COMPANIES ACT

Arrangement of Sections

1. Short title.

PART I

INCORPORATION OF COMPANIES AND RELATED MATTERS

Essential Characteristics of Companies

2. Legal status and capacity of a Company.

3. Different types of companies.

Incorporation of Companies

4. Method of incorporating a Company.

5. Incorporation of a Company.

Company Names

6. Requirements as to names.

7. Restrictions on names.

8. Change of name.

9. Public notice of name.

10. Direction to change name.

11. Change of name upon change of status of Company.

12. Use of Company name and Company number.

Articles of Association

13. Contents of articles.

14. Application of model articles.

15. Adoption or amendment of articles.

16. Effect of articles.

17. Effect of statement of objects in articles.

18. Right of shareholders to a copy of the articles.

19. Method of contracting.

20. Attorneys.

21. Authority of Directors, Officers and Agents.

22. No constructive notice.

PRE INCORPORATION CONTRACTS

23. Pre-Incorporation contracts may be ratified.

24. Warranties implied in Pre Incorporation contracts.

25. Failure to ratify.

Authentication of Documents by Company

26. Authentication of documents by Company.

PART II

PRIVATE COMPANIES

27. Articles of a Private Company.

28. Company ceasing to be a Private Company.

29. Company may become a Private Company.

30. Private companies need not keep interests register.

31. Unanimous agreement of shareholders.

PART III

COMPANIES LIMITED BY GUARANTEE

32. Application for Incorporation of a Company limited by guarantee.

33. Company limited by guarantee must have articles.

34. Power to dispose with "limited” in the name of charitable and other companies.

35. Provisions which apply to companies limited by guarantee.

PART IV

SHARES AND DEBENTURES

Prospectus

36. Dating of prospectus.

37. Specific requirements as to particulars in prospectus.

38. Expert's consent to issue of prospectus containing statement by him.

39. Consent of bank or Attorney-at-law or auditor necessary for inclusion of name in prospectus.

40. Registration of prospectus.

41. Civil liability for untrue in prospectus.

42. Criminal liability for untrue statements in a prospectus.

43. Document containing offer of shares or debentures for sale to be deemed a prospectus.

44. Interpretation of provisions relating to prospectuses.

Allotment

45. Prohibition of allotment unless minimum subscription received.

46. Effect of irregular allotment.

47. Applications for and allotment of shares and debentures.

48. Construction of reference to offering shares or debentures to the public.

Nature and type of shares

49. Nature and types of shares.

Issue of Shares

50. Initial shares.

51. Issue of shares.

52. Consideration for issue of shares.

53. Pre-emptive rights to new issues.

54. Method of issuing shares.

Calls on shares

55. Calls on shares.

Distributions to shareholders

56. Distributions.

57. Solvency test.

58. Stated capital.

59. Reduction of stated capital.

60. Dividends.

61. Recovery of distributions.

62. Reduction of shareholder liability to be a distribution.

Repurchase of shares

63. Company may acquire or redeem its own shares.

64. Purchase of own shares.

65. Enforceability of contract to purchase shares.

Redemption of shares

66. Meaning of "redeemable”.

67. Redemption at the option of Company.

68. Redemption at the option of shareholder.

69. Redemption on fixed date.

Financial Assistance in Connection with Purchase of Shares

70. Restrictions on giving financial assistance.

71. Transactions not prohibited by section 70.

Cross-holdings

72. Restriction on subsidiary holding shares in holding Company.

Transfer of shares and debentures, evidence of title

73. Transfer not to be registered except on production of instrument of transfer.

74. Transfer by legal representative.

75. Registration of transfer at the request of transferor.

76. Notice of refusal to register transfer.

77. Certification of transfers.

78. Duties of Company with respect to issue of certificates.

79. Certificate to be evidence of title.

80. Evidence of grant of probate.

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.

82. Directors prohibited from acting as trustees.

83. Perpetual debentures.

84. Power to re-issue redeemed debentures in certain cases.

85. Specific performance of contracts to subscribe for debentures.

PART V

SHAREHOLDERS AND THEIR RIGHTS AND OBLIGATIONS

86. Meaning of "shareholder”.

Liability of shareholders

87. Liability of shareholder.

88. Liability for calls.

89. Shareholders must agree to increase in liability.

Powers of Shareholders

90. Exercise of powers reserved to shareholders.

91. Exercise of powers by ordinary resolution.

92. Powers exercised by special resolution.

Minority buy-out rights

93. Shareholder may require Company to purchase shares.

94. Notice requiring purchase.

95. Purchase by Company.

96. Purchase of shares by third party.

97. Court may grant exemption.

98. Court may grant exemption if Company is insolvent.

99. Alteration of shareholder rights.

100. Shareholder may require Company to purchase shares.

101. Action not invalid.

PART VI

REGISTRATION OF CHARGES

Registration of Charges with Registrar

102. Registration of charges created by companies registered in Sri Lanka.

103. Unregistered charges void in certain cases.

104. Duty of Company to register charges existing on property acquired.

105. Register of charges to be kept by Registrar.

106. Endorsement of certificate of registration on debentures.

107. Entries of satisfaction and release.

108. Rectification of register of charges.

Provisions as to Company's Register of Charges and as to Copies
of Instruments Creating charges.

