On account of Mauritius being delisted from the non-compliant jurisdictions list of international supervisory bodies, including the Financial Action Task Force (FATF), the Bank of Mauritius (BOM), as the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) supervisor for institutions operating in the banking sector in Mauritius, has been actively engaged in implementing the FATF recommendations. As continued efforts in the fight against money laundering and terrorist financing, further amendments have been brought to the legislative frameworks, aligned with the FATF recommendations.

“Proliferation financing” now figures as one of the risks, in addition to money laundering and terrorism financing as part of conducting the national risk assessment under the Financial Intelligence and Anti-Money Laundering Act.

On another note, in September 2022, the BOM took the decision to increase the key repo rate to 3 per cent per annum in response to the soaring inflation resulting from the aftermath of the COVID-19 pandemic and from external factors such as the ongoing war following the invasion of Ukraine by Russia. This increase will boost borrowing costs and may subsequently dampen our economic growth.

The overall outlook remains positive for Mauritius for the coming years with ongoing vaccination campaigns and the lifting of travel bans, thereby boosting key sectors of the economy such as trade, manufacturing, financial services and tourism.

In this post COVID-19 era where the economy is on a recovery path, the leniency afforded to businesses during the COVID-19 pandemic through temporary time extensions has now been lifted through amendments to legislation and initial statutory obligations have been reinstated. Such reinstatements pertain to the time period for (i) calling the annual meeting of shareholders after the balance sheet date of the company and (ii) the board of directors to prepare financial statements. The obligation of directors to call for a meeting of directors when a director believes that the company is unable to pay its debts as they fall due has also been reinstated. 

Further, support programmes designed by the BOM to provide financial aid to businesses and individuals through moratorium on loans, special relief amount being made available to banks by the BOM to support cash flow and working capital requirements of economic operators and reduction of cash reserve ratio applicable to commercial banks to support such banks to assist businesses impacted by the pandemic were extended to 30 June 2022. In light of Mauritius’ recovering economic situation, the government decided to not further extend support programmes.

As further aid to the key economic players whose financial situation had been negatively impacted by the pandemic, the BOM proceeded with the set-up of the Mauritius Investment Corporation (MIC). Since its inception in 2020, the MIC has been investing in sectors with a promising economic outlook, such as tourism and manufacturing, and has, by early 2022, made a profit of around MUR58 million which will in turn be invested in sectors with a promising future. 

The ability of corporates to raise finance by issuing high-yield corporate bonds has made them less reliant on banks for funding. Some corporates also leverage on high-yield bond structures to refinance existing bank loans via bond issuance.

The domestic bonds market has been very active recently. From an international perspective, Mauritius has also been a popular platform for the issuance of these types of instruments, either through Mauritian special-purpose vehicles or through foreign corporates listing their high-yield bonds on the Mauritian stock exchange.

Peer-to-peer lending has proved very popular among start-ups and sole traders who seek microfinancing or financing of their working capital, supply chain or business expansion.

This platform has also gained an increased interest among lenders who are currently incentivised by benefiting from an 80% tax exemption on interest derived from a qualifying peer-to-peer lending platform.

Peer-to-peer lending and crowd-funding are still, however, in their infancy and require time for mass adoption. Consequently, despite their growing popularity, the volume of funds raised on peer-to-peer lending platforms is not significant enough to disrupt the traditional lending market, which remains the favoured financing route.

From a corporate lending perspective, a clear trend in more sophisticated lending structures has surfaced. Mezzanine financing and quasi-equity instruments are being used with the aim of creating long-term value for local projects.

Local banks have also showed robust participation in syndicated financing on local and outbound projects, as well as cross-border financing.

The Finance (Miscellaneous Provisions) Act 2022 (the “Finance Act”) brought substantial amendments to key legislation such as to the Bank of Mauritius Act, the Banking Act, the Borrowers Protection Act, the Companies Act, the Mauritius Civil Code, the Registration Duty Act and the National Payment Systems Act, reflecting the Government’s commitment to strengthening our banking sector and facilitating business.

