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| Mauritius:
Offshore Cyber-Island |
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| The Economy |
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| For
the past 20 years this small Indian Ocean island with a population of 1.2
million has had an average growth rate of 5.4%, which far outstrips that
of most African countries. GDP per head has risen from $219 in 1968 to
about $10,300 at purchasing power parity, putting Mauritius in the middle
income range. Unemployment is running at about 6%, with inflation at 7%. |
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| However, the
new Mauritian government, elected last September, says that its predecessors
had taken the economy to the brink of collapse through financial improvidence,
with an expected deficit this year of 6.5% of GNP. The new team of Paul
Béranger and the present prime minister, Anerood Jugnauth, was previously
in power in the 1980s, and was the architect of the country's boom. They
stabilised the economy with an International Monetary Fund (IMF) programme
and laid the basis for the rapid growth of tourism, manufactured exports
and the financial services sector |
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| In
May 2001, the International Monetary Fund (IMF) released details of its
Article IV Consultation with Mauritius praising the country's strong economic
growth. With real GDP expected to increase by 7.8 per cent over the following
year (up 3.6 per cent from the previous year), the depreciation of the
Mauritian rupee, a successful privatisation programme and several remedial
fiscal actions put into place, the IMF reported that it had agreed to grant
the government's request for technical assistance to improve the quality
of the overall public accounts and to modernise the financial sector. |
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| The
new government had already announced plans to correct the country's economic
situation. Despite the high budget deficit, government has plans for what
Béranger says are "massive investments", mainly in infrastructure,
training, housing, and communications. Mr Béranger, deputy prime
minister and finance minister, says: "We are going to move to the next
stage of economic development", that of an "information, knowledge, and
services economy", he says. The aim is a "quantum leap" to "a knowledge
island". Part of the plan involves creating "cyber cities" which would
help reduce the country's still heavy dependence on sugar and manufactured
exports. The plan relies on large-scale public spending, with the budget
deficit falling only after several years. But a continuing high growth
rate looks likely to be the payoff. |
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| Last September
Jugnauth's Socialist Militant party and Béranger's Militant Movement
were voted back into power. Their agreement is that Béranger will
take over as prime minister the year after next. Béranger started
off his career in the British Merchant Navy and was studying journalism
in Paris during the 1968 student upheaval. When he returned to Mauritius
he spent about a decade in the trade union movement before entering politics. |
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| Since coming
back to power, Béranger says the priority has been to re-establish
law and order. "There was a complete breakdown of law and order", he says,
but the law and order situation has now been turned around. |
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| The "quantum
leap" relies heavily on government investment, but the five-year plan is
to reduce the deficit from 6.5% to 5% of GDP. The World Bank has given
its stamp to the plan and offered the country support through an "umbrella"
loan. |
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| The Budget
For 2001/2002 |
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| In a mammoth
budget speech in June 2001 stamping his authority on the economy, Paul
Béranger had outlined a wealth of development initiatives under
the general heading of an 'Economic Agenda for the New Millennium'. |
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| Government,
he said, will invest massively in education, training and Information and
Communication Technology (ICT) as well as in infrastructure and environment
to transform Mauritius into a diversified, hi-tech, high income services
and knowledge economy fully integrated in the new global economic environment.
Capital expenditure will increase by 58% and total expenditure on education
by 34 per cent. |
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| 'With the
completion of this reform programme', said the Minister, 'we will have
established supervisory and prudential norms meeting the highest international
requirements. |
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| We will also
have created the necessary conditions for the integration of the financial
services industry and its sustained expansion.' |
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| Mr Beranger
said that it is the intention of the Government to develop Port Louis into
a major centre for trade, transhipment, warehousing, distribution and services.
