any dispute referred to
mediation under this section.
(5) Where the parties to a dispute or proceeding referred
to mediation under this section do not agree to settle that
dispute or proceeding within three months of the reference to
mediation, or within any extended period agreed to by all
those parties, the member of the Board shall forthwith give
notice—
(a) to the parties ; and
(b) if the matter was referred to mediation by the court,
to the court,
that the mediation has not resulted in a settlement.
390 Companies Act, No. 07 of 2007
Privilege in 509. All statements made in the course of or in relation
respect of to a mediation before a member of the Companies Disputes
mediations
proceeding. Board—
(a) shall be deemed to be made for the purposes of
arriving at a settlement of the dispute or proceeding
referred to mediation ;
(b) shall not be disclosed to any person other than the
parties to the mediation and their legal advisers,
without the consent of all parties to the mediation ;
(c) shall not be admissible in evidence in any civil or
criminal proceedings without the consent of all
parties to the mediation.
Fees payable 510. (1) Where a matter is referred to mediation under
in respect of section 508, the parties shall pay to the Companies Disputes
mediation.
Board such amount in respect of the costs incurred and such
fee as may be agreed to by the President of the Board and the
parties to the mediation. The parties shall, subject to any
agreement to the contrary, bear the costs and the fee payable
equally.
(2) Subject to subsection (3), all amounts payable under
this section shall be credited to the Fund established under
this Act.
(3) The President may direct that any fee payable under
this section in respect of a mediation, shall be paid by the
Board in whole or in part, to the member of the Board who
acted as mediator.
Companies Act, No. 07 of 2007 391
PART XXI
OFFENCES
MISCELLANEOUS OFFENCES
511. Where in any return, report, certificate, balance Penalty for false
sheet or other document, required by or for the purposes of statement.
this Act, any person wilfully makes a statement which is false
in any material particular knowing it to be false, shall be
guilty of an offence and be liable on conviction to a fine not
exceeding one million rupees or to imprisonment for a term
not exceeding five years or to both such fine and
imprisonment.
512. (1) Any person who, with intent to defraud or Penalty for
deceive a person— falsification of
records.
(a) destroys, parts with, mutilates, alters or falsifies, or
is a party to the destruction, mutilation, alteration
or falsification of any register, accounting records,
book, paper or other document belonging or relating
to a company ; or
(b) makes or is a party to the making of a false entry in
any register, accounting records, book, paper or other
document belonging or relating to a company,
shall be guilty of an offence and be liable on conviction to a
fine not exceeding one million rupees or to a term of
imprisonment not exceeding five years or to both such fine
and imprisonment.
513. Where any person or persons or trade carry on Penalty for
business under any name or title of which “Limited” or any improper use of
word “Limited”.
contraction or imitation of that word is the last word, that
person or those persons shall, unless duly incorporated with
limited liability, be guilty of an offence and shall be liable
on conviction to a fine not exceeding fifty thousand rupees.
392 Companies Act, No. 07 of 2007
GENERAL PROVISIONS AS TO OFFENCES
Compounding 514. (1) Where any company has made default in
of certain
complying with any provision of this Act requiring it to file
offences.
with or deliver or send to the Registrar any account, document
or return or to give notice to him of any matter, and has by
reason of such default committed an offence under this Act,
the Registrar may, if he thinks fit, instead of instituting
proceedings in court or where such proceedings have already
been instituted, instead of continuing such proceedings
against the company or any officer of the company in respect
of such offence, accept from the company or the officer, such
sum of money as the Registrar may think proper in
composition of the offence. Any sum so accepted shall be
credited to the Fund estabilshed under this Act.
(2) Where the Registrar has accepted any sum of money
under subsection (1) in composition of any offence,
proceedings shall not be taken against the company or any
officer of the company in respect of that offence or if already
taken, shall not be continued.
(3) Where any sum of money payable in composition of
an offence under the provisions of subsection (1) remains
unpaid for a period of one month from the date fixed for its
payment by the Registrar, or such extended time as the
Registrar may allow, the Registrar may report the default in
payment to a Magistrate. The amount unpaid shall be
recovered from the company or any officer of the company in
respect of the default, in the same manner as if it were a fine
imposed by the court, and the court shall direct that the amount
in dafault be credited to the Fund.
Offences 515. Notwithstanding anything contained in any other
summarily law to the contrary, all offences under this Act may be tried
triable.
summarily by a Magistrate.
Companies Act, No. 07 of 2007 393
516. (1) A fine may be imposed by a court for any Imposition and
offence under this Act, notwithstanding that the fine exceeds application of
fines.
the amount of the fine which the court may impose in the
exercise of its ordinary jurisdiction.
(2) The court imposing any fine under this Act, may direct
that the whole or any part of it shall be applied in or towards
payment of the costs of the proceedings or in or towards
rewarding the persons on whose information or at whose suit
the fine is recovered.
517. Nothing in this Act relating to the institution of Savings as to
criminal proceedings by the Attorney-General, shall be taken private
prosecutors.
to preclude any person from instituting or carrying on any
such proceedings.
518. Where proceedings are instituted under this Act Savings for
against any person by the Attorney-General, nothing in this privileged
communications.
Act shall be taken to require any person who has acted as
attorney-at-law for the accused, to disclose any privileged
communication made to him in that capacity.
PART XXII
MISCELLANEOUS
PROHIBITION OF PARTNERSHIP WITH MORE THAN TWENTY MEMBERS
519. (1) No company, association or partnership consisting Prohibition of
of more than twenty persons shall be formed for the purpose partnership with
more than
of carrying on any business that has for its object the
twenty
acquisition of gain by the company, association or members.
partnership, or by its individual members, unless it is
registered as a company under this Act or under some other
enactment.
(2) No company, association or partnership consisting of
more than twenty persons, which is formed outside Sri Lanka,
shall carry on in Sri Lanka any business that has for its object
394 Companies Act, No. 07 of 2007
the acquisition of gain by the company, association or
partnership or by its individual members, unless—
(a) it is duly incorporated as a company outside Sri
Lanka ; and
(b) has an established place of business within Sri
Lanka.
(3) Nothing in subsection (1) or (2) shall apply to—
(a) a partnership formed for the purpose of carrying on
practice as attorneys-at-law, consisting of persons
each of whom is an attorney-at-law ;
(b) a partnership formed for the purpose of carrying on
practice as accountants, consisting of persons each
of whom is a chartered accountant ;
(c) a pertnership formed for the purpose of carrying on
practice as members of a licensed stock exchange,
consisting of persons each of whom is a member of
that licensed stock exchange ;
(d) a partnership formed for any purpose that may be
prescribed, consisting of such persons as may be
prescribed.
(4) Where any company, association or partnership
consisting of more than twenty persons is formed in
contravention of the provisions of subsection (1) or carries
on any business in contravention of the provisions of
subsection (2), each of those persons—
(a) shall be guilty of an offence and be liable on
conviction to a fine not exceeding fifty thousand
rupees;
Companies Act, No. 07 of 2007 395
(b) shall, without prejudice to paragraph (a), be
severally liable for the payment of the whole of the
debts of the company, association or partnership of
which he is or was a member, may be sued
accordingly without joining in the suit any other
member of the company, association or partnership.
APPLICATION AND REFERENCE TO COURT
520. (1) Every application or reference to court under Procedure.
the provisions of this Act shall, unless otherwise expressly
provided or unless the court otherwise directs, be by way of
petition and affidavit, and every person against whom such
application or reference is made, shall be named a respondent
in the petition and be entitled to be given notice of the same
and to object to such application or reference.
(2) Every application or reference made to the court in
the course of any proceeding under this Act or incidental
thereto, shall be made by motion in writing.
(3) The Registrar shall be entitled to be heard or
represented in any application or reference made to the court
under this Act at any stage of such application or reference.
(4) In all proceedings before court by way of application
or reference under this Act, no order for costs shall be made
against the Registrar.
521. (1) Subject to the provisions of subsections (2) Grant of
and (3), pending the making of a final order in any application isnterim relief.
or reference to court made under this Act, the court may on
the application of a party to the proceedings, make such
interim order, including a restraining order, as it thinks fit.
Such order may at the discretion of the court, be made ex-
parte or after notice to the respondent. The respondent may
make an application for an order of revocation or variation of
the ex-parte order, with notice to the petitioner.
396 Companies Act, No. 07 of 2007
(2) The court shall not grant a restraining order or any
other form of interim order under this Act on the application
of a shareholder, former shareholder or a director, unless the
applicant has first lodged with the court an undertaking in
writing that if the order sought is granted, and the company
or any other person suffers loss or damage which the court
considers as just and equitable for the applicant to bear, the
applicant will indemnify the company or other person against
that loss or damage.
(3) The court shall, before or at the time of granting a
restraining order or any other form of interim order, fix the
amount of security which the applicant shall provide for the
undertaking given under subsection (2). Security may be
provided by depositing funds with the court or by providing
a bank guarantee or in such other manner as the court may
consider sufficient.
(4) The court may from time to time, on the application
of the company or any other person who may suffer loss or
damage as a consequence of the making or continuation in
force of an interim order, increase the amount of security to
be provided by the applicant for the undertaking given under
subsection (2). Where an order for an increase in the amount
of security to be provided is made, it shall be a condition of
the continuation of the interim order, that the increased
security be provided within a period specified by the court.
(5) The court may make such orders as it think just and
equitable—
(a) by way of enforcement of an undertaking given
under subsection (2) ;
(b) for the payment out to any person of funds
deposited as security under subsection (3) ;
(c) for the investment in an interest bearing bank
account, of any funds deposited as security under
subsection (3).
Companies Act, No. 07 of 2007 397
522. Nothing in this Act shall require disclosure by any Savings for
person to the Registrar or to an inspector appointed by the attorney-at-law
and bankers.
Registrar—
(a) of any information which he would in proceedings
in a court be entitled to refuse to disclose on grounds
of legal professional privilege, except if he is an
attorney-at-law, the name and address of his client;
or
(b) unless the court orders otherwise, by a company’s
bankers, of any information as to the affairs of any
of their customers other than the company.
523. A document may be served on a company— Service of
documents on
(a) by leaving it at or sending it by post to the registered company.
office of the company ;
(b) by delivering it or sending it by post to any director,
secretary, manager or other officer of the company;
or
(c) if for any reason it cannot be served as aforesaid, on
such director, secretary, manager or other officer, by
delivering it or sending it by post or by serving it in
such manner as may be ordered by the court.
524. Any document purporting to be made or furnished Documents to
for the purposes of this Act by or on behalf of a company or be received in
evidence.
by any person, shall for all purposes be, until the contrary is
proved, deemed to have been made or furnished by such
company or person, as the case may be. Any person signing
any such document shall be deemed to be cognizant all
matters therein.
525. Where a limited company is plaintiff in any action Costs in action
or other legal proceeding, any judge having jurisdiction in by certain
limited
the matter may, where it appears by credible testimony that companies.
there is reason to believe that the company will be unable to
398 Companies Act, No. 07 of 2007
pay the costs of the defendant if successful in his defence,
require sufficient security to be given for those costs, and
may stay all proceedings until the security is given.
Power of court 526. (1) Where in any proceeding for negligence,
to grant relief in default, breach of duty, or breach of trust against an officer of
certain cases.
a company or a person employed by a company as auditor
(whether he is or not an officer of the company), it appears to
the court hearing the case that the officer or person is or may
be liable in respect of the negligence, default, breach of duty
or breach of trust, but that he has acted honestly and
reasonably, and that having regard to all the circumstances
of the case, including those connected with his appointment,
he ought fairly to be excused for the negligence, default,
breach of duty or breach of trust, that court may relieve him,
either wholly or partly, from his liability on such terms as the
court may think fit.
(2) Where any such officer or person referred to in
subsection (1) has reason to apprehend that, any claim will or
might be made against him in respect of any negligence,
default, breach of duty or breach of trust, he may apply to the
court for relief, and the court on any such application shall
have the same power to relieve him as under this section it
would have had, if it had been a court before which
proceedings against that person for negligence, default,
breach of duty or breach of trust has been brought.
Regulations. 527. (1) The Minister may make regulations for or in
respect of all matters which are stated or required by this Act
to be prescribed or for which regulations are required or
authorised by this Act to be made.
(2) Every regulation made by the Minister shall be
published in the Gazette and shall come into operation on
the date of such publication or on such later date as may be
specified in the regulation.
