Investment Funds 2020

Last Updated November 26, 2019

Mauritius

Law and Practice

Authors



BLC Robert & Associates is the leading independent business law firm in Mauritius. The firm has seven partners and more than 30 locally and internationally trained lawyers. The firm serves a diverse client base, including regional and international financial institutions, corporations, funds and public sector bodies. BLC Robert prides itself on offering practical commercial solutions to complex transactions and legal issues. It provides a broad range of sophisticated legal services, while being fully integrated with the African Legal Network (ALN) to meet clients’ regional aspirations. It also maintains very close relationships with global legal firms, enabling it to tap into the latest best practices.

Mauritius has established itself as a leading international financial services centre, and has made it to the pantheon of successful developing economies by adopting international norms and best practices and promoting a business-friendly environment. The choice of Mauritius as a domicile for structuring business into Africa and Asia is well established among fund managers and institutional investors. It has always proved itself as a jurisdiction of economic substance, and has recently undertaken further regulatory reforms for global business entities to enhance their footprint when using Mauritius as their investment platform. Various types of vehicles, structures and financing products are available. Mauritius is a recognised jurisdiction for global investment funds and, according to the 2019 Financial Services Commission (FSC) published statistics, there were 991 funds (including both open-ended and closed-ended funds) established as of the end of December 2018. 

In addition, Mauritius is a politically stable jurisdiction with a system of law inspired by English common law and French civil law, with a final right of judicial recourse to the Judicial Committee of The  Privy Council of the United Kingdom, but at the same time being geographically and culturally close to countries in Africa and Asia, making it a preferred platform for establishing holding structures in the emerging markets of these continents. Mauritius is a member of the Southern African Development Community (SADC), the Indian Ocean Rim Association (IORA) and the Common Market for Eastern and Southern Africa (COMESA).

Mauritius’ regulatory framework provides for both retail funds and alternative investment funds (AIFs). AIFs are authorised as investment funds generally and also further categorised as expert funds or professional collective investment schemes under the laws of Mauritius. They are available only to sophisticated and expert investors and high net worth persons, and are exempted from the stricter regulations compared to retail funds. Retail funds are offered to the public and are regulated as open-ended (collective investment schemes) or closed-ended funds.

Funds can be set up as companies, limited partnerships, protected cell companies (PCC) or trusts. The typical vehicle used to structure a closed-ended fund is a company or a limited partnership, whereas a collective investment scheme is commonly structured as a company, unit trust or PCC.

Companies

Companies may be established as public or private entities, and are incorporated under the Companies Act 2001. Participants are issued with shares of the company. A private company is limited to 50 shareholders and cannot offer shares to the public. Companies have the following features:

  • the liability of a shareholder is limited to the extent of their investment;
  • a board is subject to the doctrine of fiduciary responsibility;
  • they have a separate legal personality; and
  • statutory rules for filing and reporting ensure transparency and accountability.

Distribution to shareholders is subject to the company remaining solvent, and the company is treated as one taxable unit.

Limited Partnership

This is a form of partnership governed by the Limited Partnerships Act 2011. A limited partnership can be set up with or without legal personality, and will have at least one general partner and one or more limited partners. The general partner is responsible for the management of the limited partnership and has unlimited liability for the debts and obligations of the partnership. The liability of the limited partner is limited to the maximum amount of its contribution, provided that the limited partner plays no part in the management of the partnership. Where the limited partner does become involved in the management of the partnership, he or she will be treated as a general partner and will be liable for the debts of the partnership. Participants’ interests are referred to as partnership interests. In terms of advantages, a private equity fund structured as a partnership would offer the benefits of the relative flexibility of the vehicle, the mitigation of fiduciary risks, the ability to account for profits and losses at the limited partner level, and tax transparency. The partnership also offers limited liability to limited partners, but the liability of a general partner is not capped.

Protected Cell Company (PCC)

A PCC is subject to the Protected Cell Companies Act 1999 and the Companies Act 2001. Participants in a PCC are issued with shares in the relevant cell in which they invest, which are referred to as "cell shares". The segregation of assets and liabilities can be achieved by using a PCC. PCCs are often structured to meet the objectives of investment, such as providing for investor returns from specific cells, distinct separation of non-cellular assets and cellular assets, and restricting liability arising from one cell to that cell only. PCCs have the same advantages as companies, including limited liability for shareholders, a board which has fiduciary duties, separate legal personality and the same statutory rules for filing and reporting.

Trusts

Trusts are created under the Trusts Act 2001, and participants are issued with units in the trust. A trust established in Mauritius can have up to four trustees, of whom at least one should be a qualified trustee (a person who is authorised as such by the FSC).

Trusts are relatively easy to set up, but do not have legal personality. The creation of a trust does not require any registration or incorporation. No corporate filings are required, and a trust can be structured as a non-resident trust, which is not liable to tax in Mauritius. Trustees are subject to fiduciary duties. Migration, restructuring and termination are relatively simple to accomplish.