In line with the spirit of the budgetary measures, provisions of the Bank of Mauritius Act have been amended to bring more clarification regarding the proposed Central KYC and the Account Registry; there will now be a “Central KYC System” and a “Central Accounts Registry”, each having distinct functions.

Provisions relating to confidentiality requirements to strengthen the duty of confidentiality imposed on a financial institution, a service provider or a person conducting a due diligence on a financial institution for the purpose of acquiring shareholding in that institution have been introduced in the Banking Act.

In terms of an application for a banking licence, the Banking Act now provides that an applicant may be granted an in-principle approval upon the BOM being satisfied that such applicant is eligible for a licence subject to terms and conditions it may determine and upon submission of certain documents.

The Borrower Protection Act 2007 introduces an exception in terms of which no penalty will be charged if a borrower defaults on payment of instalment(s) in respect of a loan pursuant to a credit agreement where the mortgaged immovable property is the sole residence of that borrower.

Changes have been brought to the administrative requirement relating to the filing of the statement of the particulars of charges (SOP) which needed to be accompanied by a certified copy of the charge instrument, within 28 days of the creation by a company of such charge. Henceforth, it is no longer required that the charge instrument be certified when filing the SOP with the Registrar of Companies, thus facilitating the filing process.

The Registration Duty Act, the Inscription of Privileges and Mortgages Act and the Transcription and Mortgage Act have been amended to cater for deeds and documents bearing electronic signatures which comply with the requirements for secured digital signatures under the Electronic Transactions Act and such electronically signed documents are now deemed to meet the requirements and to reproduce the contents of the original deed or documents for the purposes of the aforementioned acts.

New provisions have been inserted at Article 2107 of the Mauritius Civil Code to the effect that it is now mandatory for a creditor to erase any inscription of the non-possessory pledge (gage sans déplacement) after the full repayment of the debt by the debtor as soon as possible, and for a term not exceeding one month following the full repayment of the debt.

In view of modernising the banking legislation, the BOM has further amended the National Payment Systems Act in that the power conferred on the BOM has now broadened; the BOM may now, in addition to its existing power to vary the conditions of an authorisation or a licence issued under the National Payment Systems Act, amend or cancel such conditions, or impose new conditions.

Other Notable Developments

The BOM has reached an advanced stage in the design of the Central Bank Digital Currency (CBDC) and is also gearing up to launch its CBDC on a pilot basis this year, in line with transitioning from a cash-dominated economy to a digitised economy in view of making Mauritius a destination of choice with respect to digital banking and financial services in our part of the world.

The first milestone achievement of the BOM rests in the introduction of the Mauritius Central Automated Switch (MauCAS), a fully digital hub for routing payments among operators on a 24/7 basis. The MauCAS enables banks and non-bank operators to provide payment and value-added services through cards, mobile phones or other innovative channels while maintaining the interoperability of different channels of payments. Following the launch of the MauCAS, the launch of Pop as the first universal digital payment solution in Mauritius last year is considered a major technological breakthrough in the field of digital payments, which are now accessible and affordable via a smartphone for anyone with a bank account in Mauritius.

The BOM has, further, recently approved a new mobile payment application (m-payment) called Blink, which was launched on 12 May 2022. Blink relies on the Instant Payment System of the BOM, which allows it to be compatible with all banks in the country, all merchant QR codes and all internet connections. It allows users with a Mauritian bank account to pay virtually using any mobile network. Payments can also be made by scanning any QR code registered with MauCAS.

On another note, the Bank of Mauritius has revised its guideline on 22 August 2002 in relation to Cross-Border Exposure in order to supplement the existing guidelines issued by the Bank of Mauritius and to provide a set of additional minimum standards that would need to be followed by banks in respect of their cross-border exposure. The revised guideline on Cross-Border Exposure now imposes several obligations on banks such as obtaining appropriate legal advice/opinion from a reputable legal counsel in the relevant jurisdiction on, inter alia, the legitimacy and enforceability of the cross-border facility agreements, guarantees and other documentation. In addition, the revised guideline on Cross-Border Exposure now provides that banks shall verify and obtain appropriate confirmation regarding the existence of the underlying collaterals and charges inscribed thereon (including their respective rankings), if any.

