Private M&A Comparative Guide -

1 Deal structure

1.1 How are private M&A transactions typically structured in your jurisdiction?

Private M&A transactions in Mauritius may be structured as:

share transactions, through:
- the sale of shares of the target to the buyer by contract; or
- the redemption of the seller's shares and issue of new shares to the buyer through corporate actions pursuant to the Companies Act;
asset sale transactions through the sale of the assets of the target to the buyer by contract;
amalgamations:
a statutory procedure pursuant to the Companies Act to merge the target with another Mauritius company or, where the statutory procedure is not possible, through an order of the Supreme Court (Bankruptcy Division) upon application by the target or, with leave of the court, any shareholder or creditor of the target;
cross-border mergers, which are available to an authorised company using a special procedure under the Companies Act to merge an authorised company with a foreign company;
schemes of arrangement, through an order of the Supreme Court (Bankruptcy Division) upon application by the target or, with leave of the court, any shareholder or creditor of the target; or
takeovers pursuant to the Takeover Rules, which apply to 'reporting issuers', but not to global business licence companies.

The most common mechanisms are:

sale of the shares of the target;
sale of the assets of the target; and
amalgamation through the statutory procedure.

These three structures are the focus of this Q&A.

1.2 What are the key differences and potential advantages and disadvantages of the various structures?

In a share sale transaction, the buyer – directly or through a wholly owned vehicle – acquires (a whole or partial stake in) the target with all of its assets as well as existing and contingent liabilities. However, the parties may contractually agree that certain liabilities or assets (eg, any receivables) be excluded and thus be assigned to the seller.

In an asset sale transaction, the buyer acquires – directly or through a wholly owned vehicle – the brand name, goodwill, operating licences, client base, equipment, right to lease, patents, intellectual property, domain names, plant and machinery of the target. The seller will remain the owner of the target; and as a general rule, the liabilities of the target stay with it. If the target intends to sell any immovable property it owns to the buyer, this will form part of a separate transaction by way of notarial deed.

Under the Companies Act, an amalgamation can only take place between two or more companies registered in Mauritius. Therefore, in an amalgamation scenario, the target will be absorbed by a Mauritius company owned by the buyer (the buyer's company). The property, rights, powers and privileges of the target will continue to be the property, rights, powers and privileges of the buyer's company. The buyer's company will continue to be liable for all liabilities and obligations of the target and all pending proceedings by, or against, the target will be continued by or against it. A conviction, ruling, order or judgment in favour of or against the target may be enforced by or against the buyer's company.

The legal documents required for a share sale transaction, an asset sale transaction and an amalgamation differ significantly from each other (see question 5).

1.3 What factors commonly influence the choice of transaction structure?

The factors that will condition the choice of mechanism include:

the type of company that the target is – whether a domestic company or a global business licence/authorised company;
whether the transaction is consensual or resisted by some shareholders or a hostile transaction;
the tax treatment of the proceeds received by the seller;
the regulatory requirements in any jurisdiction in which the target has subsidiaries;
whether the target has debts which must be restructured with the involvement of the creditors;
whether the target has liabilities which the buyer will not take on;
the ease of obtaining regulatory approval for the transaction, if required;
the financial situation or solvency of the target; and
the status and standing of the seller.

1.4 What specific considerations should be borne in mind where the sale is structured as an auction process?

Structuring a sale by way of auction is not common for private M&A transactions in Mauritius.

Where auctions are held – for example, to enforce a share pledge through the sale of the pledged shares pursuant to the Civil Code:

a licensed auctioneer must be appointed to carry out the sale;
public notices must be issued; and
statutory delays must be observed.

2 Initial steps

2.1 What agreements are typically entered into during the initial preparatory stage of a private M&A transaction?

Typically, the buyer will issue a letter of intent expressing the wish to acquire the shares or assets, subject to:

the satisfactory completion of financial, legal and other due diligence; and
the conclusion of the definitive transaction agreements.

The letter of intent will include:

the basic terms of the transaction;
an indicative price; and
an exclusivity period.

The seller must countersign the letter of intent to confirm its agreement.

The parties will then enter into a non-disclosure agreement so that the seller and the target start providing due diligence information to the buyer and its advisers. After completion of the due diligence exercises, the buyer will issue a binding term sheet to the seller containing the final terms and conditions on which the buyer is prepared to effect the transaction, including the preferred structure.