109. Copies of instruments creating charges to be kept by Company.

110. Company's register of charges.

Review of Register of Charges

111. Review of Register of charges.

Application of this Part to overseas companies

112. Application of this Part to charges and property to be acquired by an Overseas Company.

PART VII

MANAGEMENT AND ADMINISTRATION

Registered office

113. Registered office of a Company.

114. Change of registered office.

115. Requirement to change registered office.

Company Records

116. Location of Company records.

117. Form of records.

Inspection of Company records

118. Inspection of records by Directors.

119. Inspection of Company records by shareholders.

120. Public inspection of Company records.

121. Manner of inspection.

122. Copies of documents.

Share register

123. Company to maintain share register.

124. Place of share register.

125. Stamp duties in case of shares registered in register outside Sri Lanka.

126. Index of shareholders.

127. Power to close register.

128. Power of court to rectify register.

129. Trusts not to be entered on share register.

130. Share register to be evidence.

Annual return

131. Annual return.

132. Declaration and certificate to be sent by Private Company with annual return.

Meetings and Proceedings

133. Annual General Meeting.

134. Convening of extraordinary general meeting on requisition.

135. Length of notice for calling meetings.

136. Provisions as to meetings and votes.

137. Power of court to order meeting.

138. Representation of companies at meetings of other companies and of creditors.

139. Proxies.

140. Right to demand a poll.

141. Voting on a poll.

142. Circulation of shareholder's resolutions on requisition.

143. Special resolutions.

144. Resolution in lieu of meeting.

145. Resolutions requiring special notice.

146. Resolutions passed at adjourned meetings.

147. Minutes of proceedings of meetings of shareholders and Directors.

Accounting Records

148. Duty to keep accounting records.

149. Place where accounting records are kept.

Duty to prepare financial statements

150. Obligation to prepare financial statements.

151. Contents and form of financial statements.

152. Obligation to prepare group financial statements.

153. Contents and form of group financial statements.

Auditors

154. Appointment of auditor.

155. Auditor's fees and expenses.

156. Appointment of partnership as auditor.

157. Qualifications of auditors.

158. Automatic re-appointment.

159. Appointment of first auditor.

160. Replacement of auditor.

161. Statement by person ceasing to hold office as auditor.

162. Auditor to avoid conflict of interest.

163. Auditor's report.

164. Auditor's access to information.

165. Auditor's attendance at shareholders' meeting.

Annual report to shareholders

166. Obligation to prepare annual report.

167. Sending of annual report to shareholders.

168. Contents of annual report.

169. Failure to send reports etc.

Registration of Financial Statements

170. Registration of financial statements.

Interpretation

171. Balance sheet date.

Investigation of Company's Affairs

172. Investigation of Company's affairs on application of shareholders.

173. Investigation of Company's affairs in other cases.

174. Power of inspectors to carry out investigations into affairs of related companies.

175. Production of documents and evidence at investigation.

176. Inspector's report.

177. Proceedings on inspector's report.

178. Expenses of investigation of Company's affairs.

179. Inspector's report to be evidence.

180. Appointment and powers of inspectors to investigate ownership of Company.

181. Power to require information as to persons interested in shares or debentures.

182. Power to impose restrictions on shares or debentures.

183. Registrar's powers to verify assets and liabilities.

Powers of Management

184. Management of Company.

185. Major transactions.

186. Delegation of powers.

Directors' duties

187. Duty of Directors to act in good faith and in the interests of Company.

188. Directors to comply with Act and Company's articles.

189. Directors standard of care.

190. Use of information and advice.

Transactions in which a Director is Interested

191. Meaning of "interested”.

192. Disclosure of interest.

193. Avoidance of transactions.

194. Effect on third parties.

195. Non-application of sections 192 and 193 in certain cases.

196. Interested Director may vote.

197. Use of Company information.

Disclosure of Directors' Interests in Shares

198. Meaning of "relevant interest”.

199. Relevant interests to be disregarded in certain cases.

200. Disclosure of share dealing by Directors.

Appointment and Removal of Directors

201. Number of Directors.

202. Qualification of Directors.

203. Director's consent required.

204. Appointment of first and subsequent Directors.

205. Appointment of Directors to be voted in individually.

206. Removal of Directors.

207. Director ceasing to hold office.

208. Resignation of last remaining Director.

209. Validity of Director's acts

Retiring age of Directors

210. Age limit for Directors.

211. Section-211

212. Section-212

Disqualification of Directors

213. Persons prohibited from managing companies.

214. Court may disqualify Directors.

Miscellaneous Provisions Relating to Directors

215. Proceedings of Board.

216. Remuneration and other benefits.

217. Restrictions on loans to Directors.

218. Indemnity and insurance.

219. Duty of Directors on insolvency.

220. Duty of Directors on serious loss of capital.

Secretaries

221. Secretary.

222. Qualifications of Secretary to be prescribed.

Register of Directors and Secretaries

223. Register of Directors and Secretaries.

Prevention of Oppression and Mismanagement

224. Oppression.

225. Mismanagement.

226. Who may make an application.

227. Power of court to act under section 224 or section 225 during winding up proceedings.

228. Powers of court on application under section 224 or section 225.

229. Effect of alteration of articles of Company by order under section 224 or 225.

230. Addition of respondents to application under section 224 or section 225.

231. Consequences of termination or modification of certain agreements.

232. Extended meaning of "shareholder”.

Restraining Orders

233. Restraining orders.

DERIVATIVE ACTIONS

234. Derivative actions.

235. Costs of derivative action to be met by Company.

236. Powers of court where leave is granted.

237. Compromise, settlement or continuance of derivative action.

Ratification

238. Ratification of certain actions of Directors.

PART VIII

AMALGAMATIONS

239. Amalgamations.

240. Amalgamation proposal.

241. Approval of amalgamation proposal.

242. Short form amalgamation.

243. Registration of amalgamation proposal.

244. Certificate of amalgamation.

245. Effect of certificate of amalgamation.

246. Powers to acquire shares of shareholders dissenting from scheme or contract approved by majority.

PART IX

COMPROMISES WITH CREDITORS

247. Interpretation.

248. Compromise proposal.

249. Notice of proposed compromise.

250. Effect of compromise.

251. Variation of compromise.

252. Powers of court.

253. Effect of compromise in liquidation of a Company.

254. Costs of compromise.

PART X

APPROVAL OF ARRANGEMENTS, AMALGAMATIONS AND COMPROMISES BY COURT

255. Interpretation.

256. Court approval of arrangements, amalgamation and compromises.

257. Court may make additional orders.

258. Application of Part VIII.

259. Application of section 253 to compromise approved under this Part.

PART XI

PROVISIONS RELATING TO OFFSHORE COMPANIES

260. Interpretation.

261. Company incorporated for business outside Sri Lanka.

262. Grant of certificate of registration to off-shore Company.

263. Continuation of business of off-shore Company.

264. Prohibition on carrying on business in Sri Lanka.

265. Cessation of business as an off-shore Company.

PART XII

WINDING UP

(I) Preliminary Modes of winding up

266. Definition of contributory.

267. Modes of winding–up.

CONTRIBUTORIES

268. Power of liquidator to enforce liability of share holders and former shareholders.

269. Liability of former shareholders for unpaid calls.

(II) WINDINGUP 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.