Local banks have been partnering with several agencies to promote green loans at preferential interest rates and, by the same token, offering borrowers the possibility of receiving investment grants, depending on the specificities of their projects.

The Government has also expressed its firm intention of decreasing its carbon footprint, by introducing several incentives for the financing of projects in the renewable energy sectors.

From a retail perspective, the acquisition of fast chargers for electric vehicles, rainwater-harvesting systems and photovoltaic systems for domestic use are fully tax-deductible. To make electric vehicles more accessible, hybrid and electric vehicles benefit from a reduced excise duty.

A guideline on Climate-related and Environmental Financial Risk Management has been published by the Bank of Mauritius and made effective as of 1st April 2022 with a view to assisting local financial institutions in embedding sound governance and risk management frameworks for climate-related and environmental financial risks within their existing risk management frameworks.

Banks

Pursuant to the Banking Act 2004, no person is allowed to engage in banking business in Mauritius without a banking licence issued by the BOM.

Banking business is defined under the Banking Act 2004 as:

• the business of accepting sums of money, in the form of deposits or other funds, whether or not those deposits or funds involve the issue of securities or other obligations howsoever described, withdrawable or repayable on demand or after a fixed period or after notice; and
• the use of those deposits or funds, either in whole or in part, for:

(a) loans, advances or investments, on their own account and at the risk of the person carrying on that business;

(b) the business of acquiring, under an agreement with a person, an asset from a supplier for the purpose of letting out the asset to the person, subject to payment of instalments together with an option to retain ownership of the asset at the end of the contractual period;

• paying and collecting cheques drawn by or paid in by customers and making other payment instruments available to customers; and
• includes other such services as are incidental and necessary to banking.

Procedures

An applicant wishing to be authorised to operate as a bank must be a body corporate and must apply to the BOM using the prescribed form, accompanied by a non-refundable processing fee of MUR250,000 (approximately USD5,952). Among other AML, cybersecurity and related prescribed procedures and requirements, including the minimum capital adequacy ratio which the applicant needs to adhere to, the applicant must show adequate substance in Mauritius by having a principal place of business in Mauritius. In terms of staffing requirements, the applicant must have at least ten suitably qualified full-time officers, including the CEO, the Deputy CEO and key functional heads. The estimated operational costs of the applicant must not be less than MUR25 million (approximately USD595,200).

Non-banks

Moneylending activities are regulated by the Financial Services Commission of Mauritius. The Financial Services Act 2007 provides that, subject to certain exemptions as provided under the Fifth Schedule of the Financial Services Act 2007, any person, other than a bank or a non-bank deposit-taking institution, whose business is that of moneylending or who provides, advertises or holds themself out in any way as providing that business, whether or not they possess or own property or money derived from sources other than the lending of money, and whether or not they carry on the business as a principal or as an agent, is required to apply for a licence with the Financial Services Commission.

Procedures

An applicant wishing to be authorised to operate as a non-banking financial institution conducting moneylending activities must be a body corporate and must apply to the Financial Services Commission using the prescribed form, accompanied by a non-refundable processing fee, which varies depending on the type of licence being applied for. Among other AML, cybersecurity and related prescribed procedures and requirements, including the minimum paid-up and unimpaired capital (normally ranging around MUR50 million (approximately USD1,190,000)) that the applicant needs to adhere to, the applicant must show adequate substance in Mauritius by having a principal place of business in Mauritius and complying with other prescribed requirements.

There is currently no restriction on foreign lenders to grant loans from their foreign jurisdiction. However, if those foreign lenders intend to carry on the business of moneylending in Mauritius, they should first obtain the appropriate licence from the Financial Services Commission or the Bank of Mauritius, depending on the activities that they wish to conduct.