Companies Act, No. 07 of 2007 399
(3) Every regulation made by the Minister shall as soon
as convenient after its publication in the Gazette, be brought
before Parliament for approval. Any regulation which is not
so approved shall be deemed to be rescinded as from the date
of disapproval, but without prejudice to anything previously
done thereunder. Notification of the date on which any
regulation is so deemed to be rescinded, shall be published
in the Gazette.
528. In the event of any inconsistency between the Sinhala text to
Sinhala and Tamil texts of this Act, the Sinhala text shall prevail in case
of inconsistency.
prevail.
529. (1) In this Act, unless the context otherwise Interpretation.
requires—
“accounting period” means in relation to any body
corporate, the period in respect of which the financial
statements of such body corporate are made up,
whether the said period is a year or not;
“agent” does not include any person’s attorney-at-law
acting as such ;
“annual return” means the return required to be made by
a company under section 131;
“articles” means articles of association of a company as
originally framed or as altered by special resolution,
including so far as they apply to the company, the
regulations contained in Part C of the Schedule to
the Joint Stock Companies Ordinance, 1861 or in
Table B in the Schedule to the Joint Stock Banking
Ordinance, 1897 or in Table A in the First Schedule
to the Companies Ordinance (Cap. 145) or in Table
A in the First Schedule to the Companies Act, No.
17 of 1982, or the model articles ;
400 Companies Act, No. 07 of 2007
“balance sheet date” means the close of the 31st day of
March or of such other date as the Board of the
company has adopted as the company’s balance
sheet date and the notification of which is given
forthwith to the Registrar ;
“board” and “board of directors” in relation to a company,
means —
(a) directors of the company who number not less
than the required quorum acting together as a
board of directors ; or
(b) if the company has only one director, that
director ;
“book and paper” and “book or paper” includes
accounts, deeds, writings and documents ;
“certified” means certified in such manner as may be
prescribed, or if no manner of certification is
prescribed in relation to any document or class of
documents, in such manner as the Registrar may
require ;
“class” means a class of shares having attached to them
identical rights, privileges, limitations and
conditions ;
“company” means a company incorporated under this
Act or an existing company ;
“the court” means a High Court established under Article
154P of the Constitution for a Province, empowered
with civil jurisdiction by Order published in the
Gazette under section 2 of the High Court of the
Provinces (Special Provisions) Act, No. 10 of 1996,
within the Province for which such High Court is
established, or where no such High Court vested
Companies Act, No. 07 of 2007 401
with such civil jurisdiction is established for any
Province, the High Court established for the Western
Province;
“debenture” includes debenture stock, bonds and any
other securities of a company, whether constituting
a charge on the assets of the company or not ;
“director” includes—
(a) a person occupying the position of director of
the company, by whatever name called ;
(b) for the purposes of sections 187, 188, 189,
190, 197, 374 and 377—
(i) a person in accordance with whose
directions or instructions a person referred
to in paragraph (a) may be required or is
accustomed to act ;
(ii) a person in accordance with whose
directions or instructions the board of the
company may be required or is
accustomed to act ; and
(iii) a person who exercises or who is entitled
to exercise or who controls or who is
entitled to control the exercise of powers
which, apart from the articles of the
company, would be required to be
exercised by the board ; and
(c) for the purposes of sections 187 to 195 (both
inclusive), 197, 374 and 377, a person to
whom a power or duty of the board has been
directly delegated by the board with that
person’s consent or acquiescence, or who
exercises the power or duty with the consent
or acquiescence of the board.
402 Companies Act, No. 07 of 2007
The provisions of paragraphs (b) and (c) shall not apply to
a person to the extent that the person acts only in a
professional capacity;
“distribution” means—
(a) the direct or indirect transfer of money or property,
other than the shares of a company, to or for the
benefit of a shareholder ; or
(b) the incurring of a debt to or for the benefit of a
shareholder,
in relation to a share or shares held by that shareholder,
whether by means of a payment of a dividend, a
redemption or other acquisition of the share or shares, a
distribution of indebtedness or otherwise ;
“dividend” shall have the same meaning as given in
section 60 ;
“document” means a document in any form,
including—
(a) any writing on material ;
(b) information recorded or stored by means of a
tape recorder, computer, or other device and
material subsequently derived from
information so recorded or stored ;
(c) a book, graph, or drawing ; and
(d) a photograph, film negative, tape or other
device in which one or more visual images
are embodied so as to be capable (with or
without the aid of equipment) of being
reproduced ;
Companies Act, No. 07 of 2007 403
“employees’ share scheme”, in relation to a company,
means a scheme for encouraging or facilitating
the holding of shares in the company by or for the
benefit of—
(a) the bona fide employees or former employees
of the company or any related company ; or
(b) the wives, husbands, widows, widowers or
children or step-children of such employees
or former employees ;
“existing company” means, a company formed and
registered under the Joint Stock Companies
Ordinance, 1861, or the Joint Stock Banking
Ordinance, 1897, the Companies Ordinance (Cap.
145), or the Companies Act, No. 17 of 1982 ;
“financial statements” means—
(a) a balance sheet for the company as at the
balance sheet date ; and
(b) in the case of—
(i) a company trading for profit, a profit and
loss statement for the company in relation
to the accounting period ending at the
balance sheet date ; and
(ii) a company not trading for profit, an
income and expenditure statement for the
company in relation to the accounting
period ending at the balance sheet date,
together with any notes or documents giving
information relating to the balance sheet or
statement ;
404 Companies Act, No. 07 of 2007
“Fund” means, the Fund established under section 479;
“group financial statements” means—
(a) a consolidated balance sheet for the group as
at that balance sheet date ;
(b) where a member of the group trades for profit,
a consolidated profit and loss statement for
the group in relation to the accounting period
ending at that balance sheet date ; and
(c) where no member of the group trades for profit,
a consolidated income and expenditure
statement for the group, in relation to the
accounting period ending at that balance sheet
date,
together with any notes or documents giving
information relating to the balance sheet or
statement;
“holding company”, a company shall beodeemed to
be another company’s holding company, if and
only if that other company is its subsidiary. For
the purpose of this definition “company” includes
any body corporate;
“interest group” in relation to any action or proposal
affecting rights attached to shares, means a group
of shareholders—
(a) whose affected rights are identical; and
(b) whose rights are affected by the action or
proposal in the same way;
“legal representative” means, an executor or
administrator or in the case of an estate not
administrable in law, the next-of -kin who have
adiated the inheritance;
Companies Act, No. 07 of 2007 405
“listed company” means, a company, any shares or
securities of which are quoted on a licensed stock
exchange;
“licensed commercial bank” means, a company or
institution issued with a licence under the Banking
Act, No. 30 of 1988, to carry on business as a
licensed commercial bank;
“manager” includes, any person occupying the position
of manger by whatever name called;
“minimum subscription” means, the amount stated in
a prospectus as the minimum amount, which in
the opinion of the directors must be raised by the
issue of share capital and reckoned exclusively of
any amount payable otherwise than in cash;
“officer” in relation to a body corporate, includes a
director, manager or secretary;
“ordinary resolution” means, a resolution that is
approved by a simple majority of the votes of those
shareholders entitled to vote and voting on the
question;
“overseas company” shall have the same meaning as
given in section 488;
“prescribed” means, prescribed by regulation;
“prospectus” means, any prospectus, notice, circular,
advertisement, or other invitation, offering to the
public for subscription to or purchase of any shares
or debentures of a company, and includes any such
notice, circular, advertisement, or other invitation,
notwithstanding that it may contain on the face
thereof, that it is not a prospectus or offer of shares
to the public;
406 Companies Act, No. 07 of 2007
“receiver” means, a receiver of the whole or a part of the
property and undertaking of a company, appointed
under Part XV;
“redeemable” shall have the same meaning as given in
section 66;
“Register” means, the Register required to be kept under
section 473;
“Registrar” means, the Registrar-General of Companies
or other officer performing under this Act, the duty
of registration of companies;
“resolution altering articles” shall have the same meaning
as given in section 15;
“share” means, a share issued by a company;
“share register” means, the register required to be kept
under section 123;
“shareholder” shall have the same meaning as given in
section 86;
“stated capital” shall have the same meaning as given in
section 58;
“subsidiary”, a company shall be deemed to be a
subsidiary of another, if and only if—
(a) that other company either—
(i) controls the composition of its board of
directors ;
(ii) is in a position to exercise or control the
exercise of more than half the maximum
number of votes that can be exercised at
a meeting of the company;
Companies Act, No. 07 of 2007 407
(iii) hold more than half of the issued shares
of the company, other than shares that
carry no right to participate beyond a
specified amount in a distribution of
profits or capital;
(iv) is entitled to receive more than half of
every dividend paid on shares issued by
the company, other than shares that carry
no right to participate beyond a specified
amount in a distribution of profits or
capital; or
(b) the first-mentioned company is a subsidiary
of any company which is that other company’s
subsidiary.
For the purpose of this definition, the composition of a
company’s board of directors shall be deemed to be controlled
by another company if, and only if, that other company by
the exercise of any power exercisable by it without the
consent or concurrence of any other person, can appoint or
remove all or a majority of the directors, and that other
company shall be deemed to have power to appoint a director,
if—
(a) a person cannot be appointed as a director without
the exercise in his favour by that other company, of
a power to so appoint ; or
(b) a person’s appointment as a director follows
necessarily from his appointment as a director of
that other company.
In determining whether one company is a subsidiary of
another—
(a) any shares held or power exercisable by a company
in a fiduciary capacity shall be treated as not held or
exercisable by it;
408 Companies Act, No. 07 of 2007
(b) subject to the provisions of paragraphs (c) and (d),
any shares held or power exercisable—
(i) by any person as a nominee for that other
(except where that other is concerned only in
a fiduciary capacity); or
(ii) by or by a nominee for a subsidiary of that
other, not being a subsidiary which is
concerned only in a fiduciary capacity,
shall be treated as held or exercisable by that other;
(c) any shares held or power exercisable by any person
by virtue of the provisions of any debentures of the
first-mentioned company, or of a trust deed for
securing any issue of such debentures, shall be
disregarded;
(d) any shares held or power exercisable by or by a
nominee for that other or its subsidiary (not being
held or exercisable as referred to in paragraph (c)),
shall be treated as not held or exercisable by that
other, if the ordinary business of that other or its
subsidiary, as the case may be, includes the lending
of money, and the shares are held or the power is
exercisable by way of security only, for the purposes
of a transaction entered into in the ordinary course
of that business.
For the purpose of this definition “company” includes a
body corporate; and
“working day” means a day other than Saturday,
Sunday or a public holiday.
(2) For the purposes of this Act, —
Companies Act, No. 07 of 2007 409
(a) a company is related to another company, if—
(i) that company is the subsidiary or holding
company of the other company;
(ii) the holding company of that company is also
a holding company of the other company; or
(iii) that company is related to a company which
is related to the other company ;
(b) where any section of this Act provides that an officer
of a company who is in default shall be liable to a
penalty, the expression “officer who is in default”
means any director, manager, secretary or other
officer of the company, who knowingly and wilfully
authorizes or permits the default, refusal or
contravention referred to in that section;
(c) (i) one or more groups may exist in relation to
any action or proposal; and
(ii) if—
(A) action is taken in relation to some
holders of shares in a class and not
others; or
(B) a proposal expressly distinguishes
between some holders of shares in a
class and other holders of shares of that
class,
holders of shares in the same class, may fall
into two or more interest groups.
(3) Any reference in this Act—
(a) (i) to the shareholders of a company includes,
in relation to a company which has only one
shareholder, a reference to that shareholder;
410 Companies Act, No. 07 of 2007
(ii) to the directors of a company includes, in
relation to a company which has only one
director, a reference to that director ;
(b) to a body corporate or to a corporation, shall be
construed as not including a corporation sole but as
including a company incorporated outside Sri
Lanka;
(c) unless the context otherwise requires, to a person
by whom, or in whose interests a receiver was
appointed, includes a reference to a person to whom
the rights and interests under any deed or agreement
by or under which the receiver was appointed, have
been transferred or assigned.
(4) Where public notice of any matter is required to be
given under this Act, that notice shall be given by publishing
a notice of that matter—
(a) in at least one issue of the Gazette; and
(b) in at least one issue of a daily newspaper in the
Sinhala, Tamil and English languages, circulating
in the area in which—
(i) the company’s place of business;
(ii) if the company has more than one place of
business, the company’s principal place of
business; or
(iii) if the company has no place of business or
the location of neither its principal place of
business nor any other place of business is
known to the person required to give the
notice, the company’s registered office,
is situated.
