Justiceface
Justiceface
Jun 17, 2026
Sri lanka

Sri Lanka Enacts Rescue, Rehabilitation and Insolvency Act

The Sri Lankan Parliament has enacted the Rescue, Rehabilitation and Insolvency (Corporate and Personal) Act, No. 12 of 2026, following the endorsement by Speaker Dr. Jagath Wickramaratne on June 17, 2026. This legislation introduces comprehensive reforms aimed at modernizing the country's insolvency framework for both individuals and corporations.

Key Provisions of the Act

The Act amends several existing laws, including the Companies Act, No. 7 of 2007, the Inland Revenue Act, No. 24 of 2017, and the Mediation Boards Act, No. 72 of 1988. It also repeals the Insolvency Ordinance (Chapter 97). Notable provisions include:

  • Personal Insolvency Procedures: Establishes mechanisms for debt protection, moratoria, and debt restructuring, ensuring the protection of a debtor's reasonable income and essential assets.
  • Corporate Governance and Receivership: Introduces measures to enhance corporate governance and streamline receivership processes.
  • Cross-Border Insolvency: Addresses issues related to cross-border insolvency, aiming to boost predictability and confidence in the credit market.

Implications for Stakeholders

The enactment of this Act is expected to provide a fresh start for honest individual debtors and establish a structured mechanism for the rehabilitation of distressed but fundamentally viable companies. By modernizing the insolvency framework, the legislation aims to enhance the overall business environment in Sri Lanka, fostering economic growth and stability.

Legal experts and financial analysts have welcomed the Act, noting that it aligns Sri Lanka's insolvency laws with international best practices. They anticipate that the reforms will improve the country's attractiveness to investors and provide more efficient solutions for debt resolution.

As the Act comes into force, stakeholders, including legal practitioners, financial institutions, and businesses, are advised to familiarize themselves with the new provisions to ensure compliance and to leverage the opportunities presented by the updated legal framework.