There are generally no restrictions preventing the granting of security or guarantees to foreign lenders in Mauritius. However, when a security involves the taking of a fixed and/or floating charge, certain elements as to the activities of the charge-holder will need to be considered.

Under the Mauritian Civil Code, a fixed and/or floating charge can only be granted in favour of an Institution Agréée (the Civil Code Restriction).

An Institution Agréée is, effectively, an approved institution, as listed in the Institution Agréées Regulations 1988, which list certain entities as approved to hold a fixed and/or floating charge, and include “any body corporate not registered in Mauritius and having no place of business in Mauritius”.

Although the description of that approved body may appear broad, the Civil Code Restriction has been interpreted narrowly by the Supreme Court (vide Atelier Etude Limousin & others v BPCE International et Outremer & another 2014 SCJ 166).

In light of this judgment, the approach of the market has been that, in order for a foreign entity to benefit from a fixed and/or floating charge, it must necessarily be a “financing institution”, as opposed to merely being a foreign entity which may not necessarily be involved in the financing business.

The Foreign Exchange Control Act was suspended in 1994. As a result, there is currently no exchange control requiring approval for payments outside Mauritius or repatriation of profits, dividends or capital gains earned in Mauritius.

Although there are no legal restrictions under Mauritian laws applicable to the borrower’s use of proceeds from loans or debt securities, contractual restrictions on the borrower’s use of proceeds from loans or debt securities which are mutually agreed between the lender and the borrower are frequently seen.

The trust concept is recognised under Mauritian laws. The Civil Code also provides for general concepts which are used as alternatives to the agency concept, such as the “mandat” (which corresponds to agency) and the “tiers convenu” (which is a third party mutually appointed by the parties for the purpose of holding the security).

It is not uncommon for local banks to be appointed to act as security agents for the benefit of foreign lenders where charged assets are located in Mauritius.

Loans are transferred by way of novation or assignment and associated security packages are transferred by way of assignment. However, where security agents are appointed to hold security, a change in lenders or a transfer of loans, these are unlikely to affect the security.

The laws of Mauritius do not restrict a debt buy-back by the borrower or sponsor. However, it is recommended that the borrower or sponsor consider the appropriate structuring and address potential tax liabilities.

There are no specific rules applicable to “certain funds” in respect of public acquisition finance transactions. However, when dealing with a potential takeover, the law requires that an offeror give a firm intention to acquire the target, containing confirmation by the board of the offeror that sufficient financial resources are available to satisfy the acceptance of the offer. Similarly, where the offer includes a non-cash consideration, the confirmation should provide that all reasonable measures have been taken to secure full payment of the shares acquired. 

Under the laws of Mauritius, there is no withholding tax for any payment made by a company holding a global business licence in Mauritius to lenders not carrying out business in Mauritius.

VAT

Value-added tax (VAT) is applicable at a flat rate of 15% to VAT-registered entities on all goods and services supplied by them in Mauritius, subject to certain supplies being exempted under the Income Tax Act 1995 and the various income tax regulations.

Registration Duty

Registration duty is payable on the registration of a deed, the rate of which depends on the nature of the transaction witnessed by the deed under the Registration Duty Act 1804.

A Mauritian law-governed fixed and/or floating charge, mortgage and a bordereau pursuant to an assignment agreement are required to be registered (and inscribed for fixed and/or floating charges and mortgages), while registration of finance documents and security documents other than those aforementioned are at the option of the lender.

The concept of usury laws are not catered for by Mauritian laws. However, the Mauritian courts have the discretion to review downwards the interest amount if it is deemed excessive.

The assets available as collateral to lenders in Mauritius consist of:

• shares;
• land/buildings (immovable property);
• contractual rights and receivables;
• bank accounts;
• intellectual property and other intangible and tangible rights;
• equipment/material, stocks and outillage (tools of trade);
• future assets; and
• business undertakings.