2.2 Which advisers and stakeholders are typically involved in the initial preparatory stage of a private M&A transaction?

The parties involved in the initial preparatory stage are:

the buyer;
the seller;
their legal advisers;
their accountants/tax advisers; and
their corporate finance advisers.

2.3 Can the seller pay adviser costs or is this limited by rules against financial assistance or similar?

Pursuant to the Companies Act, the rules on financial assistance provide that a company cannot directly or indirectly give financial assistance for the purpose of or in connection with the acquisition of its own shares. Given that in a share transaction, a potential buyer will acquire from the seller the shares issued by the target to that seller, the seller's payment of adviser costs will not raise an issue of financial assistance.

3 Due diligence

3.1 What due diligence is typically conducted in private M&A transactions in your jurisdiction and how is it typically conducted?

The basic due diligence includes:

financial due diligence;
legal due diligence;
risk and compliance due diligence; and
IT infrastructure and security due diligence.

Depending on the business of the target, additional due diligence – such as environmental, human capital or health and safety due diligence – may be conducted.

In all cases, the buyer will carry out a valuation of the target and its business undertaking either internally or through a third-party valuer.

Due diligence is conducted through a mix of:

remote access to documents (through a virtual data room or other document sharing platform);
on-site inspections; and
independent checks (where available).

3.2 What key concerns and considerations should participants in private M&A transactions bear in mind in relation to due diligence?

As Mauritius is an international financial centre, many companies are managed in Mauritius from a corporate and administrative perspective, while their operational business activities are carried out elsewhere. Accordingly, the places where documents and information required for the purposes of the due diligence are kept may be diverse and may be subject to different laws and rules.

Participants in private M&A transactions should ensure that due diligence documents are:

obtained in a timely manner; and
up to date and accurate, in accordance with the relevant laws and rules.

3.3 What kind of scope in relation to environmental, social and governance matters is typical in private M&A transactions?

Environmental matters must be rigorously taken into consideration where they are relevant to the business – in particular, where the target has an environment impact assessment (EIA) licence that is vital to its operations. Where appropriate, environmental due diligence will ensure that the terms and conditions of the EIA licence are being complied with. Awareness is growing in Mauritius of the link between environmental sustainability issues and performance or value, but this is not yet a common area of focus in the context of private M&A transactions.

Social matters are generally limited to verifying matters relating to employee working conditions and health and safety issues as part of human capital and health and safety due diligence. Issues around social culture, impact and risk are less routinely checked as part of private M&A transactions.

Corporate governance matters are invariably verified as part of the risk and compliance due diligence. Among other things, this involves checking that:

the Code of Corporate Governance is being properly adhered to;
the board has been properly constituted;
shareholder rights are being adhered to; and
an ethical code of conduct and culture is in place.

4 Corporate and regulatory approvals

4.1 What kinds of corporate and regulatory approvals must be obtained for a private M&A transaction in your jurisdiction?

Under the Companies Act, if a company intends to acquire or sell assets which represent more than 50% of the value of its total assets, an ordinary resolution of shareholders, in addition to a board resolution, is required to approve the transaction. If the assets being acquired or sold are worth more than 75% of the value of its total assets, a special resolution of shareholders, in addition to a board resolution, is necessary to approve the transaction.

For a share sale transaction, board and special or ordinary resolutions of the seller and of the buyer are required. A share transfer instrument, in the prescribed form, must be submitted to the board of directors of the target for approval and registration of the new shareholder in the shareholders' register.

For an asset sale transaction, the following are required:

board and special resolutions of the target; and
board and special or ordinary resolutions of the buyer.

For an amalgamation, the following are required:

board resolutions and shareholders' special resolutions of the target and of the buyer approving the amalgamation; and
special resolutions of any interest group of either the target or the buyer.

Further, by virtue of a shareholders' agreement or other investment agreement, certain shareholders may have veto rights with regard to the sale of assets or the disposal of shares by other shareholders.

Regulatory approvals depend on the type of licence which the target holds. For example:

if the target carries out a regulated financial activity and is licensed by the Financial Services Commission (FSC), the prior consent of the FSC must be obtained for a sale of shares; or
if the target is a bank, the prior consent of the Bank of Mauritius – the central bank – is required.