Companies Act, No. 07 of 2007 411
TRANSITIONAL PROVISIONS AND SAVINGS
530. (1) Without prejudice to the provisions contained Transitional
in sections 5 and 10 of the Interpretation Ordinance— provisions.
(a) nothing in the repeal of any former written law
relating to companies shall affect any order, rule,
regulation, scale of fees, appointment, conveyance,
mortgage, deed or agreement made, resolution passed,
direction given, proceeding taken, instrument issued
or thing done under any former written law relating
to companies, but any such order, rule, regulation,
scale of fees, appointment, conveyance, mortgage,
deed or agreement, resolution, direction, proceeding,
instrument or thing shall, if in force on the appointed
date, continue to be in force, and so far as it could
have been made, passed, given, taken, issued or done
under this Act, shall have effect as if made, passed,
given, taken, issued, or done under the provisions of
this Act;
(b) any document referring to a provision in any former
written law relating to companies, shall be construed
as referring to the corresponding provision
contained in this Act;
(c) any person appointed to any office under or by
virtue of any former written law relating to
companies, shall be deemed to have been appointed
to that office under or by virtue of the provisions of
this Act;
(d) any Register kept under any former written law
relating to companies, shall be deemed part of the
Register to be kept under the corresponding
provisions of this Act;
(e) all funds and accounts constituted under the
provisions of this Act, shall be deemed to be in
412 Companies Act, No. 07 of 2007
continuation of the corresponding funds and
accounts constituted under the former written law
relating to companies.
(2) In this section the expression “former written law
relating to companies” means any written law repealed by
the Companies Ordinance (Cap. 145) or the Companies Act,
No. 17 of 1982 or this Act.
(3) All actions, proceedings or matters, other than those
referred to in section 532, and pending in a District Court on
the day preceding the date on which this Act came into
operation, shall stand removed to the court as defined in this
Act and such court shall have jurisdiction to take cognizance
of, hear and determine, or continue and complete, the same:
Provided that any such action, proceeding or matter, in
which the adducing of evidence has commenced in the District
Court on the day preceding the date on which this Act came
into operation, shall be heard and determined by the said
District Court.
Savings. 531. Nothing in this Act shall affect—
(a) the incorporation of any company registered under
any written law repealed by the Companies
Ordinance (Cap. 145), Companies Act, No. 17 of
1982 or this Act;
(b) Part C of the Schedule to the Joint Stock Companies
Ordinance, 1861, or any part thereof, so far as the
same applies to any company in existence on the
appointed date;
(c) Table B in the Schedule to the Joint Stock Banking
Ordinance, 1897, or any part thereof, so far as the
same applies to any company in existence on the
appointed date;
Companies Act, No. 07 of 2007 413
(d) Tables A and C in the First Schedule to the
Companies Ordinance (Cap. 145) or any part thereof,
so far as the same applies to any company in
existence on the appointed date;
(e) Table A and C in the First Schedule to the Companies
Act, No. 17 of 1982 or any part thereof, so far as the
same applies to any company in existence on the
appointed date.
532. (1) Subject to the provisions of subsection (2), the Savings of
provisions of this Act with respect to winding up shall not pending
proceedings for
apply to any company of which the winding up has winding up.
commenced before the appointed date. Every such company
shall be wound up in the same manner and with the same
incidents, as if this Act had not been enacted, and for the
purposes of the winding up, the written law under which the
winding up commenced shall be deemed to remain in full
force.
(2) Where any company is being wound up in accordance
with subsection (1), the court may, on application made by
the Registrar or by any creditor of the company, and where
the court is of opinion that it is expedient to do so in the
circumstances of the case, make order that any specified
provision of this Act with respect to liquidation shall apply
to the winding up of that company, and may give such
incidental or supplemental direction as may appear to the
court to be necessary for the purposes of the application of
such provision. Where the court makes any such order, any
provision of this Act specified in the order shall, subject to
any such directions, apply accordingly.
414 Companies Act, No. 07 of 2007
PART XXIII
REPEALS ANDAMENDMENTS
Repeals. 533. (1) The Companies Act, No. 17 of 1982 is hereby
repealed.
(2) The Companies (Special Provisions) Law, No. 19 of
1974 and the Foreign Companies (Special Provisions) Law,
No. 9 of 1975 are hereby repealed.
Amendment of 534. The First Schedule to the High Court of the
the First Provinces (Special Provisions) Act, No. 10 of 1996 is hereby
Schedule of Act,
amended by the substitution for item (2) of that Schedule, of
No. 10 of 1996.
the following item :—
“(2) All application and proceedings under the
Companies Act, No. 07 of 2007”.
FIRST SCHEDULE [Section 14]
MODELARTICLES
A. SHARES
1. Issue of shares
(1) Subject to articles 1 (2) and 1 (3), of these articles, the board
may issue such shares to such persons as it thinks fit in accordance with
section 51 of this Act. Where the shares confer rights other than those
specified in subsection (2) of section 49 of this Act, or impose any
obligation on the holder, the board must approve terms of issue which
set out the rights and obligations attached to the shares as required by
subsection (2) of section 51.
(2) Before it issues shares, the board must decide the consideration
for which the shares will be issued. The consideration must be fair and
reasonable to the company and to all existing shareholders.
(3) Where the company issues shares which rank equally with or
prior to existing shares, those shares must be offered to the holders of
the existing shares in a manner which would, if accepted, maintain the
relative voting and distribution rights of those shareholders. The offer
must remain open for acceptance for a reasonable time.
Companies Act, No. 07 of 2007 415
2. Calls on shares
(1) Where a share imposes any obligation on the holder to pay an
amount of money —
(a) on a fixed date, the holder must pay that amount on that
date;
(b) when called on to do so by the board, the board may at any
time give written notice to the holder requiring the payment
to be made within a specified period of not less than twenty
working days, and the payment must be made in accordance
with that notice.
Any amount not paid by the due date shall carry interest at a rate
fixed by the board not exceeding ten per cent per annum, accruing
daily. The board may waive payment of interest.
(2) Joint holders of a share are jointly and severally liable for any
payments to be made under paragraph (1) of this article.
(3) The company has a lien on every share to which paragraph (a)
of article 1 applies, and on every distribution payable in respect of that
share, for all amounts presently due and payable to the company in
respect of that share.
(4) The company may sell in such manner as the board thinks fit,
any shares on which the company has a lien, if—
(a) the company has given written notice of its intention to do so
to the shareholder; and
(b) the shareholder has failed to make the payment in respect of
which the lien has arisen, within ten working days of the
giving of that notice.
The transfer may be signed on behalf of the purchaser by any
person appointed to do so by the board, and the purchaser shall be
registered as the holder of the shares transferred and his title shall not be
affected by any irregularity or invalidity in the sale.
(5) The proceeds of a sale under paragraph (4) of this article shall
be received by the company and applied first in payment of the costs of
sale, and then in payment of the amount in respect of which the lien
arose. The remainder shall be paid to the person entitled to the shares,
at the time of the sale.
416 Companies Act, No. 07 of 2007
3. Distributions
(1) The company may make distributions to shareholders in
accordance with section 56 of this Act. Subject to paragraph (2) of this
article, every dividend must be approved by the board and by an
ordinary resolution of the shareholders. The board must be satisfied
that the company will immediately after the distribution, satisfy the
solvency test. The directors who vote in favour of the distribution must
sign a certificate of their opinion to that effect.
(2) The board may from time to time approve the payment of an
interim dividend to shareholders, where that appears to be justified by
the company’s profits, without the need for approval by an ordinary
resolution of the shareholders. The board must be satisfied that the
company will immediately after the interim dividend is paid, satisfy the
solvency test. The directors who vote in favour of the interim dividend
must sign a certificate of their opinion to that effect.
(3) The company is deemed to have satisfied the solvency test if—
(a) it is able to pay its debts as they fall due in the normal course
of business; and
(b) the value of its assets is greater than the sum of the value of
its liabilities and its stated capital.
4. Share register, share certificates and transfer and transmission
of shares
(1) The company must maintain a share register, which complies
with section 123 of this Act. The share register must be kept at the
registered office of the company or at any other place in Sri Lanka,
notice of which has been given to the Registrar in accordance with
subsection (4) of section 124 of this Act.
(2) Where shares are to be transferred, a form of transfer signed by
the holder or by his legal representative shall be delivered to the
company. The transfer must be signed by the transferee if the share
imposes any liability on its holder.
(3) The board may resolve to refuse to register a transfer of a share
within six weeks of receipt of the transfer, if any amount payable to the
company in respect of the share is due but unpaid. If the board resolves
to refuse to register a transfer for this reason, it must give notice of the
refusal to the shareholder within one week of the date of the resolution.
(4) Where a joint holder of a share dies, the remaining holders shall
be treated by the company as the holders of that share. Where the sole
Companies Act, No. 07 of 2007 417
holder of a share dies, that shareholder’s legal representative shall be
the only person recognised by the company as having any title to or
interest in the share.
(5) Any person who becomes entitled to a share as a consequence
of the death, bankruptcy or insolvency or incapacity of a shareholder
may be registered as the holder of that shareholder’s shares upon making
a request in writing to the company to be so registered, accompanied
by proof satisfactory to the board of that entitlement. The board may
refuse to register a transfer under this article in the circumstances set out
in paragraph (3) of this article.
(6) Where the company issues shares or the transfer of any shares
is entered on the share register, the company must within two moths
complete and have ready for delivery a share certificate in respect of
the shares.
B. MEETINGS OF SHAREHOLDERS
5. Rules relating to meetings of shareholders
A meeting of shareholders may determine its own procedure, to the
extent that it is not governed by these articles.
6. Notice of meetings
(1) Written notice of the time and place of a meeting of shareholders
must be given to every shareholder entitled to receive notice of the
meeting and to every director and the auditor of the company—
(a) not less than fifteen working days before the meeting, if the
company is not a private company and it is intended to
propose a resolution as a special resolution at the meeting;
(b) not less than ten working days before the meeting, in any
other case.
(2) The notice must set out—
(a) the nature of the business to be transacted at the meeting in
sufficient detail to enable a shareholder to form a reasoned
judgment in relation to it; and
(b) the text of any resolution to be submitted to the meeting.
(3) An irregularity in a notice of a meeting is waived if all the
shareholders entitled to attend and vote at the meeting attend the meeting
without protest as to the irregularity, or if all such shareholders agree to
the waiver.
418 Companies Act, No. 07 of 2007
(4) If a meeting of shareholders is adjourned for less than thirty
days, it is not necessary to give notice of the time and place of the
adjourned meeting, other than by announcement at the meeting which
is adjourned.
7. Methods of holding meetings
A meeting of shareholders may be held either—
(a) by a number of shareholders who constitute a quorum, being
assembled together at the place, date and time appointed for
the meeting; or
(b) by means of audio, or audio and visual communication by
which all shareholders participating and constituting a
quorum, can simultaneously hear each other throughout the
meeting.
8. Quorum
(1) Subject to paragraph (3) of this article, no business may be
transacted at a meeting of shareholders if a quorum is not present.
(2) A quorum for a meeting of shareholders is present if the
shareholders or their proxies are present who are between them able to
exercise a majority of the votes to be cast on the business to be transacted
by the meeting.
(3) If a quorum is not present within thirty minutes after the time
appointed for the meeting, the meeting is adjourned to the same day in
the following week at the same time and place, or to such other date,
time and place as the directors may appoint. If at the adjourned meeting,
a quorum is not present within thirty minutes after the time appointed
for the meeting, the shareholders present or their proxies shall be
deemed to form a quorum.
9. Chairperson
(1) If the directors have elected a chairperson of the board, and the
chairperson of the board is present at a meeting of shareholders, he or
she must chair the meeting.
(2) If no chairperson of the board has been elected or if at any
meeting of shareholders the chairperson of the board is not present
within fifteen minutes of the time appointed for the commencement of
the meeting, the shareholders present may choose one of their number
to be chairperson of the meeting.
Companies Act, No. 07 of 2007 419
10. Voting
(1) In the case of a meeting of shareholders held under paragraph
(a) of article 7, unless a poll is demanded, voting at the meeting shall be
by whichever of the following methods as determined by the chairperson
of the meeting—
(a) voting by voice; or
(b) voting by show of hands.