The common forms of security granted are as follows:

• Security over shares:

(a) a commercial pledge when the shares of a company that holds a licence issued by the Financial Services Commission are pledged in favour of a financial institution; and

(b) a civil share pledge when the pledged shares relate to a domestic company;

(c) a fixed and/or floating charge can also be granted as security over the shares.

• Security over land or building (immovable property):

(a) a mortgage under the Mauritian Civil Code; and

(b) a fixed and/or floating charge.

• Security over contractual rights and/or receivables:

(a) an assignment of contractual rights and/or receivables by way of security; and

(b) a pledge under the Mauritian Code de Commerce.

• Security over bank accounts:

(a) a pledge under the Commercial Code; and

(b) a fixed and/or floating charge.

• Security over intellectual property and other intangible and tangible rights:

(a) an assignment of rights by way of security; and

(b) a fixed and/or floating charge.

• Security over equipment/material, outillage (tools of trade) and stocks are:

(a) a special pledge under the Mauritian Civil Code; and

(b) a fixed and/or floating charge.

• Security over future assets:

(a) a pledge or an assignment by way of security under the Commercial Code; and

(b) a floating charge.

• Security over a business undertaking (fonds de commerce): a pledge of the business undertaking.

Perfection Requirements

A share pledge

In addition to the execution of the share pledge, the pledgor is required to procure the delivery of the following to the pledgee:

• a signed and undated blank share transfer form;
• share certificates or other instruments evidencing or representing the pledged shares;
• a transfer-in-guarantee instrument signed by the pledgee, the pledgor and the secretary of the company in which the shares are being pledged in respect of the pledged shares.

Fixed and/or floating charge

The fixed and/or floating charge agreement is required to be registered with the Registrar General and inscribed with the Conservator of Mortgages of Mauritius. A memorandum setting out details of the charge must be affixed to the deed prior to the inscription. The chargor must deliver the registered deed of fixed and/or floating charge and provide satisfactory evidence of registration and inscription to the secured party.

Mortgage

The deed of mortgage, with the requisite memorandum (bordereau) annexed, must be inscribed in the registers of the Conservator of Mortgages.

Assignment under the Commercial Code

A memorandum, known as a bordereau, which witnesses the assignment and forms part of the perfection requirement thereof under the Commercial Code, must be executed by the assignor and must be registered in the interest of the assignee with the Registrar General. The registered bordereau must thereafter be delivered to the assignee by the assignor.

Account pledge

A notice of pledge must be sent to the account bank.

Pledge of business undertaking (fonds de commerce)

The pledge of business undertaking is created under a deed prepared by a notary public or a deed under private signature and must be registered with the Registrar General of Mauritius. The registration with the Registrar General must be made within 15 days of the signing date of the pledge agreement.

Timing and Costs Involved

Depending on the type of entity involved, registration must be effected within eight days or up to three months for companies holding a global business licence (except for the pledge of business undertaking which must be registered within 15 days from the date of the security document). The registration process takes around three business days to complete. Registration duty and administrative fees (formerly stamp duty) payable to the Registrar General, amount to around MUR50,700 (approximately USD1,200) per document. Inscription of charges would also incur an additional inscription fee of around MUR1000 (approximately USD23).

The Mauritian Civil Code allows for the creation of a floating charge over all present and future assets of a company as security.

Downstream, upstream and cross-stream guarantees are generally permitted. This type of security is generally granted by way of a corporate guarantee, as provided under the Mauritian Civil Code. However, giving such a guarantee could be restricted where it amounts to providing financial assistance.

The laws of Mauritius restrict a target from providing a loan or guarantee or any form of security where the purpose of such a loan, guarantee or security is for the acquisition of the target’s own shares. In these circumstances, specific conditions must be adhered to by the target before it is permitted to provide any such financial assistance.

Except for the aforementioned restrictions, there are generally no other restrictions in connection with, or significant costs associated with, or consents required to approve, the grant of security or guarantees.

