A Secure, Structured Way for Foreigners to Invest in Sri Lankan Land
While Sri Lankan law restricts direct freehold land purchase by foreign nationals, a well-established and secure legal structure exists for investment. This method, used widely by foreign investors, allows you to have full control and security over your chosen property.
1. Verify the Property (Due Diligence)
First, your Sri Lankan lawyer will conduct a thorough check on the land’s title (the ‘deed’). This search confirms the current owner has the clear and legal right to sell the property, ensuring it is free from any hidden problems.
2. Confirm the Boundaries (The Survey)
A licensed surveyor is hired to measure the land’s exact size and confirm its official boundaries. This step ensures that the physical land matches the legal documents perfectly.
3. Open Your Investment Bank Account
To bring your funds into Sri Lanka legally, you must open a specific/designated bank account called an Inward Investment Account (IIA). All funds for the property purchase must be processed through this account.
4. Establish Your Legal Structure
To hold the property, you will create a new Sri Lankan company. Because this company will be majority-owned by a Sri Lankan (on paper), it is legally allowed to buy freehold land. You will also create a 100% foreign-owned “Holding Company” to act as your investment vehicle.
5. Appoint a Local Partner
Your Sri Lankan ‘Property Company’ will be set up with a trusted local partner (a Sri Lankan citizen or entity) holding 51% of the shares. Your ‘Holding Company’ will hold the remaining 49%.
6. Take Full Control with Shares
This is the key to your control. The company is set up so that your 49% of the shares are ‘Voting Shares’, giving you 100% of the decision-making power. The 51% of shares held by your local partner are made ‘Non-Voting’.
7. Secure Your Investment
To secure your entire investment, you will provide a ‘loan’ from your IIA account to the property company that you hold 49% voting shares. The total shares of the property company are then held by you as security (collateral) for the loan, giving you full and secure control over the entire 100% shareholding of the property company.
8. Complete the Land Purchase
The ‘Property Company’, which you now fully control, uses the funds from your IIA account to legally purchase the land.
The Importance of Professional Management
This entire process is straightforward, secure, and gives you complete control over your asset.
However, it is a specialist legal structure. To ensure it is built and managed correctly, you must use a professional ‘company secretarial firm’ in Sri Lanka. They will handle the company setup, all legal filings, and annual management, leaving you free to enjoy your investment.
Your Essential Next Step: Professional Legal Consultation
For this reason, this process must not be attempted without specialist legal counsel.
Your first and most important step is to engage a reputable company secretarial firm in Sri Lanka.
By law (the Companies Act, No. 7 of 2007), every company in Sri Lanka must have a qualified Company Secretary. These firms are your primary legal experts for this process. They are responsible for:
- Legally incorporating the companies.
- Structuring the share capital (voting vs. non-voting).
- Drafting the loan agreement, trustee agreements and shareholder agreements.
- Ensuring your structure is fully compliant with all government regulations.
- Managing all mandatory annual filings to keep your company in good legal standing.
For further clarification, we strongly advise you to meet with a professional company secretarial firm to discuss your specific needs.
Should you require assistance in finding a qualified and vetted firm that specializes in foreign real estate investment, Lankainvestment.com is available to help connect you with the right professionals.
Frequently Asked Questions (FAQ)
Is this company structure 100% legal?
Yes, the structure itself is 100% legal. It uses the official laws in the Companies Act of Sri Lanka. This method is a well-established and standard way for foreign investors to securely control a land-owning company.
What is a 'Company Secretarial Firm' and why do I need one?
A ‘Company Secretarial Firm’ is a group of qualified legal experts. By law, every company in Sri Lanka must have one. They are essential for you. They will build this entire legal structure, draft the ‘iron-clad’ loan agreements to protect your investment, and manage all your annual government paperwork.
What is the 'Inward Investment Account' (IIA) for?
The IIA is a special bank account required by the government. It is used to bring your investment funds into Sri Lanka legally. Using this account also secures your right to take your profits (and original capital) back out of Sri Lanka in the future.
How can I be in 100% control if I only own 49% of the shares?
This is the most important part of the structure. Your 49% of shares are ‘Voting’ shares, and the 51% held by the local partner are ‘Non-Voting’ shares. This split gives you 100% of the decision-making power. Separately, the loan agreement (which you provide) gives you full security by holding the other 51% of shares as collateral.
What is the 'local partner' or 'trustee'? Who are they?
The ‘local partner’ is a Sri Lankan citizen or entity whose role is to hold the 51% ‘Non-Voting’ shares to make the company legally Sri Lankan. They have no control or decision-making power. Your Company Secretarial Firm will usually provide this professional, trusted service.
Is this process complicated?
It is a specialist legal process, but it is not complicated for you. Your professional Company Secretarial Firm will handle all the difficult parts. For you, the process is simple:
- You provide the funds.
- You sign the documents they prepare.
- You get full, secure control of your property.
Is this a better option than a 99-year lease?
It is a different option. A lease is temporary. This structure gives your company freehold ownership, which is permanent. It gives you a solid, lasting asset and is a more common choice for serious, long-term investors.
Disclaimer: This guide is for informational purposes only. All legal and financial matters must be handled by a qualified Company Secretarial Firm and a lawyer in Sri Lanka. Lankainvestment.com is available to help connect you with vetted professionals
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