271. Definition of inability to pay debts.

Petition for Winding up and Effects thereof

272. Application for winding up.

273. Powers of court on hearing petition.

274. Power to stay or restrain proceedings against a Company.

275. Avoidance of disposition of property after commencement of winding-up.

276. Avoidance of attachments.

Commencement of Winding up

277. Commencement of winding up by the court.

Consequences of Winding up Order

278. Copy of order to be forwarded to Registrar.

279. Actions stayed on winding up.

280. Effect of winding up order.

Official Receiver in Winding up

281. Official receiver.

282. Appointment of official receiver by court in certain cases.

283. Statement of Company's affairs to be submitted to official receiver.

284. Report by official receiver.

Liquidators

285. Power of court to appoint liquidators.

286. Appointment and powers of provisional liquidator.

287. Appointment style of liquidators.

288. Provisions where person other than official receiver is appointed a liquidator.

289. General provisions as to liquidators.

290. Custody of Company's property.

291. Vesting of property of Company in liquidator.

292. Powers of liquidator.

293. Exercise and control of liquidator's powers.

294. Books to be kept by liquidators.

295. Payments by liquidator into bank.

296. Audit of liquidator's accounts.

297. Control of Registrar over liquidator.

298. Release of liquidators.

Committee of Inspection

299. Meetings of creditors and contributories to determine whether Committee of inspections shall be appointed.

300. Constitution and proceedings of Committee of inspection.

301. Powers of court where there is no Committee of inspection.

General Powers of Court in Case of Winding up by Court

302. Power to stay winding up.

303. Settlement of list of contributories and application of assets.

304. Delivery of property to liquidator.

305. Payment of debts due by contributory to Company and extent to which set-off is allowed.

306. Payment into bank of moneys due to Company.

307. Appointment of special Manager.

308. Inspection of books by creditors and contributories.

309. Power to order costs of winding up to be paid out of assets.

310. Power to summon persons suspected of having property of Company.

311. Power to order public examination of promoters, Directors.

312. Person or Officer being examined to be represented by an Attorney-at-law.

313. Power to arrest absconding contributory.

314. Powers of court cumulative.

315. Delegation to liquidator of certain powers of court.

316. Dissolution of a Company.

317. Manner of enforcing order of court.

318. Enforcement of winding up order in another court.

(III) VOLUNTARY WINDING UP

Resolutions for and commencement of voluntary winding up

319. Circumstances in which Company may be wound up voluntarily.

320. Notice of resolution to wind up voluntarily.

321. Commencement of voluntary winding up.

Consequences of Voluntary Winding up

322. Effect of voluntary winding up on business and status of Company.

323. Avoidance of transfers after commencement of voluntary winding up.

Declaration of Solvency

324. Statutory declaration of solvency in case of proposal to wind up voluntarily.

Provisions Applicable to a Shareholders' Voluntary Winding up

325. Provisions relating to a shareholders' voluntary winding up.

326. Power of Company to appoint and fix remuneration of liquidators.

327. Power to fill vacancy in office of liquidator.

328. Power of liquidator to accept shares in consideration for sale of property of Company.

329. Duty of liquidators to call creditors' meeting in case of insolvency.

330. Duty of liquidator to call general meeting in case of insolvency.

331. Final meeting and dissolution.

332. Alternative provision as to annual and final meetings in case of insolvency.

Provisions Applicable to a Creditor's Voluntary Winding up

333. Provisions applicable to a creditors' winding up.

334. Meeting of creditors.

335. Appointment of liquidator.

336. Appointment of Committee of inspection.

337. Fixing of liquidators' remuneration and ceasing of Directors' powers.

338. Power to fill vacancy in office of liquidator.

339. Application of section 328 to creditors' voluntary winding up.

340. Duty of liquidator to call meetings of Company and of creditors at end of each year.

341. Final meeting and dissolution.

Provisions Applicable to Every Voluntary Winding up

342. Provisions applicable to every voluntary winding up.

343. Distribution of property of Company.

344. Powers and duties of liquidator in voluntary winding up.

345. Power of court to appoint and remove liquidator in voluntary winding up.

346. Notice by liquidator of his appointment.

347. Arrangement when binding on creditors.

348. Power to apply to court to have question determined or powers exercised.

349. Costs of voluntary winding up.

350. Saving for rights of creditors and contributories.

(IV) WINDING UP SUBJECT TO SUPERVISION OF COURT

351. Power to order winding up subject to supervision.

352. Effect of petition for winding up subject to supervision.

353. Applications of section 275 and 276 to winding up subject to supervision.

354. Power of court to appoint or remove liquidators.

355. Effect of supervision order.

Proof and Ranking of Claims

356. Admissible claims.

357. Claims by unsecured creditors.

358. Rights and duties of secured creditors.

359. Ascertainment of amount of claim.

360. Claim not of an ascertained amount.

361. Fines, penalties or recoveries.

362. Claims relating to debts payable after commencement of winding up.

363. Mutual credit and set-off.

364. Interest on claims.

365. Preferential claims.

366. Claims of other creditors and distribution of surplus assets.

Voidable transactions

367. Transactions having preferential effect.

368. Voidable charges.

369. Uncommercial transactions.

370. Procedure for setting aside voidable transactions and charges.

371. Other orders.

