This is the second in a series of Mauritius Regulatory Alerts in which we bring you an overview of the latest legal and regulatory developments in the offshore world, with a particular focus on Mauritius.
As an international financial centre of choice, Mauritius continues to grow steadily to further promote its capabilities and opportunities to investors. This second edition captures new measures since October 2019.
There have been a number of regulatory updates to the Mauritian legal framework across a number of sectors. The following provides a summary of these updates.
FSC issues Consultation Paper to convert or shift from the Defined Benefit Pension Schemes to Defined Contribution Pension Schemes Consultation Paper
On 27 February 2020, the Financial Services Commission of Mauritius (FSC) invited comments from the public on the Consultation Paper which it issued on the same day. The Consultation Paper sets out its proposed approach on how a conversion or shift from a Defined Benefit Pension Scheme to a Defined Contribution Pension Scheme can be achieved under our laws.
In brief, every application for the aforesaid conversion is lodged with the FSC which will examine every case on its own merits as opposed to an existing set of criteria.
Fundamentally, the FSC "shall have regard to the interests of concerned scheme members as well as the sustainability of the scheme" and has outlined the below as essential to support every application:
(a) Full disclosure of information to members;
(b) Consent of all members is obtained;
(c) Communication to members of all the options available to them; and
(d) The constitutive documents of the scheme allow for the conversion.
Evidence of the fulfillment of the above conditions shall be communicated to the FSC within 14 days of the communication exercise.
Furthermore, the following is also required:
(a) A conversion plan or shift plan, certified by all members of the governing body of the scheme, which includes the rationale for conversion or shift, as the case may be and the way forward in treating any deferred members and pensioner;
(b) An actuarial valuation report as at the conversion date or shift date;
(c) A notice of amendment to the constitutive documents of the scheme given to all affected scheme members;
(d) Amended constitutive documents of the scheme for the FSC's approval together with duly approved resolutions signed respectively by all members of the governing body of the scheme and the board members of the sponsoring employer;
(e) A funding plan, where applicable, to restore solvency ratio to 100%;
(f) Evidence of the communication exercise to members of the scheme;
(g) Certified true copies of signed option forms evidencing consent of members of the scheme to convert or shift; and
(h) Such other documents or information as may be required by the FSC.
FSC invites public consultations and issues Guidelines for Mortgage Underwriting Practices and Procedures under section 130(3)(a) & (b) of the Insurance Act 2005
On 14 February 2020, the Financial Services Commission of Mauritius (FSC), in its capacity as supervisor and regulator of mortgages, invited public consultations for the oversight of underwriting practices and procedures for mortgages. The deadline for members of the public to share their views is 13 March 2020.
In this regard, they have issued the 'Guidelines for Mortgage Underwriting Practices and Procedures' under section 130(3)(a) & (b) of the Insurance Act 2005. The Guidelines lay down five fundamental principles that will foster sound mortgage underwriting.
In issuing these Guidelines, the FSC's ambition to further its objects and functions is three-fold. First, to ensure that the administration and conduct of business within the financial services sector is undertaken rigorously. Secondly, to better protect consumers of financial services (including their premiums) by adopting the appropriate measures towards this end. Finally, to establish proper market conduct and a level playing field with regards to mortgage underwriting by insurance companies.
Furthermore, the FSC also issued draft Guidelines for mortgages underwriting practices and procedures which outline the expectations of the FSC for prudent mortgage underwriting. These Guidelines are intended to apply to all insurers engaged in mortgage underwriting and/or the acquisition of mortgage loan assets. Finally, the Guidelines are meant to complement the Insurance Act 2005 as well as any FSC Rules issued by the FSC under the Insurance Act 2005.
The FSC issues Handbook and Guideline on AML/CLT Financial Services Commission issues Handbook and Guideline on AML/CLT
On 13 January 2020, the FSC issued a Handbook and Guideline on AML/CLT as part of its continued endeavour to combat money laundering and terrorist financing (AML/CFT Handbook).
The FSC has unambiguously confirmed its ambition underlying the AML/CFT Handbook as aiming to "enhance understanding of FSC's expectations and help financial institutions assess the adequacy of their internal systems and controls and remedy deficiencies with the aim of combatting laundering of criminal proceeds, the financing of terrorism and the financing of proliferation of weapons of mass destruction. Its objectives are to provide explanation and therefore assist financial institution in complying with the AML/CFT laws").
The avowed aim of the FSC in issuing the AML/CFT Handbook was three-fold:
- First, to"assist the financial institutions under the purview of the [FSC] in complying with the requirements of the FIAMLA and the FIAML Regulations 2018.' These have been identified by the FIAMLA as an institution or a person, licensed or registered or required to be licensed or registered under the following pieces of legislation:
- section 14, 77, 77A or 79A of the Financial Services Act;
- the Insurance Act;
- the Securities Act; and
- the Captive Insurance Act 2015.
The provisions of the Handbook will therefore be used to ascertain the level of compliance of financial institutions with our laws. In particular, the FSC has stated that the Handbook needs to be applied on a risk-based proportionate approach, which therefore takes into account the size, nature and complexity of a financial institution when deciding whether a certain example of good or poor practice is relevant to its business.
- Secondly, to consolidate the guidance of the FSC on anti-money laundering, financing of terrorism and financing of proliferation of weapons of mass destruction; and
- Finally, supplement the Code on the Prevention of Money Laundering and Terrorist Financing, 2012 (as amended).
Bank of Mauritius issues guideline under section 50 of the Bank of Mauritius Act 2004
Section 50 of the Bank of Mauritius Act (BOM Act) entitles the Bank of Mauritius (Central Bank), amongst others, to issue guidelines in relation to the operations and activities of and standards to be maintained by financial institutions.