4.2 Do any foreign ownership restrictions apply in your jurisdiction?

If the target owns or holds immovable property in Mauritius, the consent of the Prime Minister's Office (PMO) is required for a foreigner or foreign entity to acquire a controlling shareholding of that company. Similarly, the target cannot dispose its immovable property to a foreign national without the PMO's approval.

If the target is a domestic company and the buyer is a foreign national, the buyer can hold shares in the target only to the extent that the target carries out its business exclusively in Mauritius.

If a target that carries out business both in and out of Mauritius or exclusively out of Mauritius has a foreigner as owner, that company will need apply for a global business licence from the FSC.

Subject to the preceding paragraphs, a foreign national can hold 100% of the share capital of a company.

4.3 What other key concerns and considerations should participants in private M&A transactions bear in mind in relation to consents and approvals?

Where PMO, FSC or Bank of Mauritius approval is required, the process can be lengthy. Know-your-customer and anti-money-laundering/counter-terrorist financing clearances from regulatory authorities and banks can also take time.

Where the target has incurred indebtedness, it is common for the finance documents to contain change of control provisions that require the prior consent of creditors.

In some cases, the lease agreement also contains provisions requiring the prior consent of the landlord before a sale.

These elements should be factored in when negotiating the closing date.

5 Transaction documents

5.1 What documents are typically prepared for a private M&A transaction and who generally drafts them?

The transaction documents will depend on the structure of the transaction. The legal advisers to the buyer usually draft the transaction documents, but documents which are internal to the seller are drafted by the seller's advisers.

Sale of shares transaction: This generally involves the following documents:

a share sale and purchase agreement;
the prescribed share transfer form;
a shareholders' agreement, if applicable;
the new constitution of the target;
board and shareholders' resolutions of the seller (if a corporate) approving the sale;
board and shareholders' resolutions of the buyer (if a corporate) approving the purchase; and
board resolutions of the target approving the share sale and the share transfer form.

Asset sale transaction: This generally involves the following documents:

an asset sale and purchase agreement;
a notarial deed for the sale of immovable property to the buyer, if any;
board and shareholders' resolutions of the target approving the sale; and
board and shareholders' resolutions of the buyer (if a corporate) approving the purchase

Amalgamation: This generally involves the following documents:

an amalgamation proposal;
a shareholders' agreement, if applicable;
a new constitution for the buyer's company;
board resolutions and shareholders' special resolutions of the target approving the amalgamation;
board resolutions and shareholders' special resolutions of the buyer's company approving the amalgamation; and
special resolutions of any interest group of either the target or of the buyer's company.

5.2 What key matters are covered in these documents?

A share sale and purchase agreement and prescribed share transfer form generally include the following information:

the number of shares;
the consideration;
the agreement of the parties to sell and purchase the shares;
conditions precedent to closing;
closing procedures;
post-closing obligations;
warranties; and
representations.

An asset sale and purchase agreement generally involves the following information:

an inventory of the assets being purchased;
the consideration;
the agreement of the parties to sell and purchase the shares;
conditions precedent to closing;
closing procedures;
post-closing obligations;
warranties; and
representations.

An amalgamation proposal generally includes the following information:

the name of the buyer's company;
the registered office of the buyer's company;
the full name, usual residential address and service address of the director or directors and the secretary of the buyer's company;
the address for service of the buyer's company;
the share structure of the buyer's company, including the number of shares and the rights, privileges, limitations and conditions attached to each share;
the manner in which the shares of the target owned by the seller are to be converted into shares of the buyer's company, if any;
where the shares of seller in the target are not to be converted into shares of the buyer's company, the consideration that the seller is to receive instead of shares of the buyer's company;
any payment to be made to a shareholder or director of the target, other than a payment of the kind outlined in the preceding point;
details of any arrangement necessary to complete the amalgamation and to provide for the subsequent management and operation of the buyer's company; and
a copy of the proposed constitution of the buyer's company.

5.3 On what basis is it decided which law will govern the relevant transaction documents?

The parties may agree among themselves as to the governing laws of the contractual documents – for example:

the share sale and purchase agreement; or
the asset sale and purchase agreement.

Documents such as notarial deeds for the sale of Mauritius immovable property, any shareholders' agreements, constitutions and the statutory amalgamation proposal must be governed by Mauritius law.

6 Representations and warranties

6.1 What representations and warranties are typically included in the transaction documents and what do they typically cover?

