In implementing its first budget since the 2014 general elections, Parliament passed the Finance Act 2015 which amends various statutes, including:
- the Banking Act 2004;
- the Bank of Mauritius Act 2004;
- the Borrowers Protection Act 2007; and
- the Income Tax Act 1995.
Banking Act 2004
Exemptions from moneylender licence
Up until December 2013, the activity of moneylending in Mauritius by entities not specifically licensed as Mauritian banks under the Banking Act 2004 (BA) was governed by the Moneylenders Act 1960 (MLA). The MLA was repealed on 21 December 2013 and certain licensing requirements for moneylenders were moved under the BA.
Under the MLA, foreign lenders were expressly exempted from the licensing requirements but these provisions were not transposed with the same clarity in the BA.
The Finance Act 2015 adopted in May 2015 brought amendments to the BA clarifying the scope of the moneylender's licence. In a new schedule 4, the BA provides an exhaustive list of persons exempted from moneylender's licence, amongst which:
- A banker, an insurer or an institution not conducting lending as its primary object but as an incidental activity.
- A body corporate, incorporated and expressly empowered, or any other person expressly empowered, by any other enactment to lend money.
- An organisation whose operations are of an international character and which is approved by the Minister.
- A specialised financial institution licensed by the central bank to engage in lending activities.
- A person licensed under the Financial Services Act 2007.
- Any trustee in the exercise of his functions under the Trusts Act 2001.
These exemptions dissipate creeping uncertainties further to the abrogation of the MLA that foreign banks, foreign financial institutions, funds and holders of global business licences under the Financial Services Act 2007 needed a license to lend to Mauritian or foreign entities.
However, these new provisions open the debate regarding the need for a licence for intra-group lending between domestic holding companies and their subsidiaries and the overlap, if any, with the treasury management license issued by the Financial Services Commission.
The Bank of Mauritius has not yet issued any guideline or circular on the exact scope of application of the exemptions.
Specialised financial institution
In light of the Government's target to position the small and medium enterprise sector as a significant pillar of the economy, the Banking Act 2004 has been amended to enable the setting up of a new type of entity: the specialised financial institution.
This entity will be regulated by the Bank of Mauritius and we await guidance from the Bank of Mauritius setting out the regulatory framework in respect of its implementation.
Bank of Mauritius Act 2004
The Bank of Mauritius Act 2004 has been amended such that the regulation of payment systems and payment scheme providers now falls within the regulatory scope of the Bank of Mauritius.
Regulation in this area prior to the amendment was fragmented, with the Bank of Mauritius overseeing the management of payment systems and clearing houses being regulated by the Securities Act 2005 and, in the case of the Central Depository & Settlement Co. Ltd which clears transactions of the country's primary exchange, The Securities (Central Depository, Clearing and Settlement) Act 1996. The amendment to the Bank of Mauritius Act 2004 thus results in a consolidated approach with the Bank of Mauritius being responsible for regulating, licensing, registration and overseeing of payment systems, clearing houses and the issuance of payment instruments.
At this stage, we await detailed regulations intended to set out the mechanics in relation to the amendments.
Borrowers Protection Act 2007
Due diligence of guarantors
All loans granted for a sum not exceeding MUR 2,000,000 are subject to a distinct set of rules intended under by the Borrowers Protection Act 2007 to protect consumers.
In the 2014 case of Bramer Banking Corporation Ltd v Garrioch A M V & Anor 2014 SCJ 127, the Supreme Court of Mauritius ruled that it is the responsibility of the principal debtor to bring to the lender a guarantor who has the capacity to contract and who holds property sufficient to discharge the obligations contracted. The Supreme Court reiterated that the lender is under no obligation to ensure that a guarantor has capacity to contract and sufficient assets to discharge the obligations being secured.
The amendments to the Borrowers Protection Act reverse the Supreme Court's decision and now require that the lender perform appropriate due diligence on the debt repayment capacity of the guarantor in addition to that of the principal debtor.
Income Tax Act 1995
Levy on banks
The Income Tax Act 1995 has been amended to introduce a special levy on banks regulated by the Bank of Mauritius.
As from 1st July 2015 and until June 2018, each bank must pay a levy amounting to 3.4 % of book profit and 1% of operating income on its income derived from banking transactions with non-residents and entities holding a Global Business Licence issued by the Financial Services Commission of Mauritius. Additionally, each bank shall pay a levy of 10% on the chargeable income derived from sources other than those listed above.
As from July 2018, each bank shall pay a levy of 1.7% on book profit and 0.5% on operating profit.
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.