372. Additional provisions relating to setting aside transactions and charges.

373. Interpretation in relation to preferences.

Malpractice before Winding up and Liability of Officers

374. Fraud etc. in anticipation of winding up.

375. Fraudulent trading.

376. Power of court to require persons to repay money or return property.

377. Disclaimer of onerous property.

378. Restriction of rights of creditors as to execution or attachment in case of Company.

379. Duty of fiscal as to goods taken in execution.

Offences Antecedent to or in the Course of Winding up

380. Offences by Officers of companies in liquidation.

381. Liability where proper accounts are not kept.

382. Prosecution of delinquent Officers and members of the Company.

Supplementary Provisions as to Winding up

383. Qualifications of liquidators.

384. Corrupt inducement affecting appointment as liquidator.

385. Enforcement of duty to liquidator to make returns.

386. Notification that a Company is in liquidation.

387. Exemption of certain documents from stamp duty on winding up of companies.

388. Books of Company to be evidence.

389. Disposal of books and papers of the Company.

390. Information as to pending liquidations.

391. Resolutions passed at adjourned meetings of creditors and contributories.

Supplementary Powers of Court

392. Meetings to ascertain wishes of creditors or contributories.

Provisions as to Dissolution

393. Power of court to declare dissolution of Company void.

394. Registrar may strike off defunct Company from register.

395. Property of dissolved Company to vest in the State.

Companies Liquidation Account

396. Establishment of Companies Liquation Account.

397. Payments into and out of Companies Liquidation Account.

398. Refusal to supply essential services prohibited.

Rules and Fees

399. Rules and fees for winding up.

PART XIII

ADMINISTRATORS

Appointment of Administrator

400. Interpretation.

401. Power of Board to appoint administrator.

402. Notice to charge holders of appointment of administrator.

403. Effect of appointment of administrator.

Initial Meeting and Confirmation of Appointment

404. Duty of administrator to summon initial meeting.

405. Effect of confirmation of administrator.

Administrator's Proposals

406. Statement of proposals.

407. Consideration of proposals by creditors' meeting

408. Consequential orders where administrator ceases to hold office.

409. Approval of substantial revisions to proposals.

Notice of Administration

410. Notice of appointment of administrator.

411. Notice of administration.

The Administrator

412. Qualifications of administrator.

413. Validity of acts of administrator.

414. Consent to be appointed.

415. Vacancy in office of administrator.

Powers of Administrator

416. Powers of administrators.

417. Power to deal with charged property.

418. General duties of administrator.

419. Discharge of administrator or variation of resolution appointing administrator.

420. Remuneration and expenses of administrator.

421. Liability of administrator.

422. Relief from liability.

Ascertainment and Investigation of Company's Affairs

423. Obligations of Company and Directors to provide information, etc.

Miscellaneous

424. Creditors' Committee.

425. Protection of interests of creditors and share holders.

426. Application to administrator of provisions relating to receivers.

PART XIV

FLOATING CHARGES

427. Company may grant floating charge.

428. Instrument creating floating charge.

429. Provisions of instrument creating floating charge.

430. Dealing with property subject to floating charge before attachment.

431. Ranking of floating charges.

432. Alteration and discharge of floating charges.

433. Circumstances in which floating charge attaches to property.

PART XV

RECEIVERS AND MANAGERS

434. Interpretation.

Power to appoint receiver

435. Instrument may confer power to appoint receiver.

Qualifications of Receivers

436. Qualifications of receivers.

 

Appointment of Receiver

437. Appointment of receiver under an instrument.

438. Extent of power to appoint receiver.

439. Court may appoint receiver.

440. Notice of appointment of receiver.

441. Notice of receivership.

442. Vacancy in office of receiver.

Powers of Receivers

443. Powers of receivers.

444. Precedence among receivers.

445. Power to make calls on shares.

446. Execution of documents.

447. Obligations of Company and Directors.

448. Validity of acts of receivers.

449. Consent of mortgagee to sale of property.

Duties of Receivers

450. General duties of receivers.

451. Duty of receivers selling property.

452. No defence or indemnity.

453. Duty in relation to money.

454. Accounting records.

Reports of Receivers

455. First report by receivers.

456. Further reports by receiver.

457. Extension of time for preparing reports.

458. Persons entitled to receive reports.

459. Persons entitled to inspect reports.

460. Duty to notify breaches of any provisions of this Act.

461. Notice of end of receivership.

Application of Property and Liability for Company Obligations

462. Preferential claims.

463. Powers of receiver on liquidation.

464. Liability of receiver.

465. Relief from liability.

Court Supervision of Receivers

466. Court supervision of receivers.

467. Court may terminate or limit receivership.

468. Orders to enforce receiver's duties.

469. Orders protecting property in receivership.

Refusal to Supply Essential Services

470. Refusal to supply essential services prohibited.

 

PART XVI

REGISTRAR-GENERAL OF COMPANIES AND REGISTRATION

Appointment of Officers

471. Appointment of Officers.

472. Appeals from Registrar's decisions.

Registers and registration of documents

473. Registers to be kept.

474. Authentication of documents by seal.

475. Registration of documents, copies of documents, notices.

476. Translations of documents filed.

477. Fees.

478. Recovery of expenses and fees.

Fund

479. Fund.

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.

