Choosing the right directors is one of the most important decisions you will make when starting a company. Directors play a key role in the success and governance of your business they are not just figureheads, but strategic decision-makers who carry legal responsibilities under the Companies Act of Sri Lanka. Appointing the wrong individual can lead to serious consequences, both operationally and legally.
This guide outlines the essential legal requirements, disqualifications, and practical tips to help you select directors who can support your startup’s growth and long-term stability.
Legal Requirements for Appointing Directors in Sri Lanka
According to the Companies Act No. 7 of 2007, every company must appoint at least one director. While there is no legal requirement for directors to be residents of Sri Lanka, they must comply with specific eligibility and procedural rules.
To legally appoint a director, the following conditions must be met:
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The individual must provide written consent to act as a director using Form 18.
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They must declare that they are not disqualified from being appointed or holding office as a director.
The company is required to submit this consent form to the Registrar of Companies at the time of incorporation or when appointing new directors later.
Who Cannot Be Appointed as a Director?
Certain individuals are legally disqualified from being appointed as directors. These include:
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Individuals under 18 years of age
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Undischarged insolvents (persons declared bankrupt and not yet legally released)
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Individuals prohibited from being directors under Sections 213 or 214 of the Companies Act, or any previous company laws
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Persons declared of unsound mind by a court of law
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Non-natural persons (for example, other companies)
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Anyone who does not meet the qualifications specified in the company’s Articles of Association
Failing to comply with these legal requirements can result in penalties and may invalidate board decisions.
What Makes a Great Director for Your Startup?
Beyond meeting legal requirements, the effectiveness of your startup’s board depends on the quality and suitability of the directors you appoint. A strong director should bring more than a prestigious title they should add real value to your business.
Here are the qualities to look for:
Complementary Skills and Expertise
Choose individuals whose strengths fill the gaps in your own skill set. For example, if you are technically strong but lack financial knowledge, consider a director with experience in accounting or corporate finance. Others may bring legal, marketing, or operational expertise.
Industry Understanding
Directors with experience in your business sector can help you make more informed decisions, avoid common pitfalls, and navigate competition. They also bring credibility to your startup when dealing with investors or regulatory bodies.
Independent Thinking
Avoid appointing directors who agree with everything you say. Look for people who can challenge your ideas constructively, offer alternative solutions, and hold you accountable.
Shared Vision and Values
A misalignment in goals or ethics can lead to conflict and stagnation. Choose directors who genuinely believe in your company’s mission and are committed to building a sustainable future with you.
Trustworthiness and Legal Integrity
Since directors are legally responsible for the company’s operations and financial integrity, they must be reliable, ethical, and transparent in their actions. You must be able to trust them fully with sensitive and strategic matters.
The Risk of Appointing the Wrong Person
Appointing an unsuitable or disqualified director can have serious implications:
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Mismanagement and poor decision-making
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Legal liabilities for the company and its shareholders
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Damage to your brand’s reputation and investor confidence
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Complications in removing the director later, especially if shares or control have been transferred
That’s why it’s important to approach director appointments with the same care you would give to choosing a co-founder.
Final Thoughts
Choosing the right directors is not just a box to check during company registration it is a strategic move that can determine your startup’s success or failure. Ensure every appointment is legally compliant, ethically sound, and aligned with your long-term goals.
If you're unsure about the legal process or how to structure your board effectively, getting professional guidance can save you time, money, and stress.
Need help appointing the right directors and setting up your company properly? Talentspark Consulting offers reliable support for: Business Registration, Company Secretary Services, EPF/ETF Registration or Website & App Development
Let’s build your business on a strong foundation. Contact us today for expert guidance.
