SRI LANKA Law and Practice Contributed by: Ayanthi Abeyawickrama, Varners
may also exercise its right to terminate the investment agreement and recommend cancellation of associ - ated approvals and exemptions. 2.3 Commitments Required From Foreign Investors Foreign investors operating under the BOI or the Colombo Port City Economic Commission are required to comply with a range of legal, regulatory and contractual obligations. These typically include remitting capital through designated investment accounts, complying with sector-specific or project- specific conditions, and meeting any timelines or mile - stones agreed with the relevant authority. Investors must also ensure ongoing compliance with Sri Lankan laws relating to taxation, labour, environmental protec - tion and company administration. Where approvals or incentives are granted under a BOI agreement or Port City registration, the inves - tor is also expected to honour any commitments set out therein, such as capital infusion deadlines, local employment targets, or reporting obligations. Non-ful - filment of such commitments may result in withdrawal of approvals, suspension of incentives, or other regu - latory sanctions. 2.4 Right to Appeal The right to appeal or challenge decisions affect - ing foreign investment in Sri Lanka depends on the applicable regulatory framework and the nature of the administrative or contractual relationship between the investor and the regulatory agency. For investments under the BOI or the Colombo Port City Economic Commission, investors may seek administrative review of adverse decisions by mak - ing representations to senior officials or the Director General of the BOI or of the Colombo Port City Eco - nomic Commission. This internal review process is often the first recourse and is typically expected to be exhausted prior to initiating formal dispute resolution by referring the matter to arbitration. In addition, the affected parties may seek judicial redress by way of a writ application to the Court of Appeal, challenging the legality or procedural propri - ety of the administrative act. In addition, if the decision
amounts to an infringement of a fundamental right, a fundamental rights application may be filed before the Supreme Court, subject to the 30-day time limit. Sri Lankan administrative law principles generally require that internal or administrative review mech - anisms be pursued first, before resorting to court action, unless such remedies are unavailable, futile or have been unreasonably delayed. 3. Corporate Vehicles 3.1 Most Common Forms of Legal Entity The most common legal structure adopted by foreign investors in Sri Lanka is the limited liability company incorporated under the Companies Act, No 7 of 2007. This may take the form of a private limited company (designated “(Private) Limited”) or a public limited company (designated “PLC”) depending on the scale and intended nature of operations. Foreign investors typically choose their legal struc - ture based on the nature of the business, regulatory requirements, sector-specific approvals, tax consid - erations, and whether they wish to benefit from BOI A private limited company is generally preferred due to fewer regulatory burdens, and it requires a minimum of one shareholder and one director, with no restric - tion on foreign shareholding unless the business falls within a restricted sector. It offers limited liability to its shareholders and there is no minimum capital require - ment. This structure is best suited for greenfield pro - jects, subsidiaries of foreign companies, or most busi - ness cases due to its simplicity and flexibility. Public Limited Company A public limited company is permitted to offer its shares and other securities to the public and is gen - erally used by larger enterprises, particularly where the investors intend to raise capital from the market. If a public company seeks to list its shares on the Colombo Stock Exchange (CSE), the Listing Rules and Securities and Exchange Commission (SEC) guidelines impose a minimum capital requirement or Port City concessions. Private Limited Company
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