New company formations surge with the reduction in registration fees
Sri Lanka’s registration of new companies has surged to an average of 40 per day at present from less than 20 earlier due to a massive reduction in registration fees by Rs.11,000 compelling the Department of Registrar of Companies (DRC) to open new counters with additional staff, Registrar General of Companies D.N.R. Siriwardena told the Business Times.
The registration fee of a private company has been reduced to Rs.4,000 from Rs.15,000 this year and this has resulted in an increase in company registrations though there was a slight decline in revenue during the past four months, he revealed.
In 2016, the revenue of the department increased by a huge 182 per cent to Rs. 1.78 billion from 2015’s Rs. 632 million.
Some 8289 new companies were registered in 2016. Registration of foreign companies in Sri Lanka has also increased by 17 per cent to 41 in 2016. Even new registrations of associations under Section 34 increased by 140 per cent in 2016, DRC DATA showed.
The bulk of the new companies annually registered in Sri Lanka are such private limited companies. For example, no less than 97 per cent of the new 8289 company registrations were in this “Private Limited Company” category, he said.
Three types of changes were introduced by the Registrar of Companies, in keeping with the proposal made in Budget 2016. The three changes are the Fees for Societies, Fees Regulations for Renewal and Registration of Auditors and introducing a ‘new qualification’ to be registered as a Company Secretary in Sri Lanka.
Among the upward fee revisions were the fee for registration of a Public Limited Company under Form 1 which increased to Rs.20,000 from Rs.15,000. The registration fee of an unlimited company has increased to Rs.15,000 from Rs.12,500. Fee for registration of a company limited by guarantee increased to Rs.30,000 from Rs. 25,000 and fee for registration of mortgages charges and debentures increased to Rs, 7,500 from Rs.5,000.
However the Government’s 2016 budget proposal to impose an annual licence fee of Rs.60,000 on all private companies has not been implemented upto now as the Treasury is yet to issue the relevant circular and gazette notification towards this end, Mr. Siriwardena pointed out.
Another proposal of the same budget to impose a voluntary winding up fee of Rs.50,000 has been suspended as the relevant circular is yet to be issued by the Treasury, he said.
The main reason of companies being wound up voluntarily is only when they go out of business and have no other option but to close down. If these levies are enforced, people will have second thoughts as to forming of companies in the future and the viability of continuing their businesses, which may end up with severe blows to the Gross Domestic Production, imports and exports, and the national economy at large, several entrepreneurs complained to the Business Times.
The department’s revenue will not be able to gain the expected target this year due to non-implementation of the two budget proposals of 2016, Mr. Siriwardena said adding that however it will surpass the last year’s revenue due to the surge in new registrations.