Offshore
business activities became a significant sector
in Mauritius as from 1992, when the Mauritian
Offshore Business Activities Act (MOBA Act 1992)
came into force, bringing into being the Mauritius
Offshore Business Activities Authority (MOBAA),
which was active and effective in structuring
offshore regimes in various sectors. Non-bank
financial services legisation was updated and
modernised in 2007.
Alongside
this initiative, Mauritius began to offer a
range of very attractive investment incentives.
Initially the accent was mostly on employment
creation in manufacturing rather than the development
of a financial services centre; but this has
gradually changed, and there is now a modern
legislative structure for most of the main financial
sector activities.
In
2001, under the Financial
Services Development Act 2001 the
government established a Financial Services
Commission (FSC) and an Advisory Council. The
FSC now monitor the country's stock exchange,
offshore business activities and the insurance
industry. It also supervises non-regulated or
partly-regulated non-banking activities such
as fund management, pension schemes and management,
collective investment schemes, investment advisory
services and leasing.
The
Advisory Council helps guide the development
of financial services in the country and act
as an information centre to keep the industry
in touch with the latest international trends.
In
the new structure, MOBAA ceased to exist, and
most existing laws bearing on offshore activities
were replaced.
Due
to its network of double tax treaties with most
of the significant economies in its region,
and above all with India, Mauritius is often
chosen as a base by firms needing to set up
an offshore holding or investment company, or
trading subsidiary.
In
June, 2005, Mauritius's
Minister of Financial Services and Corporate
Affairs, Sushil Kushiram, said the sector is
booming, and predicted growth of more than 8%
for the financial services sector in the year.
Ascribing
this rapid growth to the profound reforms that
had been carried out over the previous five
years, the Minister said that the sector had
accounted for 10% of GDP in 2004, and provides
employment for 10,000.
Mr
Kushiram reported that the number of Global
Business Companies had increased from 14,457
in 2000 to 25,560 in May, 2005, thanks to the
introduction of a new Companies Act in 2001.
He praised the sector's corporate governance
and said that new insolvency legislation would
soon be introduced.
In
March 2007, the total number of Global Business
Companies stood at 31,461.
In
August 2007, the Mauritius National Assembly
adopted three financial services bills, establishing
the independence of the Financial Services Commission
and liberalizing the international 'global business
companies' regime.
Introducing
the Bills to Parliament, the Deputy Prime Minister
and Minister of Finance and Economic Development,
Mr Rama Sithanen said: “in line with our
philosophy to simplify processes and procedures,
to remove hurdles to investment, to facilitate
delivery of services, and to achieve international
standards in every activity so as to be globally
competitive, we are improving and modernising
the legal framework that govern the non-bank
financial services sector.”
The
Financial Services Bill replaces the Financial
Services Development Act 2001 and provides a
common framework for licensing and supervision
of all financial services other than banking
and for the global business sector.
This
section of the Lowtax.Net site describes the
most important types of offshore business activity
carried out from Mauritius.
Mauritius
Banking
Mauritius has adopted a cautious attitude towards
banking development, having admitted only in
the region of ten 'Offshore Banking Units' (OBUs).
In any case, the distinction between 'onshore'
and 'offshore' banks has since been removed.
The
legal and supervisory regime for OBUs is to
be found in the Banking Act 1988, with amendments
in the MOBA Act 1992, the Foreign Dealers Act
1994, the Finance Act 1998 and the Financial
Services Development Act 2001 (since superceded
by the Financial Services Act 2007). The Bank
of Mauritius (the Central Bank) is responsible
for licensing, regulation and supervision of
the banking sector.
Offshore
Banking means banking and investment banking
business conducted in currencies other than
the Mauritius rupee. OBUs may engage in fund
administration and portfolio management, and
offer treasury, custody and trust services.
OBUs,
like Offshore Companies in general, can be formed
as companies under the Companies Act 1984 (now
the Companies Act 2001), or as branches. See
Offshore Legal and Tax
Regimes for details of their tax treatment.
The
application process is fairly rigorous, and
includes provision of audited financial statements
for the past 5 years. The licensing processing
fee is $3,000 (at the time of writing), and
the annual license fee is currently $20,000.
Updated regulations, in the form of the Banking
(Processing and Licence Fees) Regulations 2007
have recently been introduced. Further detail
on this can be found here.
