Mauritius: The Enactment Of The Mauritius Limited Liability Partnerships Act 2011

From this month, local Mauritian and international businesses will have a further choice when selecting the business structure to best suit their needs.

The enactment of the Mauritius Limited Partnerships Act 2011 ("the LPA") came into effect on 15 December 2011 and introduced a Mauritius legal entity, the Limited Partnership ("LP").

The LP structure has many advantages: LPs having a legal personality are legal persons distinct from their members. This means they can enter into contracts, own property, sue and be sued in their own names, making them much more flexible than a company structure. The structure of a company requires matters to be laid down by statute, whereas the constitution and governance of an LP are set out in the partnership agreement. This flexibility means that the LP partners are free to choose the structure which works best for them.

The LPA largely follows the principles of English law, preserving the common law provisions relating to partnership, except to the extent that a contrary intention is agreed, expressly or implied between the parties. The LPA does not attempt to regulate the affairs of a partnership, leaving this to be agreed between the partners. However, to the extent that the partnership agreement does not contain provisions concerning the relation between the partners and person dealing with them, the provisions of the LPA will apply accordingly.

Partnerships which are set up under the LPA are Limited Partnerships which unless otherwise specified in the partnership agreement, shall have a continuous and successive existence, through its present and future partners until dissolution. Limited partnerships, which meet the conditions laid down in the LPA, including having at least one general partner and where the limited partners will normally have limited liability for the partnership's debt and obligations provided they take no part in the management of the partnership.

A Mauritius partnership may elect to have a legal personality under section 11 of the LPA. A partnership having a legal personality is a legal person separate from its partners and has the power to own and deal with its separate property in accordance with the agreement of its partners.

It has unlimited capacity, thus, removing ultra vires concerns. Subject to section 11 of the LPA (i) the acts of a general partner in connection with the business of the limited partnership shall bind the limited partnership in all respects; (ii) every general partner shall be jointly and severally liable with the other general partners for all debts and obligations of the limited partnership incurred while he is a general partner; (iii) a limited partnership may indemnify any partner or other person from and against all or any claims, demands and debts, unless otherwise provided in the partnership agreement. The ability of a partnership to hold property in the partnership name (rather than in the name of its individual partners) is a particular advantage to certain holding structures.

The LPA provides that a limited partnership shall consist of –

(a) one or more general partners who -

(b) one or more limited partners who –

Liabilities and Rights

It should be noted that a limited partner shall not participate in the conduct or management of the business of the limited partnership and shall not transact the business of, sign or execute documents for, or otherwise bind, the limited partnership. If a limited partner acts contrary to this provision, it may be liable as if it were a general partner in respect of all debts of the limited partnership. The LPA provides that a person may be a general partner and a limited partner at the same time in the same limited partnership. In this respect a partner who is both a general and a limited partner in the same partnership has all the rights, powers and restrictions of a general partner, except that in respect to his contribution as a limited partner, it shall have the same rights of a limited partner against the other partners.

When a partnership makes an election to have legal personality it does not fundamentally affect the relationship between its partners, which remain governed by the provisions of the partnership agreement and, where the agreement is silent, by the LPA. However, the ability for a partnership to exist as a separate l e g a l entity facilitates the continuity of contractual relationships with third parties and makes it easier to tie in new partners to existing contractual relationships. For example, section 13 of the LPA provides that a partnership agreement shall be binding upon the partners and their assignees, and upon subsequent partners in the same manner as if those persons had themselves executed it.

The LPA further provides that a partnership agreement may, to the extent specified in such agreement, provide rights to any person, including a person who is not a party to the partnership agreement (i.e., third party lender). It was envisaged that contracts would be drafted so as to give third parties protection via an express right to enforce where this was the parties' intention.

A third party (i.e. a lender not a party to a partnership agreement) may enforce that clause if either (a) the partnership expressly states that the third party shall have this right of enforcement or purports to protect the third party and (on a proper construction of the agreement) there is nothing to indicate that the contracting parties did not intend the term to be enforceable by that third party. Our view is that, the third party must be expressly identified in the agreement either by name, or as a member of a particular class or description e.g. "lenders" but need not be in existence at the time the agreement was entered into. The act of legally assigning capital contribution or commitment by the funds shall be protected by the LPA. Section 13 (5) of the LPA is intended to protect the legal rights of the bona fide third parties and to maintain the solid development of the fund industry in Mauritius.

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.