April 16, 2007 (LBO) – Sri Lanka’s long-delayed new Companies Act offers greater protection for minority shareholders and could encourage more firms to list on the Colombo bourse while increasing market liquidity, experts have said. All existing firms must register again with the Registrar of Companies so that dormant ones can be weeded out under transitional provisions in the new Act, meant to replace the decades-old existing law.
Previous company management decisions such as bonus declarations will remain valid and pending litigation will continue in the same court unless evidence has commenced, corporate law and management experts said.
But the new Act also has certain provisions that could be dangerous if abused. It was supposed come into effect from April 1 but has been delayed again because it has yet to be gazetted. It is likely to come into effect in May.
The new Act has a lot of devices that strengthen shareholder rights, Arittha Wikramanayake, Senior Partner of the law firm Nithya Partners, told LBO.
Under the new law, any shareholder and co-director of a company can go to court to ensure that directors are doing their duties.
Derivative action, in which a shareholder can bring acti