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 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;
• a separate legal personality is maintained; 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 Partnerships

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 takes no part in the management of the partnership. Where the limited partner does become involved in the management of the partnership, the limited partner will be treated as a general partner and 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 relative flexibility of the vehicle, the mitigation of fiduciary risks, the ability to account for profits and losses at 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 Companies

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". 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 that 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, at least one of whom 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, but an application to the FSC must be made in order to be authorised as a fund. 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 expert funds or professional collective investment schemes.

A fund that conducts 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 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 officers of the proposed GBL, and 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 pay 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 – for a company, a constitution and the shareholders’ agreement (if adopted); for a limited partnership, a limited partnership agreement and an investment management agreement; and 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, general partners or trustees (as applicable).
• Certificates and confirmations required by law and the regulators.
• 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 following fees are payable to the FSC for the licensing process:

• 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, an additional registration fee of USD300 and an annual fee of USD600 for each cell that is authorised as a sub-fund; and
• for the GBL, a processing fee of USD500 and an annual fee of USD1,950.

In addition to FSC fees, an incorporation fee of USD76 and an annual fee of USD229 are payable to the Registrar of Companies in the case of a company, and a registration fee of USD107 and an annual fee of USD64 are 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. Investors risk losing their limited liability status where they participate in the management of the business of the fund. In doing so, they may be viewed as acting as the general partner or a director (depending on the structure) and thus attract the unlimited liability that generally attaches to a general partner or become 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 sufficient information to allow investors 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, but such accounts need not 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, including institutional investors, development finance institutions, family offices and financial institutions.

An investment manager licensed by the FSC must:

• be incorporated or registered as a body corporate in Mauritius;
• 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 a minimum stated capital of at least MUR1 million (or an equivalent amount in a different currency) at all times;
• 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 collective investment scheme 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. A fund that is constituted as a company may be self-managed (ie, managed by its board of directors), with the approval of the FSC.

AIFs 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.

Exemptions include the following:

• 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 the prices of interests in the collective investment scheme on a weekly basis.

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 services as administrators, custodians, director services providers, etc, in Mauritius by way of business. They will need to set up either 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 services related to 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 provider. 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 assess 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. In support of the application for prior approval, a draft of an investment management agreement between the fund and foreign investment manager and evidence of the licensed status of the manager need to be submitted to the FSC, alongside details of the management team's appropriate competence and relevant fund management experience.

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 production and offering of marketing materials are regulated by the Securities Act 2005 and the regulations and rules thereunder and 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 be carried out only by locally licensed intermediaries:

• seeking to meet a person at his place of residence, work or public places;
• contacting a person by telephone, letter, circular, 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 categorisations of funds that are targeted only to specific investors and thus enjoy exemption from the regulations on the grounds 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 sophisticated investors, as defined in the Securities Act 2005 (or any similarly defined investor in the securities legislation of another country).

Under the Securities Act 2005, sophisticated investors include the following:

• the government of Mauritius;
• a statutory authority, or an agency established by an enactment for a public purpose;
• a company whose shares are wholly owned 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 not 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 a closed-ended 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 for the offer document to include such disclosures along with other disclosures specific to the type of fund as required by the FSC.

The FSC 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 in the global business sector. 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 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 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 fund applications, the FSC will usually raise such queries via email to the administrators. It is also possible to request face-to-face meetings with the FSC.

Retail funds can be set up as companies, limited partnerships, protected cell companies 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 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 making a similar name reservation and formal application 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 of Investors.

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 the necessary information on the securities to be offered and the fund 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 file with the regulator and make public the following:

• 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, containing 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 file with the regulator and make public the following:

• 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.

The quarterly reports and annual reports of 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) must also be made public.

In the case of 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 for retail funds – from individuals and corporates to institutional investors, development finance institutions, family offices and financial institutions.

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, but the prospectus can set out specific eligibility criteria for investors or any minimum investment.

There are two main categories of funds: collective investment schemes and closed-ended funds. As defined in the Securities Act 2005, a collective investment scheme 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 if 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 commodities, 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 a security or sell a security to the investment manager, the custodian, an officer of the investment manager or the custodian and an affiliate of such 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.

Through its guidelines, the FSC has announced that due to the high-risk nature of investments in digital assets and cryptocurrency, such asset class may not be suitable for retail investors; however, digital assets including cryptocurrency may constitute as asset class for investment by funds authorised as expert funds, professional collective investment schemes or specialised collective investment schemes.

The position is same as described in 2.3.2 Requirements for Non-local Service Providers.

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 if 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.

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.

In addition, a retail collective investment scheme cannot issue, use or cause to be issued or use for any purpose any advertisement in connection with a collective investment scheme unless a copy is forwarded to the FSC no later than five working days prior to the issue or use.

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, extensive disclosure is required in the prospectus of such funds in order 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);
• 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 must also 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.