Compendium of Principles of Law Regarding the Establishment and Operation of a Business in Mauritius
Written By: Miss Sapna Dwarka, Senior Legal Executive and Miss Poonam Geemul, Legal Executive
Banymandhub Boolell Chambers
Establishing a Company in Mauritius
1. A Brief Overview of the Legal Framework of Mauritius
The Republic of Mauritius is a sovereign independent state. It was previously a British and French colony, became independent in 1968 and acquired Republic status in 1992.
Mauritius operates a “hybrid” legal system, whereby both British Common law and French Napoleon Codes have been adapted to form a set of applicable rules. Moreover, Mauritius has inspired itself from various commonwealth jurisdictions to promulgate laws. For instance, the Companies Act 2001 has been very largely inspired its New Zealand counterpart.
Mauritius has a written Constitution, which is considered to be the supreme law of Mauritius. The Constitution caters for the doctrine of separation of powers among the legislative, the Executive and the Judiciary. Executive power is exercised by the government, while legislative power is exercised by the National Assembly, which consists of the members of the Government, as well as the Opposition. Nonetheless, the independence of the judiciary is firmly entrenched.
There is a system of parliamentary democracy, which is based on the Westminster model, whereby the Head of the State is the President, appointed by the National Assembly and the Head of Government is the Prime Minister who leads a council of Ministers.
The highest Court of the island is the Supreme Court of Mauritius, exercising unlimited jurisdiction over any civil or criminal proceedings. The Supreme Court also has various divisions, exercising jurisdiction as both at an original and appellate level. The Supreme Court also sits as a court of equity, and is able to dispense a number of equitable remedies which are available at common law in the United Kingdom. Urgent matters can be referred to the Judge in Chambers. Even after having become a Republic state, Mauritius has maintained the final right of appeal in all matters, to the Judicial Committee of the Privy Council, which remains the highest appellate Court of the island. There are also Courts of lower jurisdiction, namely, the Intermediate Court, the District Courts and the Industrial Court.
2. Ways in which a foreign company may enter Mauritius
a. Establishing a local entity
A foreign company may set up a corporate entity in Mauritius, through a domestic company since there are no restrictions towards foreign ownership of shares in Mauritius. Nonetheless, the authorisation of the Prime Minister would be required in the event that the company were to hold immoveable property. There is moreover the requirement that one of the directors on the board be a Mauritian resident. It should be highlighted that such a structure would create a legal personality which would be separate from its corporate shareholder, that is, the foreign company.
b. Establishing a limited partnership
Similarly, there is the possibility for the foreign company to set up a limited partnership in Mauritius, and thus it would act as a limited partner. It is brought to the attention of the reader that there are no restrictions for a general partner to be a corporate entity. In this capacity, the limited corporate partner will be liable only to the extent of his investments. On the other hand, the foreign company may also act as the general partner which would involve participation in the conduct of the affairs on the island. This would also require the appointment of an authorised agent in the event that there is no other general partner who would be a Mauritian resident.
c. Establishing a branch office
It is also possible for a foreign company which does not want to incorporate a local company to register with the Registrar of Companies. Such a branch may administer or deal with property in Mauritius as an agent, or personal representative, or trustee. This registration must be undertaken within one month of establishing a place of business in Mauritius through the submission of prescribed documents. Such a branch must have a registered office in Mauritius to which all communications and notices may be addressed. The Companies Act 2001 also caters for the appointment of an authorised agent which will be answerable for the doing of all such acts, matters and things as are required to be done by the registered entity.
3. Regulation of foreign investments
a. Establishment of Global Businesses in Mauritius
There is an adequate framework to foster investment in the country. The Financial Services Act caters for the possibility for investors to route their investments through Mauritius. Nonetheless, this legislation brings some substance to the conduct of such operations through, inter alia, the requirement to have a registered office in Mauritius, and by providing the possibility for foreign investors to carry on their business on the island, with the authorization of the regulator. In that regard, the country is savvy towards suspicious transactions and has imposed measures to counter anti-money laundering practices, as well as any possible attempts to counter terrorist financing.
To provide incentives for such investors to route their investment from Mauritius, certain categories of companies, namely those entities holding Category 1 Global Business Licences are able to apply for tax residency, so as to avail of Double Taxation treaties which Mauritius has signed with other jurisdictions. They are also able to enjoy a lower rate of corporation tax, which is at present at 3% with respect to international transactions, while domestic transactions are currently subject to a 15% taxation rate. Capital gains tax is currently not applicable in Mauritius.
Besides the tax implications of investing in Mauritius, it should be highlighted that there are currently no foreign exchange controls which are applicable to the transfer of funds from Mauritius. As such, investments effected from Mauritius, as well as profits and capital repatriated to the home country is not subject to such controls.
b. Conducting activities within Mauritius
With regard to those investors who intend to conduct business specifically in Mauritius, the Board of Investment seeks to facilitate such procedures, through its Work and Live Department. This department has been set up “as a single-facing service counter” to expedite formalities for those investors who intend to invest in Mauritius. As such, an investor whose turnover exceeds MRU 4 million annually, with a minimum initial investment of USD100,000, or its equivalent freely convertible in foreign currency, may apply for an Occupation Permit, which includes a Residence Permit from the Board of Investment. Such permit is granted within three days, subject to all requested documents being provided to the authority.