481. Enforcement of duty of Company to make returns to Registrar.

482. Unlawful disclosure of information relating to companies.

483. Production and inspection of books where an offence is suspected.

484. Registrar's power to call for information and to inspect books, registers and documents.

PART XVII

APPLICATION OF ACT TO EXISTING COMPANIES

485. Application of Act to existing companies.

486. Provisions relating to articles of existing companies.

487. Provisions relating to Company numbers of existing companies.

PART XVIII

OVERSEAS COMPANIES

488. Interpretation.

489. Documents and particulars to be delivered to Registrar by overseas companies.

490. Power of overseas companies to hold lands.

491. Return to be delivered to Registrar where documents etc. altered.

492. Financial statements of Overseas Company.

493. Name of Overseas Company.

494. Obligation to state name and particulars of Company.

495. Service on Overseas Company.

496. Registrar to be notified when Company ceases to have place of business in Sri Lanka.

497. Liquidation of assets in Sri Lanka of Overseas Company.

498. Penalties for non-compliance.

499. Enforcement of duty to comply with provisions of this Part.

Restrictions on Sale of Shares and Offer of Share for Sale

500. Dating of prospectus and particulars to be contained therein.

501. Provisions as to expert's consent and allotment.

502. Registration of prospectus.

503. Penalty for contravention of section 500, section 501 or section 502.

504. Civil liability for mis-statements in prospectus.

505. Interpretation of provisions as to prospectuses.

PART XIX

ADVISORY COMMISSION

506. Appointment of Advisory Commission.

PART XX

COMPANIES DISPUTES BOARD

507. Companies Disputes Board.

508. Board members may mediate disputes.

509. Privilege in respect of mediation proceedings.

510. Fees payable in respect of mediation.

PART XXI

OFFENCES

Miscellaneous Offences

511. Penalty for false statement.

512. Penalty for falsification of records.

513. Penalty for improper use of word "Limited”.

General Provisions as to Offences

514. Compounding of certain offences.

515. Offences summarily triable.

516. Imposition and application of fines.

517. Savings as to private prosecutors.

518. Savings for privileged communications.

PART XXII

MISCELLANEOUS

Prohibition of Partnership with more than Twenty Members

519. Prohibition of partnership with more than twenty.

Application and Reference to Court

520. Procedure.

521. Grant of interim relief.

522. Savings for Attorney-at-law and bankers.

523. Service of documents on Company.

524. Documents to be received in evidence.

525. Costs in action by certain limited companies.

526. Power of court to grant relief in certain cases.

527. Regulations.

528. Sinhala text to prevail in case of inconsistency.

529. Interpretation.

 

Transitional Provisions and Savings

530. Transitional provisions.

531. Savings.

532. Savings of pending proceedings for winding up.

PART XXIII

REPEALS AND AMENDMENTS

533. Repeals.

534. Amendment of the First Schedule of the Act, No. 10 of 1996.

SCHEDULES

7 of 2007,

13 of 2014.

AN ACT to amend and consolidate the Law Relating to Companies.

[Date of Commencement: 20th March, 2007]

1. Short title.

This Act may be cited as the Companies Act.

PART I

Incorporation of Companies and Related Matters
essential characteristics of companies

2. Legal status and capacity of a Company.

(1) A Company incorporated under this Act shall, by the name by which it is registered from time to time, be a 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).

3. Different types of companies.

(1) A Company incorporated under this Act may be 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

4. Method of incorporating a Company.

(1) Subject to the provisions of subsection (2), any person or persons may apply to incorporate a Company, other 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;

(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. Incorporation of a Company.

(1) On receipt of a properly completed application for Incorporation in the prescribed form, the Registrar shall—

(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;

(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

6. Requirements as to name.

The name of every—

(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”.

7. Restrictions on names.

(1) A Company shall not be registered by a name 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

(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”;

(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 "and”.

8. Change of name.

(1) A Company may change its name by special 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.

(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. Public notice of name.

(1) A Company shall within thirty working days of its Incorporation under this Act, give public notice of its 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.

(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.

10. Direction to change name.

(1) Notwithstanding the provisions of section 7, the 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.

(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. Change of name upon change of status of Company.

(1) Where a Company ceases to be a Private Company, it shall be deemed to have resolved to change its name in accordance with the provisions of subsection (1) of section 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.

(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 of an offence and be liable on conviction to a fine not exceeding fifty thousand rupees.

12. Use of Company name and Company number.

(1) A Company shall ensure that its name and its Company number are clearly stated in—

(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

(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 recognised abbreviation of any word in its name, unless it is misleading to do so.

Articles of Association

13. Contents of articles.

The Articles of Association of a Company may provide for any matter not inconsistent with the provisions of this Act other than the First Schedule hereto, and in particular may provide for—

(a) the objects of the Company;

(b) the rights and obligations of shareholders of the Company; and

(c) the management and administration of the Company.

14. Application of model articles.

The Articles of Association set out in the First 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.

15. Adoption or amendment of articles.

(1) Subject to the provisions of this Act and any conditions contained in its articles, a Company may at any 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.

16. Effect of articles.

Subject to the provision of section 89, the articles of 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. Effect of statement of objects in articles.

(1) Where the articles of a Company sets-out the objects of the Company, there shall be deemed to be a restriction placed by the articles in carrying on any business 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.

18. Right of shareholders to a copy of the articles.

(1) A shareholder has a right at any time to request a Company in writing for a copy of the articles of the Company, and subject to subsection (2), the Company shall comply 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.

19. Method of contracting.

(1) A contract or other enforceable obligation may 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;

(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. Attorneys.

(1) Subject to its articles, a Company may by an 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.

(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 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.

21. Authority of Directors, Officers and Agents

(1) A Company or a guarantor of an obligation of the Company or any person claiming under the Company, 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 131 of 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

(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. No constructive notice.

Subject to the provisions of subsection (3) of section 105, a person shall not be affected by or deemed to have 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. Pre-Incorporation contracts may be ratified.