A fund in Mauritius is regulated as a collective investment scheme or a closed-ended fund, and a fund authorisation is required from the FSC. AIFs are typically sub-classified as experts fund or professional collective investment schemes 

A fund conducting business principally outside of Mauritius and whose majority of shares/voting rights/legal or beneficial interests are held by non-citizens will also be required to apply for a Global Business Licence (GBL), in addition to their fund authorisation. 

It is a mandatory requirement for any corporation holding a GBL to be administered by a management company duly licensed by the FSC (Administrator). Such an Administrator must also be appointed as the GBL’s corporation secretary/registered agent, and will be responsible for liaising with the authorities on the setting up and licensing of the entity. It also has the statutory functions of conducting know-your-client procedures on the principals, the beneficial owners and the officers of the proposed GBL, and for ensuring ongoing compliance with Mauritius’ laws. 

Prior to application, the applicant will need to reserve the proposed names of the entities with the Mauritius Registrar of Companies/Registrar of Limited Partnerships (Registrar) and submit the relevant fee; if approved, the proposed name is valid for a period of two months from the date of notice of reservation of name. 

In relation to the setting up of the fund in Mauritius, the application for registration is lodged with the Registrar concurrently with the application for a GBL and authorisation to operate as a fund (open-ended or closed-ended) with the FSC. 

The following documents need to be submitted for the registration and licensing of the fund:

  • a duly completed application form for registration/incorporation and licence;
  • fund documents:
    1. for a company: a constitution and the shareholders’ agreement (if adopted);
    2. for a limited partnership: a limited partnership agreement and an investment management agreement;
    3. for a trust: the trust deed, the subscription agreement and any advisory agreement.

Drafts of the fund documents may be submitted and the FSC expects these to be in near final form; 

  • a draft offering memorandum or prospectus;
  • a consent form for initial shareholders and directors or partners; 
  • know-your-customer documentation on promoters, beneficial owners and proposed directors, the general partner or trustee (as applicable); 
  • certificates and confirmations required by law and the regulators; and
  • appropriate government/licensing fees.

The FSC may also require an applicant to furnish such additional information as it considers appropriate to process the application. The timeframe for the application of a fund authorisation is around 60 business days from the time the application is submitted to the authorities.

The fees payable to the FSC for licensing process are as follows:

  • a registration fee for collective investment schemes (open-ended) and closed-ended funds of USD1,000 and an annual fee (payable in advance) of USD3,000;
  • for a PCC, for each cell that is authorised as a sub-fund, an additional registration fee of USD300 and an annual fee of USD600 for each cell;
  • for the GBL, the registration fee and the annual fee are USD500 and USD1,950 respectively.

In addition to FSC fees,  there is an incorporation fee of USD107 and an annual fee of USD300 payable to the Registrar of Companies in the case of a company, and a registration fee of USD107 and an annual fee of USD84 payable to the Registrar of Limited Partnerships in the case of a limited partnership.

Investors typically seek participation in a structure where their liability is limited. These investments generally take the form of shares in a company limited by shares, or partnership interests in a limited partnership. The liability of investors will be limited to the amount that the investors have contractually undertaken to pay to the fund.

To enjoy limited liability, the underlying principle in both structures is for the investor to have a passive participation. An investor risks losing its limited liability status where he or she participates in the management of the business of the fund. In doing so, he or she may be viewed as acting as the general partner or a director (depending on the structure) and thus may attract unlimited liability, which generally attaches to a general partner, or be personally liable as a director.

Legal opinions on the limited liability of investors (as well as on matters such as due incorporation/registration, power, capacity and authority of the fund to execute the fund agreements) are typically provided upon request by the shareholders/limited partners.

A fund authorised in Mauritius needs to file an offering document with the FSC. The type of offering document and the relevant disclosure in this document will vary depending on the category of the fund and the target investors.

The disclosure requirements for funds being offered by way of private placement or to sophisticated investors, high net worth investors or expert investors will be reduced. However, the offer document must contain the requisite disclaimers and generally offer sufficient information to investors to allow them to make an informed decision on investment in the fund.

Reporting Requirements

Non-retail funds are required to file audited financial statements with the regulator within six months of the balance sheet date; such accounts do not need to be made public. 

The annual financial statements of companies/limited partnerships (other than those holding a GBL) are available for public inspection at the Registrar of Companies/Limited Partnerships (as applicable).

The market cannot be said to be dominated by any one type of investor, as there is a diverse range of investors in Mauritius. However, in recent times, due to Mauritius’ efforts to be compliant with international taxation and reporting regimes, more institutional investors seem to have gained confidence in using Mauritius.

An investment manager licensed by the FSC must: 

  • be incorporated as a corporate body; 
  • be engaged principally in the business of managing funds; 
  • have directors, officers and beneficial owners who meet the fit and proper test; 
  • have appropriately qualified staff;
  • maintain at all times a minimum stated capital of at least MUR1 million (or an equivalent amount in a different currency); 
  • have proper insurance cover in place; 
  • establish and document their rules of internal control to ensure that they are legally compliant and sufficiently supervised; 
  • have in place a code of ethics and a code of conduct that are binding on their officers, advisers and employees; and 
  • comply with anti-money laundering laws.

Fund managers are typically set up as companies incorporated under the Companies Act 2001.