On 15 January 2020, the Central Bank, in its capacity as the designated AML/CFT supervisory authority of financial institutions, issued the "Guideline on Anti-Money Laundering and Combating the Financing of Terrorism and Proliferation" under section 50 of the BOM Act (Guideline).
A brief highlight of the provisions of the Guideline is set out below:
- it applies to all 'financial institutions', members of their boards, management and employees.
Importantly, it has defined the term 'financial institutions' which it has been defined broadly so as to capture (i) institutions licensed by the Central Bank such as banks, non-bank deposit taking institutions, cash dealers and money lenders and (ii) institutions licensed under the National Payment Systems Act 2018;
- it guides and assists 'financial institutions' to understand and efficiently perform their statutory obligations under the legal and regulatory framework. In so doing, it confirms the Central Bank's minimum expectations on the factors which financial institutions should take into consideration when they identify, assess and mitigate the risks of money laundering and the financing of money laundering and proliferation. It especially targets the staff and officers of financial institutions;
- it outlines the requirements of the relevant legislations namely, FIAMLA (as amended), FIAMLA Regulations 2018 (as amended), Banking Act 2004 and, the United Nations (Financial Prohibitions, Travel Ban and Arms Embargo) Sanctions Act 2019; and
- it supersedes the Guidance Notes on Anti-Money Laundering and Combating the Financing of Terrorism for Financial Institutions which the Central Bank issued in pursuance of its letter dated 20 January 2017.
The New Mauritius-Kenya Double Taxation Avoidance Agreement (Kenya DTAA) and the Protocol amending the Kenya DTAA were ratified in the Government Gazette in December 2019
As announced in our first regulatory update last year, the Kenya DTAA was entered into by the Mauritian and Kenyan Governments during the State visit of President Uhuru Kenyatta in Mauritius in April 2019 following the invalidation, on 15 March 2019, by the High Court of Kenya at Nairobi of the then Double Taxation Avoidance agreement between Kenya and Mauritius.
The Kenya DTAA, which deals with the avoidance of double taxation in relation to the taxation of income, was amended on 16 October 2019 by a protocol which was signed in Washington (Protocol).
On 10 December 2019, the Minister of Finance, Planning and Economic Development (Minister of Finance) issued regulations which (i) confirmed that the Kenya DTAA and the Protocol would come into force at a date to be confirmed in the Government Gazette and (ii), revoked the Double Taxation Avoidance (Republic of Kenya) Regulations 2012.
The Companies (Beneficial Owner) (Percentage of Shares) Regulations 2019
On 25 October 2019, the Minister of Finance confirmed that the percentage which is prescribed under section 91(8)(b)(i)(A) of the Companies Act 2001, as being the benchmark to determine whether a natural person owns or controls a company, whether directly or indirectly, was set to 20% irrespective of the type of share held in the company.
Furthermore, insofar as financial institutions are concerned, the regulations declare that the percentage to be used shall be as specified in the definition of significant interest which is defined under the Banking Act as "owning, directly or indirectly, or otherwise having a beneficial interest amounting to 10 per cent or more of the capital or of the voting rights of a financial institution or, directly or indirectly, exercising a significant influence over the management of the financial institution, as the [Central Bank] may determine."
Insolvency Act 2009 – Liquidator's Remuneration, Part VI Proclaimed & Fourth Schedule amended
On 1 October 2019, the Minister of Finance issued the Insolvency (Remuneration of Liquidator) Regulations 2019.
These regulations confirm the maximum remuneration which a liquidator is entitled to claim under section 111(2) of the Insolvency Act, when he has been provided with an indemnity cover.
Under these circumstances, the liquidator's remuneration when he makes the gross realization of proceeds in the first Schedule is the corresponding percentage in the second column of the aforementioned Schedule.
Fourth Schedule Amended
On 4 October 2019 the Minister of Finance issued the Insolvency (Amendment of Schedule) Regulations 2019 which amend the Fourth Schedule of the Insolvency Act. The latter confirms the priority in ranking which a liquidator or the Official Receiver must apply at the liquidation of a Mauritian company.
In effect, the amendment increases the maximum amount in respect of wages or salaries of any employee to MUR 50,000 [± USD 1,400] as ranking ahead of preferential claims. This threshold applies in respect of wages or salaries earned by way of commission regardless of whether they are payable for time or for piece of work, task work or other similar method of work, in respect of services provided to the Mauritian employer before the commencement of the adjudication or winding up of the Mauritian employer.
Part VI Proclaimed
On 11 October 2019, Part VI of the Insolvency Act 2009 (Insolvency Act), which deals with cross-border insolvency, was proclaimed with retrospective effect. Accordingly, Part VI of the Insolvency Act came into force on 25 July 2019.
In effect Part VI is enabling in nature and merely confirms the following:
- it applies to 'insolvency proceedings' which it defines as "a collective judicial or administrative proceeding, including an interim proceeding, pursuant to a law relating to insolvency (whether personal or corporate) in which the assets and affairs of a debtor are subject to control or supervision by a judicial or other authority competent to control or supervise that proceeding, for the purpose of reorganisation or liquidation"
- it confirms that the Minister of Finance is empowered to designate a class of insolvency proceedings as a 'specified insolvency proceeding' and issue regulations in relation to these proceedings. It is to be noted that the term 'specified insolvency proceeding' not been defined under the Insolvency Act;
- it provides guidance on the criteria to be considered by the Minister of Finance when issuing regulations namely that he must be satisfied that:
- Mauritius and the foreign country are parties to an agreement for the mutual recognition of insolvency proceedings; and
- the level of recognition given to the interests of Mauritius' debtors and creditors in an insolvency proceeding in the country and the terms of the above-mentioned agreement provide for appropriate protection for the interests of debtors and creditors 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.