The Port Master Plan is being updated to promote optimal use of land in
the port area. It will identify new activities for exploitation, such
as cruise traffic and harbour front development, as well as requirements
for new port infrastructure. Measures will be taken to strengthen security
and safety in the port and rationalise the storage and handling of petroleum
products. The long-delayed project for setting up additional storage facilities
for petroleum products at Mer Rouge will be implemented. To enhance operational
efficiency, the Cargo Handling Corporation will enter into a strategic
alliance with a partner of international repute. |
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| The Government,
he said, is concerned about the lacklustre performance of the Stock Exchange,
and will provide the necessary leadership to find viable and durable solutions
and to restore confidence in the stock market. In this context, the advisability
of listing some state-owned companies will be examined. To encourage institutional
investors to participate in the Stock Exchange, the Banking Act would be
amended to allow banks to invest up to 10% of their capital base in shares
of listed companies. |
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| The
Minister intended to give the freeport a new boost to enable the sector
to meet fully the high expectations built on it. He applauded the recent
decision by the Shenhzen/Shenfubao Group from China to invest US$ 6 million
in new freeport infrastructure as a clear indication of the development
potential of the freeport. He promised improved legislation that would
provide a framework conducive to the rapid and smooth development of freeport
activities in the country. |
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| He also announced
a Venture Capital Fund for start-ups in the ICT sector and other high value-added
activities. The Fund will provide direct investment in shares, up to Rs
250,000 per project and would encourage Mauritian entrepreneurs to enter
into joint ventures with overseas partners to benefit from their know-how
and access to markets. The Venture Capital Fund would provide loans of
up to Rs 500,000 per project for equity participation. |
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| The
movie industry also got a boost, with a package of measures and incentives
to allow the take-off of film-making activities in Mauritius. The Mauritius
Film Development Corporation (MFDC) will be replaced by a Mauritius Film
Commission. It will regulate and co-ordinate all activities relating
to film-making in Mauritius and act as a one-stop shop for foreign film
producers. A film production scheme will be implemented to provide financial
assistance to Mauritians to encourage them to produce films and documentaries
with local content. |
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| In an attempt
to bring in more revenue, Béranger took some tough decisions. He
raised value added tax by two percentage points in the budget and, to cover
mounting losses at stateowned companies, raised electricity and petrol
prices. |
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| Further privatisation
is on the cards, but due to "nationalist feelings" Béranger said
the government would continue to hold majority stakes in state-owned corporations.
Negotiations had been recently completed on the sale of a stake of the
telecommunications company to France Telecom and there are plans to sell
stakes in the harbour, water, and electricity supply utilities. |
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| Not long after
the government announced its economic plans, the Economist Intelligence
Unit issued a report on the country, which concluded that Mauritius could
reach 6 per cent economic growth and establish a conducive environment
for foreign investment as long as it maintains a low inflation rate. The
report stated: 'Economic reforms will be essential during the forecast
period to address the structural weaknesses which the government has so
far managed to ignore, having enjoyed preferential access to foreign markets
and having relied on the depreciation of the rupee to safeguard export
competitiveness ... the government led by Sir Anerood Jugnauth should introduce
a series of reforms to improve competitiveness, attract foreign investments
and control the budget deficit.' |
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| The country's
highly successful export processing zones are one feature of the economy
the government is not about to change. While trade unions are increasing
their pressure on the zones, no one in the country questions the concept
of these zones, said Béranger. |
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| The IT
Free-Trade Zones |
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| Soon after
being elected, the Mauritian government had announced plans to create an
IT free-trade zone on the island. Prime Minister, Anerood Jugnauth, said:
'The year 2001 will be marked by the relaunch of the Mauritian economy.
We want to make Mauritius an information technology free trade zone with
digital parks.' |
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| E-commerce
adoption in Mauritius is expected to be a catalyst that will help propel
Mauritius to become a service based society. Mauritius aims to become the
regional electronic hub for businesses and government entities within already
established trading communities such as SADC, COMESA, and it is envisaged
that the Offshore and Freeport sectors will play crucial roles in terms
of attracting investment and providing a logistical platform for e-commerce. |
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| 'As a country,'
says the Government, 'we want to ensure that Mauritian businesses, institutions
and communities at large will have access to the social and economic opportunities
created by the new technologies, information infrastructure and digital
content. This will result in business growth and development, new and innovative
jobs, improved capacity for communications and improved ability to extend
our reach to other countries.' |
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| The Government
sees Mauritius as possessing a number of crucial advantages in terms of
e-commerce development: 'There is a good telecommunications infrastructure
and a significant number of operators in the transport, business and financial
services, trade and publishing. The country occupies a key position in
the field of logistics and distribution; an international outlook, a high
standard of education and good linguistic skills are also among our key
assets.' |
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| The Mauritius
government is also planning to implement a 'green visa concept' which allows
Indian companies looking to set up a venture in Mauritius to bring in as
many IT experts as they need without complicated red tape procedures. |
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| In January
2001 Port Louis, Deputy Prime Minister and Finance Minister Paul Berenger
announced the setting up of an Infocom Development Authority to promote
investments in information technology and to regulate the sector. He said
that the new authority would take care of both the Mauritius Telecommunications
Authority and the National Computer Board. "Information technology is the
priority of the government," he said. |
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| The Government's
plans were given their clearest expression to date by Paul Berenger in
his budget speech in June 2001, when he said that the Government's overall
objective is to develop Mauritius into a Cyber Island and a knowledge hub.