An expert fund is only available to either an investor making an initial investment on its own account of no less than USD100,000, a sophisticated investor (as defined in 2.3.7 Investor Protection Rules) or any similarly defined investor in the securities legislation of another country.

A professional collective investment scheme is only available to a sophisticated investor, as defined in the Securities Act 2005, or on a private placement basis in the case of an open-ended fund where the minimum subscription amount is at least USD200,000 and for a closed-ended fund where the subscription amount is generally more than USD200,000.

To qualify for the categorisation of a professional collective investment scheme the following restrictions apply: shares acquired by the participants may not be resold to the public and the participants are advised of this restriction at the moment of subscription, and the fund may not be listed for trading on a securities exchange.

There are two main categories of funds: collective investment schemes and closed-ended funds. A collective investment scheme, as defined in the Securities Act 2005, has an obligation to redeem a participant’s shares at their request, at a price corresponding to the net asset value of those investments (minus fees and commissions). This obligation does not exist with closed-ended funds, which are characterised principally by the fact that the investors do not have control on exiting the fund.

A fund is required to be managed by an investment manager licensed as a CIS Manager by the FSC, or by a foreign investment manager with the approval of the FSC in the case of a fund holding a GBL. Where a fund is constituted as a company, it may be self-managed (ie, managed by its board of directors), with the approval of the FSC.

Alternative Investment Funds are classified as expert funds (which must be open-ended) or professional collective investment schemes (which can be both open-ended and closed-ended), and are entitled to exemptions from the detailed regulations that apply to retail funds.

For example, AIFs are exempt from the following (among other things):

  • the requirement to have a prospectus in the prescribed form (the offering memorandum can be customised subject to a few mandatory disclosure requirements); 
  • the minimum funding requirements; 
  • investment and borrowing restrictions; 
  • the requirement to prepare and file management reports and quarterly reports; 
  • the requirement to conduct daily valuations; and
  • the requirement to publish, on a weekly basis, the prices of interests in the collective investment scheme. 

To qualify for the categorisation of a professional collective investment scheme, the following restrictions apply: shares acquired by the participants may not be resold to the public and the participants are advised of this restriction at the moment of subscription, or the fund is not listed for trading on a securities exchange.

Non-local service providers cannot provide these services in Mauritius by way of business. They will need to either set up a branch or a subsidiary in Mauritius, which will need to apply for a licence from the FSC in order to conduct business in Mauritius.

Where there is no business establishment in Mauritius and the service provider does not solicit Mauritius residents in respect of the marketing of securities, there will be no prohibition on the service provider dealing with such persons and no licensing requirement will normally be triggered for such non-local service providers. However, depending on the services being provided, the fund may require the approval of the FSC prior to the appointment of the non-local service provider. 

The prior approval of the FSC is required for a fund in Mauritius to appoint a foreign manager to manage a fund authorised in Mauritius. However, this option is only available where the fund holds a GBL. 

The FSC will consider if the licence of the foreign investment manager is issued by a regulatory body in a jurisdiction that has comparable regulation to Mauritius for investor protection. In support of the application for prior approval, a draft of an investment management agreement between the fund and foreign investment manager needs to be submitted to the FSC, alongside evidence of the licensed status of the manager.

The timeframe for the application for a fund authorisation is around 60 business days from the time the application is submitted to the authorities. 

The production and offering of marketing materials are regulated by the Securities Act 2005 and the regulations and rules thereunder, and by the Guidelines for Advertising and Marketing of Financial Products 2014 issued by the FSC (Guidelines).

The law limits any solicitation to invite or induce a person in Mauritius to buy, sell or exchange securities to be done solely by licensed persons. The following activities may only be carried out by locally licensed intermediaries:

  • seeking to meet a person at his place of residence, work or public places;
  • contacting this person by telephone, letters, circulars, the internet or other electronic means or telecommunication system; or
  • publishing or causing an advertisement to be published or circulated by a person to induce another person to buy, sell or exchange securities or to participate in transactions involving securities, or offering such a person services, recommendations or advice for those purposes.

The Guidelines regulate the conduct of the marketing and the content of advertisements and marketing materials, and require certain specific disclosures and disclaimers on the product and the persons promoting them.

All marketing materials need to be submitted to the FSC prior to dissemination.

Shares or interests in funds that are authorised as professional collective investment schemes or expert funds can only be offered to specific types of investors, as described in 2.2.3 Restrictions on Investors.

There are specific categories of funds that are targeted only to specific investors and thus enjoy exemption from the regulations on the ground that they are only offered to sophisticated, institutional or high net worth investors.

"Expert funds" can only be offered to expert investors (ie, an investor that makes an initial investment for its own account of no less than USD100,000) or to sophisticated investors, as defined in the Securities Act 2005 (or any similarly defined investor in the securities legislation of another country).

A sophisticated investor is defined under the Securities Act 2005 as including: 

  • the government of Mauritius;
  • a statutory authority, or an agency established by an enactment for a public purpose;
  • a company whose shares are owned completely by the government of Mauritius, a statutory authority or an agency established by an enactment for a public purpose; 
  • the government of a foreign country, or an agency of that government;
  • a bank (licensed by the Bank of Mauritius);
  • a fund manager (licensed by the FSC);
  • an insurer (licensed by the FSC); 
  • an investment adviser (licensed by the FSC);
  • an investment dealer (licensed by the FSC); and
  • a person declared by the FSC to be a sophisticated investor.