Typical representations and warranties include the following:

validity of incorporation and due existence;
power to conduct business;
all corporate approvals being obtained;
all third-party waivers, consents and approvals being obtained;
no material adverse effect on the business of the target;
validity, binding nature and enforceability of agreements;
no breach of licences, constitutions, laws, orders or judgments of a court of law having a material adverse effect;
the good standing and solvency of the target;
in the case of a share sale transaction, that:
- the seller is the sole legal and beneficial owner of the shares;
- the shares being sold are fully paid up;
- the shares are free from encumbrances or other security interests;
- there is no prohibition on the sale of the shares; and
- the seller has the right to sell the shares; and
in the case of an asset sale transaction, that:
- the target is the sole legal and beneficial owner of the assets;
- the assets are free from encumbrances or other security interests;
- there is no prohibition on the sale of the assets; and
- the seller has the right to sell the assets.

6.2 What are the typical circumstances in which the buyer may seek a specific indemnity in the transaction documentation?

Generally, a buyer indemnity is included for all breaches of representations and warranties.

6.3 What remedies are available in case of breach and what is the statutory timeframe for bringing a claim? How do these timeframes differ from the market standard position in your jurisdiction?

The remedy for breach of contract is damages.

The statutory timeframe is 10 years.

6.4 What limitations to liability under the transaction documents (including for representations, warranties and specific indemnities) typically apply?

Liability may be contractually limited for all breaches of agreement, except where the breaches have arisen due to:

lack of good faith;
gross negligence;
wilful default; or
fraud on the part of a party.

6.5 What are the trends observed in respect of buyers seeking to obtain warranty and indemnity insurance in your jurisdiction?

Warranty and indemnity insurance for buyers is not common in Mauritius.

6.6 What is the usual approach taken in your jurisdiction to ensure that a seller has sufficient substance to meet any claims by a buyer?

This approach is not common in Mauritius. If the seller cannot pay, court action or insolvency proceedings may be triggered against the seller.

6.7 Do sellers in your jurisdiction often include restrictive covenants in the transaction documents? What timeframes are generally thought to be enforceable?

Restrictive covenants by sellers are quite rare, except for confidentiality obligations and restrictions on a potential buyer in a failed transaction to start a business in competition with the seller or target. The limitation period is usually two years.

Buyer restrictive covenants are also common, in particular with regard to non-compete covenants and employee non-solicitation covenants. The timeframe is usually three years.

6.8 Where there is a gap between signing and closing, is it common to include conditions to closing, such as no material adverse change (MAC) and bring-down of warranties?

Yes, this practice is common.

6.9 What other conditions precedent are typically included in the transaction documents?

Typically, a buyer will want to ensure that:

all necessary corporate approvals and third-party consents, waivers and approvals have been obtained prior to closing; and
all existing encumbrances and security interests have been released prior to closing

7 Financing

7.1 What types of consideration are typically offered in private M&A transactions in your jurisdiction?

Typically, cash or a mix of cash and non-cash consideration in the form of shares of the buyer or its group.

7.2 What are the key differences and potential advantages and disadvantages of the various types of consideration?

None of the types of considerations discussed in question 7.1 confer a significant advantage or disadvantage – except perhaps that in accepting shares of the buyer, the seller is taking a risk that the buyer will perform.

7.3 What factors commonly influence the choice of consideration?

The choice of consideration is contractually negotiated and agreed in the light of the financial due diligence. The financial resources of the buyer and the need of the seller for cash may also influence the choice of consideration.

7.4 How is the price mechanism typically agreed between the seller and the buyer? Is a locked-box structure or completion accounts structure more common?

The price mechanism will depend on the outcome of the financial due diligence of the target. A locked-box structure is more common in Mauritius.

7.5 Is the price typically paid in full on closing or are deferred payment arrangements common?

Again, this is something that is contractually agreed. In certain cases, payment of part of the price is conditional on the fulfilment of the financial performance of the target represented by the seller.

7.6 Where a deferred payment/earn-out payment is used, what typical protections are sought by sellers (eg, post-completion veto rights)?

It is rare for sellers to obtain veto rights after completion of an acquisition, unless it remains a significant shareholder of the target.

7.7 Do any rules on financial assistance apply in your jurisdiction, and what are their implications for private M&A transactions?

