Guide to Companies - International Law Office

Introduction
Global Business Companies
Foreign Companies
Continuation and Discontinuation
Foreign Tax Credit

Introduction

Mauritius’s statutory law on companies is contained in the Companies Act 2001, which was modelled on its New Zealand counterpart. In September 1986 the minister of justice instructed the Law Commission “to examine and review the law relating to bodies incorporated under the Companies Act 1955 and to report on the form and content of a new Companies Act”. The commission endorsed the view that: (i) the enabling function of company law should be seen as a standard contract reducing the costs of organizing a business enterprise; and (ii) the regulatory function should protect against abuse of management power while providing protection for minority shareholders and creditors where the market fails. The goal was for the regulation of corporate activity to be commensurate with the real danger of abuse, while not inhibiting legitimate business activity. The commission determined that the most appropriate legislation would be primarily enabling in form, rather than regulatory, except where the risk of abuse was clear, and from these principles the act was formed. The act has been amended regularly by the legislature to keep track of changes in law affecting Mauritius-incorporated companies, with the latest amendment accompanying the entry into force of the new Financial Services Act 2007, which has had a direct bearing on global business companies in Mauritius.

Types and categories of company
The act provides for several types and categories of company.

Company Types	Company Categories
Companies limited by shares	Private company
Companies limited by guarantee	Private company
Companies limited by shares and guarantee	Small private company, which is not required to appoint a secretary or auditor, but cannot hold a Category 1 Global Business Licence
Unlimited companies	Public company. If a company does not state it is a private company, then it is a public company
Foreign companies	Public company. If a company does not state it is a private company, then it is a public company
Limited life companies, which have a constitutionally limited life not exceeding 50 years from the date of incorporation, although this may be extended to a maximum of 150 years	Public company. If a company does not state it is a private company, then it is a public company

Global Business Licence
The repealed Financial Services Development Act 2001 introduced the concept of: (i) ‘qualified global business’, defined as any business or other activity carried out from Mauritius by any entity, preferably corporate in nature, with persons ordinarily resident outside Mauritius and conducted in a currency other that the Mauritius rupee; and (ii) ‘global business companies’, defined as companies holding either a Category 1 (formerly ‘offshore companies’) or a Category 2 (formerly ‘international companies’) Global Business Licence, eligible to conduct qualified global business from Mauritius. The Financial Services Development Act was repealed by the Financial Services Act, which has revamped the meaning of ‘qualified global business’ - now referred to as ‘global business’. Any body corporate formed or registered in Mauritius which proposes to conduct business outside Mauritius will be deemed to be conducting global business in Mauritius and accordingly may apply to the Financial Services Commission for a Category 1 or Category 2 Global Business Licence.

Dormant companies
Dormant companies are exempt from accounts auditing and paying certain fees, although they must still file accounts and returns as required under the Companies Act. A ‘dormant company’ is defined as having no significant accounting transactions (excluding payment of bank charges, licence fees and compliance costs) over an extended period of time, but a company may also declare itself dormant upon passing a special resolution. The company must then file the resolution with the registrar of companies at the Division of Companies within 14 days of the date of the resolution.

General
Objectives
Under the Companies Act a company need no longer state its objectives unless its constitution requires otherwise. However, if a company wishes to state its objectives, its business purpose will be restricted to those specific objectives.

Constitution
To simplify the registration process and the operation of companies, the act dispensed with the requirement that a company must have a memorandum and articles of association. However, a company may choose to have a constitution, although there is no statutory requirement to have one as the act comprehensively delineates the rights, powers, duties and obligations of the company, the board and each director and shareholder.

Under a constitution the company, the board and each director and shareholder still have the same rights, powers, duties and obligations set out in the act, except to the extent that they are restricted, limited or modified by the company’s constitution. A company’s constitution effectively acts as a binding contract between (i) the company and each shareholder, and (ii) each shareholder, in accordance with its terms and provisions.

If a company adopts a constitution post-incorporation the shareholders may do so at any time through a special resolution (and by extension alter and revoke an existing constitution in the same way). Under the act, shareholders already benefit from enforcement rights and the ability to obtain remedies for breach of any constitutional provision. Companies incorporated prior to the commencement of the act may also retain their memorandum of association and articles of association as their constitution, but are prohibited from altering any of the existing provisions unless and until the two separate documents are replaced by a single consolidated document, which will thereafter be referred to as ‘the constitution’. The board of a company must file a notice of any adoptions, alterations or revocations with the registrar within 14 days of the event occurring.