(2) In the case of a meeting of shareholders held under paragraph
(b) of article 7, unless a poll is demanded, voting at the meeting shall be
by shareholders signifying individually their assent or dissent by voice.
(3) A declaration by the chairperson of the meeting that a resolution
is carried by the requisite majority is conclusive evidence of that fact,
unless a poll is demanded in accordance with paragraph (4) of this
article.
(4) At a meeting of shareholders, a poll may be demanded by —
(a) not less than five shareholders having the right to vote at the
meeting; or
(b) a shareholder or shareholders representing not less than ten
per centum of the total voting rights of all shareholders
having the right to vote at the meeting.
(5) A poll may be demanded either before or after the vote is taken
on a resolution.
(6) If a poll is taken, votes must be counted according to the votes
attached to the shares of each shareholder present and voting.
(7) The chairperson of a shareholders’ meeting is not entitled to a
casting vote.
11. Proxies
(1) A shareholder may exercise the right to vote either by being
present in person or by proxy.
(2) A proxy for a shareholder is entitled to attend and be heard at
a meeting of shareholders as if the proxy were the shareholder.
(3) A proxy must be appointed by notice in writing signed by the
shareholder. The notice must state whether the appointment is for a
particular meeting, or for a specified term.
420 Companies Act, No. 07 of 2007
(4) No proxy is effective in relation to a meeting, unless a copy of
the notice of appointment is given to the company not less than twenty-
four hours before the start of the meeting.
12. Minutes
(1) The board must ensure that minutes are kept of all proceedings
at meetings of shareholders.
(2) Minutes which have been signed correct by the chairperson of
the meeting are prima facie evidence of the proceedings.
13. Shareholders proposals
Shareholders entitled to do so may give notice of the resolution to
the company in accordance with section 142 of this Act and it shall be
the duty of the company to give notice of the resolution or circulate the
statement, or both, as the case may be, in accordance with section 142.
The company is not required to give notice of a resolution or circulate
a statement in the circumstances set out in subsections (4) or (5) of
section 142.
14. Corporations may act by representatives
A body corporate which is a shareholder may appoint a
representative to attend a meeting of shareholders on its behalf in the
same manner as it could appoint a proxy.
15. Votes of joint holders
Where two or more persons are registered as the holder of a share,
the vote of the person named first in the share register and voting on a
matter, shall be accepted to the exclusion of the votes of the other joint
holders.
16. Loss of voting right if calls unpaid
If a sum due to a company in respect of a share has not been paid,
that share may not be voted at a shareholders’ meeting other than a
meeting of an interest group.
17. Annual general meetings and extraordinary general meetings
of shareholders
(1) Subject to paragraphs (2) and (3) of this article, the board must
call an annual meeting of the company to be held —
(a) once in each calendar year;
Companies Act, No. 07 of 2007 421
(b) not later than six months after the balance sheet date of the
company; and
(c) not later than fifteen months after the previous annual
meeting.
The meeting must be held on the date on which it is called to be
held.
(2) The company need not hold its first annual meeting in the
calendar year of its incorporation, but must hold that meeting within
eighteen months of its incorporation.
(3) An extraordinary meeting of shareholders entitled to vote on
an issue may be called at any time by the board, and must be called by
the board on the written request of shareholders holding shares, carrying
not less that ten per centum of votes which may be cast on that issue.
(4) A resolution in writing signed by not less than eighty-five per
centum of the shareholders entitled to vote on the resolution at a meeting
of shareholders, who together hold not less than eighty-five per centum
of the votes entitled to be cast on that resolution, is as valid as if it had
been passed at meeting of those shareholders. The company need not
hold an annual meeting if every thing required to be done at the
meeting (by resolution of otherwise) is done by resolution and is in
accordance with this clause.
(5) Within five working days of a resolution being passed under
paragraph (4) of this article, the company must send a copy of the
resolution to every shareholders who did not sign it.
(6) A resolution may be passed under paragraph (4) of this
article without any prior notice being given to shareholders.
18. Voting in interest groups
Where the company proposes to take action which affects the rights
attached to shares within the meaning of section 99 of this Act, the
action may not be taken unless it is approved by a special resolution of
each interest group, as defined in this Act.
19. Shareholders entitled to receive distributions, exercise pre-
emptive rights, and attend and vote at meetings
(1) The shareholders who are entitled to receive notice of a meeting
of shareholders for any purpose shall be—
(a) if the board fixes a date for the purpose, those shareholders
whose names are registered in the share register on that date;
422 Companies Act, No. 07 of 2007
(b) if the board does not fix a date for the purpose, those
shareholders whose names are registered in the share register
at the close of business on the day immediately preceding
the day on which the notice is given.
(2) A date fixed under paragraph (1) of this article should not
precede by more than thirty working days, the date on which the
meeting is to be held.
(3) Before a meeting of shareholders, the company may prepare a
list of shareholders entitled to receive notice of the meeting arranged in
alphabetical order, and showing the number of shares held by each
shareholder—
(a) if a date has been fixed under paragraph (1) of this article,
not later than ten working days after that date; or
(b) if no such date has been fixed, at the close of business on the
day immediately preceding the date on which the notice is
given.
(4) A person named in a list prepared under paragraph (3) of this
article is entitled to attend the meeting and vote in respect of the shares
shown opposite his name in person or by proxy, except to the extent
that—
(a) that person has, since the date on which the shareholders
entitled to receive notice of the meeting were determined,
transferred any of his shares to some other person; and
(b) the transferee of those shares has been registered as the
holder of those shares, and has requested before the
commencement of the meeting that his or her name be entered
on the list prepared under paragraph (3) of this article.
(5) A shareholder may examine a list prepared under paragraph
(3) of this article during normal business hours, at the registered office
of the company.
C. DIRECTORS AND SECRETARY
20. Appointment and removal of directors
(1) The shareholders may by ordinary resolution fix the number of
directors of the company.
Companies Act, No. 07 of 2007 423
(2) A director may be appointed or removed by ordinary resolution
passed at a meeting called for the purpose or by a written resolution in
accordance with paragraph (4) of article 17. Unless the company is a
private company, the shareholders may only vote on a resolution to
appoint a director if—
(a) the resolution is for the appointment of one director; or
(b) the resolution is a single resolution for the appointment of
two or more persons as directors, and a separate resolution
that it be so voted on has first been passed without a vote
being cast against it.
(3) A director may resign by delivering a signed written notice of
resignation to the registered office of the company. Subject to section
208 of this Act, the notice is effective when it is received at the registered
office or at any later time specified in the notice.
(4) A director vacates office if he—
(a) resigns in accordance with paragraph (3) of this article;
(b) is removed from office in accordance with the provisions of
this Act or these articles;
(c) becomes disqualified from being a director pursuant to section
202 of this Act;
(d) dies; or
(e) vacates office pursuant to subsection (2) of section 210 of
this Act, on the ground of his age.
21. Power and duties of directors
(1) Subject to section 185 of the Act which relates to major
transactions, the business and affairs of the company shall be managed
by or under the direction or supervision of the board. The board shall
have all the powers necessary for managing and for directing and
supervising the management of the business and affairs of the company.
(2) The board may delegate to a committee of directors or to a
director or employee any of its’ powers which it is permitted to delegate
under section 186 of this Act.
(3) The directors have the duties set out in the Act, and in particular—
(a) each director must act in good faith and in what he believes
to be the best interest of the company;
424 Companies Act, No. 07 of 2007
(b) no director shall act or agree to the company to Act, in a
manner that contravenes any provisions of this Act or these
articles.
22. Interested directors
(1) A director who is interested in a transaction to which the company
is a party must disclose that interest in accordance with section 192 of
this Act.
(2) Subject to paragraph (3) of this article, a director of a company
is interested in a transaction to which the company is a party, if, and
only if, the director—
(a) is a party to or will or may derive a material financial benefit
from the transaction;
(b) has a material financial interest in another party to the
transaction;
(c) is a director, officer or trustee of another party to, or person
who will or may derive a material financial benefit from the
transaction, not being a party or person that is—
(i) the company’s holding company, being a holding
company of which the company is a wholly-owned
subsidiary;
(ii) a wholly-owned subsidiary of the company; or
(iii) a wholly-owned subsidiary of a holding company
of which the company is also a wholly-owned
subsidiary;
(d) is the parent, child or spouse of another party to or person
who will or may derive a material financial benefit from the
transaction; or
(e) is otherwise directly or indirectly materially interested in the
transaction.
(3) A director of a company is not interested in a transaction to
which the company is a party, if the transaction comprises only the
giving by the company of security to a third party which has no
connection with the director, at the request of the third party, in respect
of a debt or obligation of the company for which the director or
another person has personally assumed responsibility in whole or in
part, under a guarantee, indemnity or by the deposit of a security.
Companies Act, No. 07 of 2007 425
(4) Paragraph (2) of this article does not apply to any remuneration
or other benefit given to a director in accordance with section 216 of
the Act, or, to any insurance or indemnity provided in accordance with
section 218 of the Act.
(5) A director of a company who is interested in a transaction
entered into or to be entered into by the company, may—
(a) vote on a matter relating to the transaction;
(b) attend a meeting of directors at which a matter relating to the
transaction arises and be included among the directors present
at the meeting for the purpose of a quorum;
(c) sign a document relating to the transaction on behalf of the
company; and
(d) do any other thing in his capacity as a director in relation to
the transaction,
as if he were not interested in the transaction.
(6) A director of a company who has information in his capacity as
a director or employee of the company which would not otherwise be
available to him, must not disclose that information to any person or
make use of or act on the information, except—
(a) for the purposes of the company;
(b) as required by law; or
(c) in accordance with paragraph (7) of this article.
(7) A director of a company may disclose, make use of or act on
information if—
(a) the director is first authorized to do so by the board under
paragraph (8) of this article; and
(b) particulars of the authorization are entered in the interests
register.
(8) The board may authorize a director to disclose, make use of or
act on information, if it is satisfied that to do so will not be likely to
prejudice the company.
(9) A director must disclose all dealings in shares of the company
in which he has a relevant interest, in accordance with sections 198,
199 and 200 of the Act.
426 Companies Act, No. 07 of 2007
23. Procedure at meetings of directors
(1) Articles 24 to 30 sets out the procedure to be followed at
meetings of directors.
(2) A meeting of directors may determine its own procedure, to the
extent that it is not governed by these articles.
24. Chairperson
(1) The directors may elect one of their number to be the chairperson
of the board and may determine the period for which the chairperson
is to hold office.
(2) If no chairperson is elected or if at a meeting of the board the
chairperson is not present within five minutes after the time appointed
for the commencement of the meeting, the directors present may choose
one of their number to be chairperson of the meeting,
25. Notice of meeting
(1) A director, the secretary or if requested by a director to do so,
an employee of the company, may convene a meeting of the board by
giving notice in accordance with this article.
(2) Not less than twenty-four hours notice of a meeting of the
board must be given to every director who is in Sri Lanka.
(3) An irregularity in the notice of a meeting is waived if all directors
entitled to receive notice of the meeting attend the meeting without
protest as to the irregularity or if all directors entitled to receive notice
of the meeting agree to the waiver.
26. Methods of holding meetings
A meeting of the board may be held either—
(a) by a number of the directors who constitute a quorum being
assembled together at the place, date and time appointed for
the meeting; or
(b) by means of audio or audio and visual communication by
which all directors participating and constituting a quorum
can simultaneously hear each other throughout the meeting.
27. Quorum
(1) A quorum for a meeting of the board is a majority of the
directors.
Companies Act, No. 07 of 2007 427
(2) No business may be transacted at a meeting of directors if a
quorum is not present.
28. Voting
(1) Every director has one vote.
(2) The chairperson has a casting vote.
(3) A resolution of the board is passed if it is agreed to by all
directors present without dissent or if a majority of the votes cast on it
are in favour of it.
(4) A director present at a meeting of the board is presumed to
have agreed to and to have voted in favour of a resolution of the board,
unless he or she expressly dissents from or votes against the resolution
at the meeting.
29. Minutes
The board must ensure that minutes are kept of all proceedings at
meetings of the board.
30. Unanimous resolution
(1) A resolution in writing signed or assented to by all directors
entitled to receive notice of a board meeting, is as valid and effective as
if it had been passed at a meeting of the board duly convened and held.