In
March, 2005, the Mauritius National Assembly
passed two bills - the Bank of Mauritius Bill
and the Banking Bill
- designed to give the Central Bank more autonomy
and to remove differences between the offshore
and onshore banking regimes.
Then
Prime Minister Paul Berenger said it was the
government's decision to give the Bank of Mauritius
real independence. He also made a point of mentioning
the statutory basis for banking confidentiality
incorporated in the new legislation. Requests
for information in future would have to be authorised
by a judge of the Supreme Court.
Although
the opposition had some criticisms of some aspects
of the corporate governance regime set up for
the central bank, and of the bank's supervisory
procedures, these weren't sufficient to prevent
a unanimous vote in favour of the bills.
Under
the new law, the Bank of Mauritius offers only
one type of banking licence as opposed to the
two (onshore and offshore) previously available.
The Banking Act clarifies the division of responsibilities
for the financial; sector between the central
bank and the Financial Services Commission.
The Act also annulled the existing Foreign Exchange
Dealers Act; in future, such dealers will fall
under the aegis of the central bank.
The
existing rule that 40% of a bank's directors
should be independent, currently forming part
of the Rules on Corporate Governance issued
in 2001, forms part of the new law. The definition
of independent director is: 'having no relationship
with, or interest in, whether past and present,
the financial institution or its affiliates,
which could reasonably be perceived to materially
affect the exercise of his judgment in the best
interest of the financial institution'.
The
minimum capital requirement for a bank was increased
from Rs 100m to Rs 200m, but banks were allowed
to increase their capital in two stages, from
Rs 100m to Rs 150m by 1st July, 2005, and then
to Rs 200m by 1st July, 2006.
The
new law gives the central bank power to appoint
a 'Conservator' to protect the assets of a bank's
depositors if 'the financial institution has,
or its directors have (i) engaged in practices
detrimental to the interests of its depositors,
(ii) knowingly and negligently permitted its
chief executive officer, any of its managers,
officers or employees to violate any provision
of the banking laws, any enactment relating
to anti-money laundering or prevention of terrorism
or guidelines and instructions issued by the
Central Bank. The law also enables the central
bank to establish a deposit insurance scheme
as a protection 'against the loss of part of
all of deposits in a bank that will contribute
to the stability of the financial system in
Mauritius and minimize the exposure to loss'.
Other
provisions included a strengthening of KYC rules,
laying down that 'every financial institution
shall only open accounts for deposits of money
and securities, and rent out safe deposit boxes,
where it is satisfied that it has established
the true identity of the person in whose name
the funds or securities are to be credited or
deposited'. Banks will also have to rotate their
auditors at least once every five years.
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Captive Insurers in Mauritius used to governed
by the Offshore Insurance Regulations 1992,
issued under the MOBA Act 1992. MOBAA also issued
a set of 'Guidelines on the Regulation and Supervision
of Captive Insurance Business in Mauritius'.
The
Financial
Services Development Act 2001 brought the insurance
sector under the new Financial Services Commission.
The
Mauritius Financial Services Commission announced
in April, 2005, that a new Insurance Bill had
been passed by the National Assembly. The Insurance
Act 2005 provides for the implementation of
the International Association of Insurance Supervisors’
(IAIS) Standards and Core Principles and focuses
on specific regulatory issues relating to capital
adequacy, solvency, corporate governance, early
warning systems and the protection of policyholders
and the financial system at large.
Applications
for captive status in Mauritius are normally
made through a local Captive Management company,
which effectively has delegated powers from
the Financial Services Commission. Applications
will include notarised company documents, a
certificate of compliance with local laws from
a Mauritius lawyer, actuarial information, a
business plan, and the name of a Principal Representative
who is accountable to the FSC. A licensed captive
may need to retain the services of a Captive
Management company on an ongoing basis.
Captive
Insurers, like Offshore Companies in general,
can be formed as companies under the Companies
Act 1984 (now the Companies Act 2001), or as
branches. See Offshore
Legal and Tax Regimes for details of their
tax treatment.
Both
private (single-company) and public (3rd party)
captives are allowed; there is provision for
both rent-a-captives and for protected cell
companies (see below).
The
license fee for formation of a captive at the
time of writing is $500, and the ongoing annual
registration fee is $1,500. Annual filing required
by the FSC includes audited financial statements,
solvency certificates and actuarial valuations.