A professional collective investment scheme is available to the public and is only available to a sophisticated investor, as defined in the Securities Act 2005, or as a private placement in the case of an open-ended fund where the minimum subscription amount is at least USD200,000 and for an closed-end fund where the subscription amount is generally more than USD200,000.

Investors are not protected by any statutory compensation arrangements in Mauritius in the event of the fund's failure, and it is mandatory to make such disclosures along with other disclosures specific to the type of fund as required by the FSC, in the offer document.

The Financial Services Commission is mandated under the Financial Services Act 2007 to, inter alia, ensure the orderly administration of financial services and global business activities, and to ensure the sound conduct of business in the financial services sector and the global business sector. In order to achieve its objectives, the FSC elaborates policies that aim to ensure the fairness, efficiency, transparency and stability of the financial system in Mauritius. It also publishes monthly newsletters, FAQs and circular letters to provide regular updates and guidance. The regulator’s online portal is well maintained and accurately contains general information, up-to-date legislation and regulations, as well as statistics on licensed entities operating in Mauritius at any one time.

The FSC conducts investigations and imposes sanctions (including revocation or suspension of the licences) where it has reasonable cause to believe that a licensee is committing or has committed a breach of the relevant laws, or is carrying on or has carried on an activity that may cause prejudice to the soundness and stability of the financial system of Mauritius or to the reputation of Mauritius, or that may threaten the integrity of the system.

Where additional information or clarifications are required by the FSC with respect to funds application, the FSC will usually raise such queries via email with the administrators. It is also possible to request face-to-face meetings with the FSC.

There are no particular regulatory restrictions or requirements in relation to the types of investments for alternative investment funds. Any person wishing to establish a specialised fund that invests in real estate, derivatives, commodities or any other product must apply to the FSC for a decision as to whether such fund would be authorised.

An open-ended fund categorised as an expert fund or a professional collective investment scheme is required to appoint a custodian holding a custodian licence under the Securities Act 2005 to hold and safekeep the assets of the fund. Only banks are eligible for a custodian licence, and trust companies that are subsidiaries of banks. If the fund holds a GBL, it may appoint a foreign custodian with the approval of the FSC. The appointed custodian must act independently from the fund manager and the fund. However, closed-ended funds are exempt from the requirement to appoint a custodian, and the assets are held in the name of the fund itself. 

Risk

Although there are no specific rules on risks for exempted funds, the offering memorandum of such fund must disclose all material risks to potential investors so as to allow any potential investor to make an informed decision on whether or not to invest in the fund.

Valuation and Pricing

AIFs are free to specify the method and frequency of their valuations. 

System and Controls

AIFs are not regulated as strictly as retail funds. On the basis that they can only be offered to sophisticated or high net worth investors, they are exempt from the application of various prudential and conduct of business rules that are generally applicable to retail funds.

Insider Dealing and Market Abuse

The Securities Act 2005 contains a chapter on market abuses, which creates the offences of insider dealing, false trading, market rigging, fraud and deceptive conduct involving securities. The prohibition on insider dealing is a general prohibition applicable to any person who uses insider information to deal in the securities of a reporting issuer (directly or indirectly), or who discloses insider information unlawfully.

Transparency

AIFs have reduced filing and publication requirements, but are still required to file annual financial statements. 

Money Laundering

All funds must comply with the Financial Intelligence and Anti-Money Laundering Act 2002, a law inspired by the Financial Action Task Force (FATF) principles. Funds must carry out customer due diligence (CDD) in accordance with the law and a code prescribed by the FSC. This includes verifying the identity of investors and being satisfied that the source of funds is lawful. For corporate investors, the fund must obtain copies of incorporation documents to establish the existence of the fund and the identity of its principals. The fund must also provide CDD information on the investor(s), directors and other principals, including beneficiaries, account signatories and any person operating under a power of attorney. Reduced or enhanced CDD may be applied depending on the profile of the investors, whether or not they are regulated institutions, and their country of domicile. 

Short Selling

There are no rules that specifically address short selling.

Foreign Accounts Tax Compliance Act (FATCA) and Common Reporting Standards (CRS) Regimes

FATCA

The Republic of Mauritius and the government of the United States of America signed an Agreement for the Exchange of Information Relating to Taxes (the Agreement) to set the legal framework to enable the exchange of tax information between the two countries, and the Inter-Governmental Agreement (Model 1 IGA) to improve international tax compliance and to implement FATCA. Both the Agreement and the IGA entered into force on 29 August 2014. The Agreement provides for the exchange of tax information (upon request, spontaneous and automatic) between Mauritius and the USA. The IGA provides for the automatic reporting and exchange of information in relation to accounts held with Mauritius financial institutions by US persons and the reciprocal exchange of information regarding financial accounts held by Mauritius residents in the USA. Following the IGA, Mauritius financial institutions will not be subject to the 30% withholding tax on US source income, provided they comply with the requirements of FATCA.