Government, he said would marshal the resources and efforts required to
fulfil this ambition. Mr Berenger told Parliament that a line of credit
of US$ 100 million had already been secured from the Government of India
for the implementation of these projects. |
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| In view of
the importance of the project, Prime Minister Anerood Jugnauth himself
is chairing a Ministerial Committee to spearhead the development of ICT
in Mauritius. The three task forces set up to look into the establishment
of a Cyber City, and the implementation of e-Education and e-Government
projects are reporting on a monthly basis to the Committee. |
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| At the end
of a speech that lasted three and a half hours, the Minister announced
plans for a government-sponsored incubator: 'In our drive to make of Mauritius
a Cyber Island, we are not ignoring the need to promote Mauritian entrepreneurship.
Our young people are endowed with talent and potential for innovative ideas
in ICT. They need to be provided with the necessary support and facilities.
The National Computer Board will set up an ICT incubator to promote start-ups. |
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| The Cyber-City
Project |
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| The Ebène
Cyber City Project is being set up by Business Parks of Mauritius Ltd (BPML),
an associate of Software Technology Parks of India, whose executives have
prepared a fully worked-out business plan for the establishment of the
City. It will comprise a cyber tower, a business tower, a knowledge complex,
a multi-media complex, a Government administrative complex, common facilities
and residential units. |
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| The E-Government
Project |
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| In his budget
speech, the Finance Minister followed up on the Prime Minister announcement
of the government plans to create an electronic interface with its citizens.
'We need to provide to our citizens and investors alike, 24 hours a day,
7 days a week, on-line access to government information and services from
anywhere,' said the Minister. 'Each ministry and department will have its
own interactive website accessible through a common Government Portal.
The Government On-line Centre Project is estimated to cost Rs 40 million.
We are at the same time accelerating the implementation of various computerisation
projects in ministries and departments. In this Budget, I am making a total
provision of Rs 180 million for Government IT projects.' |
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| Modernisation
Of The Legal Structure |
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| Moves were
already afoot under the previous government to modernise the country's
legal structure, partly just to catch up with competitors, partly to give
expression to the decision to eschew 'offshore' status as such, and partly
as a follow-up to the decision to sign a Commitment Letter to the OECD
in order to avoid 'blacklisting'. |
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| In this context
the Mauritius Offshore Business Activities Authority (MOBAA), which had
been a 'one-stop-shop' for the offshore sector, and had been the licensing
and supervisory authority for offshore companies (except banks) since 1992
had clearly outlived its usefulness, as had the various pieces of legislation
which explicitly recognised offshore companies and structures. All this
is being swept away, and according to an official at the Companies Division
of the Mauritius Ministry of Economic Development, Financial Services and
Corporate Affairs, the new legislation will come into effect in October. |
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| There follows
a brief assessment of the effects of the new laws, although note that these
general summaries are intended to give only very basic information and
should certainly not be relied upon for authoritative direction. The new
laws are not always easy to interpret and are not yet in effect. Professional
guidance is absolutely necessary for anyone affected by them. |
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| The Companies
Act 2001 |
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| The new Act
replaces most of the Companies Act of 1984, other than sections dealing
with insolvency and public companies, which will remain in force until
new legislation is brought forward in separate bills. The 1984 Act was
the first major revision of companies' legislation in Mauritius and provided
a virtually complete restatement of the law relating to companies. The
1984 Act used as its basic model the Singapore Companies Act 1967 (as revised
in 1970 and 1975). The Singapore Act had used as its basic model the Australian
Uniform Companies Act of 1961 which was in turn substantially based on
the UK Companies Act 1948. |
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| Since 1984
significant changes in company legislation have been made in the United
Kingdom, Australia, New Zealand and South Africa. The Government had made
piecemeal reforms to companies' legislation, especially in respect of the
offshore sector, but decided the time had come for a root-and-branch restatement
of the law to adapt it to modern business realities. |
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| The Government's
starting point for the new law was New Zealand company law, which is widely
regarded among English-speaking jurists as representing the best available
compromise between the various modern trends in corporate legislation,
now that English law has been so influenced by EU law as to be no longer
satisfactory as a model for common law jurisdictions. |
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| The Government
says that the core company law contained in the new Act provides the basic
framework for the incorporation, internal management and receivership of
all companies, what could colloquially be called provisions for the birth,
life and ill health of all companies, with provisions for the death of
the company being contained in the Insolvency Bill which has yet to be
published. The incorporation and management of exempt offshore companies
continues to be governed by the separate International Business Companies
Act 1994 which deals with the special needs of that group of companies.
