Sri Lanka’s New Insolvency Act Comes Into Effect Following Speaker’s Endorsement
COLOMBO — Speaker of Parliament Dr. Jagath Wickramaratne has officially endorsed the certificate on the Rescue, Rehabilitation and Insolvency (Corporate and Personal) Bill today (17).
With the Speaker’s signature, the legislation officially enters into force as the Rescue, Rehabilitation and Insolvency (Corporate and Personal) Act, No. 12 of 2026, according to a statement from the Department of Communication of Parliament.
Legislative Timeline
- First Reading: March 17, 2026
- Passed by Parliament: May 6, 2026 (following a parliamentary debate)
- Enacted into Law: June 17, 2026
Key Legal Amendments and Repeals
The new Act modernizes Sri Lanka’s financial and legal framework by repealing outdated colonial-era laws and amending several key existing statutes:
- Repealed: The Insolvency Ordinance (Chapter 97).
- Amended: The Companies Act, No. 7 of 2007.
- Amended: The Inland Revenue Act, No. 24 of 2017.
- Amended: The Mediation Boards Act, No. 72 of 1988.
Core Objectives of the Act
The legislation is designed to boost confidence and predictability in the credit market by introducing structured frameworks for both individuals and businesses.
1. Personal Insolvency & Debtor Protection
For individual citizens, the Act introduces formal procedures for debt protection, moratoria, and debt restructuring. Crucially, it safeguards a debtor’s reasonable income and essential assets, ensuring that honest individuals facing financial distress are given a structured “fresh start” rather than total financial ruin.
2. Corporate Rehabilitation & Governance
For the business sector, the Act shifts the focus from outright liquidation to corporate recovery. It establishes legal mechanisms to rehabilitate distressed companies that remain fundamentally viable. Furthermore, it introduces updated regulations governing corporate governance, receivership, and cross-border insolvency to better align Sri Lanka with international financial standards.