A security is generally released only when the secured obligation has been paid in full and all facilities which gave rise to the secured obligation have been terminated. However, when dealing with the release of mortgages and fixed and/or floating charges, an additional procedure is required to ensure that the security is erased from the public registers of the Conservator of Mortgages. The erasure is formalised by a letter from the secured party to the Conservator of Mortgages confirming the discharge of the secured obligation, the release of the security and requesting the erasure of the security from the registers of the Conservator of Mortgages. In respect of pledges and assignments, the secured party is required to return all documents delivered to it at the time of perfection of the security (which include share certificates, blank transfer forms or, in some instances, the bordereau), and counterparties will update their internal records to reflect the discharge and release.

By way of exception, the parties can also mutually agree to release the security before the discharge of the secured obligation. This can be done by way of a release agreement entered into between the parties providing for the release of the security.

In the event of insolvency, the Mauritian Insolvency Act 2009 provides the following ranking of claims of preferential creditors:

• cost of the liquidator;
• costs of compromises by the company with its creditors under the Companies Act;
• payments made pari passu with first-ranking fixed and floating charges and mortgages inscribed for more than three years;
• first-ranking fixed and floating charges and mortgages inscribed for less than three years;
• other secured creditors; and
• all other unsecured creditors who have been proved in the bankruptcy or winding-up.

When competing security interests arise, they are treated equally unless the lenders and the same borrower contractually vary their priority over the security by way of a subordination or intercreditor agreement. The subordination or intercreditor agreement will generally provide that the junior lender will not receive payments from the borrower until the senior lender has been paid.

The contractual provisions of a Mauritian law-governed subordination agreement will survive the insolvency of the borrower and will be recognised and given right in an insolvency procedure.

The circumstances for a secured lender to enforce a security will depend on the contractual provisions of the financing and security documents and on the type of security granted to the lender. In general, an event of default must have occurred under the finance and security documents, which will trigger the enforcement of the security.

Enforcement of a Fixed Charge

A secured lender can enforce a fixed charge that it holds over assets by appointing a public or private registered usher to seize the assets, without the need to serve a “commandement” (notice) on the debtor. If the debt remains unpaid, for three weeks following the date of seizure, the creditor can then sell the seized assets by public auction (in the case of movable assets), or by serving a notice in the same manner previously described (in the case of immovable assets).

Enforcement of a Floating Charge

The floating charge must first be converted into a fixed charge. This is known as the crystallisation of the floating charge. This requires the appointment of a court usher to draw a memorandum of inventory, which will then be transmitted to the Conservator of Mortgages to be inscribed in its registers, whereupon the charge is converted to a fixed charge. This process may entail further costs in terms of taxes or fees.

Enforcement of a Special Civil Pledge over Shares

The bank must serve notice on the debtor, stating its intention to proceed with the transfer of the pledged shares. The bank can then cause the pledged shares to be transferred seven days after the notice is served.

Enforcement of a Pledge of Shares under the Commercial Code

The pledgee must realise the pledged shares by completing and executing the share transfer form. No other formalities are required.

Enforcement of Mortgages

The creditor can enforce a mortgage by serving the debtor a commandement (notice) notifying the debtor that, if it fails to pay the amount claimed, a seizure will be effected on the mortgaged property. The service of the commandement is effected through a public or private registered usher. The seizure of the mortgaged asset cannot be effected until at least ten days have elapsed since the date on which the commandement was served. The usher will then draw up a memorandum of seizure that must be registered and transcribed with the Conservator of Mortgages/Registrar General of Mauritius. A creditor enforcing a mortgage must also register and transcribe a memorandum of charges with the Conservator of Mortgages/Registrar General of Mauritius, containing the desired conditions of sale. The property may then be seized and sold, before the Supreme Court of Mauritius, to the highest bidder.

The choice of a foreign law as the governing law of the contract will be upheld in Mauritius.

A foreign judgment or arbitral award against a Mauritian company will be enforceable in Mauritius without a retrial of the merits of the case, subject to fulfilling the necessary exequatur procedures to recognise that foreign judgment or arbitral award.