(2) Any such resolution may consist of several documents
(including facsimile or other similar means of communication) in like
form, each signed or assented to by one or more directors.
(3) A copy of any such resolution must be entered in the minute
book of board proceedings.
31. Managing director and other executive directors
(1) The board may form time to time appoint a director as managing
director for such period and on such terms as it thinks fit.
(2) Subject to the terms of a managing director’s appointment, the
board may at any time cancel an appointment of a director as managing
director.
(3) A director who holds office as managing director ceases to
hold office as managing director, if he ceases to be a director of the
company.
428 Companies Act, No. 07 of 2007
(4) The managing director shall be paid such remuneration as may
be agreed between him and the board. His remuneration may be by
way of salary, commission, participation in profits or any combination
of these methods or any other method of fixing remuneration.
(5) The board may delegate to the managing director, subject to
any conditions or restrictions which they consider appropriate, any of
their powers which can be lawfully delegated. Any such delegation
may at any time be withdrawn or varied by the board. The delegation
of a power of the board to the managing director does not prevent the
exercise of the power by the board, unless the terms of the delegation
expressly provide otherwise.
(6) A director other than the managing director who is employed
by the company shall be paid such remuneration as may be agreed to
between him and the board. His remuneration may be by way of salary,
commission, participation in profits or any combination of these methods
or any other method of fixing remuneration.
32. Secretary
(1) The company must at all times have a secretary.
(2) The board may appoint the secretary for such term and on such
conditions as it thinks fit. The remuneration of the secretary shall be
agreed to by the board and the secretary.
(3) The board may remove the secretary.
(4) The secretary may not be —
(a) the sole director of the company; or
(b) a corporation, the sole director of which is the sole director
of the company.
(5) Where the Act or these articles require something to be done by
a director and the secretary, it is not satisfied by the same person doing
that thing acting in both capacities.
D. ACCOUNTS AND AUDIT
33. Accounting records, financial statements, audit etc.
(1) The board must ensure that the company keeps accounting
records which —
(a) correctly record and explain the company’s transactions;
(b) will at any time enable the financial position of the company
to be determined with reasonable accuracy;
Companies Act, No. 07 of 2007 429
(c) will enable the board to prepare financial statements in
accordance with this Act; and
(d) will enable the financial statements of the company to be
readily and properly audited.
(2) The accounting records must comply with subsection (2) of
section 148 of this Act.
(3) The board shall ensure that within five months after the balance
sheet date of the company, financial statements which comply with
section 151 of the Act (and if applicable, group financial statements
which comply with section 153 of the Act) are completed in relation to
that balance sheet date and are dated and signed on behalf of the board
by two directors or if the company has only one director, by that
director.
(4) At every annual meeting, the company must appoint an auditor
for the following year in accordance with section 154 of the Act. An
auditor who is appointed at an annual meeting is deemed to be
reappointed at the following annual meeting, unless —
(a) he is not qualified for re-appointment;
(b) the company resolves at that meeting to appoint another
person in his place; or
(c) the auditor has given notice to the company that he does not
wish to be re-appointed.
(5) The board must within five months after the balance sheet date
of the company, prepare an annual report on the affairs of the company
during the accounting period ending on that date which complies with
section 166 of this Act. The board must send a copy of the annual
report to every shareholder not less than twenty working days before
the date fixed for holding the annual meeting of shareholders.
E. LIQUIDATION AND REMOVAL FROM THE REGISTER
34. Resolution to appoint liquidator
The shareholders may resolve to wind up the company voluntarily
by special resolution.
35. Distribution of surplus assets
(1) The surplus assets of the company available for distribution to
shareholders after all creditors of the company have been paid, shall be
distributed in proportion to the number of shares held by each
shareholder, subject to the terms of issue of any shares.
430 Companies Act, No. 07 of 2007
(2) The liquidator may with the approval of a special resolution,
divide the surplus assets of the company among the shareholders in
kind. For this purpose he may set such value as he considers fair on any
property to be divided, and may determine how the division will be
carried out as between the shareholders or different classes of
shareholders.
F. MISCELLANEOUS
36. Documents to be kept by company
(1) The company must keep at its registered office or at some other
place notice of which has been given to the Registrar in accordance with
subsection (4) of section 116 of the Act, the following documents :—
(a) the certificate of incorporation and the articles of the
company;
(b) minutes of all meetings and resolutions of shareholders within
the last ten years;
(c) an interests register, unless it is a private company which has
dispensed with the need to keep such a register;
(d) minutes of all meetings and resolutions of directors and
directors’ committees within the last ten years;
(e) certificates given by directors under this Act within the last
ten years;
(f) the register of directors and secretaries required to be kept
under section 223 of this Act;
(g) copies of all written communication to all shareholders or all
holders of the same class of shares during the last ten years,
including annual reports prepared under article 33(5);
(h) copies of all financial statements and group financial
statements required to be completed under this Act for the
last ten completed accounting periods of the company;
(i) the copies of instruments creating or evidencing charges and
the register of charges required to be kept under sections
109 and 110 of this Act;
(j) the share register required to be kept under section 123 of
the Act; and
Companies Act, No. 07 of 2007 431
(k) the accounting records required by section 148 of this Act
for the current accounting period and for the last ten
completed accounting periods of the company.
(2) The references in paragraph (1) of this article to “ten years”
and to “ten completed accounting periods” shall include such lesser
periods as the Registrar may approve, by notice in writing to the company.
37. Rights of directors and shareholders to documents etc.
(1) The directors of the company are entitled to have access to the
company’s records in accordance with section 118 of the Act.
(2) A shareholder of the company is entitled—
(a) to inspect the documents referred to in section 119 of the
Act, in the manner specified in section 121 of the Act; and
(b) to require copies of or extracts from any document which he
may inspect, within five working days of making a request
in writing for the copy or extract, on payment of any
reasonable copying and administration fee determined by
the company. The fee may be determined by any director or
by the secretary, subject to any directions from the board.
38. Name of company
The company may change its name by special resolution in
accordance with section 8 of the Act.
39. Notices
(1) Where the company is required to send any document to a
shareholder or to give notice of any matter to a shareholder, it shall be
sufficient for the company to send the document or notice to the
registered address of the shareholder by ordinary post. Any document
or notice so sent is deemed to have been received by the shareholder
within three working days of the posting of a properly addressed and
prepaid letter containing the document or notice.
(2) A shareholder whose registered address is outside Sri Lanka
may give notice to the company of an address in Sri Lanka to which all
documents and notices are to be sent, and the company shall treat that
address as the registered address of the shareholder for all purposes.
(3) A document may be sent or notice given by the company to the
joint holders of a share, by giving the notice to the holder first named
on the share register in respect of the share.
432 Companies Act, No. 07 of 2007
(4) Where a shareholder has died or has become bankrupt or
insolvent, the company may continue to send all notices and documents
in respect of his shares addressed to him at his registered address,
notwithstanding that some other person has by reason of the death,
bankruptcy or insolvency, become entitled to those shares, or may send
any notice or document to an address to which that other person requests
the company to send such notices.
(5) A copy of every notice or document sent to all shareholders
must be sent to the auditor of the company.
40. Insurance and indemnity
(1) The company shall indemnify every director, auditor and
secretary of the company for the time being against any costs incurred
in the course of defending any proceeding that relates to any act or
omission in his capacity as director, auditor or secretary, in which
judgment is given in his favour or in which, he is a acquitted or which
is discontinued.
(2) The company may indemnify a director or employee in
circumstances where paragraph (1) does not apply, to the extent
permitted by subsection (3) of section 218 of the Act, if the board
considers it appropriate to do so.
41. Modification in respect of private companies
(1) If the company is registered as a private company, this article
shall apply to that company.
(2) The company must not offer any shares or other securities
issued by it to the public.
(3) The company must at no time have more than fifty shareholders,
not including shareholders who are —
(a) employees of the company; or
(b) former employees who became shareholders of the
company while being employed by it, and who have
continued to be shareholders after ceasing employment with
the company.
(4) The company may by unanimous resolution of its shareholders
dispense with the keeping of an interests register. Any such resolution
shall cease to have effect if any shareholder gives notice in writing to
the company that he requires it to keep an interests register.
Companies Act, No. 07 of 2007 433
(5) Where all the shareholders of the company agree to or concur
in any action which has been taken or is to be taken by the company —
(a) the taking of that action is deemed to be validly authorized
by the company, notwithstanding anything in these articles;
and
(b) the provisions of this Act referred to in the Second Schedule
to this Act, do not apply in relation to that action, pursuant to
section 31 of the Act.
42. Interpretation
(1) In these articles “the Act” means the Companies Act, No. 07
of 2007, and terms which are defined in the Act, shall have
the same meaning in these articles.
SECOND SCHEDULE [Section 31 (1)]
PROVISIONS WHICH DO NOTAPPLYTO PRIVATECOMPANIESACTINGWITHUNANIMOUS
SHAREHOLDERAPPROVAL
Section 52 (Consideration for issue of shares)
Section 53 (Pre-emptive rights to new issues)
Section 56 (Distributions)
Section 60 (Dividends)
Section 61 (Recovery of distributions)
Section 64 (Purchase of own shares)
Section 70 (Restrictions on giving financial assistance)
Section 90 (Exercise of powers reserved to shareholders)
Section 92(1) (b) (Powers exercised by special resolution)
Section 99 (Alteration of shareholder rights)
Section 185 (Major transactions)
Section 192 (Disclosure of interest)
Section 193 (Avoidance of transactions)
Section 216 (Remuneration and other benefits)
Section 217 (Restrictions on loans to directors)
Section 218 (Indemnity and insurance)
434 Companies Act, No. 07 of 2007
THIRD SCHEDULE [Section 35 (1)]
PROVISIONSWHICHDONOTAPPLY TO COMPANIESLIMITEDBY GUARANTEE
Part IV (Shares and Debentures)
Sections 93 to 98 (Minority buy-out rights)
Sections 99 to 101 (Interest groups)
Section 123(1)(b) and (c) (Company to maintain share register)
Section 124(1) and (3) (Place of share register)
Sections 198 to 200 (Disclosure of director’s interests in shares)
Section 220 (Duty of directors on serious loss of capital)
Part VIII (Amalgamations)
Sub-paragraphs (b) and (e) to (j) of the Fifth Schedule (Matters to
be included in Annual Return).
FOURTH SCHEDULE [Section 37(1)]
MATTERS TO BE SPECIFIED IN PROSPECTUSAND REPORTS TO BE SETOUTTHEREIN
PART 1
MATTERS TOBE SPECIFIED
1. The business which the subscribers or promoters intend that the
company should carry out during the period of five years from
the date of commencement of business by the company.
2. The number of founders or management or deferred shares if
any, and the nature and extent of the interest of the holders in the
property and profits of the company.
3. The number of shares, if any, fixed by the articles as the
qualification of a director, and any provision in the articles as to
the remuneration of the directors.
4. The names, descriptions and addresses of the directors or proposed
directors.
5. Where shares are offered to the public for subscription, particulars
as to—
(a) the minimum amount which in the opinion of the
directors, must be raised by the issue of those shares in
Companies Act, No. 07 of 2007 435
order to provide the sums, or if any part thereof is to be
defrayed in any other manner, the balance of the sums,
required to be provided in respect of each of the following
matters :—
(i) the purchase price of any property purchased or
to be purchased which is to be defrayed in whole
or in part out of the proceeds of the issue ;
(ii) any preliminary expenses payable by the company
and any commission so payable to any person in
consideration of his agreeing to subscribe for or
of his procuring or agreeing to procure
subscriptions for any shares in the company ;
(iii) the repayment of any moneys borrowed by the
company in respect of any of the aforesaid matters;
(iv) working capital ; and
(b) the amounts to be provided in respect of the matters aforesaid
otherwise than out of the proceeds of the issue, and the
sources out of which those amounts are to be provided.
6. The time of the opening and closing of the subscription lists.
7. The amount payable on application and allotment on each share,
and in the case of second or subsequent offer of shares, the
amount offered for subscription on each provious allotment
made within the two preceding years, the amount actually
allotted, and the amount, if any, paid on the shares so allotted.
8. The number, description and amount of any shares in, or
debentures of the company which any person has or is entitled
to be given an option to subscribe for, together with the following
particulars of the option, that is to say—
(a) the period during which it is exercisable ;
(b) the price to be paid for shares or debentures subscribed
for under it ;
(c) the consideration (if any) given or to be given for it or
for the right to it ;
(d) the names and addresses of the persons to whom it or the
right to it was given or if given to existing shareholders
or debenture-holders as such, the relevant shares or
debentures.
