Mauritius: Funds In Mauritius

Last Updated: 23 March 1998
In 1992, Mauritius passed legislation introducing its offshore sector. Since then there has been considerable interest generated by Mauritius as an offshore base for investment. To date there are nearly 3,000 offshore companies registered in Mauritius whilst some 60 Funds have been incorporated in Mauritius and actively channel their investments through Mauritius.

The Mauritius Offshore Business Activities Authority (MOBAA) is the administrative authority which regulates the formation and management of Funds in Mauritius . MOBAA also acts as a facilitator with other administrative departments.

A number of Funds have been structured in Mauritius with the ultimate purpose of investing in emerging markets: the Asian sub-continent and more especially India, Pakistan and China have been favourite destinations.

There are a number of reasons for which institutional investors would think of Mauritius as a viable alternative to the better known offshore centres for the structuring of collective investment schemes. The most obvious one is the advantageous network of Double Taxation Agreements (DTA) which Mauritius has signed with a number of friendly countries. The DTA with India has so far been the most widely used. There are a number of treaties which are awaiting signature and others are in the process of being negotiated.

It is further worth noting that the DTA network allows a Fund incorporated in Mauritius to invest simultaneously in a number of jurisdictions with which Mauritius has tax treaties.

With the development of the offshore sector , the Mauritian professionals have adjusted their standards to those existing in the world of international finance. The Mauritian financial services sector has a pool of professionals most of whom are qualified at the best universities in Europe and the United States of America. Funds incorporated in Mauritius are competently managed and serviced from within Mauritius and the standard and quality of the service offered by the Mauritian professionals have so far been without question.

The legal framework is also suitable for the creation of Fund subsidiaries in Mauritius. The Mauritius Companies Act of 1984 which is largely based on the UK Companies Act of 1948, applies for the operation of the "offshore company" which is the corporate structure which is normally used by foreign investors. In 1994, amendments were made to provide for the creation of the "investment company" which is best adapted to the structure of an open-ended Fund.

The provisions applicable to investment companies are wider and more flexible than those applicable to offshore companies.

The investment company allows redemption of ordinary shares at the request of the shareholder . Moreover, redemptions can be made out of paid -up capital, the share premium or any other reserves whilst for offshore companies, redemptions can only be made out of distributable profits or out of the proceeds of a fresh issue of shares.

As a result of the above changes in the Companies Act, Funds with a two tier structure have been able to create a Mauritian open -ended corporate entity , which whilst being a subsidiary, mirrors the activities of the parent company in terms of new issues and redemptions.

As regards close- ended structures, it is worth noting that it is possible to have a Limited Life Company (LLC) , which has the characteristics of a partnership but operates as a corporate entity. These companies are especially attractive to Funds which will require ultimate repatriation of funds into the United States.

The MOBAA in regulating the incorporation and setting up of Funds is vigilant in checking the credentials of the promoter of the Fund as well as those of the fund manager, the investment manager and the investment adviser.

MOBAA will also check the credibility and trustworthiness of the global custodian. As far as local custodians to the Fund are concerned, there are seven branches of well established banks which operate as Offshore Banking Units (OBU's) and which provide custodial services for Funds.

In the foreseeable future, Mauritius will be playing an increasingly important role in the African region and the Indian Ocean. The involvement of Mauritius in the Indian Ocean Rim Initiative and the forthcoming signature of a number of DTA's with a number of countries in the Southern African Region is bound to be an added attraction to the development of the offshore Fund industry of Mauritius.

The Stock Exchange of Mauritius has recently started to accept primary and secondary listings of offshore and foreign companies. It is thought that this will be a determining move in encouraging future Funds to invest in the local stock market.

The offshore sector in Mauritius is constantly broadening its fields of expertise to better service the needs of its clients. The calculation of the Net Asset Value (NAV) is one of the specialised services which are being provided by the professionals in the offshore sector.

The next step in this direction will be the provision of investment advisory and managerial services, which although not presently available in Mauritius with regard to foreign markets, are likely to be introduced shortly to cater for the more demanding needs of the international investor.

International Management (Mauritius) Ltd. (IMM) is a leading offshore management company in Mauritius which specialises in tax and legal consultancy to foreign investors.

The complete service provided by IMM includes legal and tax advice on the choice and structuring of an offshore entity , as well as all the incorporation procedures including the obtention of the Tax Residence Certificate.

As part of its third party Fund post-incorporation management, IMM undertakes all corporate, registrar , administrative and transfer agency services. NAV calculations are also carried out internally.

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

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