McLarens Attorneys

A Private Trust Company (PTC) is a company formed to act as a trustee to a limited number of trusts (maximum of four) either for the benefit of a single family, or for the benefit of different branches of a family or for distinct (but related) family groups. The administration, investment management services or investment advice required in connection with the trusts is outsourced to licensed service providers.

In Mauritius, a PTC takes the form of a Global Business Company, which would hold either a Category 1 Licence or a Category 2 Licence. However the PTC does not need to be licensed as a Corporate/Qualified Trustee as defined under the Trust Act 2001.

A PTC must be established through a Licensed Management Company such as AAMIL Ltd. The constitution of the company will restrict its activities to that of acting as a Private Trust Company. There are several CONDITIONS applicable to PTC, namely:

Must restrict its activities to that of private trust business services;
At all times maintain a minimum paid up capital of US$ 5,000;
Provide its private trust business services solely to connected persons;
Not solicit trust business from, or provide trust business services to, the public;
Appoint a duly licensed Management Company to carry out its trust administration services and as Company Secretary;
Forthwith notify the FSC of any change in the nature and scope of its private trust business
Provide the FSC on a yearly basis or  upon request, a list of  trusts for which it acts as private trustee
Adhere to the Mauritius Anti Money Laundering/Combating Terrorist Financing legislation.

In brief, the operation of a PTC is a private trusteeship arrangement whereby:
a high net worth individual (HNWI) sets up a company (known as a PTC) that will act as a trustee in respect of his own assets that would be settled in a trust or a number of trusts;
The client base of the PTC comprises of high net worth families or family who are able to evaluate and assume the financial risks and economic consequences of their investments.

ADVANTAGES AND COST BENEFITS

There is no public Register of Directors and Shareholders of the PTC. There is also no registration of the individual underlying trusts. The information provided to the Financial Services Commission (FSC) for the purpose of licensing is treated with utmost confidentiality.
A trust company owned by the family can afford to be more flexible in its decision making compared to a third party trustee who might need to seek indemnities from all beneficiaries before major decisions.
The involvement of the settlor or a family member or personal advisor on the board of the trust company will allow the actions of the trustee to be closely monitored by the family.
Provides a holding structure for underlying operating companies of different jurisdictions leading to the start of a Family Office where all the client’s financial affairs may be centralized as illustrated in the picture below
Structure can accommodate Exotic or High Risk Assets which a normal trustee would otherwise not accept or would only accept for a very high Trustee fee
Administration of PTC and of underlying trusts and operating companies undertaken by professional Management Company in a low cost jurisdiction, i.e. Mauritius.
Enables client to have Control without compromising the validity of the structure
Provides Protection  to the client who may not feel comfortable with public corporate trustee
As it is a Corporate structure, it is a structure which is easier to explain to clients from Civil Law jurisdictions not familiar with the Trust Concept
Enables family participation and empowerment of children
Provides a convenient way to pass control and influence over family business interests and wealth to the next generation

OWNERSHIP, DIRECTORS & ADMINISTRATION

One of the key aspect of setting up a PTC is with regard to the shares/ownership of the PTC, in short, who should own the shares of the PTC. The prudent approach would be to ensure a separation of ownership from the settlor assets so that the shares of the PTC should not form part of his estate. Some ownership structuring possibilities are to either have the shares registered in a separate discretionary trust or in a purpose trust. The Mauritius Trust Act 2001 provides for both types of trust to be set up in Mauritius.
The second important aspect to consider is the directorship of the PTC. Individual or corporate directors can be appointed. However one should be careful of the place of residence of Directors which may impact on taxation of the PTC and the underlying trust. The important question to consider here is where central management and who has control of the PTC. At all cost shadow directors should be avoided. The Board of directors should be seen as making the decisions
It is therefore very important to pay particular attention in the drafting of the constitution of the PTC with particular attention as who can appoint directors and replace them and also provision for successor directors. The drafting of the underlying trust documentation (Trust Deed) is also important otherwise may result in Sham trusts.

