The Central Bank of Sri Lanka (CBSL) has introduced new rules governing structural changes in licensed finance companies (FCs), tightening oversight of investments, business expansion, capital adjustments and other major corporate changes.
The new Finance Business Act Directions No. 04 of 2026 on Structural Changes consolidate the regulatory framework applicable to FCs and revoke three previous directions. Issued in August, the Directions take effect immediately, subject to transitional provisions.The CBSL said the new framework is aimed at ensuring that structural changes in finance companies are carried out in a prudent, transparent and orderly manner, while protecting the resilience and soundness of individual institutions and the stability of the wider financial system. Under the new regime, finance companies must obtain prior
approval from the relevant authority specified by the CBSL before undertaking designated structural changes. Approval responsibilities have been divided between the Governing Board of the CBSL and the Director of the Department of Supervision of Non-Bank Financial Institutions (DSNBFI).
The CBSL Governing Board’s approval is required for the formation or acquisition of subsidiaries or associate companies, both locally and overseas, as well as increases in investments in such entities. Approval is also required for acquiring or disposing of a subsidiary or associate’s business, selling all or part of an FC’s own business, acquiring another company’s business and mergers or amalgamations with other financial institutions.
Changes to an FC’s name and major Board restructuring will also require Governing Board approval. A Board restructuring is defined as the replacement of more than 50% of Board members within a three-month period. Meanwhile, the Director of DSNBFI will oversee changes to share capital, including share issuances, cancellations, splits, consolidations and buy-backs, along with amendments to Articles of Association.
Approval will also be required for starting non-finance-related business activities and for transferring or selling assets worth more than 10% of core capital below prevailing market value. The new framework marks a significant strengthening of CBSL oversight over the strategic and structural activities of finance companies.
Source: Daily News
