Under Mauritian law, a floating charge is a general security interest over all present and future movable or immovable assets (including rights), which may change in quantity and value during the security period. The principles of floating charges in Mauritius derive from English Common Law known in Anglo-Saxon jurisdictions, but the relevant provisions are found, written in French, under the Mauritian Civil Code (based on the Napoleonic Code). This is a clear illustration of Mauritius' hybrid system.
In financing transactions, the floating charges are amongst the more popular security which lenders particularly banks like to have in their security package. Caution is called for though. Below are 5 things you should have in mind when thinking of a Mauritian floating charge:
1. Parties A floating charge can be granted by a debtor or a guarantor further to or in anticipation of a facility made available by an "institution agréée" (an authorised body). Article 2202-2 of the Mauritian Civil Code lists the authorised bodies entitled to benefit from the charge, being the Government of Mauritius, any bank licensed under the Mauritian Banking Act 2004, any insurance company and any other local or foreign financing institution approved by the Minister of Finance. The 1988 Institutions Agréées Regulation of the Minister of Finance names specific entities as approved bodies and also includes catch-all provision for (i) any body corporate certified holding a global business licence issued by the Finance Services Commission and (ii) any body corporate not registered in Mauritius and having no place of business in Mauritius. Although these two categories of approved bodies may look very wide, the spirit of Article 2202-2 of the Mauritian Civil Code is that these entities must be "financing" entities. This principle has been touched upon in a 2014 judgement of the Commercial Division of the Supreme Court (Atelier Etude Limousin & ors vs BPCE International et Outremer & anor 2014SCJ166).
2. Assets The "assiette" which can be covered by a floating charge is very wide as it allows the creation of a general security over all types of property and rights wherever located and whether they already exist or not in the assets of the grantor at the time of creation of the charge. In addition the floating charge is certainly one of the most flexible security interests available under Mauritian law as it allows the free disposal of the assets during the security period which is an invaluable advantage for the running of the grantor's business. The free disposal during the security period can however be limited contractually or be made subject to the beneficiary's prior consent.
3. Formalities The instruments creating the floating charge can be made by private or notarial deed and have to be registered with the Registrar General of Mauritius and inscribed in the public registers kept at the office of Conservator of Mortgages. The inscription is mandatory and it goes to the validity of the charge. The formalities have to be completed within 8 days (or 3 months if the grantor holds a global business licence issued by the Financial Services Commission). The cost associated with the registration and inscription is ad valorem but of approximately USD 1,800 if the secured obligations are higher in value to MUR 2,000,000.
4. Ranking A floating charge takes its ranking among the other secured creditors and in respect of the assets charged on the date of its inscription with the Conservator of Mortgages. The date of inscription will therefore determine whether it is a first ranking security or not. Beneficiaries of charges can agree to cede their ranking or to be treated pari-passu. In an insolvency procedure, a valid floating charge will benefit from a preferred ranking.
5. Enforcement A floating charge is an executory title, which means that there is no need for a judicial enforcement. However, enforcement will be subject to crystallising (converting) the floating charges into a fixed charge by drawing up an inventory of the specific assets over which the charge will be realised. The conversion into a fixed charge does not affect the ranking of the security which will remain determined by the date of inscription of the floating charge. Once assets have been identified and crystalized into a fixed charge, the beneficiary may proceed to the realisation of the security based on the nature of the underlying asset.
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.