The Protected Cell Company (PCC) Act 1999 came into force in January 2000. This legislation provides additional opportunities, flexibility and security for international investment structuring. The object of the legislation is to enable a company holding a Category 1 Global Business Licence, incorporated under the Financial Services Development Act 2001, to create cells within its capital for the purposes of segregating the assets within that cell from claims related to other assets. A PCC may issue cell shares in respect of different cells for the purpose of segregating protecting different assets, referred to as cellular assets.

The cellular assets attributed to a cell will only be affected by the liability of the company arising from transaction attributable to that cell. Further, a PCC may pay dividend, cellular dividend, in respect of which the cell shares by reference only to the cellular assets and liabilities attributable to the cell in respect of which the cell shares were issued.

KEY FEATURES

Single legal entity.

Legal segregation and protection of assets and liabilities for each cell.
No minimum capital requirement is imposed for the PCC or the cell(s) except in the case of insurance business.
Creation of cellular and non-cellular assets.
Unlimited number of cells may be provided with, each cell having its own name or designation.
Incorporation may be continued or converted from an existing company.
A formal procedure is provided for the liquidation, receivership or administration order for any individual cell.
An important feature of the PCC Act is the provisions for the protection of creditors. A person dealing with a PCC must be informed of the PCC status and the cell with which the relevant transactions are taking place must be identified, as stipulated in sections 11 and 13(2) respectively. Additionally, the Directors of a PCC are bound by law to keep the cellular assets separate and separately identifiable from cellular assets attributable to other cells. If a Director fails to inform a person that he is dealing with a PCC, and that person is otherwise unaware of, and has no reasonable basis for knowing, which cell he is dealing with, the Directors incur personal liability to that person in respect of the transaction. Nevertheless, the Directors have a right of indemnity against the non-cellular assets of the PCC in respect of their personal liability unless they acted in a fraudulent, reckless or negligent manner or in bad faith.

USES OF PCCS

As provided under the PCC Act, a PCC can be used to carry out two types of global business namely global insurance business and investment funds (i.e. Collective Investment Schemes).
Life assurance companies can legally separate the assets of life, pension and individual policyholders.
Composite insurers – where the assets of life insurance business need to be legally separated from those of non-life business.
Conglomerates – where several cells are established, each holding a particular insurance exposure of the parent and segregated, for example, in relation to the various geographical locations, corporate division or types of risk of those exposures.
Insurance and re-insurance – where insurers or reinsurers can accommodate the differing needs of clients.
Reinsurance – where finite reinsurance contracts and securitisation issues can be placed within separate cells.
Multi-nationals – where companies can operate their captive insurance, treasury and other functions globally in a single entity using the same core capital.
Captive insurance companies – segregate distinct areas of risk and activity into different ‘cells’.
Rent-a-captive  – where the owners of the PCC offers capital financing to clients, who, because of their own size, would find it impractical to set up their own individual captive insurance arrangements.
This type of structure is particularly attractive for global business funds (collective investment schemes) with various classes of shares, umbrella or multi-class funds, affording each individual share class the same limited liability that would be obtained if separate corporate structures were used for each different category of investor. (NB: It is a requirement that there is pooling of investors’ funds at the level of the cell).

INCORPORATION

A PCC may be directly incorporated or may be registered by way of continuation provided that the incorporation and registration requirements prescribed in the Companies At 2001 and the FSD Act 2001 are satisfied. The incorporation procedure of a PCC is similar to that of a global business category 1. In the case of a continuation, additional requirements as laid down in section 5 of the PCC Act 1999 must be satisfied.

All applications should be submitted to the Financial Services Commission (FSC) on a prescribed form through a management company. Applications should be accompanied by a detailed business plan and policyholders profile for each cell along with corporate statutory documents. Subsequent cells created at a later stage should be disclosed to the FSC with details of its business plans and policyholders. 