CRS

Mauritius has signed the Convention on Mutual Administrative Assistance in Tax Matters (the Convention) developed by the Organisation for Economic and Co-operation and Development (OECD), under which information can be exchanged on request, spontaneously or automatically. Thus, Mauritius will be able to exchange information automatically on a reciprocal basis with all those jurisdictions that have signed the Convention. Under the CRS, financial institutions will need to report accounts held by non-residents to the MRA, which will be used for eventual exchange with other jurisdictions. 

Funds in Mauritius must assess their FATCA and CRS classification to determine their reporting requirements to the MRA.

Funds in Mauritius can access fund finance for subscription financing and/or leverage.

There are no regulatory restrictions or requirements in relation to borrowings for funds categorised as expert funds or professional collective investment schemes.

Typically, a fund finance transaction related to private equity funds will be secured by security over bank accounts of the fund and assignment of rights to make capital calls, which is accompanied by a power of attorney in favour of the lender to exercise such rights on behalf of the fund/general partner and/or manager (as the case may be) in addition to the assignment.

The main issues are the restrictions on the creation of security rights over capital commitments/calls or the use of investor’s contributions, which may be set out in the private equity funds’ documentation and more specifically in the side letters between the fund and a particular investor. It is also common for investors to resist acknowledging any notice of assignment and refuse to pay the lender directly.

The tax status will depend on the type of vehicle used to structure a fund. Funds are generally structured as companies or limited partnerships. 

Companies

Companies are tax opaque. Where a fund is structured as a company, it is liable to pay tax on its chargeable income at the rate of 15%. However, a fund duly authorised by the FSC may be entitled to benefit from a partial exemption of 80% on all its income if it satisfies the following conditions relating to the substance of its activities:

  • it carries out its core income-generating activities in Mauritius;
  • it employs, directly or indirectly, an adequate number of suitably qualified persons to conduct its core income-generating activities; and
  • it incurs a minimum expenditure proportionate to its level of activity.

Alternatively, a company fund may be entitled to claim foreign tax paid on their foreign source income as credits against the income tax payable in Mauritius (up to a maximum of 15%) in respect of that income where this can be evidenced (“Foreign Tax Credit”). The Mauritius Income Tax Act 1995 (ITA) defines “foreign source income” as income that is not derived in Mauritius.

There is no withholding tax on a dividend distributed by a fund established as a company to its shareholders. Furthermore, any interest paid by a fund that is established as a company holding a GBL will be exempt from withholding tax to the extent that the interest is paid out of the foreign source income of the fund. There is no tax applicable on capital gains in Mauritius.

Limited Partnership

A fund structured as a limited partnership will be tax transparent, unless it also holds a global business licence, in which case it can elect to be tax opaque and, in this case, the tax treatment will be similar to that of a company. 

Funds structured as limited partnerships that have elected to be tax transparent will not be taxable in Mauritius if they qualify as a resident société under the ITA, but instead their partners who are tax resident in Mauritius will be subject to tax in Mauritius, as set out below.

A limited partnership will meet the criteria of a resident société as understood under the ITA namely when the seat of the limited partnership is in Mauritius and the limited partnership has at least one partner or manager resident in Mauritius.

Tax opaque entities are entitled to benefit from the various tax treaties that Mauritius has with other countries.

The above tax considerations would be applicable to a fund established as a collective investment scheme, and to a closed-ended fund.

There is no withholding tax on the following payments by a fund established as a company or a limited partnership:

  • distribution by the fund to its resident and non-resident investors;
  • in respect of a fund holding a GBL, interest paid to non-residents out of the foreign source income of the fund; or
  • interest paid to a company resident in Mauritius. 

Non-resident Investors

An investor who is not tax resident in Mauritius and does not otherwise derive any income from Mauritius is not required to pay any tax in Mauritius, whether in respect of income or gains (including distributions) received from a fund, its worldwide income or otherwise, and is not required to make any tax filing in Mauritius. 

Resident Investors

An investor who is tax resident in Mauritius will be liable to income tax as follows: 

  • if the investor is a body corporate, at the rate of 15%; or
  • if the investor is an individual, at the rate of 10% on his annual net income not exceeding MUR650,000 and at the rate of 15% for any annual net income exceeding MUR650,000.

A tax resident investor that is a body corporate will be entitled to benefit from the Foreign Tax Credit and a partial exemption of 80% in respect of the following types of income:

  • a foreign source dividend, provided that such dividend is not allowed as a tax-deductible item in the source country and the company satisfies the conditions relating to the substance of its activities as prescribed; 
  • interest income, provided that the company satisfies the conditions relating to the substance of its activities as prescribed;
  • profit attributable to a permanent establishment that a resident company has in a foreign country;
  • income derived by a collective investment scheme (CIS), closed-ended fund, CIS manager, CIS administrator, investment adviser or assets manager licensed or approved by the FSC;
  • income derived by companies engaged in ship and aircraft leasing;
  • income derived by a company from reinsurance and reinsurance brokering activities, subject to satisfying conditions as may be prescribed relating to the substance of its activities; 
  • income derived by a company from the leasing and provision of international fibre capacity, subject to satisfying conditions as may be prescribed relating to the substance of its activities; and 
  • income derived by a company from the sale, financing arrangement, asset management of aircraft and its spare parts, and aviation advisory services related thereto, subject to satisfying conditions as may be prescribed relating to the substance of its activities.

