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Mauritius: Offshore Business Sectors

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). The Financial Services Act 2007 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.

The number of investment funds stood 331 in May, 2005, with USD16bn under management. By December 2012, this had increased to 936.

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.

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, 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 USD500 (at the time of writing) licensing processing fee and a USD1,750 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 USD92 million. At the end of August 2011, there were 38 companies listed on the Official Market, representing a market capitalisation of almost USD6.158bn, up from USD4.8bn in 2009.

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.

From 2010 onwards, SEM has been able to settle and trade equity and debt products in Euro and GBP. It became the first exchange in Africa to list, trade and settle equity products in USD in June, 2011.



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