2021 marked the 20th anniversary of the Mauritian Companies Act 15 of 2001, which was approved in May 2001 and enacted by Parliament on 1 December 2001. The coming into force of the Act paved the way for a major revamp of the legislation governing companies and also led to the repealing of the previous Companies Act 1984 as well as the International Companies Act 1994.
In line with international best practice and inspired by New Zealand’s Companies Act, the Act was promulgated to provide a more business friendly approach to the running of Mauritian incorporated or registered companies. The Act aimed to create an enhanced and a sophisticated business environment and to provide greater flexibility to foster financial structuring within the Mauritian jurisdiction.
Two decades later, at a time where the world is facing new economic, social and environmental issues such as the prevailing pandemic and major global tensions and conflicts, reflections on new legal concepts are emerging with a view to adapting the Mauritian companies’ legal framework. Even though significant amendments to the Act were brought over the years, new questions may arise as to ‘What’s next after 20 years of the Companies Act 2001?’.
Events leading to the introduction of the Act
The first set of legislation relating to company law in Mauritius was passed in 1913. A major revision of the legislation took place nearly 70 years later, resulting in the enactment of the Companies Act 1984. Two decades later, the Mauritian legislator led a reform to facilitate the ease of doing business in Mauritius and to establish the country as a financial services centre.
One of the arguments presented by the Mauritian Government in favour of this radical reform was that the new legislation would align the legal provisions governing domestic companies with those companies known at that time as ‘offshore companies’. Further, the Act introduced a basic framework regarding the incorporation, management and winding up of companies (save for receiverships which were regulated by the Companies Act 1984 until the Insolvency Act 2009 came into force).
The Act also introduced innovative concepts such as a single document to stand as the constitution of a company, unanimous shareholders’ agreements and the no par value shares concept. The concept of authorised capital was also abolished.
The innovations introduced by the Act demonstrate the willingness of Parliament to enhance the Mauritian corporate and financial sector. Since its enactment, the Act has been subject to various evolutions to align the country’s legal framework with international standards.
Major changes since the introduction of the Act
Several significant amendments were made to the Act in the areas of corporate governance and compliance with international anti-money laundering and combating the financing of terrorism (AML/CFT) standards. For example, aimed at supporting and enhancing the proper implementation of good corporate governance, amendments were made to provide, inter alia, for the appointment of independent directors and the duty of directors to ensure that company records are kept for a period of at least seven years from the date of the completion of a transaction or operation. Additional penalties ranging from fines to imprisonment were also introduced for directors’ breach of duty.
Spurred into action when Mauritius entered the Financial Action Task Force (FATF) and the European Commission grey and black lists as a result of certain strategic deficiencies in its AML/CFT framework, specific modifications were brought to the Act. The aim was to reinforce the legal and regulatory AML/CFT framework to address highlighted deficiencies and to ensure compliance with international standards, including the FATF recommendations.
Companies are now required to, not only disclose beneficial ownership information and make same available following AML/CFT enquiries, but also to record any action taken to identify those beneficial owners and to file any changes with the Registrar of Companies.
The COVID-19 pandemic had an inevitable impact on the Act. At the height of the pandemic, the legislator had to adapt it to cater for the intricacies associated with the situation and granted the Registrar of Companies wider discretion during the Covid-19 period to allow flexibility in reporting obligations, filings of financial statements and issuing of practice directions, guidelines, or such other instructions.
What’s next?
The Act has appreciably evolved over two decades to cater for significant changes occurring at an accelerated pace in the economic, business and technological environments. With the emergence of threats such as climate change and pandemics, there has been a growing movement amongst businesses to align their operations and purpose with best practices, so as to embrace environmental, social or economic changes.
For instance, the financial statements of a company are no longer the pre-eminent factor in evaluating it for investment purposes. Investors nowadays are increasingly conscious of their investment decision whereby they would assess a company’s non-financial information, such as corporate social responsibility reports, environmental social and governance (ESG) disclosures and sustainability practices, or require ESG practices to be a pre-requisite or an ongoing obligation following their investments.
There are currently no mandatory ESG reporting requirements for companies (save for those companies listed on the SEM Sustainability Index (SEMSI), whose entry on the SEMSI is based on prescribed ESG and sustainability guidelines). This is despite the fact that the corporate social responsibility concept is provided for in the Income Tax Act 1995 and that principles around good corporate governance apply to certain types of entities.
While it has been noted that in New Zealand, there is no mandated ESG principles reporting, it would seem that in the United Kingdom, there is a strong willingness to amend Section 172 of the UK Companies Act 2006 to extend the duty of director of a company to operate the company in a manner that benefits the members, wider society, and the environmentIn France, the PACTE Act 2019 was enacted to amend certain provisions within the French Civil Code (FCC) in an effort to promote greater social responsibility amongst businesses in France.
Articles 1833 and 1835 of the FCC, in particular, which were once identical to those of the Mauritian Civil Code have been amended to include an additional paragraph. Article 1833 paragraph 2 of the FCC now provides that « La société est gérée dans son intérêt social, en prenant en considération les enjeux sociaux et environnementaux de son activité[1] ». One wonders if Mauritius will follow suit.
In conclusion, amendments and adjustments made to the Act since its enactment demonstrate the progress made to align the Mauritian corporate legal framework with good governance and to take account of social and environmental challenges. However, there is still ample room to further enhance the ease of doing business in Mauritius while adapting to new expectations such as ESG principles.
Perhaps an upgraded Companies Act (not merely another update) catering for new technological advancements and embracing long term social and environmental sustainability along with new concepts of company structures would be another positive step towards consolidating Mauritius’ position on the African leader board as an Internal Financial Centre.
[1] English translation: The company is managed in accordance with its social objectives, taking into consideration social and environmental issues of its activity.
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Read the original article at Bowmans.