A Guideline to Mauritius Collective Investment Schemes (CIS) and Closed-end Funds

Introduction

The Republic of Mauritius is an island nation in the Indian Ocean about 2,000 kilometers (1,200 mi) off the southeast coast of the African continent. Financial services is one of the growing sectors of the economy. Mauritius has an outsize offshore sector which it built on a low tax regime and extensive treaty network.

Mauritius as a destination for Collective Investment Schemes Business Setup

Mauritius is a globally recognized jurisdiction that has modern laws and regulations in a wide range of financial subsectors but especially so in Collective Investment Schemes industry. You can acquire a Mauritian CIS Manager License in as little as 3 months if the application and documents are in order and satisfy the requirements of the FSC.

1. A dynamic economy expected to grow around 4.5 % per year
2. A robust Services industry currently accounting for 75% of GDP
3. A rapidly developing financial services sector expected to grow at 6% per year
4. There are No exchange controls
5. Mauritius is part of the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA) and the Indian Ocean Rim Association for Regional Cooperation (IOR-ARC).
6. Stable democratic political system and sustained economic growth
7. Developed infrastructure, high-tech ICT connections
8. Large pool of qualified lawyers and accountants, university graduates and other professionals. Accountants are mostly trained in the U.K., whilst most Mauritian barristers have been called to the Bar both in the U.K. and in Mauritius
9. OECD White List jurisdiction which has never been on the Financial Action Task Force (FATF) list of uncooperative jurisdictions
10. Confidentiality is guaranteed by law in respect of all information submitted to the Financial Services Company and to the Registrar of Companies
11. Banks licensed in Mauritius include some of the major names in international banking like HSBC, Barclays, Afrasia, Standard Chartered
12. Mauritius has concluded Investment Promotion and Protection Agreements with a number of its tax treaty partners

The Financial Services Commission (FSC)

Collective Investment Schemes and other non-bank financial services are regulated by The Financial Services Commission (FSC). The regulator has stated that it aims to align itself with the practices and policies of countries that meet the highest international standards of regulation and supervision of non-banking financial services. As a member of international organizations, the FSC is bound by strict standards and practices thus preserving the stellar reputation of Mauritius in the international financial services sector. The Mauritius Financial Services Commission has their focus clearly on international policies in order to:

1. Ensure that international standards and practices are adhered to in Mauritius.
2. Encourage cooperation between local and international regulators for effective supervision and control of financial systems and exchange of information for stability, fairness and efficient markets.
3. Reinforce capacity building to enhance financial stability through cooperation, providing support and mutual assistance.
4. Eliminate money laundering, tax fraud and the financing of terrorist organizations.

About Mauritius Global Funds

Global funds registered with the Financial Services Commission (FSC) in Mauritius are commonly structured as companies incorporated under the Companies Act 2001 and licensed as a company holding a Category 1 Global Business Licence under the Financial Services Act 2007 (FSA). Such a structure, referred to as an Investment Company, is defined as one where the company’s business consists of investing its funds mainly in securities with the aim of spreading investment risk and giving members of the company the benefit of the results of the management of its funds.

Applicable Laws
• Financial Services Act 2007 (31 Dec 2018)
• Companies Act 2001 (Corporate and Business Registration Department)
• Securities Act 2005
• Securities (Collective Investment Schemes and Closed-end Funds) Regulations 2008
• Code of Business Conduct (October 2015)
• Prevention of Terrorism Act 2002
• Financial Intelligence and Anti-Money Laundering Act 2002
• Code on Prevention of Money Laundering and Terrorist Financing
• Data Protection Act 2017

Mauritius Global Funds License Categories

The law in Mauritius provides for two main categories of investment companies (funds):

• open-ended funds also known as Collective Investment Schemes (CIS); and
• closed-end funds commonly known as Private Equity Funds.

The Commission may issue licenses of the two main categories of investment companies as:

• CIS (Single fund)
• CIS (having more than 1 fund)
• CIS (Protected Cell Company)
• Closed-end Fund (Single Fund)
• Closed-end Fund (having more than 1 fund)
• Closed-end Fund (Protected Cell Company)

Categories of Collective Investments Schemes

Permitted Activities

Fully regulated CIS

This is meant for Public Funds

Professional CIS

Professional CIS are CIS which offer their shares solely to sophisticated investors or as private placements. The Professional CIS are exempted from most on-going obligations/regulations generally imposed on public CIS.

Specialised CIS

A Specialised CIS is a CIS which invests in real estate, derivatives, commodities or any other product authorised by the Financial Services Commission.

Expert Fund

An Expert Fund is a CIS that has applied to the Commission to be licensed as an Expert Fund. Expert Funds are only available to expert investors.

Closed-End Funds

The provisions in the Securities Regulations relating to closed-end funds shall apply to all closed-end funds which are reporting issuers or where the closed-end fund is filing a prospectus with the intention of applying for a listing on a licensed securities exchange. A closed-end fund shall appoint and have at all times a CIS manager, however where the closed-end fund is self-managed the board of directors of the fund shall be subject to all provisions relating to a CIS manager.

