The Financial Services Commission introduces new rules in support of the new business activity of shared services, showing a continuous boost to the regulatory framework adopted by the Mauritius International Financial Centre.
Over the past two decades, the Mauritius International Financial Centre (MIFC) has been offering an unparalleled platform of substance and has – rightly – gained the international repute of being a well-regulated and transparent jurisdiction. Indeed, over the years, the MIFC's main strategy has been on diversifying the sector's service by offering and developing creative, flexible, and value-added services; whilst still maintaining its competitive edge in such a fast-growing industry. In light of this forward-looking strategy, the Financial Services Commission (FSC) has been establishing new and robust frameworks to cater for those diverse services.
In 2019, the FSC released a consultation paper on the introduction of a new business activity: Global Shared Services and its regulatory framework. The objective behind the introduction of this new business activity is to ensure that "regulated financial services companies and their related entities are afforded an opportunity to optimise their business operations and centralise their key functions, eliminating the duplication of these functions across companies within the group."
In line with this objective, The Financial (Miscellaneous Provisions) Act 2022, Act No.15 of 2022, amended the Sixth Schedule of the Financial Services Act 2007 to include the business activity of global shared services and the Financial Services (Global Shared Services) Rules 2022 (the Rules) was enacted, setting out the type of entity to which the Rules would apply as well as the conditions necessary for an application for a Global Shared Services licence and provisions required from licensees thereafter. The Rules came into operation on 03 January 2023. This article aims at providing a summary of the Rules and the necessary conditions for a licence.
TO WHOM DO THE RULES APPLY?
The Rules will apply to: "an entity incorporated in Mauritius and whose main activity is to provide Global Shared Services to a related entity providing financial services outside Mauritius."
In other words, the Rules apply to an entity:
- incorporated in Mauritius;
- having its main activity in the provision of Global Shared Services;
- providing the said Global Shared Services to a related entity, i.e., an entity which forms part of its group structure; and
- the said related entity ought to be providing financial services outside of Mauritius.
TO WHOM DO THE RULES NOT APPLY?
The Rules shall not apply to a holder of a Management Licence issued by the FSC.
WHAT DOES "GLOBAL SHARED SERVICES" MEAN UNDER THE RULES?
Some stakeholders in the financial services industry have asked what does Global Shared Services mean and include? According to the Rules, Global Shared Services means "the global activity of global shared services referred to in the Sixth Schedule of the [Financial Services Act 2007] and includes the provision of 3 or more of the services specified in the Schedule." The Schedule lists out the following services:
- Records keeping
- Financial Statement preparation
- Invoicing and Payment of Bills
- Periodic regulatory filings
- Administration of Board proceedings
- Tax support services
- Debt collection
- Data capture and reporting
- Other services as may be approved by the Commission
This effectively means that an entity providing 3 or more of the services listed out in the Schedule of Rules will be deemed to be carrying out Global Shared Services.
WHAT DOES "DATA CAPTURE" MEAN?
Whilst most of the services listed in the Schedule to the Rules are readily identifiable, items 8 and 9 are open to interpretation.
Under Item 8, Data Capture and Reporting, the question that has arisen is what is Data Capture?
From the existing laws in Mauritius, there is no specific definition of "data capturing and reporting" provided in the Financial Services Act 2007 or in any other related rules. However, a simple dictionary meaning of "data capture" is: "the act of collecting information and changing it into a form that can processed by a computer."
Although there appears to be no specific definition even in other jurisdictions, the dictionary meaning appears to be in line with what "data capture" has been interpreted to be in those foreign jurisdictions.
For instance, the European Court of Justice in Infopaq International A/S v Danske Dagblades Foreining (C-5/08) EU:C:2009:465 (16 July 2009) explained a data capture process in accordance with the facts of the case and held that:
"The act of printing out an extract of 11 words, during a data capture process consisting in scanning of newspaper articles followed by the conversion into text file, electronic processing of the reproduction, storage of part of that reproduction and printing out, does not fulfil the condition of being transient in nature as required by Article 5(1) of the Directive 2001/29 on the harmonization of certain aspects of copyright and related rights in the information society and, therefore, that process cannot be carried out without the consent of the relevant rightholders."
Insofar as item 9 is concerned, this seems to be a catch-all or future proofing item which does create some ambiguity where further clarifications and/or guidelines issued by the FSC are likely going to be required.
APPLICATION FOR THE GLOBAL SHARED SERVICES LICENCE
It is now a mandatory requirement for entities that provide Global Shared Services to a related entity providing financial services outside Mauritius to apply for a licence with the FSC. Some conditions must be satisfied for the applicant entity to be eligible for the said licence. These conditions are set out in Rule 4(3) of the Rules and include that the entity:
- should be incorporated in Mauritius;
- should not hold any other licence, authorisation, registration or approval, as the case may be, under the relevant Acts except as approved by the Commission; and
- should not be engaged in the provision of any services or
activities other than those specified in the Schedule.
This means therefore that the entity shall be restricted to only providing Global Shared Services and the services or activities specified in the Schedule.
ADMINISTRATIVE AND ORGANISATIONAL RULES FOR LICENSEES
Licensees of a Global Shared Services Licence shall also abide by the administrative and organisational rules set out in Rule 5, which includes, amongst others:
- having a board of directors with at least 2 resident directors; 1 non-executive director and 1 executive director;
- a proportionate number of staff adequate to the size, nature and complexity of its services;
- a principal bank account in Mauritius;
- adequate internal control, risk management and governance policies and procedures;
- a business continuity and disaster recovery plan;
- professional indemnity insurance cover.
WHAT DOES THIS MEAN FOR EXISTING ENTITIES PROVIDING GLOBAL SHARED SERVICES?
Existing entities which are already providing Global Shared Services to a related entity which in turn provides financial services outside Mauritius shall have a transitional period of six months to apply for the licence. The transitional period expires on 03 July 2023.
SHARED SERVICES – A BENEFICIAL OFFERING TO MAURITIUS
The direction adopted by the FSC is reflective of the strategy of the MIFC – diversifying and implementing higher value services. By leveraging shared service offerings in Mauritius, which is a growing industry worldwide, the MIFC, as a jurisdiction is set to benefit from it.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.