Those investors, who plan on exporting their products, are also entitled to a number of benefits. For instance, they may avail of duty-free privilege for their inputs and equipment, as well as a 50% annual allowance on declining balance for the purchase of electronic and computer equipment. There are also existing buildings, industrial parks and IT habitats, which are fully serviced and which already cater for utilities in terms of water, electricity and telecommunications, at their disposal. In the event that the foreign investors intend to bring their own specifications, they may lease industrial land on a long term basis from the State Land Development Company at very concessionary rates, to build their own factory space.
Moreover, Mauritius is also currently party to a number of Investment Promotion and Protection Agreements. The country has also secured preferential access to markets such as the European Union through the Cotonou Agreement, the United States through the Africa Growth and Opportunity Act, Eastern and Southern Africa though the COMESA (Common Market for Eastern and Southern Africa) and SADC (Southern African Development Community).
Whilst there are restrictions on the foreign ownership of immoveable property, an investor may acquire villas or other such property through the Integrated Hotel Scheme, Real Estate Scheme and the Invest Hotel Scheme.
4. Forms of doing business in Mauritius
Shareholders who set up companies in Mauritius may limit their liability by virtue of shares or through guarantee. An investor seeking to set up such a structure must first reserve the name of the intended company at the Companies Division of the Registrar of Companies, either by calling in person or online. Further to such reservation, he must submit the consent and certificate of the directors and company secretary, and indicate the allocation of shares and the registered office of the company in the prescribed form.
The shareholders may decide to adopt a constitution, which originally was referred to as the Articles and Memorandum of Association, but same is not mandatory under the Companies Act 2001. In the event that a constitution is adopted, this must be accompanied by a legal certificate of a barrister at law, to the effect that the provisions of the Constitution comply with the Companies Act 2001. The application process usually takes around 3 days, at the end of which the Registrar of Companies delivers a Certificate of Incorporation as well as a Business Registration Card (for domestic companies).
Whilst companies in Mauritius are heavily regulated by the Companies Act 2001, their activities, pertaining to the structure which they vehicles, may be subjected to other regulations. For example, companies which structure their businesses abroad through global businesses are also governed by the Financial Services Act 2007, while funds which vehicle their investments through such structures have to comply with the Securities Act 2005. Such businesses must address their applications to the Financial Services Commission through management companies in Mauritius. It should also be noted that there is no requirement regarding domestic ownership of shares in companies which are set up for that purpose. Nonetheless, there is the requirement to have two domestic directors on the board of global businesses which are tax residents in Mauritius.
b. Limited Partnerships
This structure is a fairly recent one and has been introduced by the Limited Partnerships Act 2011 in order to emulate practices in other jurisdictions, especially with regard to fund structuring. The applicants need to present the prescribed application form before the Registrar of Partnership, and the registration process takes around 3 days. The terms and conditions of the partnership agreement, and the document itself, need not be disclosed at the time of the application.
The Limited Partnerships Act accordingly provides for two classes of partners and therefore provides that flexibility for tax planning since the general partners are jointly and severally liable for all debts and liabilities of the partnership and the limited partners are liable to the extent of their investment, as long as they do not participate in the management of the business. The partnership is in general exempt from taxes but the partners are then levied individually.
It follows that the limited partnership in Mauritius may elect to have legal personality such that it has unlimited capacity and can sue or may be sued in its own name. If the structure does not avail of this possibility, any proceeding may be brought against the General Partner. Partnership property shall be held by the Limited Partnership itself where it has legal personality or by the general partner where this is not the case.
With regard to the jurisdictional implications, a Limited Partnership may be formed in Mauritius to carry on any business within Mauritius or elsewhere, through the grant of a global business licence. It should also be noted that a foreign Limited Partnership may apply to the Registrar to be registered as, and continue as, a Limited Partnership in Mauritius.
c. Other Business Entities
There are other entities which are present in Mauritius but which, nonetheless, are rarely used. For instance, there are general partnerships regulated by the Code of Commerce, under the name of “Société en Commandite Simple” and “Société à Responsabilité Limitée”. Trusts are also present and are regulated by the Trusts Act 2001 but same are rarely used to vehicle investments.
5. Tax treaties currently entered into by Mauritius
Appendix A to the present document lists out the tax treaties, to which Mauritius is currently a party. It should be noted that three treaties currently await ratification, namely with Russia, Congo and Zambia. On the other hand, the tax treaties with Egypt, Kenya, Malawi, Nigeria and Ghana are currently awaiting signature. Thirteen treaties are currently being negotiated with the potential parties listed at Appendix B.
For more information about Banymandhub Boolell Chambers, please visit www.templegroup.mu or the International Society of Primerus Law Firms.
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