Pursuant to the provisions of the Companies Act on financial assistance, a target cannot directly or indirectly give financial assistance for the purpose of or in connection with the acquisition of its own shares, unless the board has previously resolved that:

giving the assistance is in the interests of the company;
the terms and conditions on which the assistance is given are fair and reasonable to the company and to any shareholders not receiving that assistance; and
immediately after giving the assistance, the company will satisfy the solvency test.

7.8 What other key concerns and considerations should participants in private M&A transactions bear in mind from a financing perspective?

The timeline for transferring funds from abroad to fund the acquisition, especially with bank know-your-customer requirements, should not be underestimated.

8 Deal process

8.1 How does the deal process typically unfold? What are the key milestones?

The main stages of the deal process are as follows:

the issue and acceptance of the letter of intent from the prospective buyer;
the carrying out of due diligence by the buyer;
in light of the due diligence reports obtained by the buyer, submission of a term sheet outlining the principal terms of the transaction to the seller or the target for acceptance;
if the term sheet is accepted, negotiations on the transaction agreements; and
if an agreement is reached on the definitive transaction documents and their content, closing.

8.2 What documents are typically signed on closing? How does this typically take place?

Typically, all documents that must be signed at closing may be signed in advance of closing and kept in escrow with counsel for the buyer. Those documents will be dated at closing and will be released to all parties on closing.

The following documents will become effective on the closing date:

the transaction agreements, including the share transfer form;
letters of resignation of the existing directors and of appointment of new directors;
documents to change the authorised signatories of the target on bank accounts;
all forms or documents witnessing the transfer of specific assets, such as machinery and vehicles, to the buyer in an asset sale; and
documents for the release of encumbrances or other security interests.

Where all parties are in a single jurisdiction, face-to-face closing can take place at the office of the counsel of the target or the buyer. Otherwise, closings are conducted remotely and the signed documents are thereafter circulated to all parties by electronic means.

8.3 In case of a share deal, what is the process for transferring title to shares to the buyer?

The signed share transfer form must be submitted to the board of directors of the target. The board of directors will:

approve the transfer and the share transfer form; and
direct the company secretary of the target to effect the relevant changes in the share register.

8.4 Post-closing, can the seller and/or its advisers be held liable for misleading statements, misrepresentation, omissions or similar?

The seller, including its advisers, has a duty to act in good faith. If a lack of good faith is established, it can technically be liable. We are not aware that any such circumstances have occurred in Mauritius.

8.5 What are the typical post-closing steps that need to be taken into consideration?

These include:

making all necessary filings with the authorities;
notifying all relevant parties of the change in shareholding of the target (in a share sale or amalgamation);
dealing with mandates on bank accounts;
dealing with new employee contracts, where appropriate; and
appointing the new directors representing the buyer.

9 Competition

9.1 What competition rules apply to private M&A transactions in your jurisdiction?

Merger control from a competition perspective is governed by:

the Competition Act 2007; and
the Competition Commission Rules of Procedure 2009.

The objective of the law is to provide the Competition Commission with sufficient functions and powers to enable it to prevent mergers that are likely to result in substantial lessening of competition within the market by applying the tests of:

disruption to the business and the economy as a whole; and
distortion to competition.

This test is translated in a statutory market share threshold of 30%. It was also intended to produce specified timeframes within the Competition Act so as not to cause prejudice to the participants of a merger or acquisition through the passage of time caused by lengthy investigations by the authorities. The timeframe is shorter for mergers than for other restrictive business practices.

9.2 What key concerns and considerations should participants in private M&A transactions bear in mind from a competition perspective?

Merger situations that may attract the attention of the Competition Commission are those which bring together under common ownership and control two or more enterprises, of which at least one carries out its activities, in Mauritius or through a company incorporated in Mauritius. They are also referred to as 'restrictive business practices' in the legislation, which covers both national mergers and cross-border mergers.

Participants in a merger or acquisition that should feel concerned include:

enterprises of interconnected bodies corporate;
enterprises carried on by two or more bodies corporate controlled by one person or a group of persons; and
two distinct enterprises, one of which is controlled by a body corporate and the other by the person controlling that body corporate.

The Competition Act sets out three types of interests which may constitute control:

a material influence (ie, the ability to influence an enterprise's policy irrespective of shareholding);
a controlling interest; and
control of the enterprise's policy.

Participants in private mergers and acquisitions must consider whether:

the merger will result in the supply or acquisition of 30% of the underlying goods and services on the market;
prior to the merger, one of the participants alone supplies or acquires 30% of the underlying goods and services on the market; or
the merger, if not already created, is likely to result in a substantial lessening of competition within any market for goods and services.