Similarly for investment funds, promoters need to submit to the FSC, through a management company, an outline memorandum containing the identity, track record and credentials of the promoter, general information regarding the fund, its objectives and proposed investment, its structure, the size of the fund and the minimum subscription, track record of the functionaries of the fund and compliance with requirements of other regulatory bodies.

TAXATION

A PCC is liable to Mauritius income tax at the rate of 15% which may be reduced to 3% after application of the provisions on foreign tax credit. 

Alternatively, the PCC can claim, against the nominal tax payable, credits for actual taxes suffered. These are generally of three types, namely:-
Withholding taxes which have been retained in the source country.
Where the income consists of dividends received from a foreign investment, credit can also be claimed for underlying taxes which have been paid in the source country on the corporate profits out of which the dividends have been declared.
Tax sparing – although tax may not have been paid in the source country, credit can be claimed in Mauritius if the tax has been spared in the source country (i.e lower or zero tax rate for the promotion of industrial, commercial, scientific, educational or other development in the source country. It should be noted that the tax sparing clause is embodied in the local tax legislation and this is granted on income flows into Mauritius regardless of the ambit of a specific treaty.
Residual tax is often nil since corporate tax rates in most countries are above 15%. 

In such a situation, the PCC may even have surplus tax credits which can go to waste. However, the entity is allowed to claim the credits against any nominal taxes payable on any type of income (interest, royalties, business profits, etc), from any source country. This makes full use of all available credits. This can be particularly attractive for holding entities which derive income from many source countries, and of different nature. 

The claim for underlying tax credits is available provided the PCC holds at least 5% in the foreign company paying the dividends. However, it is also available if the dividends come through a chain of intermediate holding companies before reaching the PCC, provided the shareholding at each stage is at least 5%. 

A PCC that is centrally controlled and managed in Mauritius can accede to the benefits of Double Taxation Agreements. There is no withholding tax on dividends, capital gains and interests.

Captive Insurance Business

REGULATION

The Financial Services Development Regulations 2001 lays out the framework to facilitate the establishment of captive insurance business. Applicants for captive insurance licences are companies with a Category 1 Global Business Licence duly licensed by the Financial Services Commission. Captive Managers have been licensed to provide specialised services in the area of captive insurance.

Both pure captives and captives insuring second party and third party risk may be licensed. In the case of third party business the captive should demonstrate access to the necessary underwriting and analytical skills, financial soundness and a good track record. Full details of all programmes to be underwritten must be submitted for approval to the Financial Services Commission. Rent-a-captive and cell captives are also permitted.

A captive insurance company must obtain a licence to conduct captive business. The Captive Insurance Company may also have to appoint a licensed Management Company in Mauritius and a Principal Representative who will be accountable to the Commission.

TYPES OF CAPTIVES PERMISSIBLE

Captive General Insurance Business

Minimum Paid-Up Capital: US$ 100,000
Margin of Solvency: Surplus of assets over liabilities of US$100,000 or 15% of net premium income, whichever is higher.
Liquidity Ratio: The value of the captive’s admitted assets must not be less than 75% of the amount of its admitted liabilities.

Captive Long Term Insurance Business

Minimum Paid-Up Capital: US$ 250,000
Margin of Solvency: Liabilities not to exceed amount of long term insurance fund.

Captive General and Long Term Insurance Business

Minimum Paid-Up Capital: US$ 350,000

REINSURANCE/FILING

Captive insurance companies are required to be reinsured in excess of reasonable and prudent retention levels unless the Commission is satisfied that the captive has access to sufficient security without the need for reinsurance.

The Commission requires the annual filing of:
Audited financial statements.
Certificate of margin of solvency.
Certificate of liquidity ratio.
Actuarial valuation of adequacy of premiums and loss reserves for long term business.
Declaration of Principal Representative as to accuracy of accounts.

