Rescue, Rehabilitation and Insolvency (Corporate and Personal) Act 2026 · As enacted · Part XV
411. Wrongful trading
Official English translation. Where it differs from the Sinhala or Tamil text, the Act itself says which text prevails.
Official translationFrom Department of Government Printing, unchanged
A director of a company who believes that the company is unable to pay its debts as they become due
Rescue, Rehabilitation and Insolvency in the normal course of business, or within a reasonable time thereafter, shall, where a meeting has not already been convened under this subsection, forthwith convene a meeting of the directors of the company to consider –
whether the company is unable to pay its debts as they become due in the normal course of business, or within a reasonable time thereafter;
and
whether the Board of the company should –
resolve that an administrator of the company be appointed under section 186;
make an application to the court under paragraph (b) of subsection (1) of section 190 for the appointment of an administrator of the company; or
make an application to the court under paragraph (c) of subsection (2) of section 298 for the appointment of a liquidator of the company.
Where –
a director fails to comply with subsection (1);
at the time of that failure, the company was unable to pay its debts as they became due in the normal course of business, or within a reasonable time thereafter; and
a liquidation of the company commences within five years thereafter, the court may, on the application of the liquidator or a creditor, order that the director shall be liable for the whole or part of any loss suffered by creditors as a result of the
Rescue, Rehabilitation and Insolvency company not being put into administration or liquidation at the time of the failure.
Where –
either –
a meeting is convened under subsection (1)
but the directors fail to hold it; or
at a meeting convened under subsection (1), the directors fail to take one of the steps set out in paragraph (b) of subsection (1);
at the time of that failure, there were no reasonable grounds to believe that the company was able to pay its debts as they became due in the normal course of business, or within a reasonable time thereafter; and
a liquidation of the company commences within five years thereafter, the court may, on the application of the liquidator or a creditor, order that the directors of the company, other than those directors who attended the meeting and voted in favour of taking one of the steps set out in paragraph (b)
of subsection (1), shall be liable for the whole or part of any loss suffered by creditors as a result of the company not being put into administration or liquidation at the time of the failure, as the court thinks fit.
In making an order under this section, the court may, where necessary –
impose any term or condition; and
make any other ancillary order.
Rescue, Rehabilitation and Insolvency
Nothing in this section shall –
affect or limit the application of section 187 of the Companies Act; or
prevent the board of a company from convening a meeting of the shareholders to consider a resolution of the company for –
the appointment of an administrator under section 185;
an application to the court under paragraph (b) of subsection (1) of section 190 for the appointment of an administrator; or
an application to the court under paragraph (c) of subsection (2) of section 298 for the appointment of a liquidator.
CHAPTER 2
Voidable Transactions