Companies are used extensively by people to conduct their businesses and since the past decade, there has been a significant increase in setting up of companies in Mauritius by foreigners. In most cases, these clients would hold the shares in these companies in their own name. In doing so, they tend to overlook the potential consequences of an unfortunate demise in respect of their shareholding. As such, we should consider what would happen to their shareholding upon their demise and ensure that the process for the transmission of their shareholding to their heirs is as seamless and straightforward as possible. This requires careful thoughts on succession related issues and how to address them.
What is Succession?
Succession is simply the process by which property that is left by a deceased shall be vested, transmitted, liquidated or shared between the heirs of the deceased. It includes the transmission of rights and obligations of the deceased to the heirs. It can also be said that it is the right by which the heir can take possession of the deceased's estate.
Succession comes into two forms:
- Succession ab intestato (succession to the property of a person dying intestate) or legal succession; and
- Succession by will or testament.
When does Succession occur?
Under the Mauritian Civil Code (the "Code"), succession occurs upon death of the de cujus (the person).
The process of succession can also begin as follows:
- With a judgment establishing a presumption of death under the relevant Articles of the Code;
- With a judgment establishing "absence" under Art 128 of the Code.
It is important to determine the exact moment of death of the person as this will determine who are the people eligible to the succession. This can become very tricky when there is the hypothesis of "comourants", i.e two or more persons respectively called upon of the succession die in the same event. In such cases, the presumption of survivorship shall apply. This is governed by the Code.
Where does the succession occur, in which country and which law applies?
It is important to identify the place of where succession occurs as any actions for or claims regarding succession will be heard before the court of that place.
Basically, the applied principles of succession of property in Mauritius are:
- The law where the property is
located (Lex rei sitae). This applies to immovable
property. As such, Mauritian laws shall apply for succession of
immovable property situated in Mauritius.
It should be noted that there are restrictions on inheritance of property in a foreigner's country of origin. A foreigner cannot inherit property in Mauritius unless a Mauritian Citizen is legally permitted to inherit property in the deceased's country of origin.
- The law of the domicile of
the deceased (Lex domicilii). This applies to movable
property. Lex domicilii applies to the place of last domicile
(country of permanent residence) and not to the place of death of
the deceased. To sum up, the succession of movable assets is
governed by the laws of last domicile of the deceased.
It is interesting to note at this stage that a share in a company is a movable property (s.46 (1) Companies Act 2001).
Succession effects of a non-resident holding shares in a Mauritian Company (Global Business or Domestic companies)
Shares are considered as being movable property and therefore it is the law of domicile of the deceased that will apply to it. Under the Companies Act 2001 of Mauritius:
- The heir of a deceased shareholder may transfer a share even though the heir is not a shareholder at the time of transfer and such transfer of share will be valid as if he had been such a shareholder at the time of execution of the instrument of transfer; and
- Before entering a transfer as mentioned above, the directors of the company may require production of proper evidence of the title of the heir of the vesting order.
As such, it is important to determine who the heirs of the deceased are and the succession will depend on whether there is a will or the person died intestate.
Where there is a will, the shares cannot be validly transferred to the heirs until a grant of probate has been obtained by the court of domicile. Once this is granted, in addition to a copy of the will being provided to the company, a legal opinion from a lawyer in that country will be required to:
- Advise on the grant;
- To provide confirmation and verification of the laws of inheritance at the date of the death of the person;
- Confirm who are the executors and heirs of the deceased under the terms of his will;
- To give further confirmation of the residence and domicile of the person at the date of his death.
Upon receipt of all the above, the company will be able to do all needful, including advising the Registrar of Companies, for the transfer of the shares to the heirs.
Where there is a no will and the person died intestate, the shares cannot be validly transferred to his heirs until the requisite procedures is undertaken in the law of domicile to tackle the issue of succession ab intestate to determine who are the heirs of the person. In some countries a grant of letters of administration is granted. Once these procedures are completed, provided there is a legal/ court document confirming the heirs of the person, accompanied by a legal opinion by a lawyer of the country, the company will be able to do the requisite to transfer the shares to the heirs including advising the Registrar of Companies.
In both scenarios outlined above, the process may be lengthy, costly and complicated. From the perspective of the heirs, it becomes a real burden on them to complete all these formalities.
The Mauritius Shareholding Trust: The solution to the succession burden
In order to address these burdens, Axis has introduced the concept of a Shareholding Trust that can be used towards succession planning to help and assist clients to plan their succession in respect of their shareholding in Mauritius companies. However, it can equally be used to hold business interest in companies worldwide outside of the domicile of the client.
The advantages and features of the Mauritius Trust are as follows:
- Very easy and quick to set up;
- Cheap to set up and maintain. Succession procedures (be it by will or intestacy) includes considerable delay and costs and can be a burden on the heirs;
- It is a way to manage succession issues of shares in any company around the world;
- It avoids the cumbersome legalization, registration and cross-border enforcement formalities associated with either a foreign will or in a case where there is no will;
- No forced heirship rule, which means that the person can choose any one he wants to benefit of the shares upon his death;
- It gives the person complete freedom and flexibility to determine succession of the shares.
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.