INCORPORATION

An application to form a captive insurance company should be submitted to the Commission. Applications must be submitted through a Management Company and should be made on prescribed application forms and accompanied by:
A certificate from a law practitioner practising in Mauritius to the effect that the application complies with the laws of Mauritius.
A copy of the Constitution of the company together with the prescribed statutory forms.
Name of the Principal Representative who shall be an executive of the appointed Captive Management Company.
A Business Plan.
Actuarial report for long term licences, which certifies that:
(i) the financing of the captive is sufficient to cover both technical reserves and the required margin of solvency;
(ii) the Business Plan is actuarially sound as it relates to long term business;
(iii) the name of the appointed Captive Management Company.

FEES

Application Fee to the FSC : US$ 500
Annual Licence Fee to the FSC : US$ 1,500
Annual Licence Fee to the Registrar of Companies: approx. US$ 200.

Collective Investment Scheme

REGULATION

Funds registered with the Financial Services Commission in Mauritius are commonly structured as companies incorporated under the Companies Act 2001 and licensed as a company holding a Category 1 Global Business Licence under the Financial Services Development Act 2001. The Funds can be structured as two tier funds, or increasingly as single tier funds. These funds invest in a wide range of investment products, including portfolio or fixed income securities and venture capital.

REGISTRATION REQUIREMENTS

A Collective Investment Company needs to be approved by the Financial Services Commission before it commences business. In considering an application, the Commission needs to be satisfied about the following:
the track record and credentials of the promoters;
the fund structure;
the objectives of the fund;
the investors and the market targeted;
types of investment the fund will be dealing in;
the track record of the investment manager, custodian, and administrator;
compliance with regulations in third countries, as appropriate (e.g. SEBÍs approval if investment is to be made in India).
Once the Commission is satisfied with the above, it may give an approval in principle so as to enable all constitutive documents to be prepared and the company to be incorporated.

ADMINISTRATION & CONTROL

The Commission generally wishes to satisfy itself that, as far as possible, substance and central administration is in Mauritius. To this end, the Fund must have a local administrator, a local custodian, and a local auditor. The requirement that central administration is situated in Mauritius implies that:
the accounts are kept and the accounting documents are available in Mauritius;
the share register is kept in Mauritius;
issues and redemptions of shares are carried out in Mauritius;
calculation of the Net Asset Value (NAV) is carried out in Mauritius.
two directors who are resident in Mauritius
qualified secretary resident in Mauritius
bank account is maintained in Mauritius with an offshore bank and investments are made via that bank account
board meetings are initiated and chaired in Mauritius.
The above does not exclude the possibility of the Fund obtaining assistance for the management of its assets from an investment adviser established overseas, nor does it prevent management decisions in relation to investment and disinvestment being executed overseas. Also the requirement for the location of the issuance and redemption of shares in Mauritius does not preclude foreign intermediaries from participating in the placing and redemption operations as distributors or nominees. The Commission insists on the independence of the manager, the trustee and the custodian. 

In appropriate circumstances, it is also possible to establish a management or advisory company in the sector to take advantage of the beneficial tax regime. 

After incorporating the company, Copex provides the following services with respect to the ongoing activities of the fund:
Provide registered office address.
Provide two directors and qualified secretary resident in Mauritius.
Open bank account.
Provide local signatories for bank account.
Provide administrator and registrar, and carry out NAV calculations.
Preparation of quarterly accounts to the authorities.
Prepare and file tax returns.

A Global Business Company may apply to the Registrar of Companies either at the time of incorporation, continuation or after to be designated as a Limited Liability Company (LLC). A Global Business Company Category 2 may also be registered as a LLC. LLCs guarantee members liability and are treated as a partnership’ (or look through) for income tax purposes.

An LLC is charactertised by:
Duration limited to 50 yrs with the possibility of extension to a maximum of 150 yrs.
Limitation on transfer of shares or other interests in the company unless by unanimous shareholders’ resolution.
Management of the company by its member(s) or a manager.
Dissolution of the company upon death, insanity, bankruptcy, expulsion, cessation or dissolution of a member.