Directors
A company’s business and affairs are managed by its board of directors and the first directors are those named in the application for registration or the amalgamation proposal. All companies must have at least one director who is ordinarily resident in Mauritius, although this requirement may be waived for global business companies.

The board may delegate any of its powers to a committee of directors, a director or an employee of the company, although the board remains responsible for the exercise of power by that delegate as if the board had directly exercised the power itself.

The duties of a company’s directors have been codified under the Companies Act such that every director, in exercising his or her powers and discharging his or her duties, must:

• exercise his or her powers in accordance with the act and within the limits and subject to the conditions and restrictions established by the company’s constitution;
• obtain the authorization of a shareholders’ meeting before doing anything or entering into any transaction for which the authorization or consent of a shareholders’ meeting is required by the act or by the company’s constitution;
• exercise his or her powers honestly and in good faith in the best interests of the company and for the respective purposes for which such powers are explicitly conferred or implied;
• exercise the degree of care, diligence and necessary skill that a reasonably prudent person would exercise in comparable circumstances; and
• not make use of or disclose any confidential information received by them on behalf of the company as directors.

Directors of any company can be appointed by an ordinary resolution of the shareholders, unless the company’s constitution provides otherwise. However, a director of a public company may be removed from office only by an ordinary resolution passed at a meeting called for the purpose that includes the removal of that director. A director of a private company may be removed from office only by a special resolution of the shareholders passed at a meeting called for that purpose. The acts of a person as a director will still be valid even though that individual’s appointment was defective or the individual was not qualified for appointment as a director.

Shares
While the act specifies the basic rights attached to a share, those rights may be varied by a company’s constitution, which may allow for the issuance of different classes of shares, including fractional shares, and attach to these any special, preferential or deferred rights, privileges or conditions.

The act also requires that a share created or issued after it entered into force must have no par value, with the exception of:

• pre-existing companies;
• global business companies; or
• upon the registrar’s approval that the company is a wholly owned subsidiary registered outside Mauritius and that for reporting purposes it is necessary to be formed with shares carrying a par value.

Companies no longer need to maintain an authorized share capital, but must now report their stated capital, which is the total of the nominal value of any par-value shares and any premium paid. If the shares are issued with no par value, the stated capital is the total of any amount paid or due on the issue of and subsequent calls on the shares. The stated capital cannot be reduced unless a special resolution is passed and the solvency test has been satisfied, although global business companies are exempt from the requirement to give public notice of any proposed reduction in stated capital.

A company’s board may authorize a distribution by the company at any time, of any amount and to any shareholders it sees fit, but must satisfy a solvency test immediately after authorization.

Annual meeting
Every company must hold an annual shareholders’ meeting once in each calendar year no later than six months after the company’s balance date and not later than 15 months after the previous annual meeting. Nevertheless, a company need not hold that meeting within the first calendar year of its registration.

Filing of other documents
Charges
Every company must file with the registrar a statement of the particulars of any charge or of making any issue of debentures charged on or affecting any property of the company.

Registered office and address for service
Every company must have a registered office in Mauritius to which all communications and notices may be addressed and which constitutes the address for service of legal proceedings of the company.

Statutory registers and records
All companies must maintain a share register, company records and accounting records, with the exception of certain global business companies.

The share register must record the shares issued by the company and state whether under the company’s constitution or the terms of issue of the shares there are any restrictions or limitations on their transfer. If expressly permitted by its constitution, a company may keep copies of its share register at different locations, but the principal register must be kept in Mauritius.

In addition to the share register, the company records must include the constitution, register of directors (and directors’ interest, if required), minutes of all meetings and resolutions of directors and shareholders within the last seven years.

Procedure for incorporation
An application for registration must be made through a licensed management company and be preceded with the reservation of a name with the registrar.

The application is then submitted to the registrar and will supply:

• the name of the proposed company;
• whether the company is to be limited or unlimited;
• whether the company is to be a private company;
• the proposed registered office; and
• the full name and address of each applicant, director and secretary of the company.

Global business companies must then apply to the Financial Services Commission to obtain either a Category 1 or Category 2 Global Business Licence.

Global Business Companies
Category 1 Global Business Licence
Any entity holding a Category 1 Global Business Licence (GBL1) is allowed to undertake any business activity which is not illegal or against public policy. A further licence must be obtained if it is to provide financial or investment services.

