Investment in Sri Lanka

 
Investments in Shares by Resident Outside Sri Lanka

01. In Ordinary Shares

Permission has been granted by the Controller of Exchange for the issuance of shares by companies incorporated in Sri Lanka to persons resident outside Sri Lanka (non-residents) by notices published in the Government Gazette Notification No. 1232/14 of 19.04.2002 which was subsequently amended by Gazette Notification No 1248/19 of 08.08.2002, Gazette Notification No 1685/2 of 21.12.2010 and Gazette Notification No 1737/9 of 20.12.2011, subject to certain exclusions, limitations and conditions.

The payments for acquisition or transfer of shares shall be made only out of or into a “Securities Investment Account” (SIA) opened in a Domestic Banking Unit of a licensed commercial bank.

The dividends, sale proceeds, liquidation proceeds, proceeds generated through capital redemption or share buy back in relation to the investments made in shares of both listed and unlisted companies may be credited to the SIA through which the investments were initially made. Payments in relation to the share acquisition such as bank charges, Government taxes, stamp duty, payments to brokers etc. can also be made through the SIA.

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02. In Preference Shares

Permission has been granted by the Controller of Exchange for the issuance and transfer of Sri Lanka rupee denominated redeemable preference shares in a company classified as specified business enterprises to persons resident outside Sri Lanka (non-residents) by notices published in the Government Gazette Notification No. 1791/43 of 04.01.2013, subject to the conditions specified  in the above gazette.

The tenure of a preference share shall not be less than three years from the date of issue.

The conversion of the preference shares into ordinary shares may be effected at any time and shall comply with the exclusions and limitations specified in the Government Gazette Notification No 1232/14 of 19.04.2002 as amended. 

The payments for acquisition or transfer of preference shares shall be made only out of or into a “Securities Investment Account” (SIA) opened in a Domestic Banking Unit of a licensed commercial bank.

 

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Investments in Sri Lanka Development Bonds by Persons Resident Outside Sri Lanka

Permission has been granted for the following eligible investors to invest in Dollar denominated Government bonds titled Sri Lanka Development Bonds (SLDBs), under the Government Gazette Notification No 1559/16 of 23.07.2008. As per the government Gazette Notification No 1559/16 of 23/07/2008, the following investors can invest in SLDBs:

  • Primary Dealers appointed by the Central Bank of Sri Lanka
  • Citizens of foreign states whether living in Sri Lanka or outside Sri Lanka
  • Citizens of Sri Lanka who are living outside Sri Lanka, permanently
  • Citizens of Sri Lanka who have proceeded outside Sri Lanka to take up employment or to set up a business or engage in a profession
  • Companies or firms established outside Sri Lanka
  • Companies registered to carry on insurance business in Sri Lanka

Permission of the Controller of Exchange has been granted to designated agents (Primary Dealers and Authorized Dealers in foreign exchange who have been appointed by the Superintendent of Public Debt) to purchase and market SLDBs issued by the Government of Sri Lanka. Designated agents are permitted to maintain “Sri Lanka Development Bond Investment Account (SLDBIA)” and “Dollar Account for Bond Investment (DABI)” in USD with a commercial bank for the purpose of dealings in SLDBs.

Designated agents are permitted to maintain “Sri Lanka Development Bond Investment Account (SLDBIA)” and “Dollar Account for Bond Investment (DABI)” in USD with a licensed commercial bank for the purpose of dealings in SLDB.

Payments for acquisition of SLDB shall be made only out of or into a Securities Investment Account (SIA) opened with a Domestic Banking Unit of any licensed commercial bank.

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Investments in Rupee Denominated Treasury Bonds by Persons Resident Outside Sri Lanka

The Government of Sri Lanka opened the rupee denominated Treasury bond (T-bond) market  for investors resident outside Sri Lanka, with the objective of developing the debt securities market in Sri Lanka, with effect from November 2006.

Permission has been granted through the Government Gazette Notification No. 1481/1 of 22.01.2007 for resident outside Sri Lanka to invest in rupee denominated T-bonds. Investors resident outside Sri Lanka can invest up to 12.5% of the total outstanding stock of T-bonds and T-bills at a given time.

Non-resident investors shall make their investments in T-bonds  only out of or into a Securities Investment Account (SIA) opened in the Domestic Banking Unit of any  licensed commercial bank.

Proceeds of sale or maturity, coupon of the T-bonds can be credited into the SIA through which the initial investment was made to acquire the T-bonds.. The ancillary payments such as bank charges, government taxes, stamp duty, payments to brokers, primary dealers etc. can be made out of the funds in the SIA.    

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Investments in Rupee Denominated Treasury Bills by Resident Outside Sri Lanka

The Government of Sri Lanka, opened the rupee denominated Treasury bill (T-bill) market for investors resident outside Sri Lanka, with the objective of further widening and diversifying the Government securities market and enhancing the competition in the Treasury bill market with effect from 23.05.2008.

The investors are permitted to invest up to 12.5% of the total outstanding stock of T-bonds and T-bills at a given time.

T- bills can be purchased by a resident outside Sri Lanka through participating agents, i.e., licensed commercial banks and primary dealers.

Non-resident investors shall make their investments in T-bills only out of or into a Securities Investment Account (SIA) opened in the Domestic Banking Unit of any  licensed commercial bank.

Proceeds of sale or maturity, coupon of the T-bills can be credited into the SIA, out of which the initial investment was made to acquire the T-bills. Ancillary payments such as bank charges, Government taxes, stamp duty, payments to brokers, primary dealers etc. can be made out of the funds in the SIA.