(1) For the purpose of this section and sections 24 and 25 of this Act, the expression "Pre-Incorporation contract” means—

(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.

(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.

24. Warranties implied in Pre-Incorporation contracts.

(1) Notwithstanding anything to the contrary in any law, in a Pre-Incorporation contract, unless a contrary intention is expressed in the contract, there shall be an implied warranty 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.

(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. Failure to ratify.

Where a Company has acquired property pursuant to a Pre-Incorporation contract that has not been ratified by the 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. Authentication of documents by Company.

A document or record of proceedings requiring authentication by a Company shall be signed by a Director, Secretary, or other authorised Officer of the Company.

PART II

Private Companies

27. Articles of a Private Company.

The articles of a Private Company shall include provisions which—

(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

(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.

28. Company ceasing to be a Private Company.

(1) If a Private Company alters its articles in such a way that the articles no longer comply with the requirements of 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.

(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.

29. Company may become a private company.

Where a Limited Company alters its articles so that the articles comply with the requirement of section 27—

(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 section 11.

30. Private companies need not keep interests register.

(1) A Private Company may by unanimous resolution of its shareholders dispense with the keeping of an interests register, and while such a resolution is in force, 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 interest register.

31. Unanimous agreement of shareholders.

(1) Where all the shareholders of a Private Company agree in writing to 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 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;

(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 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. Application for Incorporation of a Company limited by guarantee.

Any two or more persons may apply to form a Company limited by guarantee by making an application to the Registrar for the same in the prescribed form signed by each of the initial members, together with the following 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.

33. Company limited by guarantee must have articles.

(1) A Company limited by guarantee shall have articles which sets out—

(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.

34. Power to dispose with "limited” in the name of charitable and other Companies.

(1) Where the Registrar is satisfied that an Association about to be formed as a Company limited by guarantee is to be formed for promoting commerce, art, science, religion, charity, sport, or any other useful object, and intends to apply its profits, if any, or other income in 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

(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 authorise 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 licence, 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 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.

35. Provisions which apply to companies limited by guarantee.

(1) The provisions contained in the list of sections of this Act specified in the Third Schedule hereto, shall not apply to and in respect of a Company 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 was 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

36. Dating of prospectus.

A prospectus issued by or on behalf of a Company or 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.

37. Specific requirements as to particulars in prospectus.

(1) Every prospectus issued by or on behalf of a Company or by or on behalf of any person who is or has been engaged or interested in the formation of the Company, shall 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 bonafide invitation to a person to enter into an under-writing agreement with respect to the shares 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.

(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 cognisant 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 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. Expert's consent to issue of prospectus containing statement by him.

(1) A prospectus inviting persons to subscribe for shares in or debentures of a Company and including a statement purporting to be made by an expert, shall not be issued, unless—

(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. Consent of bank or Attorney-at-law or auditor necessary for inclusion of name in prospectus.

(1) No bank shall be named as a Company's banker in any prospectus inviting persons to subscribe for shares in or debentures of the Company, unless such bank has given and has not before delivery of a copy of the prospectus for registration, withdrawn its written consent to the inclusion in such prospectus of its names as the Company's banker:

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 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 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.

40. Registration of prospectus.

(1) No prospectus shall be issued by or on behalf of 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.

(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 documents (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 prospectus 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.

41. Civil liability for untrue in prospectus.

(1) Subject to the provisions of this section, where a prospectus invites persons to subscribe for shares in or 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;

(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 public 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;

(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 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,

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.

42. Criminal liability for untrue statements in prospectus.

(1) Where a prospectus issued includes any untrue statement, any person who authorised the issue of the prospectus 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 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. Document containing offer of shares or debentures for sale to be deemed a prospectus.

(1) Where a Company allots or agrees to allot any shares in or debentures of the Company with a view to offering all or any of those shares or debentures for sale to the public, any document by which the offer for sale to the public is made shall for all purposes be deemed to be 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.

(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.

44. Interpretation of provisions relating to prospectuses.

For purposes of the preceding provisions of this Part of this Act—

(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 reference incorporated in, or issued with, such prospectus.

Allotment

45. Prohibition of allotment unless minimum subscription is received.

(1) No allotment shall be made of any share capital of a Company offered to the public for subscription, unless the amount stated in the prospectus as the minimum amount which in the opinion of the Directors must be raised by the 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 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.

46. Effect of irregular allotment.

(1) An allotment made by a Company to an applicant in contravention of the provisions of section 45 shall be 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 authorises 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.

47. Applications for and allotment of shares and debentures.

(1) No allotment shall be made of any shares in or debentures of a Company in pursuance of a prospectus issued generally and no proceedings shall be taken on applications made in pursuance of a prospectus so issued, until the 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”).

(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 wilfully 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.

(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.

48. Construction of reference to offering shares or debentures to the public.

(1) Any reference in this Act to offering of any shares or debentures to the public shall, subject to any provision to the contrary contained therein, be construed as including a reference to offering them to any section of 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.

Nature and Types of Shares

49. Nature and types of shares.

(1) A share in a Company shall be movable property.

(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.

50. Initial shares.

(1) Immediately following the Incorporation of a 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.

(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.

51. Issue of Shares

(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).

(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. Consideration for issue of shares.

(1) Before issuing any shares, the Board shall—

(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. Pre-emptive rights to new issues.

(1) Subject to the Company's articles, where a Company issues shares which rank equally with or above existing shares in relation to voting or distribution rights, 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.

54. Method of issuing shares.

(1) A share is deemed to be issued when the name of 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

55. Calls on shares.

(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

56. Distributions.

(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

(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. Solvency test.

(1) A Company shall be deemed to have satisfied 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.

(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.

58. Stated capital.

(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).

59. Reduction of stated capital.

(1) Subject to the provisions of subsection (3), a Company may by special resolution reduce its 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.

(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.

60. Dividends.

(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.

