Choosing directors
How many directors are required for a new company in Sri Lanka?
The number of directors required is determined by the shareholders through an ordinary resolution.
| Type | Minimum | Maxmium |
|---|---|---|
| Private company | 1 | Not specified |
| Public company | 2 | Not specified |
How are directors appointed?
Directors can be appointed by:
- An ordinary resolution at a meeting specifically called for this purpose.
- A written resolution.
Can directors be removed from their position?
Yes, directors can be removed by an ordinary resolution passed at a meeting or by a written resolution.
How can a director resign from their position?
A director may resign by delivering a signed written notice to the registered office of the company. The resignation becomes effective when received or at a later specified date.
What are the disqualifications for being a director?
The following individuals are disqualified:
- People under eighteen years of age.
- Undischarged insolvents.
- Persons prohibited from being a director or involved in company management under previous company laws or sections 213 or 214 of the current Act.
- Persons adjudged to be of unsound mind.
- Non-natural persons.
- Persons not complying with specific qualifications mentioned in the company's articles.
What is required for a person to be appointed as a director?
The individual must consent in the prescribed form (Form 18) to be a director and certify that they are not disqualified from being appointed or holding office as a director.
What happens if a disqualified person acts as a director?
They will still be treated as a director for the purposes of any provision of the Companies Act that imposes a duty or obligation on a director.
What powers do directors have?
The business and affairs of the company are managed by or under the direction of the board of directors. The board can delegate its powers to a committee of directors, a director, or an employee, as permissible under the Act.
What are the duties of a director?
Directors must:
- Act in good faith and in the best interest of the company.
- Not act in a manner that contravenes the Act or the company’s articles.
How are board meetings conducted?
- Notice: Meetings must be preceded by at least twenty-four hours' notice.
- Quorum: A quorum for a meeting is a majority of the directors.
- Voting: Each director has one vote, with the chairperson having a casting vote in the event of a tie. Resolutions are passed by majority vote or unanimous agreement of all directors present.
Are minutes required for board meetings?
Yes, the board is responsible for ensuring that minutes of all proceedings at board meetings are kept.
Can the board appoint a managing director?
Yes, the board can appoint a managing director and delegate any of its powers to this position. The managing director's remuneration and terms of appointment are determined by the board.
What are the requirements regarding directors' interests in company transactions?
Directors must disclose any interest in transactions to which the company is a party.
Interested directors can still participate in meetings and vote on matters related to the transaction, provided they disclose their interest.
How should directors use company information?
Directors should use company information only for the purposes of the company unless authorized otherwise by the board.