A GBL1 is a company engaged in qualified global business and which is carried on from within Mauritius with persons all of whom are resident outside Mauritius and where business is conducted in a currency other than the Mauritian rupee. 

It is the recommended structure for individuals, body corporate, trust or partnership including limited liability partnership or a société for investment and other high profile business. A GBL1 may be locally incorporated or may be registered as a branch of a foreign company. Public companies, those engaged in banking, insurance and fund management, and companies wishing to benefit from the provisions of Double Taxation Agreements (DTAs), can only be incorporated as GBL1 companies. 

Confidentiality is strictly observed in terms of the FSD Act. No person or body is authorized to disclose information or present documentation to any court, tribunal, committee of inquiry or other authority in Mauritius unless ordered to do so by a Court of Law on application by the Director of Public Prosecution for inquiry into the trafficking of narcotics and dangerous drugs, arms trafficking or money laundering as defined under existing legislation. Upon application to the FSC, full disclosure is required on the beneficial owners of the company. However, such information is not available for public inspection.

QUALIFIED GLOBAL BUSINESS

As per the Second Schedule of the FSD Act, a GBL1 can engage in the following Qualified Global Business Activities:

Aircraft Financing and Leasing
Asset Management
Consultancy Services
Financial Services
Fund Management
Information and Communication Technology Services
Insurance
Licensing and Franchising
Logistics and/or Marketing
Operational Headquarters
Pension Funds
Shipping and Ship Management
Trading
Such other qualified global business activity as approved by the FSC.

CAPITAL, SHARES & SHAREHOLDERS

CAPITAL

The usual authorized share capital is US$ 1 million with all the shares having a par value.
The minimum stated share capital is 1 share.
GBL1 are subject to no restrictions as to the distribution of their assets. They may purchase their own shares subject to the Solvency Test. The share may either be cancelled or held as treasury shares.

Shares & Shareholders

Registered shares, preference shares, redeemable shares and shares with or without voting rights.
Par value shares if any may be stated in more than one currency.
Minimum of 1 shareholder and same rule applies if the company is a wholly owned subsidiary.
Shareholders may be individual or corporate entity.
Shares may be subscribed by nominees but beneficial owners should be disclosed.
Annual meeting must be held every year not later than 15 months after previous meeting, and not later than 6 months after balance sheet date. Meetings need not be held in Mauritius.

TAXATION & TAX SITUATION

Taxation
GBL1 companies are resident in Mauritius for tax purposes.
There is no capital gains tax, no withholding tax on payment of dividends and   interest or royalties.
No stamp duties or capital taxes.
No inheritance tax.
GBL1 companies are liable to taxes at the rate of 15% subject to 80% deemed credit with an effective rate of 3%

Tax Situation

Provided that the GBL1 owns at least 5% of an underlying company, credit will be available on foreign tax paid on the income out of which the dividend was paid (x underlying foreign tax credit’).
When a company not resident in Mauritius, which pays a dividend, has itself received a dividend from another company not resident in Mauritius (a x secondary dividend’) of which it owns either directly or indirectly at least 5% of the share capital, such dividend will be allowable as foreign tax credit and an underlying foreign tax credit will also be available.
Mauritius has no thin capitalization rules.
Interest and royalty payments paid by GBL1 companies are tax exempt.
Tax sparing credits are available x Under this regime the effective rate of taxation in Mauritius can be reduced, as a long stop provision exists whereby GBL1 companies may elect not to provide written evidence to the Commissioner of Income Tax showing the amount of foreign tax charged and enjoy a deemed taxation at 80% of the normal tax rate of 15%. Thus, the use of this long stop provision in isolation would reduce the effective rate of tax in Mauritius from 15% to 3%.