This leaves the Companies Act as a vehicle for providing the core company
law provisions for domestic companies, including companies described in
the Mauritius Offshore Business Activities Act 1992 as "offshore companies". |
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| Some key features
of the new legislation are as follows: |
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The Act introduces
a simple form of incorporation enabling a company to be incorporated on
the filing of a single application together with the necessary consents
from the proposed directors and secretary and a notice of reservation of
the proposed company name. It will not be necessary to submit a constitution
at the time of incorporation. If a company wants to depart from the standard
requirements set out in the Actl, then, either on incorporation or subsequently,
it needs to file a separate constitution setting out the departures from
the standard form. The new legislation also recognises the reality of 'nominee'
shareholders by allowing companies to operate with just one shareholder.
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The Act does away
with the need for a separate objects clause, and provides that a company
has the rights, powers and privileges of a natural person; this incidentally
removes the remains of the one-time ultra vires doctrine. This would not
preclude a company from stating specific objects in its constitution if
it wished to limit the capacity of a company in this way.
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The Act replaces
the Memorandum and Articles of Association by a single constitution, which
is no longer required to be notarised.
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Private companies
will continue to be prohibited from offering shares or debentures to the
public, will be able to dispense with the holding of company meetings by
passing resolutions by means of entry in the company minute book, and exempt
private companies will not be required to appoint a qualified auditor or
a qualified secretary and will be entitled to file only a summary statement
of accounts with the Registrar.
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The proposed legislation
will retain the distinction between exempt and non-exempt private companies
in the same form as in the existing legislation.
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The Act introduces
no par value shares and permits a company to issue shares which are not
designated with any monetary value.
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The Act incorporates
the new procedure of self-purchase and holding of treasury shares introduced
by the Finance Act 1999.
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The new legislation
makes provision for a company to provide in its constitution for the company
to have power to indemnify or insure its directors, secretary or employees
in accordance with the limitations provided by the Act.
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The Act contains
a requirement that public companies and non-exempt private companies are
required to prepare and present their accounts in accordance with international
accounting standards and that exempt private companies are required to
present their accounts in accordance with accounting practices and principles
that are reasonable in the circumstances and having regard to any requirements
set out in regulations made under the Act.
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The old Companies
Act required all companies to appoint an auditor but relieved exempt private
companies from the requirement to appoint a qualified auditor. The new
Act allows an exempt private company not to appoint an auditor (whether
qualified or unqualified).
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Offshore Companies
are brought under the Companies Act and redesignated as "external companies".
New provisions allow for the continuation in Mauritius of companies which
are incorporated elsewhere and also provides for the incorporation of limited
life companies.
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| The Trust
Act 2001 |
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| The Trusts
Act 2001 replaces the following Acts which are repealed: |
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The Trusts Act
1989;
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The Trust Companies
Act 1989; and
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The Offshore Trusts
Act 1992.