If the participants are unable to decide whether a particular merger situation will fall under any of the above categories, it is open to them to apply to the Competition Commission for guidance in that regard. The legislation remains silent on the duty of notification. Currently, there is no requirement for participants of a private merger or acquisition to notify the commission before a merger.

An investigation into a merger situation may be conducted by the commission either:

on its own initiative, where it considers that the thresholds are being met which would turn a merger situation into a restrictive business practice; or
upon receiving a complaint to that effect.

Any investigation of a merger situation by the commission cannot exceed six months.

Where the commission determines after an investigation that a merger situation exists, it may issue directions which are remedial, preventive or mitigating in nature, depending on whether they relate to a prospective or completed merger. Any order or direction of the commission may be appealed to the Supreme Court. However, such appeal will not operate as a stay of the order or direction given by the commission. Failure to comply with a direction of the commission:

may result in the commission applying to the judge in chambers for a mandatory order requiring the enterprise to make good the default within a specified period; and
will also constitute a criminal offence.

Data dealt with by the commission in investigating merger situations is kept confidential subject to disclosure obligations under the law.

10 Employment

10.1 What employee consultation rules apply to private M&A transactions in your jurisdiction?

There are no employee consultation rules.

10.2 What transfer rules apply to private M&A transactions in your jurisdiction?

If, following a transfer or the takeover of a trade or business by a new employer, a worker is offered employment on terms and conditions which are not less favourable than those of his or her previous agreement and the worker accepts the offer of employment, the worker's employment with the new employer is be deemed to be continuous. If the worker refuses the offer, the worker is not entitled to claim that his or her employment has been terminated without justification.

Where a transfer or the takeover of a trade or business involves a substantial change in the working conditions of a worker, the worker can claim that his or her contract of employment has been terminated by the new employer without justification.

Where, either pending a transfer or the takeover of a trade or business or after a transfer or takeover of a trade or business, the employment of any worker of the transferor or transferee is terminated, the termination will be deemed to be without justification where the grounds for the termination are other than economic, technological or structural grounds.

The minister for employment matters has the authority to grant exemptions to employers in specific industries, relieving them from the need to comply with the above requirements. The minister can establish guidelines regarding the terms and conditions under which the new employer can offer employment to the worker during the transfer of the business or takeover of the previous employer's trade.

10.3 What other protections do employees enjoy in the case of a private M&A transaction in your jurisdiction?

Termination of an employment without justification may subject an employer liable to pay the employee compensation equivalent to three months' salary per year of service. In addition, the employer must pay the employee one month's salary in lieu of notice of termination.

10.4 What is the impact of a private M&A transaction on any pension scheme of the seller?

Pursuant to the Workers' Rights Act and the Private Pension Scheme Act and Rules, an employee may elect to:

transfer the amount in the private pension scheme to a new pension scheme (if any) of the buyer; or
transfer it to an insurance company.

10.5 What considerations should be made to ensure there are no concerns over the potential misclassification of employee status for any employee, worker, director, contractor or consultant of the target?

The status of a person is determined by the type of contract that the person has with the company. Therefore, it is imperative to ensure that the terms of the relationship between the company and any person are clearly specified in the relevant contract.

10.6 What other key concerns and considerations should participants in private M&A transactions bear in mind from an employment perspective?

Other than as stated elsewhere in question 10, there are no significant concerns and considerations to be highlighted.

11 Data protection

11.1 What key data protection rules apply to private M&A transactions in your jurisdiction?

The Data Protection Act 2017 regulates mergers and acquisitions in Mauritius from a data protection perspective. The Data Protection Act came into force on 15 January 2018. It adopted the principles embodied in the EU General Data Protection Regulation. Some of the aims and objectives of the legislation include:

putting in place appropriate safeguards to enable the safe cross-border transfer of personal data; and
minimising the risk of personal data breaches.

11.2 What other key concerns and considerations should participants in private M&A transactions bear in mind from a data protection perspective?

Data protection assumes importance in mergers and acquisitions insofar as the data involved is often the driver of such ventures. The key concerns and considerations of the participants in private mergers and acquisitions will therefore involve establishing appropriate data protection safeguards during both the pre-closing and post-closing phases of the merger.

Before establishing these safeguards, data which requires special attention and which should be preserved and kept confidential should be identified. This will determine the level of protection that such data requires.