When a foreign lender does not own any immovable property in Mauritius, the debtor (as defendant) can apply for an order for the foreign lender (as plaintiff) to provide security for its costs before proceeding further with any claim in court.

The Insolvency Act 2009, which is the principal legislation dealing with the insolvency of companies, sets out the formal mechanism for the rescue or reorganisation of a company, which is the voluntary administration of a company.

The aim of a voluntary administration is to enable a business, property and affairs of a company to be administered in a way (i) to provide an opportunity for the company and its business to continue to exist or, should the former scenario not be possible, (ii) to provide a better return for the company’s creditors and shareholders, compared to an immediate winding-up of the company.

The administrator may be appointed by the company in administration, by a secured creditor holding a charge over the whole/substantially the whole of the company’s property or a buy-order of the court.

The Mauritius Companies Act 2001 provides further mechanisms for company rescue, which include:

• a compromise between the company and its creditors;
• amalgamation procedures; and
• a scheme of arrangement by a creditor or a shareholder in relation to the company.

The facility agreement will generally treat an insolvency event as an event of default and will usually include mechanisms where, upon the occurrence of such an event, the lender may have recourse to claim repayment of the loan and to enforce the security or guarantee which was provided to secure the loan amount.

Pursuant to the commencement of administration under the Insolvency Act 2009, while a company is in administration and upon the appointment of an administrator, a lender cannot enforce a charge on the property of the company except with the written consent of the administrator or with the permission of the court and on terms that the court thinks appropriate.

This restriction, however, does not apply in the case of a secured creditor, ie, a person who holds a charge on or over the property of the company and includes the holder of a “gage”. The secured creditor may apply to the court for an order granting leave to them to enforce their security within a specified period after the company has been put into administration.

The restriction does not further apply to those secured creditors who have already taken steps to enforce their rights to recover the property before the beginning of the administration of the company.

In an event of insolvency under the Insolvency Act 2009, the order of priority in which the following persons are entitled to be paid out the property of a company are as follows:

• first, the liquidator or receiver for their fees and expenses and any indemnity to which they are entitled from the property of the company;
• second, costs of compromises by the company with its creditors under the Companies Act;
• third, payments made pari passu with first-ranking fixed and floating charges and mortgages inscribed for more than three years;
• fourth, first-ranking fixed and floating charges and mortgages inscribed for less than three years;
• fifth, other secured creditors; and
• sixth, all other unsecured creditors who have been proved in the bankruptcy or winding-up.

The doctrine of equitable subordination does not exist under the laws of Mauritius.

Potential risk areas which the lender may face, upon a borrower, security provider or guarantor becoming insolvent, are as follows.

Voidable Preference

A voidable preference is a transaction which involves creating a charge over the debtor’s property and incurring an obligation, and which (i) has been entered into by the company as a debtor at a time when the company is unable to pay its due debts and which (ii) enables another person to receive more towards satisfaction of a debt by the company than that person would receive in the bankruptcy or liquidation.

A voidable preference made within two years immediately before adjudication or commencement of the winding-up may be set aside by the court upon application by an official receiver or a liquidator.

Voidable Charge

A charge over a property or undertaking of a debtor, given within two years before the debtor’s adjudication or the commencement of the winding-up and where, immediately after the charge was given, the debtor was unable to pay its due debts, may be set aside by the court upon application by an official receiver or a liquidator.

Mauritius has enacted legislation to cater for the increasing demand of development in various sectors of the economy. Several parastatal bodies were also set up to facilitate investments and the setting up of projects of various types.

Banks and other financiers have also been playing a major role in the financing of projects in Mauritius.

A series of attractive fiscal measures were put in place to encourage development in renewable energy, which has triggered an array of sizeable projects involving wind farms, solar farms and waste recycling.

Most project finance is privately owned, although the government is also involved, particularly in energy projects where it stands as the sole power-purchaser for grid distribution. 

The Mauritian government has promulgated the Public-Private Partnership Act 2004, which came into force on 1 March 2005 (the “PPP Act”).