The
minimum paid-up capital required for a captive
is $100,000 for a general insurer, $250,000
for a long-term insurer, and $350,000 for a
combined company. Long-term liabilities must
not exceed the value of the fund; for general
business admitted assets must amount to at least
75% of admitted liabilities; and assets must
exceed liabilities by $100,000 or 15% of net
premium income, whichever is higher.
23
insurance companies were registered in Mauritius
as of June 2006.
Protected
Cell Companies (PCC)
The
Protected Cell Company (PCC) Act 1999 provides
for a company incorporated for the purposes
of carrying out a global business activity under
the Financial Services Development Act 2001
(ie a GBC1) to
create cells within its capital for the purposes
of segregating the assets within that cell from
claims related to the other assets. A PCC is
governed by the PCC Act 1999 (as amended), and
the Companies Act 2001.
A
PCC may be directly incorporated under the Companies
Act 2001 (see Forms of
Company). A PCC may be registered as a foreign
company by way of continuation as a PCC, provided
that the incorporation and registration requirements
prescribed in the Companies Act 2001 are satisfied.
An existing company may be converted into a
PCC.
The
incorporation procedures for a PCC is similar
to that of a GBC 1 and therefore the application
is channeled through the Financial Services
Commission.
In
terms of the payment of dividends and, generally,
taxation, each protected cell is treated independently.
The
Protected Cell Companies (Amendment of Schedule)
Regulations 2005, were enacted in July, 2005,
following various representations made by the
industry to extend the use of the PCC structure
to other business activities besides CIS and
insurance businesses. The new list of qualified
global business activities for a PCC is as follows:
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Mauritius
Investment Fund Management
Mauritius did not, until recently, legislate
specifically for collective investment schemes.
MOBAA developed a set of regulatory practices
to accommodate investment fund managers, which
were 'grandfathered' into the Financial Services
Development Act 2001 (as amended). This has
however, been replaced by the Financial Services
Act 2007, which has codified the framework for
collective investment schemes in Mauritius.
Funds
are normally incorporated as public companies
under the Companies Act 1984 (now the Companies
Act 2001), and are referred to as Investment
Companies. Bearer shares, shares of no par value
and debentures are not permitted.
A
new Securities Bill was passed by the National
Assembly in March, 2005.
The
2005 Securities Act establishes a framework
for the regulation of securities markets, market
participants, self-regulatory organisations,
and the offering and trading of securities to
ensure fair, efficient and transparent securities
market. It aims at striking an appropriate balance
between the protection of investors, the interest
of market makers and market participants and
the financial system in general.
280
fund management companies were operating at
the end of 2003, with a total NAV of more than
US$9bn, up 50% on the previous year. The
number of investment funds had increased to
331 in May, 2005, with $16bn under management.
An
Investment Company can be closed-ended or open-ended.
Closed-ended Investment Companies can be listed
on the Mauritius Stock Exchange. Closed-ended
Investment Companies used to be formed as Limited
Life Companies under the MOBA (Companies) Regulations
1995 (this was the format that would be preferred
in most cases by a US investment partnership).
Limited Life Companies can now be formed under
the Companies Act 2001.
Either
type of Investment Company can function as an
umbrella fund, and an Investment Company can
be a member of an umbrella fund established
elsewhere.
MOBAA
(now the Financial Services Commission) requires
a substantial amount of information about a
proposed Investment Company during the licensing
process, including its investment policy, the
antecedents of the investment manager and the
promoters, its adherence to marketing and investment
regulatory regimes in other countries, etc.
Normally, MOBAA (the FSC) has a number of administrative
requirements:
- An
Offshore Fund must have a local administrator,
custodian (usually a bank) and auditor;
- Accounts
and accounting documents are kept in Mauritius;
- The
share register is kept in Mauritius;
- Issues
and redemptions of shares are carried out
in Mauritius;
- Calculation
of the NAV is carried out in Mauritius.
While
this sounds restrictive, in practice the FSC
permits part or all of these functions to be
performed elsewhere as long as the arrangements
are clearly transparent and available to Mauritian
supervisors.
Funds
operating from Mauritius must produce a prospectus
whose content is governed by a set of FSC rules.
Funds must file full financial statements with
the FSC half-yearly (unaudited) and annually
(audited). Abbreviated quarterly asset statements
are also required. The FSC has a continuing
right of inspection over Investment Company's
records.
Investment
Companies have access to Mauritius' Double
Tax Treaties; for details of their tax treatment
generally, see Offshore
Legal and Tax Regimes. Fees payable are
a $500 (at the time of writing) licensing processing
fee and a $1,500 annual license fee.
