There has been a growing interest to ascribe a meaning to the phrase 'institutions agréées' since the Mauritian Supreme Court (Supreme Court) began to entertain disputes which involve Mauritian companies licensed to conduct offshore business activities by the Financial Services Commission of Mauritius (FSC).
This article does not profess to have determined its meaning. Instead, it analyses the approach of the Supreme Court on the question to guide actors of the global business industry on what the highest court of the land will be prepared to accept as 'institutions agréées'.
The starting point on 'institutions agréées' is Article 2202-1 of the Mauritian Civil Code (Civil Code) which recites that:
"[t]oute sûreté fixe ou flottante ../.. ne peut être inscrite qu'au seul profit d'une institution agréée visée à l'article 2202-2 à l'exclusion de tout autre créancier."
Clearly the language of Article 2202-1 of the Civil Code makes two things mandatory namely:
- it is only an 'institution agréée' identified by Article 2202-2 of the Civil Code which is capable of having a fixed or floating charge inscribed in its name; and
- the creation of a fixed or floating charge in favour of an 'institution agréée' must exclude any other creditor.
Regrettably, Article 2202-1 of the Civil Code has remained silent on the meaning of 'institutions agréées'. However, Article 2202-2 provides clarity on its scope by setting out a comprehensive list of entities designated as 'institutions agréées." These are reproduced below:
- the Mauritian Government;
- a bank established under the Banking Act;
- any insurance company;
- the Development Bank and the Cooperative Bank;
- the Mauritius Housing Corporation;
- any cooperative, subject to Article 2203 and subsequent articles of the Civil Code; or
- any institution or financing organisation, whether Mauritian or foreign, approved by a regulation issued by the Minister of Finance (emphasis is ours).
From the above list, it is the last item (highlighted) which is of interest and it has two noteworthy aspects as follows:
- first, it vests the Mauritian Minister of Finance with unfettered discretion to widen the list of 'institutions agréées' in order to accommodate additional institutions which meet with the requirement of being a 'financing' institution or organisation, noting that the latter may be a foreign entity; and
- secondly, the financing element.
The Minister's Discretion
Article 2202-2 of the Civil Code has conferred discretion on the Minister of Finance to issue regulations in order to expand the list of 'institutions' or 'financing organisations' to be regarded as 'institutions agréées'.
In this regard, the Minister of Finance exercised his statutory powers in 1987. This led to the issue of the Institutions Agréées Regulations 1988 (Regulations 1988) which increased the list of designated 'institutions agréées'. The Regulations 1988 came into force on 18 December 1987.
The additional entities admitted as 'institutions agréées' under the Regulations 1988 over and above those identified under Article 2202-2 of the Civil Code are as follows:
- a company approved by the Minister of Finance and acting as the representative of a debenture holder;
- any body corporate which is not registered in Mauritius and does not reckon a place of business in Mauritius; and
- any company incorporated and registered under the Companies Act 2001 or any body licensed by the FSC as a category 1 or category 2 global business licence.
The Financing Element
A first reading of the last criterion on the list of 'institutions agréées' under Article 2202-2 of the Civil Code (highlighted above) lends the view that an 'institution agréée' must be involved in financing activities. Furthermore, it has a wide reach as an 'institution agréée' can be a Mauritian or foreign entity.
The Supreme Court addressed its mind to the financing element in one noteworthy case, namely in Atelier Etude Limousin & Ors v BPCE International et Outre Mer & Anor 2014 SCJ 166 (Atelier Limousin).
This concerned an application by unsecured creditors of a Mauritian company for an interlocutory injunction, amongst others, (i) to restrain a French company, which was a secured creditor, from realising assets under fixed and floating charges that had been inscribed in its favour with the Mauritian Registrar General/Conservator of Mortgages and (ii) to restrain the receiver manager from acting in this capacity.
The application was built on the premise that these fixed and floating charges were null and void because the French company had been acknowledged as an 'institution agréée' under Regulation 1988 which admitted "any body corporate not registered in Mauritius and having no place of business in Mauritius" as an "institution agréée". It was argued that the latter provision offended Article 2202-02 of the Civil Code which did not list such an entity as an 'institution agréée'. The argument went further into alleging that what Regulation 1988 did was to effectively appoint indiscriminately all foreign companies as 'institutions agréées' to the exclusion of Mauritian incorporated companies. Finally, it was contended that an 'institution agréée' had to be an 'institution' or 'organisme de financement' within the meaning of Articles 2202-2(1)-(7) of the Civil Code. Accordingly, Regulation 1988 was contrary to public order under Article 1172 of the Civil Code and it therefore followed that the fixed and floating charges were null and void and the same principle extended to the appointment of the receiver manager who had been appointed under them.
In setting aside the application, the Supreme Court affirmed that the predecessor of the French company was an 'institutions agréée'. Accordingly, the fixed and floating charges were validly created and the security created thereunder had been perfected with the Registrar General/Conservator of Mortgages. It also followed that the appointment of a receiver manager under these was valid. However, the Supreme Court held that even if the appointment could be challenged, the receiver manager could still be appointed as such by means of any instrument as provided by section 183(1)(a)(i) of the Insolvency Act 2009.
The Supreme Court went further and held that Regulations 1988 were not contrary to Article 2202-2 of the Civil Code. It took the view that the Minister of Finance had been expressly empowered to designate, by way of regulations, the institutions and financial organisations (Mauritian or foreign) which were entitled to be recognised as 'institutions agréées' and thus empowered to create a fixed and/or floating charge over part or the whole assets of the debtor for loans advanced to it. As regards foreign entities which had been granted security the Supreme Court held that the charge that had been created in its favour was not thereby invalidated as a matter of law but rather under the terms of Article 2202-1 of the Civil Code, the charge deed would not confer the status of a secured creditor to such an entity which would enjoy priority over other creditors (unsecured or future secured creditors). The rationale for this was that the 'charge' purportedly created in favour of the entity was not a fixed or floating charge under the Civil Code.
In reaching this determination, the Supreme Court sought reliance on (i) the repealed Loans, Charges and Privileges (Authorised) Bodies Act 1969 which first provided for fixed and floating charges and actually admitted as 'authorised body' the very same "any body corporate not registered in Mauritius and having no place of business in Mauritius" which features in the Regulations 1988 and (ii) an interpretation of Articles 2201-1 and 2202-2 of the Civil Code. The Supreme Court held that the Regulations 1988 should not be read in isolation but instead within the context of the Civil Code. According to the Supreme Court, the phrase "any body corporate" did not mean any entity, company or société but designated any 'institution' or a financial institution under Article 2202-2 of the Civil Code.
On appeal, the determination of the Judge in Chambers to decline the injunction was upheld by the Supreme Court sitting in its appellate jurisdiction.
There is no doubt that the arguments raised by the applicant in Atelier Limousin and the reasoning of the Judge in Chambers have raised important questions as to what the Minister of Finance really intended when Item (vii) of Regulation 1988 (highlighted in this article) was made part of these regulations.
An important caveat to the determination in Atelier Limousin is that it is interlocutory in nature as it was delivered by a Judge in Chambers i.e. the Supreme Court in its equitable jurisdiction. While it can be respectfully stated that it lacks the precedent value of a determination in an open court determination the more so that on appeal the Supreme Court in its appellate jurisdiction did not address its mind specifically to this question but rather whether the refusal of the injunction was erroneous; nevertheless, by reason of the repercussions of this determination, it cannot be lightly considered as it provides a valuable insight into the likely approach of the Supreme Court on these matters.
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.