The PPP Act provides for the implementation of PPP agreements between contracting authorities and private parties and establishes a set of rules governing public-private procurement.

Over the years, the main PPP projects have involved the energy sector, with the setting up of various power plants using fossil fuel and renewable sources, the development of the freeport zone and airport terminal and the setting-up of a waste-water treatment plant.

There are currently ten active projects in the country, with active investments exceeding USD940 million.

Government approval will be required to obtain the necessary permits and licences. Non-citizens who have an interest in a project that would own immovable property (such as land or buildings) may also be required to obtain the Prime Minister’s approval prior to acquisition of the land (freehold or leasehold right) or buildings, except for certain government-approved schemes.

Certain application fees may also be required at the time of applying for the specific licences.

There is generally no requirement to register any application document, although some finance documents would require registration with the Registrar General’s office.

The Ministry of Energy and Public Utilities (MOE) oversees the formulation of policies and strategies in the energy, water and waste-water sectors, radiation safety and nuclear security and is responsible for the establishment of a responsive legal framework to govern the development of these sectors.

The government has set up various statutory bodies to manage these sectors:

• the Utility Regulatory Authority (URA) was set up in 2016 in accordance with the Utility Regulatory Authority Act 2004 to regulate utility services, namely electricity, water and waste water;
• the Central Water Authority is responsible for the treatment and distribution of potable water;
• the Waste-water Management Authority is responsible for the collection, treatment and disposal of waste water;
• the Mauritius Renewable Energy Agency is responsible for promoting renewable energy projects.

Other government bodies are as follows:

• the Road Development Authority is responsible for the construction, care, maintenance and improvement of motorways and main roads;
• the Ministry of Land Transport and Light Rail is responsible for devising and implementing policies for land transport operation, traffic management and road safety;
• the government has set up a fully owned company, the Metro Express Limited, for the implementation and operation of a Light Rail Transit System, which began commercial operation in January 2020.

The ownership structure is the primary concern for a project – the type of vehicle used and how it is organised to “house” the investors and financiers. Traditionally, a private company limited by shares would be the favoured option, but other structures may be more appropriate, depending on the type of project.

Where immovable property would be owned or leased over a period by the project vehicle, approval from the Prime Minister’s office would be required if non-citizens would be holding a direct or indirect shareholding or interest in the project company, except where certain exemptions are provided.

The financial structure would also be of relevance in determining how the project would be financed, which could involve equity, short-term and long-term loans, bonds (listed or unlisted), quasi-equity and the determination of the relevant revenue streams to service the debts. Each type of financing would require specific attention in order to comply with the regulatory environment.

Depending on the type of project, the financing may be effected using traditional banking methods. Renewable energy-related projects may also receive financial support from specific agencies. The use of bonds is another method for raising finances and the Financial Services Commission has recently issued a guide for the issue of corporate and green bonds in Mauritius with a view to assisting potential issuers in better understanding the legal and regulatory requirements for the issuing of sustainable bonds and the listing of these bonds on exchanges licensed in Mauritius.

The Offshore Petroleum Act has been introduced at the end of 2021 to provide for the conduct of petroleum activities in the seabed and subsoil areas of the maritime zones of Mauritius, such as the prospecting, exploration, retention and production of petroleum.

The Environment Protection Act is the main legislation governing environmental issues relating to projects. It requires a promoter to prepare an Environmental Impact Assessment (EIA) or a Preliminary Environmental Report (PER), as the case may be, and to obtain the necessary EIA Licence or PER Licence with whatever conditions may be imposed by the governing body. 

The Environmental Assessment Division of the Ministry of Environment, Solid Waste Management and Climate Control is responsible for ensuring the identification of any environmental impacts of major projects and for addressing any issues at the inception of a project. This division is also responsible for ascertaining that appropriate measures have been taken to mitigate adverse environmental impacts, enhance the positive impacts and promote sustainable development. EIA Licences and PER Licences are issued by this division.