436 Companies Act, No. 07 of 2007
9. The number and amount of shares and debentures which within
the two preceding years have been issued or agreed to be issued,
as fully or partly paid up for a consideration other than cash and
the consideration for which those shates or debentures, have
been issued or are proposed or intended to be issued.
10. (1) As respects any property to which this paragraph applies–
(a) the names and addresses of the vendors ;
(b) the amount payable in cash, shares or debentures to the
vendor and where there is more than one separate vendor
or the company is a sub-purchaser, the amount so
payable to each vendor ;
(c) short particulars of any transaction relating to the
property completed within the two preceding years in
which any vendor of the property to the company or
any person who is or was at the time of the transaction,
a promoter or a director or proposed director of the
company had any interest, direct or indirect.
(2) The property to which this paragraph applies is property
purchased or acquired by the company or proposed so to
be purchased or acquired, which is to be paid for wholly or
partly out of the proceeds of the issue offered for
subscription by the prospectus or the purchase or acquisition
of which has not been completed at the date of the issue of
the prospectus, other than property—
(a) the contract for the purchase or acquisition whereof
was entered into in the ordinary course of the
company’s business, the contract not being made in
contemplation of the issue nor the issue in consequence
of the contract ; or
(b) as respects which the amount of the purchase money is
not material.
11. The amount if any, paid or payable as purchase money in cash,
shares or debentures for any property to which the last foregoing
paragraph applies, specifying the amount if any, payable for
goodwill.
12. The amount, if any paid within the two preceding years or
payable as commission (but not including commission to sub-
underwriters) for subscribing or agreeing to subscribe or
procuring or agreeing to procure subscriptions, for any shares
in or debentures of the company, or the rate of any such
commission.
Companies Act, No. 07 of 2007 437
13. The amount or estimated amount of preliminary expenses and
the persons by whom any of those expenses have been paid or
are payable and the amount or estimated amount of the expenses
of the issue and the persons by whom any of those expenses
have been paid or are payable.
14. Any amount or benefit paid or given within the two preceding
years or intended to be paid or given to any promoter and the
consideration for the payment or the giving of the benefit.
15. The dates or parties to and general nature of every material
contract, not being a contract entered into in the ordinary course
of the business carried on or intended to be carried on by the
company or a contract entered into more than two years before
the date of issue of the prospectus.
16. The names and addresses of the auditors, if any, of the company.
17. Full particulars of the nature and extent of the interest, if any, of
every director in the promotion of or in the property proposed
to be acquired by the company, or where the interest of such a
director consists in being a partner in a firm, the nature and
extent of the interest of the firm, with a statement of all sums
paid or agreed to be paid to him or to the firm, in cash or shares
or otherwise by any person, either to induce him to become or
to qualify him as a director or otherwise for service rendered by
him or by the firm in connection with the promotion or formation
of the company.
18. Where the prospectus invites the public to subscribe for shares
in the company and the share capital of the company is divided
into different classes of shares, the right of voting at meetings of
the company conferred by and the other rights and obligations
attached to the several classes of shares, respectively.
19. In the case of a company which has been carrying on business or
a business which has been carried on for less than three years, the
length of time during which the business of the company or the
business to be acquired, as the case may be, has been carried on.
PART II
REPORT TO BE SET OUT
20. (1) A report by the auditors of the company with respect to—
(a) profits and losses and assets and liabilities in accordance
with the provisions of sub-paragraph (2) or sub-
paragraph (3) of this paragraph, as the case requires ;
and
438 Companies Act, No. 07 of 2007
(b) the rates of the dividends, if any, paid by the company
in respect of each class of shares in the company in
respect of each of the five financial years immediately
preceding the issue of the prospectus, giving particulars
of each such class of shares on which such dividends
have been paid, and particulars of the cases in which no
dividends have been paid in respect of any class of
shares, in respect of any of those years,
and, if no accounts have been made up in respect of any part of
the period of five years ending on the date three months before
the issue of the prospectus, containing a statement of that fact.
(2) Where the company has no subsidiaries, the report shall—
(a) so far as regards profits and losses, deal with the profits
or losses of the company in respect of each of the five
financial years immediately preceding the issue of the
prospectus ; and
(b) so far as regards assets and liabilities, deal with the
assets and liabilities of the company as at the last date to
which the accounts of the company were made up.
(3) Where the company has subsidiaries, the report shall—
(a) so far as regards profits and losses, deal separately with
the company’s profit or losses as provided by the
provisions of sub-paragraph (2) of this paragraph and
in addition, deal either—
(i) as a whole with the combined profits and losses of
its subsidiaries, so far as they concern members of
the company ; or
(ii) individually with the profits or losses of each
subsidiary, so far as they concern members of the
company,
or, instead of dealing separately with the company’s profits or
losses, deal as a whole with the profits or losses of the company
and so far as they concern members of the company with the
combined profits or losses of its subsidiaries ; and
(b) so far as regards assets and liabilities, deal separately
with the company’s assets and liabilities as provided by
Companies Act, No. 07 of 2007 439
the provisions of sub-paragraph (a) above, and in
addition deal either—
(i) as a whole with the combined assest and liabilities
of its subsidiaries with or without the company’s
assets and liabilities ; or
(ii) individually with the assets and liabilites of each
subsidiary,
and shall indicate as respects the assets and liabilities of the
subsidiaries, the allowances to be made for persons other than
members of the company.
21. Where the proceeds or any part of the proceeds of the issue of
the shares or debentures are or is to be applied directly or indirectly
in the purchase of any business, a report made by accountants
(who shall be named in the prospectus) upon—
(a) the profits or losses of the business in respect of each of
the five financial years immediately preceding the issue
of the prospectus ; and
(b) the assets and liabilities of the business at the last date to
which the accounts of the business were made up.
22. (1) Where—
(a) the proceeds or any part of the proceeds of the issue of
the shares or debentrures are or is to be applied directly
or indirectly in any manner resulting in the acquisition
by the company of shares in any other body corporate;
and
(b) by reason of that acquisition or anything to be done in
consequence thereof or in connection therewith, that
body corporate will become a subsidiary of the
company,
a report made by accountants (who shall be named in the
prospectus) upon—
(i) the profits and losses of the other body corporate
in respect of each of the five financial years
immediately preceding the date of issue of the
prospectus ; and
440 Companies Act, No. 07 of 2007
(ii) the assets and liabilities of the other body corporate
at the last date to which the accounts of the body
corporate were made up.
(2) The report referred to in sub-paragraph (i) shall—
(a) indicate how the profits or losses of the other body
corporate dealt with in the report would in respect of
the shares to be acquired, have concerned members of
the company and what allowance would have fallen to
be made in relation to assets and liabilities so dealt with
for holders of other shares, if the company had at all
material times held the shares to be acquired ; and
(b) where the other body corporate has subsidaries deal
with the profits or losses and the assets and liabilities of
the body corporate and its subsidiaries in the manner
provided by sub-paragraph (3) of paragraph 20 in
relation to the company and its subsidiaries.
PART III
PROVISIONSAPPLICABLE TO PARAGRAPHS1 TO 22
23. The provisions of paragraphs 3, 4, 13 (so far as it relates to
preliminary expenses) and 17 shall not apply in the case of a
prospectus issued more than two years after the date on which
the company is entitled to commence business.
24. Every person shall for the purpose of this Schedule, be deemed
to be a vendor who has entered into any contract absolute or
conditional for the sale or purchase or for any option of purchase,
of any property to be acquired by the company in any case
where—
(a) the purchase money is not fully paid at the date of the
issue of the prospectus ;
(b) the purchase money is to be paid or satisfied wholly or in
part out of the proceeds of the issue offered for
subscription by the prospectus ;
(c) the contract depends for its validity or fulfillment on the
result of that issue.
25. Where any property to be acquired by the company is to be
taken on lease, this Schedule shall have effect as if the expression
“vendor” included the lessor, the expression “purchase money”
included the consideration for the lease, and the expression
“sub-purchaser” included a sub-lessee.
Companies Act, No. 07 of 2007 441
26. Any references in paragraph 8 to subscribing for shares or
debentures shall include acquiring them from a person to whom
they have been allotted or agreed to be allotted with a view to his
offering them for sale.
27. For the purposes of paragraph 10 where the vendors or any of
them are a firm, the members of the firm shall not be treated as
separate vendors.
28. Where in the case of a company which has been carrying on
business or of a business which has been carried on for less than
five years, the accounts of the company or business have only
been made up in respect of four years, three years, two years or
one year, provisions of paragraphs 20, 21 and 22 shall have
effect as if reference to four years, three years, two years or one
year, as the case may be, were substituted for references to five
years.
29. The expression “financial year” in paragraphs 20, 21 and 22
means the year in respect of which the accounts of the company
or of the business, as the case may be, are made up, and where
by reason of any alteration of the date on which the financial
year of the company or business terminates, the accounts of the
company or business have been made up for a period greater or
less than a year, that greater or lesser period shall for the purpose
of those paragraphs be deemed to be a financial year.
30. Any report required by paragraphs 20, 21 and 22 shall either
indicate by way of a note, any adjustments as respect the figures
of any profits or losses or assets and liabilities dealt with by the
report which appear to the person making the report necessary,
or shall make those adjustments and indicate that adjustments
have been made.
31. Any report by accountants required by paragraphs 20, 21 and
22 shall be made by accountants qualified under this Act for
appointment as auditors of a company, and shall not be made by
any accountant who is an officer or servant or a partner of or in
the employment of an officer or servant of the company or of
the company’s subsidiary or holding company or of a subsidiary
of the company’s holding company, and for the purpose of this
paragraph the expression “officer” shall include a proposed
director, but not an auditor.
442 Companies Act, No. 07 of 2007
FIFTH SCHEDULE [Section 131]
MATTERS TO BEINCLUDEDINANNUALRETURN
The following matters shall be included in the annual return of a
company, other than any matters which are specified in regulations
made under this Act, as matters which all companies or any class of
companies may omit from their annual return :—
(a) a list of all persons who, on the fourteenth day from the date
of the first or only ordinary general meering in the year, are
shareholders of the company, and all persons who have
ceased to be shareholders since the date of the last return or
in the case of the first return, of the incorporation of the
company ;
(b) the names and addresses of all the past and present
shareholders mentioned in the return, and the number of
shares held by each of the existing shareholders at the date of
the retuen, specifying shares transferred since the date of the
last return or in the case of the first return, of the incorporation
of the company by persons who are still shareholders and
have ceased to be shareholders respectively, and the dates of
registration of the transfers. If the names are not arranged in
alphabetical order, the return shall have annexed to it an
index sufficient to enable the name of any person in such list
to be readily found ;
(c) the date of incorporation and any change of name of the
company ;
(d) the address of the registered office of the company ;
(e) the total number of shares issued by the company ;
(f) the stated capital of the company ;
(g) the total number of shares forfeited ;
(h) the total amount of shares for which share warrants are
outstanding at the date of the return ;
(i) the total amount of share warrants issued and surrendered
respectively since the date of the last return ;
(j) the number of shares comprised in each share warrant ;
Companies Act, No. 07 of 2007 443
(k) all such particulars with respect to the persons who at the
date of the return are the directors or the secretary of the
company, as are required to be contained in the register of
directors and secretaries of a company ;
(l) the total amount of the indebtedness of the company in
respect of all mortgages and charges which are required to
be registered with the Registrar under this Act ;
(m) the name and address of the auditor of the company, at the
date of the return.
SIXTH SCHEDULE [Section 186]
PROVISIONS WHICH CONFER POWERS ON BOARDWHICHMAY NOT BEDELEGATED
Section 51 (Issue of shares)
Section 52 (Consideration for issue of shares)
Section 56 (Distributions)
Section 58 (2) and (3) (Stated capital)
Section 59 (4) (Reduction of stated capital)
Section 64 (Purchase of own shares)
Section 67 (Redemption option of company)
Section 70 (Restrictions on giving financial assistance)
Section 114 (Change of registered office)
Section 241 (Approval of amalgamation proposal)
Section 242 (Short form amalgamation)
Section 401 (Power of board to appoint administrator)
Section 415 (Vacancy in office of administrator)
SEVENTH SCHEDULE [Section 249(2)]
PROCEEDINGS AT MEETINGS OFCREDITORS
1. Methods of holding meetings
A meeting of creditors may be held—
(a) by assembling together those creditors entitled to take part
and who choose to attend at the place, date, and time appointed
for the meeting;
444 Companies Act, No. 07 of 2007
(b) by means of audio or audio and visual communication, by
which all creditors participating can simultaneously hear
each other throughout the meeting; or
(c) by conducting a postal ballot in accordance with paragraph
7 of this Schedule, of those creditors entitled to take part.