The
Stock Exchange Act 1988 established a small
but thriving exchange which is run by the Stock
Exchange of Mauritius Ltd (SEM), a private limited
company. The Act also established the Stock
Exchange Commission (SEC), which controls and
supervises stock exchange operations.
At
the time of launch, two markets operated: the
Official List and the Over-The-Counter Market
(for unlisted shares). The Development &
Enterprise Market (DEM), which was launched
in August 2006, replaced the OTC market and
provided a listing facility for small companies
and start-ups.
The
SEMDEX - the all shares index - reflects capitalisation
based on each listed stock which is weighted
according to its shares in the total market.
The
Official Market started its operations in 1989
with five listed companies and a market capitalisation
of nearly US$92 million. The market capitalization
of the Stock Exchange of Mauritius at the end
of 2002 was Rs40bn. At the end of 2005, there
were 41 companies listed on the Official Market,
representing a market capitalisation of almost
US$2.6 bn. Market cap at the ned of 2008 was
USD3.3bn, 40% lower than a year earlier.
An
additional index, known as the Total Return
Index, or SEMTRI, was subsequently launched
to provide a performance measurement tool for
the local market.
The
stock market was opened to foreign investors
following the lifting of exchange control in
1994.
In
September, 2005, the Mauritius Stock Market
unveiled its plans for its alternative market,
the Development & Enterprise Market (DEM),
designed for companies previously quoted on
the Over-The-Counter (OTC) Market, Small and
Medium-sized Enterprises (SME’s) and newly
set-up companies which possess a sound business
plan and demonstrate a good growth potential.
It
is meant for companies seeking an organised
and regulated market to raise capital to fund
their future growth, improve liquidity in their
shares, obtain an objective market valuation
of their shares and enhance their overall corporate
image. The rules governing the DEM are less
stringent than those of the Official Market,
and the market is open to foreign investors.
With
the implementation of the DEM, the OTC Market
was phased out in January 2007.
In
November, 2005, SEM announced that it had been
admitted to membership of the World Federation
of Exchanges (WFE) during its November general
assembly.
The
exchange is only the second bourse in sub-Saharan
Africa after Johannesburg to join the group,
which sets standards for stock exchanges around
the world.
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Mauritius
Ship Management and Maritime Operations
See
Offshore Business Review
– Shipping for a more general treatment
of offshore shipping registries.
Registration
in the Mauritius Open Ship Registry is regulated
by the Mauritius Merchant Shipping Act 1986
and the Mauritius Shipping (Amendment) Act 1992,
which are modelled on the English Merchant Shipping
Act. Administration of the Registry is in the
hands of the Director of Shipping, Ministry
of Trade and Shipping.
Port
Louis is the Home Port of the Registry and houses
its Head Office. Provisional Certificates of
Registry can also be issued by Mauritian Embassies,
Consulates and Honorary Consuls worldwide.
The
following categories of person can own and register
ships or bareboat charters lasting a minimum
of 12 months:
- Citizens
of Mauritius;
- Mauritian-registered
companies controlled by Mauritian citizens;
- Other
companies whether or not Mauritian, subject
to approval;
- Mauritian
GBC1 and GBC2 (old Offshore Companies and
International Companies) -see Forms
of Company - provided that their activities
are confined to the registering of ships under
the Mauritian flag and that their shipping
activities are carried out exclusively outside
Mauritius.
Ships
to be registered must be not more than 15 years
old and class must be maintained with one of
the classification societies approved by the
Director of Shipping. Third party insurance
must be evidenced, also compliance with the
major international maritime conventions.
The
actual registration process is carried out through
the Financial Services Commission and involves
the incorporation of an Offshore Company or
an International Company if one does not already
own the ship. Provisional registration is good
for six months. A normal range of documentation
is required during the registration process.
Mortgage
rules are in line with the British System of
Mortgages. Mortgages, which can apply during
provisional registration, and their discharge,
are registered with the Director of Shipping.
See
Offshore Legal and Tax
Regimes for details of the taxation of Mauritian-registered
ships.
Mauritius
also operates an International Aircraft Registry
under the MOBA Act 1992 (now the Financial Services
Development Act 2001, as amended). This Registry
is administered by the Financial Services Commission,
while the licensing, certification and regulation
of aircraft and their operations is carried
out by the Department of Civil Aviation.
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