Key Reasons to Conduct Thorough Research on Sri Lankan Companies

In the dynamic business environment of Sri Lanka, ensuring the accuracy of company details is paramount for banks, financial institutions, and other organizations. Cross-checking these details is essential to avoid potential risks and ensure smooth transactions. Over time, we’ve identified several ways in which company records can be manipulated. Here are some key areas to focus on:

1. Directors

• Verification of Directors: Form 20 is used to confirm the directors of a company. However, it’s crucial to verify if these directors are genuinely involved in the company’s operations or if they were appointed temporarily for specific transactions.
• Temporary Appointments: Companies can remove existing directors and appoint new ones just to open a bank account or complete a business transaction, only to remove them afterward. This practice can obscure the true leadership of the company.

2. Shareholders

• Changes in Shareholding: Shareholder details can change instantly but may not be immediately reflected in official documents. Share transfers are only recorded in the Registrar of Companies’ records at the time of the annual return submission.
• Verification Challenges: There is no immediate way to check for subsequent changes in shareholding after the annual return. This is why our SEARCH REPORT includes a timeline review, allowing decision-makers to assess any changes in shareholding trends.
• Declarations: Banks and financial institutions can request a declaration signed by major shareholders or ask the board of directors to confirm any changes in shareholding since the last annual return.

3. Registered Address

• Address Changes: Companies can change their registered address for various purposes, such as obtaining a facility, opening a bank account, or registration. While billing proof can confirm the address, it can still be manipulated.
• Investigative Measures: Thoroughly investigate marketing materials, social media, and websites to verify the strategic importance of the address for the business. For example, a restaurant operating in southern Sri Lanka might register a Colombo address just to open a bank account.

4. Articles of Association

• Instant Changes: Changes to the Articles of Association can be made instantly. It’s important to review these documents carefully, especially sections related to share transfers and authorizations.
• Key Sections: Focus on who authorizes share transfers, whether board approval is required, and how the share transfer price is decided.

5. Company Name

• Name Changes: While the company number remains unchanged, the company name can be easily checked on the Registrar of Companies’ online portal (eROC). This ensures that any name changes are accurately reflected.

The Importance of SEARCH REPORTS

These are some of the key reasons why our SEARCH REPORT is vital for every bank, financial institution, and even government organization. Hiring a third-party professional to conduct these reports before dealing with any customer, prospect, or business partner can prevent potential issues and ensure informed decision-making.

Over the past decade, we have provided these search reports to numerous international clients before they engage with companies in Sri Lanka. The question remains: how important are these details to local institutions? Do they conduct this research, or do they simply rely on the information disclosed by clients?

By prioritizing thorough research and verification, banks and financial institutions can safeguard their operations and build stronger, more reliable partnerships. Contact us today to learn more about our SEARCH REPORT services and how we can help you ensure the accuracy of your client information.