The introduction of the investment company as a distinct offshore corporate entity is the central feature of the amendments brought. Whilst under the MOBAA Act, it is stipulated that offshore funds management and international financial services are amongst the approved offshore activities, the regulations have now defined the offshore investment company as being 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 special provisions now apply to the investment companies with retroactive effect to the 1st of July 1993 and can be broadly summarised as follows:
1. Redemption of shares:
An offshore investment company may now issue ordinary or redeemable shares which can be redeemed at the option of the company or of the shareholder .
The following provisions are of special interest:
a) Redeemable shares can only be issued if there are other classes of shares issued.
b) Redemption of shares may be effected out of profits, gains, or revenue whether realised or unrealised and the paid up capital, the share premium account or any other reserves.
The change in this provision consists in the fact that previously, redemptions could only be effected in very limited circumstances, and in practice it was not always easy for a company in the nature of an investment company, to arrange its capital structure in such a way as to allow for speedy and flexible redemption. The fact that such redemptions can be effected without being affected by the provisions concerning prohibited transactions in shares, particularly concerning reductions in capital, allows the optimum flexibility required by an investment company (especially one with an open ended structure) and a certain mobility in shareholding. It is noted that this provision especially interests those enterprises which may not have sufficient realised profits at any given time to redeem their shares.
c) Redemptions can only be effected where :
I. the shares are fully paid; and
II. following the redemption:
- the company is able to pay its debts as they become due in the normal course of business; and
- the value of the company's assets is greater than the value of its liabilities including contingent liabilities; and
- the valuation of the assets and the estimate of liabilities for the above purpose are reasonable having regard, e.g. to the most recent financial statements, or other information available at the time of redemption.
d) Shares redeemed under the new provisions are treated as cancelled on redemption. Accordingly, the amount of the company's issued capital shall be reduced by the nominal value of those shares. Redemption of shares obviously does not affect the amount of the company's authorised share capital.
e) Where a company has redeemed or is about to redeem shares, it may issue shares up to the nominal amount of the shares redeemed or to be redeemed, by a directors' resolution.
It is to be noted that where new shares are issued before redemption of the old shares, the new shares shall not be deemed to have been issued unless the old shares have been redeemed within one month of the issue of the new shares.
There are provisions governing situations where payments for purported redemptions of shares are made in breach of the regulations. In these situations, the amount paid out may be recovered by the offshore investment company from:
a) the shareholder, unless he received the payment in good faith,
or
b) the directors of the offshore investment company, or the directors of the company entrusted with the management of the investment fund, who shall be jointly and severally liable to the company for so much of the amount irregularly paid out which has not been recovered from the shareholders.
2. Stock Exchange Listing.
An offshore investment company is exempted from the requirements for public companies under the Companies Act, concerning the issuance of a prospectus and other forms of disclosure about its financial affairs ,except if:
I. it applies for listing on the Mauritius Stock Exchange;
II. it proposes to invite the public in Mauritus to subscribe to, to deposit money with , or to lend money to the company.
This exemption however does not apply ;-
I. with regard to disclosure requirements in the country in which the company makes a public offering and with conditions which may be attached to its offshore certificate;
II. with regard to independent disclosure requirements which the MOBAA may have.
3. Notice requirements.
Offshore investment companies are also relieved from the duty to publish information imposed on other companies with regard to special resolutions to alter certain clauses in the memorandum of association such as alteration of and reduction of capital.
Furthermore, with regard to compromises, arrangements, amalgamations, reconstructions or in certain cases of take over schemes, whilst other companies are required to seek an order of the Court. Offshore investment companies, will only require a special resolution.