TAX RESIDENCY & DOUBLE TAXATION AGREEMENTS-

Tax Residency

A Global Business Category 1 Company wishing to benefit from the tax relief under the Double Taxation Agreements, requires a Tax Residence Certificate (TRC), which is issued by the Commissioner of Income Tax in Mauritius. To be tax resident, the company must demonstrate that the “effective management and control” is in Mauritius. To satisfy this test the applicant company is required to:
Have at least two resident directors in Mauritius .
Chair and initiate Board Meetings from within Mauritius.
Maintain an account with a local bank through which funds must flow.
Maintain its registered office and all statutory records in Mauritius .
Have a local qualified company secretary.
Have a local auditor.
Investors should ensure that the above relevant conditions are also satisfied in the country of investment to guarantee eligibility of DTA benefits.
Double Taxation Agreements
Mauritius has an extensive network of Double Taxation Agreements (DTA) which include: Belgium, Botswana, China, Croatia, Cyprus, France, Germany, India, Indonesia, Italy, Kuwait, Luxembourg, Madagascar, Malaysia, Mozambique, Namibia, Nepal, Oman, Pakistan, Rwanda, Senegal, Singapore, Sri Lanka, South Africa, Swaziland, Sweden, Thailand, United Kingdom, Zimbabwe and Uganda. The network provides for interesting tax planning opportunities thereby enhancing the image of the jurisdiction as a tax planning centre.

The attractive concessions provided by those treaties include:
Elimination of double taxation through tax credit equivalent to Mauritian tax.
Reduction in withholding taxes on dividends, interest and royalties.
Exemption from capital gains.
Possible exemption on interest payments on loans.

REQUIREMENTS, INCORPORATION, MIGRATION & FEES

Requirements

A GBL1 requires a minimum of one Director who must be a natural person. For treaty access, a minimum of two local Directors are required and board meetings must be held in Mauritius.
Must at all times have a registered office in Mauritius.  Accounting records and statutory documents including register of members, debenture holders, and officers must be kept there. It is recommended that a Register of Charges and Register of Interests be kept.
Must at all times have a qualified company secretary (corporate or individual) who is   resident in Mauritius .
Only a licensed and qualified Management Company  can provide registered office and act as secretary.
A GBL1 need not make annual returns, but must file audited profit & loss account and balance sheet annually with the Financial Services Commission, within 6 months of the financial year-end. The accounts must be prepared in accordance with internationally accepted accounting standards. Tax returns must also be filed with Income Tax Authorities
Mobility
A foreign company may transfer its seat to Mauritius and continue as a GBL1.
A GBL1 may transfer its statutory seat to another jurisdiction.
A GBL1 may be converted into a GBL2 and vice versa.

Incorporation Process

Following the name reservation with the Registrar of Companies, application documents including a business plan are submitted to the Financial Services Commission. Upon meeting all licensing conditions, the Commission issues a letter of intent stating the conditions under which the licence will be issued. Once the approval in-principle has been received from the FSC, the application for incorporation is submitted to the Registrar of Companies. The incorporation and licensing is generally completed within 15 days, provided all details are submitted at the time of application. 

 Original signed Consent to Act as Directors forms will have to be filed in due course with the Registrar of Companies.

Documentation

Desired company name. A fee is payable to the Registrar of Companies for name reservation.
Details of all principals (name and address, nationality, country of residence, business track record, photocopies of first four pages of passport, etc.). In case of Corporate owner, profile and audited accounts of the company is required.
Detailed business plan with 3 year financial forecasts and amounts of investments to be made.
Bank reference letter.
Duly filled in and signed Statutory Application Form.
Fees
Annual Fees to Financial Services Commission: US$ 1,500.
Annual Fees to Registrar of Companies: approx: US$ 200.
Application Processing Fee to Financial Services Commission: US$ 500.
Constitution
The Constitution has replaced the Memorandum and Articles of Association. There is no requirement for a company to have a Constitution. Where a company does not have a Constitution, the company shall be governed by the provisions as set out in the FSD Act or the shareholders or members may adopt one through special resolution.