The Limited Partnerships Act 2011 (the "Act") came into force on 15 December 2011. Mauritius has been a popular jurisdiction for collective investment schemes and for investment holding companies investing in the emerging African and Asian markets. Limited partnerships now offer foreign investors another vehicle which may provide additional flexibility in structuring collective investment schemes and investment holding vehicles.
The limited partnership is attractive as it provides the benefits of combining limited liability protection for a person who participates in a partnership with the advantages of tax transparency.
The procedure for the setting up of a limited partnership is straightforward.
Under the Act, a limited partnership must comprise at least one general partner (who is liable for all the debts and obligations of the limited partnership) from which no contribution is required and at least one limited partner (who generally is an investor and whose liability is limited to the value of his agreed capital contribution).
The general partner has the authority to conduct and manage the business and affairs of the limited partnership. In contrast, the limited partner does not participate in the conduct or management of the business of the limited partnership or carry out any transaction on behalf of the limited partnership.
There is no restriction on the number of partners in a limited partnership.
A limited partner as well as a general partner can be a natural person, a body corporate or an unincorporated body, formed or registered with or without liability in Mauritius or elsewhere, including any société or partnership or any other body of persons.
The limited partnership must at all times maintain a registered agent in Mauritius if the limited partnership does not have a general partner in Mauritius. The registered agent should be a person resident in Mauritius and can be a body corporate or an unincorporated body in Mauritius or in the case of a limited partnership holding a global business licence, the management company of the limited partnership may act as registered agent.
The name of a limited partnership must end with the words "Limited Partnership", the abbreviation "L.P." or the designation "LP" and may contain the name of any general partner or any deviation of the general partner's name.
A limited partnership registered in Mauritius must have a partnership agreement. This provides flexibility in the structuring and operation of the limited partnership as the administration and the conduct of the affairs of the limited partnership is largely dependent on the terms of the partnership agreement reflecting the needs and expectations of investors.
To register a limited partnership in Mauritius, an application must be lodged with the Registrar of Limited Partnerships (the "Registrar") who is also the Registrar of Companies. A declaration signed by one or more of the general partners stating the name of the limited partnership, the nature of its business, its registered office and its principal place of business, and the duration of the limited partnership must be filed with the Registrar. The filing of the partnership agreement is optional. Upon registration, the Registrar will issue to the general partners a certificate of registration. A registration fee of Rs3,000 (approximately USD100) is payable to the Registrar together with an annual fee of Rs2,500 (approximately USD85). If the limited partnership intends to have a global business licence, a separate application for such must also be lodged with the Financial Services Commission of Mauritius (the "FSC").
A limited partnership can be registered with or without legal personality. In this connection, the general partners must file a signed declaration and they have the option to make an election for registering the limited partnership with or without legal personality.
A limited partner can effect a capital contribution in the form of money, loan, other property or services and where a non cash contribution is provided, the value of the contribution shall be agreed in the partnership agreement.
If the limited partner is involved in the conduct and management of the limited partnership, he incurs the same liability as the general partner and therefore loses limited liability status. However, the Act provides a list of circumstances in which the limited partner will not be deemed to have participated in the conduct and management of the limited partnership. These include among others:
- consulting with and advising a general partner with respect to the activities of the limited partnership;
- approving the purchase or sale by the limited partnership of any asset;
- acting as an officer or shareholder of the general partner that is a body corporate or an unincorporated body.
Capital and profit distributions may be made freely in accordance with the terms of the partnership agreement provided that a solvency test is satisfied. There is also a claw-back mechanism where a payment is made at a time when the partnership is insolvent or becomes insolvent within 6 months as a result of the payment being made.
The Registrar is required to maintain a register of limited partnerships containing a record of every limited partnership registered under the Act and documents filed in relation to each limited partnership. This is publicly available for inspection. However, in relation to a limited partnership holding a global business licence and subject to the partnership agreement, the register may only be inspected by an officer, management company or registered agent of that limited partnership.
The financial statements of a limited partnership are filed with the Registrar unless the limited partnership holds a global business licence in which case financial statements are filed with the FSC. Financial statements do not need to be audited unless this is required under the partnership agreement or the limited partnership holds a global business licence. The limited partnership must also file its annual returns with the Registrar.
The Act also provides for the registration and continuation of foreign limited partnerships in Mauritius.
A limited partnership may apply for a global business licence with the FSC under the Financial Services Act 2007. In considering an application for a category 1 global business licence, the FSC has regard to whether the conduct of business will be or is being managed and controlled from Mauritius and whether:
- at least one partner is resident in Mauritius (where the partner is a natural person) or incorporated, formed or registered under the laws of Mauritius (where the partner is not a natural person);
- the registered agent is resident in Mauritius;
- the limited partnership will at all times maintain its principal bank account in Mauritius;
- the limited partnership will at all times maintain its accounting records at its registered office in Mauritius;
- the limited partnership prepares or proposes to prepare its statutory financial statements and causes or proposes to have such financial statements to be audited in Mauritius.
A limited partnership may also be set up as a collective investment scheme under the Securities Act 2005 and the Securities (Collective Investment Schemes and Closed-end Funds) Regulations 2008.
Further details regarding the regulatory requirements specific to investments funds and global business companies in Mauritius may be found in our firm's briefings entitled 'Mauritius investments funds' and 'global business companies' respectively.
The default tax position of a limited partnership is that of tax transparency. Accordingly, the limited partnership will not be liable to income tax in Mauritius. All profits will be taxed in the hands of the partners and not at the level of the limited partnership.
Where the limited partnership makes an election to have legal personality, it will lose the tax transparent position and will be liable to corporate tax at the rate of 15%. If such a limited partnership holds a category 1 global business licence, it will qualify for deemed tax credits at a maximum of 80% of foreign income and this will result in an effective tax rate of 3% for the limited partnership.
For tax treaty purposes, any structure established in Mauritius which intends to take advantage of tax treaty benefits under any of the Mauritius Double Taxation Avoidance Agreements should ensure that the vehicle is tax resident in Mauritius and that management and control is exercised in Mauritius. This will be an important factor to consider when structuring investments using a Mauritius limited partnership.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.