GBL1 licence holders qualify for protection under various tax treaties to which Mauritius is a party, but only if falling within the definition of ‘resident’ under taxation laws. To satisfy this requirement, the Financial Services Act requires that the GBL1 be managed and controlled from Mauritius. To be deemed resident a GBL1 entity must:

• have at least two directors resident in Mauritius of sufficient calibre to exercise independence of mind and judgement;
• have its principal bank account in Mauritius at all times;
• keep and maintain its accounting records at its registered Mauritius office;
• prepare its statutory financial statements or cause to have such financial statements to be audited in Mauritius; and
• provide for directors’ meetings to include at least two directors from Mauritius.

Applying for a GBL1
Applications to the commission can be submitted only through a duly licensed management company and must be accompanied by the prescribed processing fees, a law practitioner’s certificate certifying that the application complies with the laws of Mauritius and any other information which the chief executive of the commission may request.

In addition to corporate entities, trusts and partnerships (including a limited partnership or a ‘société’) may apply for a GBL1. Regarding corporate entities, both public and private companies in Mauritius and foreign companies may apply for a GBL1.

A company may also apply directly for a GBL1 while in the incorporation process. Once incorporated and the applicant has accepted any conditions provided by the commission, the commission will issue the GBL1 after the payment of the prescribed licence fee, which is renewable every year.

A GBL1 may also be applied for upon the registration in Mauritius of a branch of a foreign company (or even by way of continuation, where allowed by law in the country of origin). The branch of a foreign company may then have access to the various tax treaties available through Mauritius, provided the commissioner of tax is satisfied that effective control and management of the foreign company is in Mauritius. The opportunity for continuing a company originally registered in a foreign jurisdiction with a GBL1 allows the foreign company to benefit from relief on its existing holdings if that country has a double taxation treaty with Mauritius.

Administrative and financial requirements
A GBL1 company must file with the commission its annual audited financial statements within six months after the close of its financial year, prepared in accordance with international financial reporting standards and audited in accordance with the International Standards on Auditing and other standards acceptable under the Financial Reporting Act 2004 by an audit firm approved by the commission.

The commission may vary the conditions attached to a GBL1 licence if it determines that more stringent financial reporting standards are required.

Secretary
A GBL1 company must have a minimum of one company secretary who must be a natural person ordinarily resident in Mauritius, although a corporation may act as secretary with the approval of the registrar and subject to certain specified conditions.

Category 2 Global Business Licence

Any entity holding a Category 2 Global Business Licence (GBL2) is allowed to undertake any activity other than those activities listed in the Fourth Schedule of the Financial Services Act, which are:

• banking;
• financial services;
• holding or managing or otherwise dealing with a collective investment fund or scheme as a professional functionary;
• providing registered office facilities, nominee services, directorship services, secretarial services or other services for corporations; and
• providing trusteeship services.

Financial services are listed in the Second Schedule of the Financial Services Act and include:

• financial business activities;
• asset management;
• credit finance;
• custodian services (non-CIS);
• distribution of financial products;
• factoring;
• leasing;
• occupational pension scheme;
• pension fund administrators;
• pension scheme management;
• retirement benefits scheme;
• superannuation funds;
• registrar and transfer agent;
• treasury management; and
• such other financial business activity as may be specified by the commission.

A significant difference between a GBL1 and a GBL2 is that a GBL2 is exempt from the provisions of the Income Tax Act 1995 and is deemed to be ‘non-resident’ for tax purposes.

A GBL2 provides greater flexibility and it is a suitable vehicle for holding and managing private assets. However, it cannot raise capital from the public or conduct any financial services or act as a fiduciary.

Applying for a GBL2
The Financial Services Act provides that only private companies may apply for a GBL2. Similar to a GBL1 application, it must be accompanied by the incorporation documents and a law practitioner’s certificate certifying that the application complies with the laws of Mauritius.

Once the company is incorporated and the applicant signifies its acceptance of the commission’s conditions, the commission will issue the GBL2 after the payment of the prescribed fee.

Secretary
There are no statutory requirements for a GBL2 company to have a secretary.

Taxation
Under the Income Tax Act a GBL1 company pays the uniform tax rate of 15%. However, a GBL1 company is entitled to foreign tax credits and may opt to claim credit for actual tax suffered in another jurisdiction, resulting in an effective tax rate of 3% or nil in certain circumstances. In addition, a GBL1 that is centrally controlled and managed and is tax resident in Mauritius may, upon written approval from the commissioner of income tax, receive tax relief from over 32 double taxation agreements Mauritius has with other countries.

A GBL2 company is not resident for tax purposes and therefore cannot claim double taxation relief under the double taxation treaties in force in Mauritius.

Both licences allow a company to repatriate profits freely and there is no withholding tax on capital gains, dividends or interest, nor any levied stamp duty. The commission and registrar of companies have low annual licence and registration fees.