Details on availability of T-bills and prevailing market rates can be obtained from licensed commercial banks, primary dealers and from the Central Bank website (www.cbsl.gov.lk).


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Investments in Special Foreign Investment Deposit Account (SFIDA) by Persons Resident Outside Sri Lanka

Permission has been granted by the Controller of Exchange to  Authorized Dealers to accept investments in deposits into their domestic banking units from persons outside Sri Lanka under the terms and conditions stipulated in the following  operating instructions/directions.

Non-resident investors, who wish to maintain deposits in Sri Lanka can open an SFIDA with any licensed commercial bank. An SFIDA can be opened as time or saving deposits in designated foreign currencies or in Sri Lanka rupees and can be held jointly, subject to maintaining of a minimum balance of USD 10,000.

Foreign investors shall make their investments in SFIDA directly or through a Securities Investment Account (SIA) opened in the Domestic Banking Unit of any licensed commercial bank.

If the investment in SFIDA was made through a SIA, the maturity proceeds of SFIDA can be credited into the SIA out of which the initial deposit was placed. Payments such as bank charges, Government taxes, stamp duty etc. can be made out of the funds in the SIA.

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Permission for Companies Incorporated Outside Sri Lanka to Establish Places of Business in Sri Lanka

Permission has been granted by the Controller of Exchange by a notice published in the Government Gazette No. 1681/10 dated 22.11.2010 for companies incorporated outside Sri Lanka to register as an overseas company under the Companies Act No. 07 of 2007 to carry on business in Sri Lanka as a branch, project, liaison, representative office or any similar office (overseas company).

As per the said gazette notification, an overseas company engaged in permitted commercial, trading, or industrial activity needs to invest a minimum of USD 200,000. The said minimum investment requirement shall be remitted by the parent company only through their Securities Investment Account (SIA) opened in a licensed commercial bank.

After registration of the overseas company in Sri Lanka, rupee equivalent of USD 200,000 should be transferred from the SIA of the parent company to the rupee account of the overseas company in Sri Lanka.

Profits, surplus funds, franchise/royalty payment from the overseas office can be received to the credit of the SIA of the parent company. Further, based on the requirement, the parent company can make payments for the maintenance of the overseas office out of the funds in the SIA of the parent company.

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Investments by Persons Resident Outside Sri Lanka in Rupee Denominated Debentures Issued by the Companies Incorporated in Sri Lanka

Permission has been granted by the Controller of Exchange under a notice published in the Government Gazette  No 1681/11 of 22.11.2010 for persons resident outside Sri Lanka to invest up to 100% of the listed debentures in the Colombo Stock Exchange.
 
Non-resident investors may make their investments in listed debentures only out a Securities Investment Account (SIA) opened in the Domestic Banking Unit of any licensed commercial bank.

The proceeds of sale or maturity of debentures can be credited into the SIA out of which the initial investment was made in debentures. Payments such as bank charges, Government taxes, stamp duty etc. related to the acquisition of debentures can be made out of the funds in the SIA.

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Investments by Persons Resident Outside Sri Lanka in Units Issued by Local Unit Trusts

Permission has been granted by the Controller of Exchange for persons resident outside Sri Lanka to invest in Units issued by Unit Trusts in Sri Lanka which operate on a licence issued by the Securities and Exchange Commission of Sri Lanka (SEC), under the Government Gazette Notification No 1719/22 of 18.08.2011.

Foreign investors may invest in units in a unit trust directly or through a Securities Investment Account (SIA) opened in the Domestic Banking Unit of a licensed commercial bank.

If the Units have been purchased through a SIA, the proceeds on sale or redemption of units and dividends income can be credited into the SIA through which the initial investment was made to acquire the Units.

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Lending money to Sri Lankan companies (under general or special permission) by Foreign Investors

Under section 5 of the Exchange Control Act, any person resident in Sri Lanka requires the prior permission of the Central Bank to borrow in foreign currency.

Permission has been granted for companies incorporated under the Companies Act No. 07 of 2007 to borrow from a person resident outside Sri Lanka (Lender) under the External Commercial Borrowing Scheme (ECBS) introduced by the Government Gazette Notification No 1791/15 of 01.01.2013.

ECBS is a general permission that has been granted by the Controller of Exchange for a company incorporated under the Companies Act, No. 07 of 2007 to borrow from a person resident outside Sri Lanka, under the External Commercial Borrowing Scheme (ECBS), commencing 01.01.2013 to 31.12.2015.

However, this permission shall not apply to a company limited by guarantee or an offshore company.

A borrower may obtain USD 30 million or its equivalent value in any other foreign currency under the ECBS provided that the maximum amount of borrowing per company per each calendar year shall be USD 10 million or its equivalent value in any other foreign currency.

Any company which intends to borrow above the said limits shall obtain a special permission from the Controller of Exchange.

The proceeds of the loan which has been obtained with the special permission of the Controller of Exchange shall be remitted to Sri Lanka only through a Securities Investment Account (SIA) opened with the Domestic Banking Unit of a licensed commercial bank in the name of the lender.

The loans which have been obtained under the ECBS may also be remitted to Sri Lanka through a SIA opened in the name of the lender.

However, loan recoveries, interest, fees and other payments related to the loan, funds realized from the disposal of the security, any compensation awarded by a Court of Law in a legal action taken at the time of a default of a loan can be credited to SIA and repatriated out of the SIA, provided that the loan proceeds have been initially granted through the SIA of the lender.

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