A tax resident investor who is an individual will be entitled to the following:

  • the Foreign Tax Credit;
  • a deduction of the appropriate amount of income exemption threshold that is applicable to him from his net income in each income year; and
  • any other reliefs, allowances and deductions as applicable to him. 

Any dividend income received or gains made by any Mauritian investor from a fund established as a company in Mauritius is exempt from income tax. 

There is no special or preferential tax regime for investors participating in AIFs. 

Retail funds can be set up as companies, limited partnerships, protected cell companies (PCC) or trusts, as further described in 2.1.1 Fund Structures

A fund in Mauritius is regulated as a collective investment scheme or a closed-ended fund, and a fund authorisation is required from the Financial Services Commission (FSC). 

A retail fund conducting business principally outside of Mauritius, the majority of whose shares/voting rights/legal or beneficial interests are held by non-citizens, will also be required to apply for a GBL. 

The process for setting up retail funds would entail a similar name reservation and formal application made to the authorities as described in 2.1.2 Common Process for Setting Up Investment Funds, and the same timeframe and fees would be applicable. 

The liability of investors participating in structures such as companies limited by shares or limited partnerships will be limited to the amount that the investors have contractually undertaken to pay to the fund, so long as their participation remains passive, as further expounded in 2.1.3 Limited Liability.

Disclosure Requirements

A fund authorised in Mauritius needs to file an offering document with the FSC. The type of offering document and the relevant disclosure in this document will vary depending on the category of the fund and the target investors.

The offering document should contain all information on the securities to be offered and the fund which would be required to allow investors to make an informed assessment of the investment.

A prospectus is required for funds targeting the public or retail investors, and needs to comply with a list of prescribed disclosure requirements, including the matters required by the Mauritius Securities Act 2005 (the Act) and the rules and regulations made thereunder, for instance:

  • investment objectives and restrictions;
  • details and functions of the investment manager;
  • events concerning the termination of a manager’s appointment;
  • types of investors targeted and recommended lock-in periods, terms of subscription (including minimum initial or subsequent investment, distribution rights, entry or exit fees, method/procedure of subscription or redemption, method and frequency of net asset value calculations); and
  • any fees or charges to be attributed to the fund.

Reporting Requirements

Collective Investment Scheme (Retail Fund)

An open-ended retail fund must both file with the regulator and make the following public:

  • quarterly unaudited financial statements prepared in accordance with the International Financial Reporting Standards (IFRS), which contain matters prescribed by fund regulations, no later than 45 days after the end of each quarter; and
  • annual reports (including audited financial statements), which contain matters prescribed by fund regulations, no later than 90 days after the fund’s balance sheet date.

Closed-ended Fund (Retail Fund)

A closed-ended retail fund must both file with the regulator and make the following public:

  • comparative quarterly financial statements prepared in accordance with IFRS, no later than 45 days after the end of each quarter; and
  • an annual report, including audited comparative financial statements prepared in accordance with IFRS, no later than 90 days after the fund’s balance sheet date.

For domestic open-ended or closed-ended retail funds (ie, those funds that do not hold a GBL unless they are listed on a securities exchange in Mauritius), the quarterly reports and annual reports must also be made public.

For a public offering, the retail fund must register itself as a reporting issuer and is subject to an additional disclosure requirement (to the FSC). Reporting issuers must notify the FSC of any material changes to their affairs.

There is a diverse range of investors in retail funds, and more institutional investors seem to have gained confidence in using Mauritius, due to Mauritius’ efforts to be compliant with international taxation and reporting regimes.

Fund managers are typically set up as companies incorporated under the Companies Act 2001. Please see 2.2.2 Legal Structures Used by Fund Managers.

Collective investment schemes and closed-ended funds that are retail funds have no limitation on the type of investor or minimum investment by investors, although the prospectus can set out specific eligibility criteria of investors or any minimum investment. 

There are two main categories of funds: collective investment schemes and closed-ended funds. A collective investment scheme, as defined in the Securities Act 2005, has an obligation to redeem a participant’s shares at their request, at a price corresponding to the net asset value of those investments (minus fees and commissions). This obligation does not exist with closed-ended funds, which are characterised principally by the fact that the investors do not have control on exiting the fund.

A collective investment scheme has a number of restrictions on its investment and practices, which may be lifted with the approval of the FSC, where it is satisfied that the fund has justification and provided that the fund makes adequate disclosure in its prospectus as to investment rules and risks. For instance, without the FSC’s approval, it cannot:

  • invest more than 5% of its net assets in the security of the issuer, unless it is a debt security issued by the government of Mauritius or the government of any other country;
  • purchase and hold more than 10% of a class of securities of that issuer;
  • purchase real estate;
  • purchase a mortgage;
  • purchase a security for the purpose of exercising control or management over the issuer of that security;
  • have more than 10% of its net assets in illiquid assets;
  • purchase or sell derivatives or physical commodity, except within limits established by the FSC;
  • subscribe to securities offered by a company in formation;
  • lend money, securities or other assets; 
  • invest in aggregate more than 10% of its net asset value in shares of another collective investment scheme;
  • acquire more than 10% of the shares of any single collective investment scheme; or
  • purchase or sell a security to the investment manager, the custodian, an officer of the investment manager or the custodian, or an affiliate of the foregoing persons, unless the purchase or sale is carried out at arm’s length.

