Mauritius is known as an established financial centre and platform for foreign investments and debt financing of assets in Africa, Asia and the region offering financing structuring solutions to both institutional investors and international financial institutions. Here are 10 features which foreign lenders may consider when lending in Mauritius.1
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 The MLA was repealed on 21 December 2013 and the moneylender licensing regime was consolidated with that of banks under a set of amendments to the BA in 2015.
The amendments clarified the scope of the moneylender's licence by providing an exhaustive list of persons exempted from the need for moneylender's licence, including (i) a banker, an insurer or an institution not conducting lending as its primary object but as an incidental activity and (ii) body corporate, incorporated and expressly empowered, or any other person expressly empowered, by any other enactment to lend money.
These exemptions dissipated previous uncertainties as to whether foreign banks and foreign financial institutions needed a license to lend money in Mauritius.
2. Role of Mauritian entities
In cross-border transactions Mauritian entities are commonly used as holding companies or as special purpose vehicle for investments and enjoy the benefit of a range of Investment Promotion and Protection Agreements and Double Taxation Agreements. In a financing transaction, the Mauritian entity would typically either be the borrower which will on-lend or invests the funds borrowed into the operating entity located outside of Mauritius or intervene as a guarantor as the parent of the operating entity.
3. Types of vehicles
Mauritius offers a range of vehicles which may be adapted to maximise the investment opportunities of promotors and allow them to raise finance by debt or equity. The vehicles available are limited liability companies, foreign company registered in Mauritius, limited partnerships, protected cell companies, trusts and foundations.
In addition, the country offers the option of applying for global business licences, which would, in certain circumstances, allow access to the benefit of additional tax incentives and investment protection against nationalization of foreign assets and repatriation of investments.
Given the structuring and non-operational (or limited operational) role of Mauritian entities in investment or financing structuring, their Mauritian based assets tend to be limited with an an incidence on the type of collateral that would typically be sought. Security would thus typically be over:
- Shares in the capital of the Mauritian entity (to the extent that we are dealing with a company);
- Bank accounts; and
These assets will be secured by using the legal mechanisms of the pledge, the assignment by way of security and fixed or floating charges. The Mauritian structure would also typically provide personal security as guarantor.
As a general rule, a lender does not have to be licensed or registered in Mauritius to take security governed by Mauritius laws. However, to validly benefit from a fixed or floating charge a lender must qualify as an "institution agréée" (an approved body). The Mauritian legislation identifies approved bodies as including foreign financing institution while a regulation of the Minister of Finance names specific entities and provides catch-all categories being (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 seem broad, article 2202-2 of the Mauritian Civil Code has been interpreted narrowly to say that these entities must be "financing" entities2 to validly benefit of a fixed or floating charge.
5. Financial assistance
The notion of financial assistance under Mauritian law relates only to a company providing a loan, a guarantee or a security for the purpose of or in connection with the acquisition of its own shares. Mauritian company law prescribes that the board of the company must be satisfied of the following for such financial assistance to be validly approved, (a) the granting of assistance is in the interests of the company, (b) the terms and conditions of the assistance are fair and reasonable to the company and to any shareholders which are not principals of the assistance (a principal is the person whose obligations are being guaranteed or secured by the assistance) and (c) the company will satisfy a statutory solvency test immediately after granting the assistance. The solvency test is met if (a) the company is able to pay its debts as they become due in the normal course of business and (b) the value of the company's assets is greater than the sum of the value of its liabilities and its stated capital.
6. Level of interests charged
There is no concept of usurious interest rate under Mauritian law as such the parties are free to determine the interest rate under the loan agreement. However, the courts may revise an agreement if it considers that the lender has abuse of its position or rights in imposing a rate of interest which would be seen as unfair. This determination is made on a case by case basis. Mauritian law does, in certain instances, prescribe conditions for the possibility of compounding of interests.
To the exception of fixed and floating charges and of bordereau for assignments of receivables under Mauritian laws, there are no obligations for the finance documents to be registered in Mauritius for their validity. Registration is optional and done mainly for the purposes of certainty of the date.
8. Governing law of loan agreement
In cross-border sophisticated transactions, the governing laws of the loan agreements commonly used remain English laws and US laws.
Personal foreign judgments for a fixed sum of money may be enforced in Mauritius by way of a common law procedure (that is, a non-statutory procedure) known as exequatur. If the judgment emanates from a superior court of the United Kingdom, it may also be enforced by way of registration under the Reciprocal Enforcement of Judgments Act 1923. As mentioned below, both methods of enforcement are in fact very similar.
These two processes provide for enforcement without reconsideration of the merits of the foreign judgments if some criteria are met. Criteria are essentially the same in both cases and they include public policy considerations, absence of fraud, final nature of the foreign judgment and valid jurisdiction of the foreign court.
10. Insolvency regime
Mauritian law insolvency regime is conceptually similar to those to be identified in established common law jurisdiction where the notions of administration, receivership and liquidation prevail and Mauritian company law also allows for the possibility of a compromise with creditors and schemes of arrangements.
1. This article considers only lending through Mauritius to finance projects or assets located outside of Mauritius.
2. This principle reaffirmed upon in a 2014 judgement of the Commercial Division of the Supreme Court (Atelier Etude Limousin & ors vs BPCE International et Outremer & anor 2014SCJ166).
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.