If you’re running a private limited company in Sri Lanka and also own a property you’d like to rent to your company—perhaps as an office, warehouse, or business premises—you might be wondering:
“Do I really need a rental agreement if I’m the sole director and shareholder of the company?”
The short answer is: Yes, you do.
Even if you’re the only person involved on both sides of the transaction (landlord and tenant), a formal rental or lease agreement is legally required and strongly recommended. Here’s why.
🔍 Why You Need a Rental Agreement — Even with Your Own Company
A rental agreement isn’t just a formality. It’s essential for:
1. ✅ Legal Protection
A signed lease gives you and your company legal clarity. If there’s ever a dispute (tax audit, regulatory review, or sale of the company), you’ll have the documents to prove that everything was above board.
2. ✅ Tax Compliance
- As the landlord, your rental income must be declared in your personal income tax return.
- As the tenant (your company), rent can be claimed as a business expense—but only if there’s proper documentation like:
- A lease agreement
- Rent receipts
- Payment proof
3. ✅ Stamp Duty Requirement
Under Sri Lankan law, stamp duty must be paid on lease agreements. Without it, the lease isn’t legally valid.
4. ✅ Company Law Compliance
Even as the sole director and shareholder, you’re still bound by the Companies Act No. 7 of 2007. Let’s take a closer look.
📘 What the Law Says – Companies Act No. 7 of 2007
Here are the key sections of the Companies Act that apply:
🔸 Section 192 – Director’s Interest in Transactions
You must disclose any personal interest in a transaction with the company. Even if you’re the only director, you still need to record the disclosure in writing (like in a board resolution or note to file).
🔸 Section 189(3) – Self-Approval in Sole Directorship
If you’re the only director, you’re allowed to approve the transaction (like a lease), but you must:
- Disclose your interest
- Document the approval and terms
🔸 Section 183 – Powers of the Board
The board (you) can enter into contracts like leases, but must act in the best interest of the company. This means the rent amount, duration, and terms should be fair and reasonable.
✍️ How to Legally Sign the Rental Agreement
Even though you’re both landlord and tenant, you need to sign the agreement in two separate capacities:
Example:
Signed by the Landlord (Individual):
Name: [Your Full Name]
NIC: [Your NIC Number]
Signature: ___________________
Date: ___________
Signed by the Tenant (Company):
Name: [Your Name]
Designation: Director
Company: [Your Company Name (Pvt) Ltd]
Signature: ___________________
Date: ___________
You may also affix the company seal, if you use one.
🧾 Other Important Steps to Take
| Task | Required? | Purpose |
|---|---|---|
| Written Rental Agreement | ✅ | Legal proof of transaction |
| Board Resolution (by sole director) | ✅ | Record of approval & disclosure of interest |
| Stamp Duty Payment | ✅ | Mandatory for validity |
| Issue Rent Receipts | ✅ | Required for audit & tax |
| Declare Rent as Income | ✅ | Part of your personal tax return |
| Company Records | ✅ | Maintain agreement & payments in company accounts |
📝 Sample Note/Resolution (Sole Director)
“As the sole director and shareholder of [Company Name], I hereby disclose my interest in leasing the premises located at [Address] to the company. I confirm that the terms are fair and reasonable, and in the best interest of the company.”
This simple statement can be recorded as a board resolution or a note to file, fulfilling the requirements of the Companies Act.
📌 Final Thoughts
Renting your own property to your own company is perfectly legal in Sri Lanka—but only if done transparently and documented properly.
Having a formal rental agreement, paying stamp duty, and disclosing your interest as a director aren’t just legal steps—they’re smart business practices that protect you and your company in the long run.