It should also be noted that a collective investment scheme can only borrow money or create a charge over its assets when either the transaction is only a temporary measure to accommodate a request for the redemption of securities of that fund, and the outstanding amount of all borrowings does not exceed 5% of the fund, or the charge secures a claim for fees and expenses incurred for services rendered while redeeming those securities.

The investment and borrowing restrictions do not apply to closed-ended funds.

The position is the same as described in 2.3.2 Requirements for Non-local Service Providers. Unless there is no business establishment and no solicitation is made to Mauritius residents, non-local service providers will need to set up either a branch or a subsidiary in Mauritius, which will need to apply for a licence from the FSC.

The position is the same as described in 2.3.3 Local Regulatory Requirements for Non-local Managers.

Where a retail fund holds a GBL, it will be able to appoint a foreign manager, subject to the prior approval of the FSC. The FSC will consider whether the licence of the foreign investment manager is issued by a regulatory body in a jurisdiction that has a comparable regulation to Mauritius for investor protection.

The timeframe for the application of a fund authorisation is around 60 business days from the time the application is submitted to the authorities. 

There are no separate rules for marketing or offering different kinds of funds. The production and offering of marketing materials are governed by the Securities Act 2005, the rules and regulations made under it and the Guidelines for Advertising and Marketing of Financial Products 2014, as provided in 2.3.5 Rules Concerning Marketing of Alternative Funds.

Once authorised, there are no restrictions on the categories of persons to whom retail funds can be marketed, which will follow any eligibility criteria set out in the fund’s offer document. 

Since retail funds target the public, the disclosure required in the prospectus of such funds is extensive, to assist investors to understand the investment and risks. Retail funds need to comply with a list of prescribed disclosure requirements, including the matters required by the Mauritius Securities Act 2005 and the rules and regulations made thereunder, for instance:

  • investment objectives and restrictions;
  • details and functions of the investment manager;
  • events concerning the termination of a manager’s appointment;
  • types of investors targeted and recommended lock-in periods; 
  • terms of subscription (including minimum initial or subsequent investment, distribution rights, entry or exit fees, method/procedure of subscription or redemption, method and frequency of net asset value calculations); 
  • an explanation of the nature of the risks; and
  • any fees or charges to be attributed to the fund. 

In addition, the prospectus should specify the type of investors for whom the investment in the fund is suitable. 

The fund manager also must send an account statement to each investor with full information regarding investment to allow the investor to be fully aware of the overall investment.

The approach of the Regulator is as provided in 2.3.8 Approach of the Regulator

Retail funds have investment and borrowing restrictions, as further described in 3.3.1 Regulatory Regime

Retail funds formed as a collective investment scheme must appoint a custodian holding a custodian licence under the Securities Act 2005 to hold and safekeep the assets of the fund. Only banks are eligible for a custodian licence, and trust companies that are subsidiaries of banks. If the fund holds a GBL, it may appoint a foreign custodian with the approval of the FSC. The custodian appointed must act independently from the fund manager and the fund. 

Closed-ended funds are exempt from the requirement to appoint a custodian, and the assets are held in the name of the fund itself. 

Risk

Although there are no specific rules on risks, the prospectus of the retail fund must disclose all material risks to potential investors.

Valuation and Pricing

An open-ended retail fund must conduct a valuation on a daily basis or at such other intervals as agreed with the FSC. The prospectus must describe the valuation method that such fund will employ in valuing its portfolio to arrive at a net asset value. 

System and Controls

Various prudential and conduct of business rules apply to an open-ended retail fund, such as: 

  • minimum funding requirements; 
  • regulation of its constitutive documents and prospectus; 
  • regulation of its bookkeeping principles; 
  • regulation of transactions with related parties; and
  • mandatory investors' voting powers. 

Insider Dealing and Market Abuse

The Securities Act 2005 contains a chapter on market abuses, which creates the offences of insider dealing, false trading, market rigging, fraud and deceptive conduct involving securities. The prohibition on insider dealing is a general prohibition applicable to any person who uses insider information to deal in the securities of a reporting issuer (directly or indirectly) or who discloses insider information unlawfully.

Transparency

Retail funds have several disclosure and reporting requirements, as detailed in 3.1.4 Disclosure Requirements. In addition, an open-ended retail fund must publish the issue, sale, repurchase and redemption prices at least once a week or at such frequency as the FSC may approve. 

Money Laundering

There is no difference in the obligations of alternative investment funds and retail funds under the anti-money laundering laws, as further expounded in 2.4 Operational Requirements

Short Selling

There are no rules that specifically address short selling. For retail funds, securities lent and collateral received by the fund must be disclosed in the financial statements.