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| The
following is a summary of some of the more important features of the new
Act. |
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| The new Act
sets a maximum duration of 99 years for trusts other than purpose trusts
(25 years) and charitable trusts (may be perpetual), and permits the accumulation
of income (limited to 25 years if immovable property in Mauritius is involved). |
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| A settlor
may also be a trustee, a beneficiary, a protector or an enforcer, but may
not be the sole beneficiary of a trust of which he is a settlor. |
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| A transfer
or disposition by a non-citizen can not be set aside, avoided, or otherwise
declared invalid or ineffective by virtue of any rule or law of his domicile
or nationality relating to inheritance or succession or any rule or law
of a similar nature, or any rule or law restricting the right of a person
to dispose of his property during his lifetime so as to preserve such property
for distribution at his death, or any rule or law having similar effect. |
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| Trusts are
irrevocable notwithstanding any provision of the Bankruptcy Act, or any
other law of Mauritius or any rule of law of any other jurisdiction or
the fact that the trust is voluntary, and is effected without consideration,
or is made on or for the benefit of the settlor, the spouse or children
of the settlor, or any of them. A trust shall not be void or voidable,
or otherwise invalidated in the event of or by reason of the settlor's
bankruptcy or liquidation of his property or in any action or proceedings
against the settlor at the suit of his creditors. |
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| However the
Court may declare a trust void, where it is established that the trust
was made with the intent to defraud persons who were creditors of the settlor
at the time when the trust property was vested in the trustee. No such
action can be undertaken after more than 2 years from the date of the transfer
or disposal of the assets to the trust. |
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| Notwithstanding
any rule or law relating to enforcement of judgments given by the court
of another jurisdiction, where the law of Mauritius is the proper law of
a trust, the Court shall not vary it or set it aside or recognise the validity
of any claim against the trust property pursuant to the law of another
jurisdiction or the order of a court of another jurisdiction in respect
of: |
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the personal and
proprietary consequences of marriage or the dissolution of marriage;
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succession rights
(whether testate or intestate) including the fixed shares of spouses, ascendants
and descendants or relatives; or
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the claim of creditors
in an insolvency.
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| Protective
or spendthrift trust are allowed for. The terms of a trust may make the
interest of a beneficiary subject to termination, restriction on alienation
of or dealing in that interest or any part of that interest, or dimunition,
suspension or termination, in the event of the beneficiary becoming insolvent
or any of his property becoming liable to seizure or sequestration for
the benefit of his creditors and such trust shall be known for the purposes
of this Act as a protective or spendthrift trust. |
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| A purpose
trust must have an enforcer whose duty is to enforce the trust in accordance
with its terms and purposes. |
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| The settling
of immovable property in Mauritius on a trust of which a non-citizen is
a beneficiary requires the approval of the Prime Minister under the Non-Citizens
(Property Restriction) Act. |
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| The Act allows
for a protector of a trust to be appointed. His functions will be to advise
the trustee of the trust. The exercise by the trustees of any of their
powers and discretions shall be subject to the prior consent of the protector.
The trust instrument may appoint as protector any person of full age and
of sound mind, including the settlor, or any body corporate, any firm,
partnership or group of persons, whether incorporate or unincorporate.
The protector has a range of other powers and may also be a settlor, a
trustee or a beneficiary of the trust. |
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| The Act provides
for the appointment of a custodian trustee which shall be a firm, a partnership
or a body corporate and who will act on the instructions of a managing
trustee. |
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| The Act provides
for the appointment of a managing trustee having the role and functions
to manage the trust without being vested with the trust property which
is vested in a custodian trustee. |
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| The settlor
or beneficiary of a trust may give to the trustees a letter of his wishes
or the trustees may prepare a memorandum of the wishes of the settlor with
regard to the exercise of any functions conferred on the trustees by the
terms of the trust. |
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| The number
of trustees of a trust shall not exceed 4 of whom, at any one time, at
least one shall be a qualified trustee. |
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| Except where
ordered by the Court or a Judge in Chambers a trustee shall keep as confidential
and shall not be required to disclose to any person not legally entitled
to it or be required to produce or divulge to any Court, tribunal, committee
of enquiry or other authority in Mauritius or elsewhere, any information
or document in his possession or under his control relating to: |
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the state and
amount or any other details of the trust property;
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the conduct of
the trust administration;
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the trustee's
deliberations as to the manner in which a power or a discretion was exercised,
or a duty conferred or imposed by the law or by the terms of the trust
was performed;
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the reason for
any particular exercise of such power or discretion or performance of duty
or the material upon which such reason will be or might have been based;
or
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the exercise or
proposed exercise of such power or discretion or the performance or proposed
performance of such duty.
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