Understanding Sections 13 to 18 of the Companies Act No. 07 of 2007
When starting a company in Sri Lanka, one of the most important documents you’ll come across is the Articles of Association. But what exactly is it? And why is it so important?
Let’s break it down in simple terms.
🔍 What Are the Articles of Association?
The Articles of Association are the official rulebook of a company. It governs how the company operates, including:
- The rights and duties of shareholders
- How decisions are made
- How the business is managed
Think of it as a contract between the company and its shareholders, and between the shareholders themselves.
📄 What Can Be Included in the Articles? (Section 13)
Your company’s articles can include any rule that isn’t against the Companies Act.
Specifically, you can cover:
- 🎯 The objectives of the company (What it’s allowed to do)
- 👥 Shareholder rights and responsibilities (e.g., voting, dividends)
- 🏢 Management and administration rules (e.g., director duties, meetings)
You have the freedom to customize the articles to suit your company’s needs — as long as they don’t go against the law.
🧩 What If You Don’t Draft Your Own Articles? (Section 14)
The law provides a default set of rules, called the Model Articles (in the First Schedule of the Act).
If your company doesn’t write its own, these Model Articles will apply automatically — unless you modify or reject them in your incorporation documents.
So, small businesses and startups often start with the Model Articles and later change them if needed.
🔄 Can You Change the Articles Later? (Section 15)
Yes — but with some rules.
You can:
- ✏️ Adopt new articles
- 🔧 Modify the existing ones
- 🔁 Switch to the Model Articles
To do this, you need to pass a special resolution (at least 75% of shareholders must agree).
After changing the articles, you must:
- Notify the Registrar within 10 working days
- Submit the full text of the changes or new articles
⚠️ Penalty for Not Notifying
- Company: Fine up to Rs. 50,000
- Officers (like directors): Fine up to Rs. 50,000 each
🪪 Why Are the Articles So Important? (Section 16)
Once adopted, the Articles of Association are legally binding. It’s like a contract between:
- The company and each shareholder
- Each shareholder and the other shareholders
Example:
If a shareholder owes money to the company as per the articles, the company can legally recover it.
🚫 What If the Articles Limit Company Activities? (Section 17)
Some companies include a list of allowed activities in their articles (like “We only do IT services”).
If that happens:
- It becomes a restriction — your company should not do anything outside that list
- However, any deals made outside those activities are still valid in law (unless fraud or bad faith is involved)
But:
- Shareholders or directors can go to court to stop the company from breaking the restriction
- Directors can also be held responsible for acting against the articles
📥 Can a Shareholder Ask for a Copy of the Articles? (Section 18)
Yes! Every shareholder has the right to request a copy at any time.
The company must:
- Provide it within 5 working days
- May charge a small fee (max Rs. 500)
- Can refuse if a copy was already given in the last 6 months
⚠️ Penalty for Non-Compliance
- Company: Fine up to Rs. 200,000
- Officers: Fine up to Rs. 100,000
📌 Summary: Articles of Association Made Simple
| Topic | Explanation |
|---|---|
| What is it? | A rulebook or contract that governs the company |
| Customizable? | Yes – you can write your own or use the Model Articles |
| How to change it? | Through a special resolution + notify the Registrar |
| Legal power? | Binding contract between company and shareholders |
| Restricting company activity? | Possible, but still legally valid unless challenged |
| Shareholder access? | Yes – entitled to request a copy with some conditions |
💡 Final Thoughts
The Articles of Association may sound technical, but it’s one of the most practical and powerful documents your company will ever have. It defines:
- How you operate
- Who has power
- How disputes are resolved
If you’re forming a new company or planning changes to your current structure, always review your articles carefully. You can start with the Model Articles but customizing them ensures they match your real-world business operations.
Need help drafting or updating your company’s Articles of Association? I can help you with templates or customized versions that suit your industry and goals.