Foreign Accounts Tax Compliance Act (FATCA) and Common Reporting Standards (CRS) Regimes

Funds in Mauritius must assess their FATCA and CRS classification to determine their reporting requirements to the MRA. Please see 2.4 Operational Requirements.

Funds in Mauritius can access fund finance for subscription financing and/or leverage.

A retail fund formed as a collective investment scheme can only borrow money or create a charge over its assets when either the transaction is only a temporary measure to accommodate a request for the redemption of securities of that fund, and the outstanding amount of all borrowings does not exceed 5% of the fund, or the charge secures a claim for fees and expenses incurred for services rendered while redeeming those securities.

Closed-ended funds are not subject to any borrowing restriction.

Retail closed-ended funds would follow usual lending practices and take into account the assets and receivables of the fund. 

There can be issues in financing closed-ended funds where the fund documents set out limitations on the creation of security over assets of the fund.

The tax regime that applies to alternative investment funds also applies to retail funds, in the manner described in 2.6 Tax Regime.

An investor in a retail fund is taxed in the same manner as an investor in an alternative investment fund, as described in 2.6 Tax Regime, and there is no special or preferential tax regime for investors participating in retail funds. 

Special Purpose Fund

In the National Budget 2019/2020, the Government announced the revamping of the Special Purpose Fund (SPF) regime to ease access to new markets. 

An SPF is a fund authorised as a collective investment scheme or a closed-ended fund that is not resident in Mauritius for tax purposes and is exempt from tax in Mauritius; it is instead taxed in accordance with the tax laws that apply in the countries where the investments are made. 

In the existing regime, the FSC may approve a fund to be a SPF if: 

  • the purpose of the fund is to conduct investment solely in countries that do not have a tax arrangement with Mauritius;
  • the purpose of the fund is to invest mainly in securities whose returns will be exempt from taxation; or
  • all the investors of the fund are pension schemes or other persons entitled to tax exemption, and the fund does not hold a global business licence. 

In December 2019, the FSC issued a consultation paper on proposals for new criteria for the SPF regime. 

AML/CFT

Mauritius has taken several important steps during the last two years to enact legislation that has strengthened the country’s anti-money laundering and terrorist financing prevention efforts. Mauritius made several amendments to its Financial Intelligence and Anti-Money Laundering Act 2002 (FIAMLA) through the Finance (Miscellaneous Provisions) Act 2018. 

The relevant amendments aim to strengthen the national AML/CFT framework by, inter alia:

  • enhancing the existing legal framework for preventative measures that apply to financial institutions and Designated Non-Financial Businesses and Professions;
  • extending the scope of the FIAMLA to include proliferation financing;
  • establishing a legal framework to support the National Risk Assessment exercise; and
  • providing a general penalty for contravention of those provisions of the FIAMLA for which no specific penalty was set out.

In October 2018, a new set of regulations known as the Financial Intelligence and Anti-Money Laundering Regulations 2018 (“FIAMLR 2018”) became effective, revoking the previous 2003 regulations. The FIAMLR 2018 address, inter alia, the following FATF requirements: 

  • customer due diligence;
  • politically exposed persons;
  • correspondent banking;
  • money or value transfer services;
  • new technologies;
  • wire transfers;
  • reliance on third parties; and
  • internal control and foreign branches and subsidiaries.

In May 2019, the United Nations (Financial Prohibitions, Arms Embargo and Travel Ban) Sanctions Act 2019 (UN Sanctions Act) and the Anti-Money Laundering and Combatting the Financing of Terrorism and Proliferation (Miscellaneous Provisions) Act 2019 were enacted.

The UN Sanctions Act was enacted to enable Mauritius to implement targeted sanctions imposed by the United Nations Security Council under Chapter VII of the Charter of the United Nations. The act makes provision for two regimes – one for the implementation of UN sanctions and one for the implementation of domestic sanctions. Under the UN Sanctions Act, reporting persons (including funds) are prohibited from dealing with funds and other assets of parties listed on the sanctions list of the United Nations. Reporting persons also have obligations to report suspicious information, and to implement internal controls to comply with the act.

The Anti-Money Laundering and Combatting the Financing of Terrorism and Proliferation (Miscellaneous Provisions) Act 2019 has amended various enactments (including the Companies Act 2001, the Banking Act 2004, the FIAMLA and the Financial Services Act 2007), with a view to meeting international standards of anti-money laundering and combating the financing of terrorism and proliferation, and to address threats to international peace and security.

BLC Robert & Associates

2nd Floor, The AXIS
26 Bank Street
Cybercity
Ebene 72201
Mauritius

+230 403 2400

+230 403 2401

chambers@blc.mu www.blc.mu
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Law and Practice

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BLC Robert & Associates is the leading independent business law firm in Mauritius. The firm has seven partners and more than 30 locally and internationally trained lawyers. The firm serves a diverse client base, including regional and international financial institutions, corporations, funds and public sector bodies. BLC Robert prides itself on offering practical commercial solutions to complex transactions and legal issues. It provides a broad range of sophisticated legal services, while being fully integrated with the African Legal Network (ALN) to meet clients’ regional aspirations. It also maintains very close relationships with global legal firms, enabling it to tap into the latest best practices.

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