✅ General Rule: At Least Two Shareholders
Under normal circumstances, every company must have a minimum of two shareholders at the time of incorporation. These shareholders become the initial owners of the company by purchasing or holding shares.
This rule ensures that the company has a broader ownership base and helps promote corporate accountability and stability.
⚠️ Exception to the Rule: Single Shareholder Companies
The Act provides two specific exceptions where a company can be incorporated with only one shareholder:
1️⃣ Government-Owned Companies
“A company may have a single shareholder where such shareholder is the Secretary to the Treasury holding shares on behalf of the Government of Sri Lanka.”
✅ What It Means:
If the Government of Sri Lanka wants to fully own a company, the Secretary to the Treasury can be the sole shareholder on behalf of the State.
🧾 Real-Life Example:
Let’s say the government wants to create a company called Lanka Rail Infrastructure Ltd, to oversee railway modernization.
- The Secretary to the Treasury is listed as the sole shareholder in the application.
- The company is 100% government-owned.
- No private individuals or other companies hold shares.
This setup allows the Government to maintain full control through a legal, incorporated structure.
2️⃣ Single Individuals or Corporate Entities
“A company may have a single shareholder where such shareholder is an individual or a body corporate.”
✅ What It Means:
You can start a private company as a one-person business — either as:
- An individual person, or
- A company (corporate body) that owns 100% of the shares.
This is a modern feature in corporate law, allowing greater flexibility for entrepreneurs and corporate groups.
🧾 Example 1: Individual Shareholder
Imagine Nimal Perera, a software engineer, wants to start his own company, NP Tech Solutions (Pvt) Ltd, and he doesn’t have a partner.
- Nimal becomes the sole shareholder and director.
- He owns 100% of the shares.
- As long as he complies with all legal requirements, this is completely valid under the Act.
🧾 Example 2: Corporate Shareholder
Let’s say a parent company in Singapore, Global Holdings Pte Ltd, wants to establish a fully owned Sri Lankan subsidiary, Global Lanka Pvt Ltd.
- Global Holdings Pte Ltd is the sole shareholder of the new Sri Lankan company.
- This is allowed under the Act since a corporate entity can act as the sole shareholder.
✅ Key Benefits of Allowing a Single Shareholder
| Benefit | Explanation |
|---|---|
| ✔️ Encourages entrepreneurship | Individuals can easily start a business without needing a partner. |
| ✔️ Simplifies group structures | Parent companies can fully own subsidiaries. |
| ✔️ Enables full government control | For strategic state-owned enterprises, single-shareholder control is possible. |
| ✔️ Reduces compliance burden | Especially useful for small businesses or solo founders. |
⚠️ Important to Remember
- Even if a company has only one shareholder, it must still comply with other legal requirements:
- It must have at least one director.
- It must appoint a company secretary.
- It must file annual returns and maintain proper corporate records.
Also, while one-person companies are legally allowed, it’s often wise to consider how succession, control, and risk will be managed if the single shareholder becomes incapacitated or passes away.
📝 Final Thoughts
While Sri Lanka’s Companies Act traditionally required at least two shareholders, modern reforms allow more flexibility by permitting single-shareholder companies in specific cases — benefiting both entrepreneurs and the Government.
Whether you’re a solo founder, a foreign investor, or a government body, the law gives you options to structure your business in a way that suits your purpose.
