Mauritius: Aspects Of Mauritian Equity And Debt Funding

Last Updated: 30 September 1996
FUNDING ISSUES

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.

CLASSES OF SHARES

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.

BEARER SHARES

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.

TRANSFER OF 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.

DEBENTURES

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions