The recent legal developments in Mauritius

BLC Chambers in BLC Chambers in Ebene look at the latest legal changes in Mauritius look at the latest legal changes in Mauritius

Introduction

The advent of the newly elected government in Mauritius has been the catalyst for several developments that have already taken place in the regulatory regime pertaining to the financial sector or are in the pipeline. The avowed intention is to further enhance the reputation of Mauritius as an international financial centre of good standing.

Some of the major developments include, inter alia, the application of the substance requirements by the Financial Services Commission (FSC) which has been in the offing since 2013, the revisions to the Insurance (Amendment) Act 2015 (the “Act”), the Double Taxation Agreement (DTA) between Mauritius and South Africa and the proposed revision to the Guide to Corporate Governance.

Application of the substance requirements

The revision made to Chapter 3 of the 'Guide to Global Business' (the “Guide”) on the September 4 2013 by the FSC enhanced the substance requirements for Category 1 global business companies (“GBC 1”) which are enforceable since January 2015.

A GBC 1 must now comply with the 'Control and Management of Conduct of Business' by satisfying at least one of the following requirements:

(a) the corporation must have office premises in Mauritius;
(b) the corporation must employ a resident of Mauritius on a full time basis;
(c) the corporation's constitution must contain a clause whereby all disputes arising out of the constitution must be resolved by way of arbitration in Mauritius;
(d) the corporation must hold within the next 12 months, assets (excluding cash held in bank account, shares/interests in another GBC) which are worth at least $100,000 in Mauritius;
(e) the corporation's shares must be listed on a securities exchange licensed by the FSC;
(f) the corporation must have a yearly reasonable expenditure in Mauritius which can be expected from any similar corporation in Mauritius.

Insurance (Amendment) Act 2005

The objective of the Insurance (Amendment) Act 2005 (the “Act”) is to allow the FSC to exercise more effective supervision over related companies of an insurer. The amendment to the Act caters for the appointment of a Special Administrator upon request by the Minister where the FSC is satisfied that the liabilities of an insurer and any of its related companies, exceed its assets by at least one billion rupees and such excess is a threat to the soundness of the financial system of Mauritius. The amendment further provides that the approval of the Minister is required for the transfer of undertaking, in whole or in part, of an insurer and any of its related companies to a particular insurer and its related companies.

One of the features of the amendment is that the Special Administrator shall possess the equivalent qualifications of an insolvency practitioner under the Insolvency Act 2009. The Special Administrator shall have the same powers, duties and functions of an administrator under the Financial Services Act 2007 and Insolvency Act 2009 and of a Conservator under the Insurance Act 2005.

Revised Double Taxation Agreement (DTA) between Mauritius and South Africa

The Double Taxation Avoidance Agreement (Republic of South Africa) Regulations 2015 (the “Revised DTA”) between Mauritius and South Africa will be effective as from January 1 2016 following the memorandum of understanding (“MOU”) between the two countries on May 22 2015.

Article 4(1) of the Revised DTA brings clarity to the determination of residency of a person, other than an individual, who is a resident of both countries. In order to determine the contracting state of such person, the competent authorities shall take into account, amongst others, the following:

(a) where the meetings of the board of directors or equivalent body are usually held;
(b) where the Chief Executive Officer and other senior executives usually carry on their activities;
(c) where the senior day to day management of the person is carried on;
(d) where the person's headquarters are located;
(e) which country's laws govern the legal status of the person;
(f) where its accounting records are kept; and
(g) any other factors that may be identified and agreed by the competent authorities of the contracting states.

Other key features of the Revised DTA are listed in the table below:

Revised code of corporate governance

The National Committee on Corporate Governance (NCCG) has proposed a revamped draft to the current Guide to Corporate Governance 2004. It is likely that a new Code shall come into effect by the end of 2015.

The need to review the current 2004 code has been widely accepted by stakeholders of the Mauritian economy for various reasons, the main ones being that it was over 12 years old, needed to be aligned with best international practices, laws and guidelines (the Bank of Mauritius guidelines) and following recommendations from the World Bank.

The salient features of the draft code include:

(a) The new code would be more specific rather than a general code applicable to any entity through the use of implementation guidance for Banks, non-banking financial institutions, listed corporations on the stock exchange of Mauritius.
(b) Family businesses and Category 1 global business companies would also be concerned by the new code.
(c) The new code would also provide for a compulsory disclosure and an enhanced disclosure.
(d) The new code is based on 15 governance principles which would include the role of the Board, its composition, conflict of interest as well as board committees.

This article is intended to provide general information only. It is not intended to offer, nor should it be interpreted as offering, legal advice. You must not act upon the matters referred to in it without taking specific advice.