Foreign Companies

The Companies Act defines a 'foreign company' as a body corporate incorporated outside Mauritius or a partnership formed or incorporated or existing in Mauritius or elsewhere. All foreign companies which have a place of business or that are carrying on business in Mauritius must be registered with the registrar, including foreign companies establishing or using a share transfer office or a share registration office in Mauritius or administering, managing or dealing with property in Mauritius as an agent, personal representative or trustee, whether through its employees or an agent or in any other manner.

However, exemptions apply so that a foreign company would not amount to carrying on business in Mauritius if it:

• is or becomes a party to a legal proceeding or settles a legal proceeding or a claim or dispute;
• holds meetings of its directors or shareholders or carries on other activities concerning its internal affairs;
• maintains a bank account;
• effects a sale of property through an independent contractor;
• solicits or procures an order that becomes a binding contract only if the order is accepted outside Mauritius;
• creates evidence of a debt or creates a charge on property;
• secures or collects any of its debts or enforces its rights in relation to securities relating to those debts;
• conducts an isolated transaction that is completed within 31 days, not being one of a number of similar transactions repeated from time to time; or
• invests its funds or holds property.

Name
A foreign company may not carry on business in Mauritius unless it has registered its name with the registrar. The name, or altered name, cannot be one that the registrar deems undesirable or is a name (or kind of name) that the minister of finance has directed the registrar not to accept for registration, unless otherwise allowed solely with the minister's written consent. They may not use any name other than that which it has registered in Mauritius.

A foreign company must:

• conspicuously exhibit its name and the place where it is formed or incorporated outside its registered office and every place of business established by it in Mauritius (except in the case of a banking company);
• state its name and the place where it is formed or incorporated on all its bill heads and letter paper and in all its notices, prospectuses and other official publications; and
• give notice where the liability of its members is limited, unless the last word of its name is the word ‘Limited’ or ‘Limitée’ or the abbreviation ‘Ltd’ or ‘Ltée’.

Registration formalities
Within one month of establishing a place of business or carrying on business in Mauritius a foreign companies must file with the registrar - along with its certificate of notice of name reservation, certified copies of its certificate of incorporation and constitution or memorandum of articles - a list of directors containing their full names, residential address and occupation, the local authorized agents and the registered office in Mauritius.

Registered office
Foreign companies must have a registered office in Mauritius to which all communications and notices may be addressed. The registered office must be open and accessible to the public for not less than four hours on every day other than Saturdays, Sundays or public holidays.

Authorized agents
Foreign companies must appoint an authorized agent which must do and be answerable for everything required of and by the company under the Companies Act.

A foreign company or its authorized agent may file with the registrar a written notice stating that the authorized agent has ceased or will cease to be the authorized agent on a date specified in the notice. If the foreign company wishes to continue carrying on or maintaining a place of business in Mauritius it must appoint a new authorized agent within 21 days of the previous agent ceasing to act.

Within one month of appointing a new authorized agent a foreign company must file a memorandum of this with the registrar, along with a copy of the deed, document or power of attorney.

Ongoing requirements
Foreign companies must file a notice with the registrar within one month of any increases in authorized share capital. The notice must include both the original amount and the increased amount. In instances where a foreign company does not have share capital but increases the number of its members beyond the number registered with the registrar, it must file a notice of the increase with the registrar within one month.

Foreign companies must also file copies with the registrar of any orders made by a court under any law in force in the country in which that foreign company is incorporated within one month of the order being issued.

Branch registers
Any foreign company with share capital and shareholders resident in Mauritius must keep a branch register of this either at its Mauritius-registered office or at some other place in Mauritius. However, a foreign company need not keep a branch register until two months from the receipt of a written application by a shareholder resident in Mauritius for registration of its shares.

A branch register is prima facie evidence of any matters directed or authorized to be inserted therein. Furthermore, a certificate under the seal of a foreign company specifying shares held by a shareholder and registered in the branch register is prima facie evidence of the title of the shareholder to the shares and the registration of the share in the branch register.

Logically, foreign companies that are constitutionally prohibited from inviting the public to subscribe for shares are exempt from the requirement of having branch registers.

Accounting requirements
Within three months of its annual shareholders’ meeting a foreign company must file a copy of its balance sheet up to the end of its last preceding accounting period in a form and containing the particulars and accompanied by copies of the documents that the company must annex, attach or send with its balance sheet (by law as applicable from time to time in the place of the foreign company’s incorporation or origin), and a declaration certifying that they are true copies of the required documents.

