TYPES OF SHARES
Mauritius law contemplates three types of shares, an ordinary share, a preference share, and a participating preference share. An ordinary share is defined as a share which is not a preference share or a participating preference share.
PREFERENCE SHARE/PARTICIPATING PREFERENCE SHARE
Preference shares may be issued where the articles permit. The rights of the holders of preference shares in relation to other share must be clearly set out in the memorandum or articles with respect to:
a) repayment of capital
b) participation in surplus assets and profits
c) cumulative or non-cumulative dividends
d) voting, and
e) priority of payment of capital and dividend
A preference share is defined as one which entitles the holder to a dividend of a fixed amount, or not exceeding a fixed amount, whether cumulative or not, and, in a winding up, to repayment of capital, in priority to any other class of shares, but which confers no other rights in respect of dividend or capital.
A participating preference share is defined as a preference share which entitles the holder -
( a ) in addition to a preferential dividend, to participate for dividend in any surplus profits with the ordinary shareholders once the ordinary shareholders have received the equivalent of the preferential dividend; and/or
( b ) in addition to a preferential right to repayment on a winding up, to participate with the ordinary shareholders in any surplus which may remain after the paid up capital has been repaid
REDEMPTION OF SHARES
Ordinary shares, except in the case of Offshore Investment Companies, may not be redeemed. Preference shares can be redeemed. A redemption of preference shares is not deemed to reduce the amount of the share capital of the company.
Preference shares can be redeemed of profits which would otherwise be available for dividend, or out of the proceeds of a fresh issue of shares made for the purposes of the redemption.
Where a preference share is redeemed otherwise than out of the proceeds of a fresh issue, a sum equal to the nominal amount of the shares redeemed is transferred out of profits which would otherwise have been available for dividend, to a capital redemption reserve.
The capital redemption reserve may be applied in paying up unissued shares of the company to be issued to members as fully paid bonus shares.
Any premium payable on redemption shall be provided for out of profits or out of the share premium account before the shares are redeemed.
REDUCTION OF SHARE CAPITAL
A redemption of preference shares shall not be deemed to reduce the amount of the share capital of the company.
The share capital can be reduced, where the articles permit, in any manner, including by extinguishing or reducing the liability on any of the shares in respect of share capital not paid up; by cancelling any paid up capital which is lost or unrepresented by available assets; by paying off any paid up share capital which is in excess of the needs of the company; or by altering the memorandum to reduce the amount of share capital.
The Companies Act seems to require an application to court for permission to reduce capital which makes the process time-consuming and expensive. Provision is made for creditors to be heard before the court confirms a reduction in share capital.
THE OFFSHORE INVESTMENT COMPANY
In 1995 regulations were made which clarified the position with regard to variable capital companies in Mauritius.
From the beginning of the offshore centre in Mauritius, offshore companies had been set up as the operating subsidiaries of open-ended funds established in jurisdictions such as Luxembourg and Dublin for investment in India.
When shares in the Luxembourg fund were redeemed, there was a parallel redemption of shares in the Mauritian subsidiary. The redemption was funded from the disposal of investments in India and was invariably a redemption out of the capital of the Mauritian company. Until 1995, it was unclear whether Mauritian law permitted such a redemption out of capital. On a reading of the provisions of the Companies Act relating to redeemable preference shares, it would seem not.
The Mauritius Offshore Business Activities (Companies) Regulations 1995 put the matter beyond doubt by providing that an offshore investment company can redeem shares out of profits, gains or revenue, whether realised or unrealised, and out of the paid up capital, the share premium account or any other reserves. Upon redemption the capital is reduced by the nominal value of the redeemed shares.
An offshore investment company is defined as an offshore company whose business consists of investing its funds mainly in securities with the aim of spreading investment risk and giving members of the company the benefit of the results of the management of its funds.
The 1995 Regulations thus introduce the variable capital company to Mauritian law. The Regulations are stated to be deemed to have come into operation on 1st July 1993 and thus cover the situation of the fund companies set up prior to 1995.
TREASURY SHARES
The Companies Act does not define a treasury share. Section 57(1)(e) prohibits a company from acquiring, by way of purchase or otherwise, any of its issued shares or any share of its holding company. This subsection is specifically disapplied in the case of offshore companies, as is Section 13, which prohibits a company from becoming a member of its holding company. It is possible, therefore, for an offshore company to hold shares in itself, which can be described in the articles as treasury shares.
PREMIUM
A share can be issued at a premium. There are no restrictions on the size of the premium in proportion to the nominal value of the share.
Where shares are issued at a premium, a sum equal to the aggregate amount or value of the premiums on the shares, must be transferred to a share premium account.
The share premium account can be applied in the main, in paying up unissued shares to members as fully paid bonus shares, in paying up in whole or in part the balance unpaid on shares previously issued to members, in writing off preliminary expenses of the company, and in providing for the premium payable on redemption of redeemable preference shares.
The content of this article is intended to provide general information on the subject matter. It is not, therefore, a substitute for specialist advice.
Mauritius: Doing Business In Mauritius - Capital
Last Updated: 21 August 1996
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