2. Notice of meeting
(1) Written notice of—
(a) the time and place of every meeting to be held under
paragraph 1 (a) of this Schedule;
(b) the time and method of communication for every meeting to
be held under paragraph 1(b) of this Schedule; or
(c) the time and address for the return of voting papers for
every meeting to be held under paragraph 1 (a) or (b) or (c)
of this Schedule,
shall be sent to every creditor entitled to attend the meeting and to any
liquidator not less than five working days before the meeting.
(2) The notice shall —
(a) state nature of the business to be transacted at the meeting in
sufficient detail to enable a creditor to form a reasoned
judgment in relation to it;
(b) set out the text of any resolution to be submitted to the
meeting; and
(c) include a voting paper in respect of each such resolution
and voting and mailing instructions.
(3) An irregularity in or a failure to receive a notice of any meeting
of creditors does not invalidate anything done by a meeting of creditors,
if—
(a) the irregularity or failure is not material;
(b) all the creditors entitled to attend and vote at the meeting
attend the meeting without protest as to the irregularity or
failure; or
(c) all such creditors agree to waive the irregularity or failure.
Companies Act, No. 07 of 2007 445
(4) If the meeting of creditors agrees, the chairperson may adjourn
the meeting from time to time and from place to place.
(5) An adjourned meeting shall be held in the same place unless
another place is specified in the resolution for the adjournment.
(6) Where a meeting of creditors under paragraph 1 (a) or (b) of
this Schedule is adjourned for less than thirty days, it will not be
necessary to give notice of the time and place of the adjourned meeting,
other than by announcement at the meeting which is adjourned.
3. Chairperson
(1) Where a liquidator has been appointed and is present or if the
liquidator has appointed a nominee and the nominee is present, he or
she shall act as chairperson of a meeting held in accordance with
paragraph 1 (a) or (b) of this Schedule.
(2) In any case where there is no liquidator or neither the liquidator
nor any nominee of the liquidator is present, the creditors participating
shall choose one of their number to act as chairperson of the meeting.
(3) The person convening a meeting under paragraph 1 (c) of this
Schedule shall do everything necessary that would otherwise be done
by the person chairing a meeting.
4. Quorum
(1) A quorum for a meeting of creditors is present, if—
(a) three creditors who are entitled to vote or their proxies are
present or have cast postal votes; or
(b) if the number of creditors entitled to vote does not exceed
three, the creditors who are entitled to vote or their proxies
are present or have cast postal votes.
(2) Where a quorum is not present within thirty minutes after the
time appointed for the meeting, the meeting shall be adjourned to the
same day in the following week at the same time and place or to such
other date, time, and place as the chairperson may appoint, and if at the
adjourned meeting a quorum is not present within thirty minutes after
the time appointed for the meeting, the creditors present or their proxies
shall be deemed to form a quorum.
5. Voting
(1) At any meeting of creditors or a class of creditors, other than a
meeting held for the purposes of section 250 or section 407, a resolution
446 Companies Act, No. 07 of 2007
is adopted, if a majority in number and value of the creditors or the
class of creditors, voting in person or by proxy, vote in favour of the
resolution.
(2) At any meeting of creditors or a class of creditors held for the
purposes of section 250 or section 407, a resolution is adopted, if a
majority in number representing seventy-five per centum in value of
the creditors or class of creditors voting in person or by proxy, vote in
favour of the resolution.
(3) The chairperson of the meeting shall not have a casting vote.
6. Proxies
(1) A creditor may exercise the right to vote either by being present
in person or by proxy.
(2) A proxy for a creditor is entitled to attend and be heard at a
meeting of creditors, as if the proxy were the creditor.
(3) A proxy shall be appointed by notice in writing signed by the
creditor and the notice shall state whether the appointment is for a
particular meeting or a specified term not exceeding twelve months.
(4) No proxy is effective in relation to a meeting, unless a copy of
the notice of appointment is delivered to the liquidator or if no liquidator
is acting, to the person by whom the notice convening the meeting was
given, not later than twenty-four hours before the start of the meeting.
7. Postal votes
(1) A creditor entitled to vote at a meeting of creditors held in
accordance with paragraph 1 (a) or (b) or (c) of this Schedule, may
exercise the right to vote by casting a postal vote in relation to a matter
to be decided at that meeting.
(2) The notice of meeting shall state the name of the person
authorised to receive and count postal votes in relation to that meeting.
(3) If no person has been authorised to receive and count postal
votes in relation to a meeting, or if no person is named as being so
authorised in the notice of the meeting—
(a) every director;
(b) if the company is under administration, the administrator; or
(c) if the company is in liquidation, the liquidator,
is deemed to be so authorised
Companies Act, No. 07 of 2007 447
(4) A creditor may cast a postal vote on all or any of the matters to
be voted on at the meeting, by sending a marked voting paper to a
person authoirsed to receive and count postal votes in relation to that
meeting, so as to reach that person not later than twenty-four hours
before the start of the meeting or if the meeting is held under paragraph
1 (c) of this Schedule, not later than the date named for the return of the
voting paper.
(5) It is the duty of a person authorised to receive and count postal
votes in relation to a meeting—
(a) to collect together all postal votes received by him or her;
and
(b) in relation to each resolution to be voted on—
(i) to count the number of creditors or creditors belonging
to a class of creditors, as the case may be, voting in
favour of the resolution and determine the total amount
of the debts owed by the company to those creditors;
and
(ii) to count the number of creditors or creditors belonging
to a class of creditors, as the case may be, voting against
the resolution and determine the total amount of the
debts owed by the company to those creditors; and
(c) to sign a certificate—
(i) that he or she has carried out the duties set out in sub-
paragraphs (a) and (b); and
(ii) stating the results of the counts and determinations
required by sub-paragraph (b); and
(d) to ensure that the certificate required by sub-paragraph (c)
above, is presented to the person chairing or convening the
meeting.
(6) If a vote is taken at a meeting held under paragraph 1(a) or (b)
of this Schedule on a resolution on which postal votes have been cast,
the person chairing the meeting shall include the results of voting by all
creditors who have sent in a voting paper, duly marked as for or against
the resolution.
(7) A certificate given under sub-paragraph (5) in relation to the
postal votes cast in respect of a meeting of creditors, shall be annexed
to the minutes of the meeting.
448 Companies Act, No. 07 of 2007
8. Minutes
(1) The person chairing a meeting of creditors or in the case of a
meeting held under paragraph 1(c) of this Schedule, the person
convening the meeting shall ensure that minutes are kept of all
proceedings.
(2) Minutes which have been signed correct by the person chairing
or convening the meeting are prima facie evidence of the proceedings.
9. Corporations may act by representatives
A body corporate which is a creditor, may appoint a representative
to attend a meeting of creditors on its behalf.
10. Other proceedings
Except as provided in this Schedule and in any regulations made
under this Act, a meeting of creditors may regulate its own procedure.
EIGHTH SCHEDULE [Section 355 (2)]
PROVISIONS WHICH DO NOTAPPLY INTHE CASE OFA WINDING UP SUBJECT TO
SUPERVISIONOFTHE COURT
Section 283 (Statement of company’s affairs to be submitted to official
receiver)
Section 284 (Report by official receiver)
Section 285 (Power of court to appoint liquidators)
(Section 286(Appointment and powers of provisional liquidator)
Section 287 (Appointment, style, &c., of liquidators in winding up)
Section 288 (Provisions where person other than official receiver is
appointed liquidator)
Section 289 (General provisions as to liquidators)
Section 293 (Exercise and control of liquidators’ powers)
Section 294 (Books to be kept by liquidator)
Section 295 (Payments by liquidator into bank)
Section 296 (Audit of liquidators’ accounts)
Section 297 Control of Registrar over liquidators)
Section 298 (Release of liquidators)
Section 299 (Meeting of creditors and contributories to determine
whether committee of inspection shall be appointed)
Section 300 (Constitution and proceedings of Committee of Inspection)
Companies Act, No. 07 of 2007 449
Section 301(Powers of court where there is no Committee of
Inspection)
Section 307 (Appointment of special manager)
Section 311 (Power to order public examination of promoters,
directors, &c.)
Section 213 (Persons prohibited from managing companies)
Section 315 (Delegation to liquidator of certain powers of court)
NINTH SCHEDULE [Section 365 (2)]
PREFERENTIALCLAIMS
1. The liquidator shall first pay, in the order of priority in which
they are listed:—
(a) the fees and expenses properly incurred by the liquidator
in carrying out the duties and exercising the powers of the
liquidator and the remuneration of the liquidator;
(b) the reasonable costs of a person who applied to the court
for an order that the company be put into liquidation,
including the reasonable costs of a person appearing on
the application whose costs are allowed by the court;
(c) the actual out-of-pocket expenses necessarily incurred by
a liquidation committee.
2. After paying the claims referred to in paragraph 1, the liquidator
shall next pay the following claims :—
(a) all provident fund dues, employees trust fund dues and
gratuity payments due to any employee;
(b) income tax charged or chargeable for one complete year
prior to the commencement of the liquidation, that year to
be selected by the Commissioner-General of Inland
Revenue in accordance with the provisions of the Inland
Revenue Act, No. 10 of 2006;
(c) turnover tax charged or chargeable for one complete year
prior to the commencement of the liquidation;
(d) value added tax charged or chargeable for four taxable
periods prior to the commencement of the liquidation,
such taxable periods to be selected by the Commissioner-
General of Inland Revenue in accordance with the provisions
of the Value Added Tax Act, No. 14 of 2002;
450 Companies Act, No. 07 of 2007
(e) all rates or taxes (other than income tax) due from the
company at the commencement of the liquidation which
became due and payable within the period of twelve months
prior to that date;
(f) all dues to the Government as recurring payments for any
services given or rendered periodically;
(g) industrial court awards and other statutory dues payable to
any employee;
(h) subject to paragraph 4, all wages or salary of any employee
whether or not earned wholly or in part by way of
commission, and whether payable for time or for piece
work, in respect of services rendered to the company during
the four months preceding the commencement of the
liquidation;
(i) holiday pay becoming payable to an employee (or where
the employee has died, to any other person in the
employee’s right), on the termination of the employment
before or by reason of the commencement of the
liquidation;
(j) unless the company has at the commencement of the
liquidation, rights capable of being transferred to and vested
in an employee under a contract of the kind referred to in
section 24 of the Workmen’s Compensation Ordinance, all
amounts due in respect of any compensation or liability
for compensation under that Ordinance, which have
accrued before the commencement of the liquidation;
(k) subject to paragraph 4, amounts deducted by the company
from the wages or salary of an employee in order to satisfy
obligations of the employee.
3. After paying the claims referred to in paragraph 2, the liquidator
must next pay the amount of any costs referred to in paragraph
(d) of section 254 of this Act.
4. The sum to which priority is to be given under paragraph 2 (h)
shall not, in the case of any one employee, exceed twelve thousand
rupees or such greater amount as is determined at the
commencement of the liquidation.
5. Where any compensation under the Workmen’s Compensation
Ordinance is a fortnightly payment, the amount due in respect
of that compensation shall, for the purposes of paragraph 2(i),
be the amount of the lump sum for which those payments may
be commuted under that Ordinance.
Companies Act, No. 07 of 2007 451
6. Where a payment has been made—
(a) to an employee of a company on account of wages or
salary; or
(b) to any such employee or where the employee has died, to
any other person on behalf of the employee on account of
holiday pay,
out of money advanced by some person for that purpose, the
person by whom the money was advanced has in a liquidation,
the same right of priority in respect of the money so advanced as
the employee or other person receiving the payment on behalf of
the employee would have, if the payment had not been made.
7. The claims listed in each of paragraphs 1, 2, and 3—
(a) rank equally among themselves and shall be paid in full,
unless the assets are insufficient to meet them, in which
case they abate in equal proportions; and
(b) so far as the assets of the company available for payment
of general creditors are insufficient to meet them, shall
have priority over the claims of persons in respect of assets
which are subject to a floating charge, and shall be paid
accordingly out of those assets.