Regardless of whether a foreign company is not required under the law of the place of its incorporation or origin to hold an annual shareholders’ meeting and prepare a balance sheet, it must still prepare and file with the registrar a balance sheet within a period and in a form the directors would have been required to prepare or obtain if the company was a public company. The balance sheet and all other financial statements must comply with internationally recognized accounting standards, and in particular accurately show the assets employed in, liabilities arising out of and profit or loss arising out of operations conducted in or from Mauritius.

Cessation of business in Mauritius
When a foreign company ceases to carry on or have a place of business in Mauritius it must file a notice to that effect with the registrar within seven days of the date of the cessation. The foreign company’s obligations to lodge any document (other than those that should have been filed prior to the notice) will cease from the date on which the notice is filed. The registrar will remove the foreign company’s name from the register three months after the notice is filed.

If a foreign company goes into liquidation or is dissolved in its place of incorporation or origin, the authorized agent in Mauritius must file or cause to be filed with the registrar a notice of this within one month from the commencement of the liquidation or the dissolution. Upon receipt of notice from the authorized agent the registrar will remove the foreign company’s name from the register. Where a foreign liquidator is appointed, the authorized agent must also give notice of this. The foreign liquidator will have the powers and functions of a local liquidator until the court appoints a liquidator for Mauritius.

Continuation and Discontinuation
Continuation into Mauritius
The Companies Act allows for the registration and continuation of foreign companies as any type of company admitted under the act. However, a foreign company must not be registered and continue:

• where it is in the process of winding up or liquidation;
• where a receiver or manager has been appointed, whether by court order or not, in relation to the property of the company; or
• where there is a scheme or order in force in relation to the company whereby the rights of the creditors are suspended or restricted.

In all circumstances a foreign company may not be registered as a company unless it can satisfy a solvency test immediately after registration.

Registration and effect
Upon receiving a properly completed application and on being satisfied that the requirements for registration under the act have been complied with, the registrar will enter into the register of companies the continuing company’s particulars and issue a certificate of registration in the prescribed form. Once issued, the certificate of registration constitutes conclusive evidence that all the requirements of the act regarding registration have been complied with and that the continuing company is now registered from the date of registration specified in the certificate.

No new legal entity is created as a result of a continuing company becoming registered in Mauritius and the identity of the body corporate constituted by the continuing company or its continuity as a legal entity will not be prejudiced or affected. The property, rights or obligations of the continuing company will not be affected nor will any proceedings by or against the continuing company.

Discontinuation out of Mauritius
Mauritian companies may also transfer their corporate entity to other jurisdictions, thereby being removed from the register of companies for the purpose of becoming registered or incorporated under the law in force in or in any part of another country.

A Mauritian company cannot apply for discontinuation out of Mauritius where:

• it is in liquidation or an application has been made to the court to put the company into liquidation;
• a receiver or manager has been appointed, whether by a court or not, in relation to the company’s property; or
• it has entered into a compromise with creditors or a class of creditors.

Furthermore, a company cannot be removed from the register unless it satisfies the solvency test immediately before its removal.

Registration and effect
An application by a discontinuing company for its removal from the register of companies must be made in a form approved by the registrar. Upon the registrar receiving an application satisfying all the requirements under the act, the registrar will issue a notice removing the discontinuing company from the register. The discontinuing company will be deemed removed from the register only once that notice is registered under the act.

The removal of a discontinued company from the register of companies does not result in the identity of the body corporate or its continuity as a legal person being prejudiced or affected. The property, rights or obligations of that body corporate and any proceedings by or against it will not be affected. Similarly, proceedings that could have been commenced or continued by or against a discontinuing company before it was removed from the register may be commenced or continued by or against the body corporate that continues in existence after its removal from the register.

Foreign Tax Credit

The Income Tax (Foreign Tax Credit) Regulations 1996, as amended by the Income Tax Credit (Amendment Regulation) 1997, allow for foreign tax credit on the foreign source of income of a Mauritian-resident entity. The regulations allow for the grossing up of the foreign source income and regarding foreign tax charged on dividend provide credit for the underlying tax charged in the foreign country on profits out of which the dividend is paid. A Mauritian resident entity will be entitled to foreign tax credits and may opt to claim credit for actual tax suffered in another jurisdiction, resulting in an effective tax rate or 3% or nil in certain circumstances.

For further information on this topic please contact Paul Stewart at Appleby by telephone (+1 441 295 2244) or by fax (+1 441 292 8666) or by email (PStewart@applebyglobal.com).