The participants in a merger or acquisition can:

assess the strengths and weaknesses of their data protection systems during the due diligence; and
assess the degree of protection that their data will enjoy should the proposed merger or acquisition not materialise.

The privacy policy of each participant is a material document to be considered in assessing how data in a merger situation will be handled.

The participants in a merger or acquisition must:

obtain the consent of data subjects before processing or using their data;
distinguish between personal data and special categories of personal data which require a higher degree of attention;
ensure that the processing of personal data is lawful at all times;
implement adequate levels of security to prevent personal data breaches; and
where processing operations are likely to present a high risk to the rights and freedoms of data subjects by virtue of their nature, scope, context and purposes, carry out a data protection impact assessment.

The participants in a merger or acquisition often enter into a non-disclosure agreement to ensure an adequate level of protection of their personal and confidential information. Under the data protection legislation, all data controllers must designate a data protection officer to ensure compliance with the law.

In the case of cross-border mergers, where personal data is transferred to another jurisdiction, proof of appropriate safeguards must be provided to the data protection commissioner. Any breach of the Data Protection Act constitutes a criminal offence.

12 Environment

12.1 Who bears liability for the clean-up of contaminated sites? How is liability apportioned as between the buyer and the seller in case of private M&A transactions?

It is important to check the conditions attached to any environmental impact assessment (EIA) licence, as these conditions will vary from case to case and will be annexed to the licence. The licence is provided to the entity; therefore, liability with regard to the authorities will be a liability of the target. Ideally, the M&A agreement should state that:

any liability arising from any event prior to the change in control is a liability of the seller; and
post the change in control, any such liability is a liability of the buyer.

However, as the law does not provide for any specific apportionment of the liability, if the M&A agreement is silent on apportionment of the liability it will be the target that will be liable.

12.2 What other key concerns and considerations should participants in private M&A transactions bear in mind from an environmental perspective?

Buyers should look out for:

any requirement for a change in control notification/application for approval to be made to the authorities, which could potentially be a condition of the EIA licence; and
any renewals/fresh applications to be made to the authorities for such licences.

13 Tax

13.1 What taxes are payable on private M&A transactions in your jurisdiction? Do any exemptions apply?

Mauritius does not tax capital gains. However, in the case of a transfer of immovable property to a buyer:

the buyer is liable to pay a 5% registration duty; and
the seller is liable to pay land transfer at a rate of 5%.

Any income derived by any party from a private M&A transaction in Mauritius that does not qualify as capital will be subject to corporate tax at a rate of 15%.

13.2 What other strategies are available to participants in a private M&A transaction to minimise their tax exposure?

The choice of transaction structure may have an impact on the tax treatment of a party. As such, it is important for the parties to consult with their legal and tax advisers at the outset of the transaction.

13.3 Is tax consolidation of corporate groups permitted in your jurisdiction? Can group companies transfer losses between each other for tax purposes?

There is no group tax in Mauritius.

The transfer of losses is permissible only in the case of a takeover or merger. As per the Income Tax Act 1995, tax losses can be carried forward to a surviving company following a merger, provided that the minister deems the takeover/transfer of undertaking to be in the public interest. The fulfilment of several conditions, such as those relating to employment safeguards, should be approved by the minister.

13.4 What other key concerns and considerations should participants in private M&A transactions bear in mind from a tax perspective?

We are not aware of any other key concerns or consideration from a tax perspective.

14 Trends and predictions

14.1 How would you describe the current M&A landscape and prevailing trends in your jurisdiction? What significant deals took place in the last 12 months?

The current M&A landscape in Mauritius is buoyant. A couple of large acquisitions in the banking and financial services sector are awaiting regulatory approval. Acquisitions of companies holding management licences (which manage global business licence companies, funds and authorised companies) continue to be attractive, as do bank acquisitions.

We are aware of a number of due diligence exercises that are being carried out in connection with potential private M&A transactions.

14.2 Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

We do not anticipate any major new developments on the legislative front until Summer 2024.

15 Tips and traps

15.1 What are your top tips for the smooth closing of private M&A transactions and what potential sticking points would you highlight?

We strongly recommend engaging with all stakeholders, in particular regulators, at the outset of a transaction to explain the plan to them and secure their buy-in for the project. This approach has very often facilitated transactions.

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.

Mauritius: Private M&A Comparative Guide