Section 487 of the Companies Act No. 7 of 2007
The registration of companies is a key means to ensure accountability in the private sector. An accurate and updated registry enables the state to monitor companies’ compliance with a country’s laws and regulations. Sri Lanka’s new Companies Act No.7 was passed by Parliament in October 2006 and became operative in May 2007. Its Section 487 aims at cleaning up the Companies Register by removing all non-operating companies.
This position paper discusses the shortcomings in Section 487. It argues that some provisions in the section provide room for abuse, and actually contravene the very essence of the Companies Act, i.e. to ensure the survival and continuity of a corporate entity as opposed to securing its demise. It also highlights low compliance with the Act, and provides recommendations for all stakeholders on how to overcome the loopholes in the Act.