Mauritius: Aspects Of Mauritian Equity And Debt Funding

Last Updated: 30 September 1996

The process of obtaining a reduction in capital has to be borne in mind when the method of funding the Mauritian company is under consideration.

There are no debt/equity ratios in Mauritian law so a Mauritian company can be funded substantially by debt. Loan funding injected into a company can easily be brought out. By comparison, capital which is brought into a company can only be brought out again by obtaining a court order for the reduction of capital or by redeeming the shares. Redemption of shares is generally a better option.

Redeemable preference shares can be redeemed out of the proceeds of a fresh issue of shares or out of profits which would otherwise be available for payment of a dividend. Redeemable preference shares cannot be redeemed out of capital.

Despite the restriction on redemption, to redemption out of distributable profits, it is possible to arrange the redemption to ensure the maximum return of funds. The redeemable preference shares can be issued with a very low nominal value and a very high share premium. There are no requirements in Mauritian law to maintain a proportion between nominal value and premium.

A sum equal to the premium is transferred into a share premium account. Upon redemption it is only the nominal value of the share which must be redeemed out of distributable profits. The premium element can be funded from the share premium account.


Mauritius law allows the creation of classes of shares with different rights attaching to those shares in the case of onshore private companies and offshore companies. No onshore public company or subsidiary or holding company of an onshore public company can issue shares with rights disproportionate to the rights attaching to other shares in relation to the paid up capital on the share.

It has always been assumed that a separate class of shares is constituted when the rights enjoyed by the shares differ from those enjoyed by other shares. These may be the principal rights, for example some shares carry preferential or deferred rights as to dividend or capital, or more votes than other shares. Differentiation between other rights may be sufficient to create a different class of shares, for example, differences as to freedom of transferability or redeemability.

Mauritian law follows English law in distinguishing between rights enjoyed qua shareholder and rights enjoyed qua share. Rights given to shareholders qua shareholders, rather than appertaining to the shares themselves, would probably not be regarded as class rights. Accordingly, the variations in rights procedure would not have to be followed.

A variation of the rights attaching to shares requires the prior written consent of the holders of at least three fourths of the issued shares of each class, or the sanction of a special resolution of the holders of the shares of that class.


The Mauritian International Companies Act 1994 permits the creation of bearer shares in the case of Mauritian international companies. Mauritian onshore and offshore companies cannot issue bearer shares. Bearer shares are usually issued to the bearer upon receipt by the company of a written request to so issue. The company will also exchange bearer shares for registered shares, or vice versa, upon receipt of a written request.

Bearer shares certificates are generally issued under the seal of the company and provide, by coupons or talons, for the payment of dividends on the shares.

Under Mauritian law, the holder of a bearer share certificate is entitled to the same rights and privileges as he would have had if his name had been included in the share register of the company as the holder of the shares.


Under Mauritian law, shares constitute movable property and are transferable in the manner provided in the articles. A private company is defined as one which by its articles restricts the right to transfer its shares. Such a restriction may be the requirement to obtain board or members' approval before transfer or a right of pre-emption.

Offshore and international companies formed to qualify as partnership entities from the US tax perspective generally include transfer restrictions in their articles. Such a restriction would be one which permitted shares to be transferred to other members only. A restriction on the transfer of shares is one of the four US partnership characteristics. It is also possible for an offshore company and an international company to provide for an absolute prohibition on transfer of shares (Regulation 5(a) of the Mauritius Offshore Business Activities (Companies) Regulations 1995 and section 117(1)(a) of the International Companies Act 1994). Such an absolute prohibition would be invalid in the case of shares in an onshore company.


The Mauritian Companies Act 1984 defines a debenture as a written acknowledgment of indebtedness issued by a company in respect of a loan made or to be made to it or to any other person or money deposited or to be deposited with the company or any other person or the existing indebtedness of the company or any other person whether constituting a charge on any of the assets of the company or not.

The definition provides that a debenture includes debenture stock, a convertible debenture, a bond or obligation, loan stock, an unsecured note or any other instrument created in consideration of such a loan or existing indebtedness.

The most common form of debenture in Mauritius is what is called debenture stock. The Companies Act provides a mechanism for the appointment of a debenture holders representative where debentures of the same class are issued to more than 25 persons. The agency deed signed by the issuing company and the representative can cover only one class of debentures. The holder of debenture stock accordingly is not a direct creditor of the company, but is a beneficiary under the trust by which the trustee holds the debt. Most trust deeds provide for action to be taken by the trustee, and not by an individual stockholder.

Debentures issued in a series usually contain a clause as follows: "The debentures of this series are all to rank pari passu in point of charge without any preference or priority one over another." This avoids the situation, when debentures do not contain a pari passu clause, of their ranking according to the date of issue or if all issued on the same day, by their numbering.

The effect of the clause is to place all the debentures on the same level so that if the clause is enforced, the proceeds are divided pro rata amongst the debenture holders according to the amount paid up.

The company must maintain a register of debenture holders. Onshore companies may not issue debentures to bearer, but this restriction does not apply to offshore companies.

Debentures are redeemable at the option of the company or irredeemable. Section 79 of the Mauritian Companies Act 1984 provides for the possibility of the company reissuing a redeemed debenture, which reissue is not regarded as the issue of a new debenture. After reissue the person entitled to the debentures has and is deemed always to have had the same priorities as if the debentures had never been redeemed.

Convertible debentures are viewed in Mauritian law as debt until their conversion into equity.

The content of this article is intended to provide general information on the subject matter. It is not, therefore, a substitute for specialist advice.

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