61. Recovery of distributions.

(1) A distribution made to a shareholder at a time 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

(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) relieve the Director from liability in respect of,

an amount equal to the value of any distribution that could properly have been made.

62. Reduction of shareholder liability to be a distribution.

(1) Where a Company—

(a) alters its articles; or

(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

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

63. Company may acquire of redeem its own shares.

(1) A Company may purchase or otherwise acquire any of 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.

(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. Purchase of own shares.

(1) A Company may agree to purchase or otherwise acquire its own shares if the articles of such Company provide 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

(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.

65. Enforceability of contract to purchase shares.

(1) A contract with a Company providing for the acquisition by the Company of its shares shall be specifically 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.

Redemption of shares

66. Meaning of "redeemable”.

For the purposes of this Act, a share is redeemable if the articles of the Company make provision for the redemption 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. Redemption at the option of Company.

(1) A Company may exercise an option to redeem a share which is redeemable at the option of the Company, if 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 purposes of section 56.

68. Redemption at the option of the shareholder.

(1) Where a share is redeemable at the option of the holder of the share and the holder gives proper notice to the 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

(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.

69. Redemption on fixed date.

(1) Where a share is redeemable on a specified 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.

Financial Assistance in Connection with Purchase of Shares

70. Restrictions on giving financial assistance.

(1) A Company shall not give financial assistance directly or indirectly for the purpose of or in connection with 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;

(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. Transactions not prohibited by section 70.

(1) The provisions of section 70 shall not apply to the giving of financial assistance by a Company for the purpose of or in connection with the acquisition of its own shares, if—

(a) the Company's principal purpose in giving the assistance is not to give it for the purpose of that 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 Part X;

(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.

Cross-holdings

72. Restriction on subsidiary holding shares in holding.

(1) A Company which is a subsidiary of another Company (referred to in this section as the "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.

(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

73. Transfer not to be registered except on production of instrument of transfer.

Notwithstanding anything to the contrary in the articles of a Company, it shall not be lawful for the Company to register a transfer of shares in or debentures of the Company, unless a proper instrument of transfer has been delivered to the Company:

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.

74. Transfer by legal representative.

A transfer of the shares or other interests of a deceased shareholder of a Company made by his legal 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.

75. Registration of transfer at the request of transferor.

On the application of the transferor of any share or other interest in a Company, the Company shall enter in its share register the name of the transferee in the same manner and subject to the same conditions, as if the application for the entry were made by the transferee.

76. Notice of refusal to register transfer.

(1) Where a Company refuses to register a transfer of any shares or debentures, the Company shall within two 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

(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. Certification of transfers.

(1) The certification by a Company of any instrument of transfer of shares in or debentures of the Company shall be 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 debtors 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

(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.

78. Duties of Company with respect to issue of certificates.

(1) Every Company shall within two months from the date of allotment of any of its shares, debentures or debenture stock and within two months from the date on 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 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. Certificate to be evidence of title.

A certificate signed under the name of the Company by a Director and Secretary of the Company specifying any shares held by any shareholder, shall be prima facie evidence of the title of the shareholder to the shares.

80. Evidence of grant of probate.

The production to a Company of any document which by law is sufficient evidence of probate of a will or of letters 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. Right of debenture holders and shareholders to inspect register of debenture holders and to have copies of any trust deed.

(1) Every Company which has issued debentures shall maintain a register of holders of debentures of the Company. The register shall, except when duly closed (but subject to such reasonable restrictions the Company may impose at a general meeting so that not less than two hours in each day shall be allowed for inspection), be opened for the inspection by the registered holder of any such debentures or 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.

(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.

82. Directors prohibited from acting as trustees.

A Director of a Company shall not be capable of being appointed as a trustee for the holders of debentures of the Company:

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.

83. Perpetual debentures.

A condition contained in any debentures or in any 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. Power to reissue redeemed debentures in certain cases.

(1) Where a Company has redeemed any debentures previously issued, then—

(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 priorities 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 debenture 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 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 which any person would have had under or by virtue of any mortgage or charge created before that date.

85. Specific performance of contracts to subscribe for debentures.

A contract with a Company to take up and pay for any debentures of the Company may be enforced by an order for specific performance.

PART V

Shareholders and Their Rights and Obligations

86. Meaning of "shareholder”.

(1) In this Act, the term "shareholder” means—

(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;

(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 transferred, 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.

Liability of Shareholders

87. Liability of shareholder.

(1) A shareholder shall not be liable for any act, 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.

88. Liability for calls.

(1) Subject to section 269, where a share renders its 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.

89. Shareholders must agree to increase in liability.

Notwithstanding anything to the contrary in the articles of the Company, a shareholder shall not be—

(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. Exercise of powers reserved to shareholders.

(1) Powers reserved to the shareholders of a Company by this Act may be exercised only—

(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. Exercise of powers by ordinary resolution.

Unless otherwise provided by this Act or in the articles of a Company, a power reserved to shareholders may be exercised by an ordinary resolution.

92. Powers exercised by special resolution.

(1) Notwithstanding anything to the contrary contained in the articles of a Company, when shareholders exercise a power to—

(a) alter the Company's articles;

(b) approve a major transaction for the purpose 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 subsection (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

93. Shareholder may require Company to purchase shares.

Where a shareholder is entitled to vote on the exercise of the power set out in paragraph (a) of subsection (1) of section 92 and the proposed alteration imposes or 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

(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. Notice requiring purchase.

(1) A shareholder of a Company who is entitled to require the Company to purchase shares by virtue of the 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,

and give written notice to the shareholder of the Board's decision under this subsection.

95. Purchase by Company.

(1) Where the Board agree under paragraph (a) of 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 subsection (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

(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.

96. Purchase of shares by third party.

(1) The provisions of section 95 shall apply to the purchase of shares by a person with whom the Company has 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.

