When we talk about being a “shareholder,” most people think of a name printed on a share certificate or listed in a companyβs register. But under Sri Lankan law β specifically Section 86 of the Companies Act, No. 07 of 2007 β the definition of a shareholder is much broader.
Whether you’re new to investing, part of a family business, or holding shares in trust, understanding who legally qualifies as a shareholder is vital β especially when it comes to rights, voting power, dividends, and legal protection.
Letβs break it down.
β 1. You Are a Shareholder Ifβ¦
According to the law, a person is considered a shareholder in any of the following situations:
πΉ (a) Your Name Is in the Share Register
This is the most straightforward case. If your name is entered in the company’s share register, you are officially recognized as a shareholder.
πΉ (b) You Were Named in the Application to Form the Company
If you were listed as a shareholder in the original incorporation documents when the company was formed, you are a shareholder from the moment the company is registered β even if the share register isnβt completed yet.
πΉ (c) You Are Named in a Registered Amalgamation Proposal
If your name appears as a shareholder in a merger (amalgamation) plan, and that plan has been officially registered, then you are recognized as a shareholder in the new (amalgamated) company.
πΉ (d) Shares Were Transferred to You, But Youβre Not Yet Registered
Even if the company hasnβt yet updated its records, once a share transfer has legally taken place, you are still a shareholder in the eyes of the law.
π 2. Shareholding in Trust? You Still Have Rights
Section 86 also covers beneficiaries of trusts. If someone holds shares on your behalf, and this trust is noted in the companyβs share register:
- You are treated as a shareholder.
- You enjoy the same rights and responsibilities (like voting, dividends, etc.) as if your name was on the share register directly.
This protects people who invest through legal representatives, custodians, or trustees.
β 3. What If the Company Refuses to Register Your Shares?
Letβs say you buy shares and submit all the required documents, but the company delays or wrongfully refuses to register the transfer.
Donβt worry β under Section 86:
- You are still legally treated as a shareholder.
- You still have full rights and protections, even if the company hasnβt officially recorded you yet.
π§Ύ Summary Table
| Situation | Are You a Shareholder? | Do You Have Legal Rights? |
|---|---|---|
| Name in share register | β Yes | β Yes |
| Named in incorporation documents | β Yes | β Yes |
| Named in registered amalgamation proposal | β Yes | β Yes |
| Share transfer complete, but not registered | β Yes | β Yes |
| Beneficiary of a trust (recorded in register) | β Yes | β Yes |
| Company wrongfully refuses to register your transfer | β Yes | β Yes |
π‘ Why This Matters
If youβre a shareholder, you have powerful rights β including:
- Voting at meetings
- Receiving dividends
- Inspecting records
- Taking legal action if necessary
Understanding when and how you’re recognized as a shareholder helps you protect your investment, participate in decisions, and enforce your rights.
π‘οΈ Final Thoughts
Being legally acknowledged as a shareholder doesn’t just depend on paperwork. If you’re entitled to be on the register, the law already sees you as a shareholder.
So whether you’re buying shares, involved in a merger, or holding shares in trust β know your legal standing.
If you have doubts about your registration or shareholder rights, speak to your company secretary or legal advisor. The law is on your side.
