Ownership Structure
51 local. 49 foreign. One company.
Sri Lanka's Land (Restrictions on Alienation) Act No. 38 of 2014 prohibits foreign nationals from directly holding freehold land title. The legally recognised solution is a joint venture company — where the land is owned by the company, not by any individual.
Sri Lankan Partner
A Sri Lankan citizen or entity holds the majority shareholding. This satisfies the legal requirement for freehold land ownership under Sri Lankan law. The local partner's role, responsibilities, and management fee are defined precisely in the shareholder agreement.
Foreign Investor
The foreign capital partner holds 49% of the company. This is the maximum permitted under current law. Despite the minority shareholding, the investor's financial rights, including the full 100% cash sweep during Phase 1, are protected by the shareholder agreement, not by share percentage alone.
The Company
The private limited company, jointly owned, holds the freehold land title. The villa is built on and operated from this land. The company is registered under the Companies Act No. 7 of 2007 and, where applicable, with the Board of Investment of Sri Lanka (BOI).
Why the shareholder agreement matters more than share percentage
In a standard company, a 49% shareholder has minority rights. In this structure, the shareholder agreement overrides default company law provisions to explicitly protect the investor's financial interests. Specifically:
- The investor's capital contribution is documented as a defined sum with a clear recovery mechanism.
- Profit distribution is governed by the agreement, not by share percentage.
- No major decision, including asset sale, refinancing, or structural change, can be made without the investor's written consent.
- Exit terms and buyout rights are pre-agreed and legally binding.
Capital repatriation
Sri Lanka permits the repatriation of investment capital and profits through established Central Bank of Sri Lanka (CBSL) channels. The process requires:
- Investment to be brought in through a designated inward investment account (DIIA) at a licensed commercial bank.
- BOI registration for projects meeting the applicable investment threshold.
- Compliance with the Foreign Exchange Act No. 12 of 2017 for outward remittances.
- Annual audited accounts filed with the Registrar of Companies.
We work with established legal and accounting firms in Sri Lanka to manage this process. You are encouraged to appoint independent legal counsel of your own choosing to review all documentation.
Return Structure
The 100% Payback Waterfall.
The return structure is designed to be simple, transparent, and fair. There are no complex multi-tier formulas, no hidden deductions, and no ambiguity about when the investor has been made whole.
Full Recovery
Gross Revenue
All rental income collected by the company
Operating Costs
Staff, maintenance, utilities, insurance, platform fees
Local Partner's Management Fee
Pre-agreed fixed or percentage-based fee
Net Cash Flow
100% directed to the foreign investor
100% of net cash flow goes to the investor until cumulative payouts equal the original capital.
Permanent Partnership
Gross Revenue
All rental income collected by the company
Operating Costs
Staff, maintenance, utilities, insurance, platform fees
Local Partner's Management Fee
Pre-agreed fixed or percentage-based fee
Net Cash Flow
Split 50/50 between both partners
The deal flips permanently to a 50/50 split, reflecting the underlying legal equity held by both partners.
Worked Example
A $500,000 investment: how the numbers flow.
The figures below are illustrative only. Actual results depend on occupancy, pricing, and operating costs. Past performance is not indicative of future results.
Assumptions
Phase 1 Recovery Timeline
At ~8.4 years, cumulative payouts reach $500,000. The deal flips permanently to 50/50 from that point.
Phase 2 After the Flip
Once the $500,000 is fully recovered, the same villa continues generating income, now split 50/50. At the same net cash flow of $59,600 per year, each partner receives approximately $29,800 annually in perpetuity (subject to operating performance).
The investor retains their 49% equity stake in the company and the underlying land asset. The villa can be sold at any time by mutual agreement, with proceeds distributed according to shareholding.
Legal Framework
Built on solid legal ground.
The structure is not a workaround. It is the established, legally recognised path for foreign investment in Sri Lankan real estate. Every element is grounded in statute. We work with qualified Sri Lankan legal counsel on every transaction, and we encourage investors to appoint independent legal advisors of their own choosing.
Land (Restrictions on Alienation) Act No. 38 of 2014
Prohibits foreign nationals from directly holding freehold land title in Sri Lanka. The joint venture company structure, with a minimum 51% Sri Lankan shareholding, is the legally recognised mechanism to hold freehold land for the benefit of a foreign investor.
Companies Act No. 7 of 2007
Governs the formation, operation, and dissolution of private limited companies in Sri Lanka. The joint venture company is incorporated under this Act. Shareholder agreements, director appointments, and profit distribution are all regulated by this framework.
Board of Investment of Sri Lanka (BOI) Act
BOI registration provides additional legal protections for qualifying foreign investments, including guarantees against nationalisation, tax concessions, and facilitated repatriation of capital and profits. Projects meeting the applicable investment threshold are encouraged to register.
Foreign Exchange Act No. 12 of 2017
Governs all foreign currency transactions in Sri Lanka. Investment capital must be brought in through a Designated Inward Investment Account (DIIA) at a licensed commercial bank. Outward remittances of profits and capital are permitted subject to compliance with this Act.
Inland Revenue Act No. 24 of 2017
Corporate income tax applies to the joint venture company's profits. Withholding tax may apply to dividends distributed to foreign shareholders. The applicable rates and any available exemptions depend on the nature of the investment and BOI status.
Our Approach to Legal Structuring
We do not provide legal advice. Every transaction is structured with the involvement of qualified Sri Lankan attorneys. We have established relationships with reputable law firms who specialise in foreign investment and property law, and we facilitate introductions as part of our process.
The shareholder agreement, the most important document in this structure, is reviewed and executed with independent legal oversight. We strongly encourage every investor to have the agreement reviewed by a lawyer of their own choosing before signing.
Interested in Partnering?
Start a conversation.
We discuss every potential partnership individually. There is no standard product. Each structure is tailored to the property, the investor, and the goals of both parties.
Important Disclaimer
The information on this page is provided for general informational purposes only and does not constitute financial, investment, legal, or tax advice. The Ceylon Villas & Co. is not a licensed financial advisor, investment manager, or legal practitioner.
All financial projections, return estimates, and worked examples presented on this page are illustrative only. They are based on assumptions that may not reflect actual market conditions, occupancy rates, operating costs, or regulatory requirements at the time of any investment. Past performance and projected returns are not indicative of future results.
Investment in real estate, including through joint venture structures, involves significant risk. The value of property can decrease as well as increase. Returns are not guaranteed. You may receive less than the amount you invest.
Before making any investment decision, you should consult with a qualified and independent financial adviser, legal counsel, and tax professional who can assess your personal circumstances, risk tolerance, and applicable laws in your jurisdiction.
The legal framework described on this page reflects our understanding of Sri Lankan law as of the date of publication. Laws and regulations may change. You should obtain independent legal advice to verify the current legal position before proceeding.
© The Ceylon Villas & Co. All rights reserved. This page is intended for informational purposes only and does not constitute an offer or solicitation to invest.