Licensing conditions for a Mauritius Global Funds License

The Commission may grant an authorisation for a Global scheme provided that:

1. information relating to the CIS manager and the custodian is submitted with the application for authorisation;
2. a CIS administrator with a place of business in Mauritius is appointed;
3. the accounting and reporting services are carried out by the CIS manager, or the CIS Administrator of the scheme, having a place of business in Mauritius

Legal Requirements

Categories

Entity Requirements

The entity making the application is a Mauritius GBC 1 holding a Global Business Category One License (GBL1).

Director’s Requirements

Legally speaking, a minimum of 2 directors are required for GBC 1 holding a special license such a Global Fund license. However, the regulator’s and Mauritius Corporate Governance regime require that:
a. Such an entity has got a well-balanced board in terms of experience, expertise and governance independence;
b. There needs to be fit and proper directors in different areas of running such a regulated Investment Business. Therefore, the 2 local directors required for the GBC 1 regime, almost always will not satisfy the regulator’s criteria. There will need to be an additional minimum 2 directors of different backgrounds, and who are fit and proper with experience in the investment industry.

Shareholder requirements

• The fund will need at least one shareholder.
• Corporate shareholding is allowed and 100% foreign ownership is permitted.

Auditor

• A Global Fund is required to have its accounts audited annually by an auditor.
• The auditor shall not be an officer of the custodian, the CIS manager or any support functionary of the CIS.

Minimum funding

• The prospectus of a scheme shall specify that the scheme must receive a minimum amount of subscription of at least 5% of the total amount to be raised from investors so as to begin operating the scheme.
• Where the minimum amount of subscriptions indicated in the prospectus is not reached during the first six months of the offering period, the funds shall be returned to the investors together with any interest earned thereon, unless the CIS can justify a request for extension and the Commission agrees to such an extension, which shall not exceed a further six months.

Custodian

• CIS shall appoint and shall at all times have a custodian.

Prospectus or offer document

• The constitutive documents of a CIS shall form an integral part of the prospectus or offer document of a CIS.
• The prospectus or the offering document shall include information that may be necessary to enable participants to make an informed judgement as to the investment proposed.

Ongoing Obligations

• A licensed global fund must meet the following ongoing obligations at all times to remain compliance with the Act:
  • Maintain all the conditions set in the license approval letter at all times
  • Be required to file its audited financial statements and tax return within 12 months from its balance sheet date.
  • Maintain 2 resident director in Mauritius at all times
  • Maintain a CIS Manager at all times
  • Maintain a CIS administrator with a place of business in Mauritius



Tax Obligations and Exemptions

.

The Global Fund structured as a company holding a Global Business Category One License (GBL1) shall have the following tax obligations.

• GBL1 are governed by the Income Tax Act 1995, under which they are taxed at the flat rate of 15%.
• Mauritius law allows an underlying foreign tax credit, equal to the amount of foreign taxes paid, up to the amount of tax due in Mauritius.
• In the absence of proof, the amount of foreign tax paid is presumed to be 80% of the Mauritius tax.
• The effective tax rate can thereby be reduced to a maximum of 3%.
• . The License must maintain appropriate policies of insurance for the purpose of indemnifying such licensee against any liability that may be incurred as a result of any act or omission by the licensee or any of its officers or employees in the conduct of the licensee’s securities business.
  • Within 6 months of the first anniversary of the launch of a fund;
  • Within 6 months of a fund’s financial year-end thereafter; and
  • Immediately prior to the fund ceasing to be a fund

• A GBL company should meet the following conditions at all times:

  • The core income generating activities of the GBL should be in or from Mauritius
  • GBL companies should employ directly or indirectly a reasonable number of qualified persons to carry out the core activities
  • The GBL companies should have a minimum level of expenditure proportionate to its level of activities
  • Be managed and controlled from Mauritius

• Application Requirements and Procedure

  Below are the standard required documents/information to complete an application for a Mauritius Global Fund License;

  • the constitutive documents of the scheme;
  • the prospectus prepared in accordance with the Fourth Schedule;
  • the personal questionnaire form set out in the FSC Rules which shall be completed by each of the officers of the collective investment scheme
  • the fees specified in FSC Rules.
  • a memorandum describing the functions and duties of the CIS manager, and where the CIS manager has delegated such functions and duties under regulation 18 to third parties, by a description and a copy of the contract delegating functions and duties to the third parties;
  • Director’s and Shareholder’s Due Diligence Documents
    • A personal questionnaire form
    • Curriculum Vitae
    • Recent Employment reference (Certified Copies can Suffice)
    • Professionals referee details (2 per individual)
    • Bank reference (Must be in Original)
    • Passport Copy (Certified Copies can Suffice)
    • Proof of address (Certified Copies can Suffice)
    • (h) Academic and Professional Qualification Certificates (Certified Copies can Suffice)
  
  

  Application Process

  Categories

  Collection of Information

  The main activities shall include;
  a) Determining the shareholding structure and board membership
  b) Collation of company formation KYC documents
  c) Name check at the Registrar of Companies

  Company Incorporation

  a) Preparation of company incorporation pack
  b) Filling for incorporation

  License Application Preparation

  a) Collation of license application KYC documents
  b) Signing up of required functionaries and obtaining relevant consents
  c) Preparation of required documents (Business plan, Manuals and policies) Signing of relevant forms and documents
  d) Courier of the original signed documents and due diligence documents to Mauritius

  Filing of the application

  Filing of the application with FSC

  License Approval

  Post License Compliance

  Meeting any other condition imposed upon licensing