For the purposes of this paragraph, the term “floating charge”
includes a security that conferred a floating charge at the time of
its creation, but has since become a fixed or specific charge.
8. For the purposes of this Schedule—
(a) remuneration in respect of a period of holiday or of absence
from work through sickness or other good cause, shall be
treated as wages in respect of services rendered to the
company during that period;
(b) the expression “holiday pay” in relation to a person,
includes all sums which by virtue of his contract of
employment or any enactment (including any Order made
or direction given under any written law) are payable to
that person by the company on account of the remuneration
which would in the ordinary course, have become payable
to him in respect of a period of holiday, had his period of
employment continued until he became entitled to be
allowed the holiday;
452 Companies Act, No. 07 of 2007
(c) the expression “rates” or “taxes” means any rate charge,
tax or assessment imposed or made by the Government or
by any Provincial Council or local authority or any other
authority established by or under any written law.
TENTH SCHEDULE [Section 366 (5)]
PAYMENT OFCLAIMSINLIQUIDATION
1. The liquidator may from time to time distribute such amount of
the funds held by him as he thinks fit to creditors who have
made a claim in the liquidation.
2. Before making any payment to creditors the liquidator shall
prepare a list showing all claims received, the amount of the
claim and the amount to be paid to each person who has made a
claim.
3. Before making a payment, the liquidator may—
(a) fix a date before which any creditor who wishes to
participate in the payment shall file a claim; and
(b) give public notice that a payment is to be made and of the
date fixed under sub-paragraph (a).
4. A date fixed for the purpose of sub-paragraph (a) of paragraph
3, shall not be less than twenty working days after the date of the
public notice given under sub-paragraph (b) of paragraph 3 or
more than twenty working days before the date of the proposed
payment.
5. The liquidator may exclude from a payment, any creditor who
does not make a claim before the date specified in a notice given
under paragraph 3.
6. The list prepared by the liquidator under paragraph 2 shall be
available for inspection by any creditor who has made a claim
or any shareholder of the company, on each working day which
is less than ten working days before the date of the payment.
7. The liquidator shall make the payment on the date specified in
the public notice given under paragraph 3 to each creditor
shown on the list, unless notice of an application under subsection
(3) of section 292 or section 348, for an order reversing or
modifying the decision of the liquidator to accept the claim of
that creditor, has been served on the liquidator before that date.
No payment made in accordance with this paragraph shall be
liable to be disturbed as a consequence of any subsequent
challenge to the liquidator’s acceptance of a claim.
Companies Act, No. 07 of 2007 453
8. Where a creditor makes a claim after one or more payments
have been made to creditors by the liquidator—
(a) that creditor shall be paid at the same rate in respect of his
claim as all other creditors with equal ranking claims have
previously been paid, to the extent that the assets of the
company are sufficient to do so;
(b) any payments which have already been made to other
creditors shall not be disturbed;
(c) that creditor shall be entitled to participate in the same
manner as other creditors with equal ranking claims in any
further payments to such creditors.
9. Where at the time a payment is made to creditors, a claim by any
creditor—
(a) has been rejected by the liquidator, and the creditor has
applied to the court under subsection (3) of section 292 or
section 348 for an order reversing or modifying the decision
of the liquidator; or
(b) has been allowed by the liquidator, but notice of an
application under subsection (3) of section 292 or section
348 for an order reversing or modifying the decision of
the liquidator has been served on the liquidator,
the liquidator—
(c) shall not make a payment to that creditor in respect of that
claim;
(d) may if he thinks fit, make provision for the payment that
would be made in respect of that claim and for the probable
cost of the application if the claim is admitted, before
making any payment to the other creditors.
10. A guarantor of any debt or obligation of the company who has
paid or discharged the debt or obligation in whole or in part,
whether before or after the commencement of the liquidation,
may, subject to any agreement with the principal creditor to the
contrary—
(a) if the principal creditor has made a claim in the liquidation
in respect of the amount which has been paid or discharged,
stand in the place of the principal creditor so far as the
claim in respect of that amount is concerned; or
454 Companies Act, No. 07 of 2007
(b) otherwise, make a claim in respect of the amount of the
debt or obligation paid or discharged.
ELEVENTH SCHEDULE [Section 429 (1)]
TERMSIMPLIEDININSTRUMENTSCREATINGFLOATINGCHARGES
1. The company shall not sell or otherwise dispose of the property
comprised in the floating charge (referred to in this Schedule as
the “secured property”) other than in the normal course of
business.
2. The floating charge shall be security for the payment of all sums
owing by the company to the grantee, from time to time.
3. The floating charge and the instrument creating it shall remain
in full force and effect and shall be a continuing security for the
payment of any sums owing by the company to the grantee
from time to time, notwithstanding that any sum or sums may be
paid to the grantee and that any account between the company
and the grantee may from time to time be in credit, and
notwithstanding any settlement of account or other matter or
thing whatsoever, until a final discharge of the floating charge is
executed by the grantee in respect of the property comprised in
it.
4. The company undertakes to—
(a) duly and punctually comply with all laws binding on it;
(b) duly and punctually perform and comply with the terms of
all agreements between the company and the grantee;
(c) pay or discharge on or before the due date, all its liabilities,
debts, outgoings, expenses and obligations of a monetary
nature, including rents, taxes, insurance premiums and
other outgoings in respect of the secured property;
(d) comply with all obligations, duties and restrictions binding
on the company whether arising from contract or otherwise
including all leases, sub-leases, agreements to lease, tenancy
agreements or licences in respect of the secured property;
(e) keep all its assets in good order, repair and condition and
maintain, service, renew or replace, assets essential to its
business in accordance with good commercial practice;
Companies Act, No. 07 of 2007 455
(f) obtain, keep current and not dispose of or allow to lapse
any authorisations which are now or may become required
or commercially advantageous for the conduct of its
business, and comply with all conditions and stipulations
in those authorisations;
(g) insure and keep insured such parts of the secured property
as shall for the time being be of an insurable nature against
loss or damage by fire, accident, theft, malicious damage,
flood and earthquake;
(h) duly pay the premiums payable in respect of all such
insurances.
5. Where the company neglects or fails to perform or observe any
of the terms expressed or implied in the instrument or of any
agreement between the company and the grantee, the grantee
shall have the right to perform or observe any such term, whether
by payment or action on behalf of the company, but shall not be
obliged to do so. All costs, expenses and charges paid or incurred
by the grantee under this paragraph, shall be added to and shall
form part of the moneys secured by the floating charge.
6. The company shall—
(a) deliver to the grantee as soon as practicable and in any
event within three months after the last day of each of its
financial years, all financial statements which it is required
by law to prepare, together with all auditors’ reports, annual
reports and other documents required by law to be prepared
by the company and sent to shareholders;
(b) provide such other information about the business, financial
condition and operations of the company as the grantee
may by written notice reasonably require;
(c) at the same time as any notices, documents, or information
are sent to its shareholders, deliver copies of the notices,
documents or information to the grantee.
7. Notwithstanding any other agreement between the company
and the grantee, all sums secured by this floating charge shall
become immediately due and payable by the grantee on demand
by the grantor, on the occurrence of any of the following
events:—
(a) the company failing to pay on the due date any amount
payable by the company to the grantee;
456 Companies Act, No. 07 of 2007
(b) the company failing to perform or observe any of the
terms of the instrument or of any other agreement between
the company and the grantee;
(c) any holder of a security interest in any property of the
company, taking possession or a receiver or liquidator
being appointed in respect of the whole or any part of the
secured property;
(d) any creditor of the company obtaining execution against
the whole or any part of the secured property;
(e) the commencement of the winding up of the company;
(f) the appointment of an administrator of the company;
(g) the disposal by the company of the whole or any part of its
undertaking, other than in the normal course of business ;
(h) the company ceasing to carry on business.
8. Where the secured property comprises all the property and
undertaking of the company, the grantee may appoint a receiver
of the secured property on the occurrence of any of the events
specified in paragraph 7, whether before or after demand is
made under that paragraph.
TWELFTH SCHEDULE [Section 443 (2)]
POWERSOF RECEIVERS
1. Every receiver appointed under Part XV shall, subject to the
instrument or the order of the court by or under which the
appointment was made, have the power to—
(a) demand and recover by action or otherwise, income of the
property in receivership;
(b) issue receipts for income recovered;
(c) manage the property in receivership;
(d) insure the property in receivership;
(e) repair and maintain the property in receivership;
(f) inspect at any reasonable time books or documents that
relate to the property in receivership and that are in the
possession or under the control of the grantor;
Companies Act, No. 07 of 2007 457
(g) exercise on behalf of the grantor, a right to inspect books
or documents that relate to the property in receivership
and that are in the possession or under the control of a
person other than the grantor;
(h) in a case where the receiver is appointed in respect of all or
substantially all of the property and undertaking of a
company, change the registered office of the company;
(i) do all other things incidental to the exercise of the powers
set out in this paragraph or conferred by any other provision
of this Act.
2. Without limiting the provisions of paragraph 1, a receiver who
is appointed in respect of the whole of the property and
undertaking of a company shall, subject to the instrument or the
order of the court by or under which the appointment was
made, have power to—
(a) take possession of, collect and get in the property of the
company, and for that purpose to take such proceedings as
may seem to him expedient;
(b) sell or otherwise dispose of the property of the company
by public auction, private auction or private contract;
(c) raise or borrow money and grant security for such money
over the property of the company;
(d) appoint a solicitor or accountant or other professionally
qualified person to assist him in the performance of his
functions;
(e) bring or defend any action or legal proceedings in the
name and on behalf of the company;
(f) refer to arbitration any question affecting the company;
(g) use the company’s seal if it has one;
(h) do all acts and to execute in the name and on behalf of the
company any document;
(i) draw, accept, make and endorse any bill of exchange or
promissory note in the name and on behalf of the company;
(j) appoint any agent to do any business which he is unable to
do himself or which can more conveniently be done by an
agent, and to employ and dismiss employees;
458 Companies Act, No. 07 of 2007
(k) do all such things (including the carrying out of works) as
may be necessary for the realisation of the property of the
company;
(l) make any payment which is necessary or incidental to the
exercise of his functions;
(m) effect and maintain insurances in respect of the business
and property of the company;
(n) carry on the business of the company;
(o) establish subsidiaries of the company;
(p) transfer to subsidiaries of the company the whole or any
part of the business and property of the company;
(q) grant or accept a surrender of a lease or tenancy of any
property of the company and to take a lease or tenancy of
any property required or convenient for the business of
the company;
(r) make any arrangement or compromise on behalf of the
company;
(s) rank and claim in the bankruptcy, insolvency, sequestration
or liquidation of any person indebted to the company and
to receive dividends and to accede to trust deeds for the
creditors of any such person;
(t) apply for the appointment of a liquidator of the company;
(u) do all other things incidental to the exercise of the powers
set out in this paragraph.
THIRTEENTH SCHEDULE [Section 497 (1)]
LIQUIDATION OFASSETSOFOVERSEASCOMPANIES
1. Part XII shall apply to the winding up of the assets in Sri Lanka
of an overseas company with all necessary modifications and
exclusions, and in particular the following :—
(a) references to assets shall be taken as references to assets in
Sri Lanka;
(b) references to a company shall be taken as including
references to an overseas company;
Companies Act, No. 07 of 2007 459
(c) references to dissolution shall be taken as references to
ceasing to carry on business in Sri Lanka;
(d) the following provisions shall not apply to such a winding
up:—
(i) paragraphs (b) and (c) of subsection (1) of section
267;
(ii) sections 268, 269, 316, 319 to 355 (both inclusive),
393, 394 and 395;
(e) from the commencement of the winding up, the overseas
company and its directors shall cease to have any powers,
functions and duties in relation to the company’s assets in
Sri Lanka, other than those required or permitted to be
exercised under Part XII.
2. Nothing contained in this Act shall exclude or affect the right of
a creditor of an overseas company in relation to the assets of
which a liquidator has been appointed—
(a) to bring proceedings outside Sri Lanka against the overseas
company, in relation to a debt not claimed in the liquidation
or the balance of a debt remaining unpaid after the
completion of the liquidation; or
(b) to bring proceedings in Sri Lanka in relation to the balance
of a debt remaining unpaid after the completion of the
liquidation.
460 Companies Act, No. 07 of 2007
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