97. Court may grant exemption.

(1) A Company to which a notice has been given 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.

(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. Court may grant exemption if Company is insolvent.

(1) Where a notice is given to a Company under section 94, and—

(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 company 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.

(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.

99. Alteration of shareholder rights.

(1) A Company shall not take any action that would affect the rights attached to shares, unless that action has 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.

100. Shareholder may require company to purchase shares.

Where an interest group has approved the taking of any action that affects the rights attached to shares and the Company becomes entitled to take that action, and—

(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

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. Action not invalid.

The taking of any action by a Company affecting the rights attached to shares shall not be invalid by reason only that the action was not approved under section 99.

PART VI

Registration of Charges registration of charges with Registrar

102. Registration of charges created by companies registered in Sri Lanka.

(1) Where a Company creates a charge to which this section applies, it shall be the duty of the Company within the time specified in subsection (3), to cause a copy of the instrument by which the charge is created or evidenced, to be 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;

(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 section, 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.

(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.

(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 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.

(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. Unregistered charges void in certain cases.

(1) Subject to the provisions of this Part, every charge shall in so far as it confers any security on the 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. Duty of Company to register charges existing on property acquired.

(1) Where a Company registered in Sri Lanka acquires any property which is subject to a charge that would, if it had been created by the Company after the acquisition of the property, have been required to be registered under this 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.

105. Register of charges to be kept by Registrar.

(1) The Registrar shall keep with respect to each Company, a register in the prescribed form of all the charges requiring registration under this Part, and shall on payment 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 section 102;

(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. Endorsement of certificate of registration on debentures.

(1) The Company shall cause a copy of every certificate of registration given under provision of section 105 to be endorsed on every debenture or certificate of 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.

(3) Where any person knowingly and wilfully 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.

107. Entries of satisfaction and release.

Where the Registrar is satisfied that—

(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.

108. Rectification of register of charges.

If the court is satisfied that—

(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 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 mis-statement 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. Copies of instruments creating charges to be kept by Company.

Every Company shall keep a copy of every instrument creating any charge requiring registration under this Part at its registered office or at such other place as may be notified to the Registrar under section 116. In the case of a series of uniform debentures, a copy of one debenture of the series shall be sufficient.

110. Company's register of charges.

(1) Every Limited Company shall—

(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 wilfully 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.

Review of register of Charges

111. Review of Register of charges.

(1) The Registrar may from time to time by notice in writing issued to a Company, require that Company to deliver 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.

(4) Where a Company fails to comply 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. Application of this Part to charges and property to be acquired by an Overseas Company.

The provisions of this Part of this Act shall apply in relation to charges on property in Sri Lanka which are created and to charges on property in Sri Lanka which is acquired, by an Overseas Company.

PART VII

Management and Administration registered office

113. Registered office of a Company.

(1) Every Company shall have a registered office in Sri Lanka to which all communications and notices may 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.

114. Change of registered office.

(1) Subject to the Company's articles and to the provisions of subsection (2), the Board of a Company may 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.

115. Requirement to change registered office.

(1) The Registrar may require a Company to change its registered office by notice in writing delivered or sent—

(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

(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 exceeding fifty thousand rupees.

Company Records

116. Location of Company records.

(1) Subject to the provisions of subsection (3), a Company shall keep the following documents at its registered 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;

(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 references 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;

(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. Form of records.

(1) The records of a Company shall be kept in 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

(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

118. Inspection of records by Directors.

(1) Subject to the provisions of subsection (2), every Director of a Company is entitled on giving reasonable 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.

119. Inspection of Company records by shareholders.

(1) In addition to the records being made available for public inspection under section 120, a Company shall keep the following records available for inspection in the 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;

(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. Public inspection of Company records.

(1) A Company shall keep the following records available for inspection in the manner described in section 121 by any person who serves written notice of such intention 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

(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.

121. Manner of inspection.

(1) Documents which may be inspected under 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 am and 4.00 pm 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.

122. Copies of documents.

(1) A person may require a copy of or extract from 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.

Share Register

123. Company to maintain share register.

(1) Every Company which has issued shares shall maintain a share register that records the shares issued by the 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. Place of share register.

(1) The share register of a Company may, if expressly permitted by the articles, be divided into two or more registers kept in different places.

(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 registers;

(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

(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. Stamp duties in case of shares registered in a register outside Sri Lanka.

An instrument of transfer of a share registered in a register kept outside Sri Lanka shall be deemed to be a transfer of property situated outside of Sri Lanka, and unless executed in Sri Lanka, shall be exempt from stamp duty chargeable in Sri Lanka.

126. Index of shareholders.

(1) Every Company having more than fifty shareholders shall, (unless the share register is in such a form 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.

127. Power to close register.

A Company may, after notice published in the Gazette and in any newspaper 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.

128. Power of court to rectify register.

(1) Where—

(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.

(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. Trusts not to be entered on share register.

(1) Subject to the provisions of subsection (2), no notice of any trust, expressed, implied or constructive, shall be entered on the share register 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. Share register to be evidence.

(1) The entry of the name of a person in the share register as holder of a share shall be prima facie evidence that title to the share is vested in that person.

(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.

Annual Return

131. Annual return.

(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.

132. Declaration and certificates to be sent by every private company with the annual return.

(1) Every private company shall transmit to the Registrar with it's annual return—

(a) a declaration signed by the directors of the company to the effect that to the best of their knowledge and belief, they have complied with the requirements of the principal enactment;

(b) a certificate signed by a director and the secretary of the company—

(i) confirming 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, as the case may be, 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, and such excess consists wholly of persons not included under section 27 in relation to that limit imposed under that section;

(c) a certificate issued by the Commissioner-General of Inland Revenue confirming that the company has fulfilled the requirements specified in section 106 of the Inland Revenue Act, No. 10 of 2006.

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