Over the last 20 years, Mauritius has established an enviable reputation in the global financial services industry and it is increasingly seen as a jurisdiction of choice for structuring investments in Africa, India and China through collective investment schemes and joint-venture companies. Also on the rise is the setting up of Mauritian trusts and the administration thereof, which is partly due to the fact that the Trusts Act 2001 of Mauritius (the "Trusts Act") is recognised as a modern piece of legislation by leading lawyers and other professionals specialising in this practice area. In addition, Mauritian corporate trustees are increasingly providing back office operational support to the administration of foreign trusts. This is motivated inter alia by two factors: the availability of qualified people and world class infrastructure at a lower cost resulting in a considerable reduction in operational costs to the benefit of the client.
Choosing a jurisdiction
A trust client will normally look for inter alia the following when he is looking to appoint a trustee in an overseas jurisdiction:
- a reliable corporate trustee with an established track record;
- personalised, quality and good value service through highly competent and dedicated professionals;
- a respected judiciary ;
- the presence of local professionals specialising in this practice area with reputable track records; and
- a well regulated jurisdiction.
The financial services industry in Mauritius meets all of the above criteria and has established itself as a modern and reliable financial services jurisdiction for the management not only of global business companies, investment funds and protected cell companies, but also for the setting up and administration of various types of Mauritian law trusts. The number of professionals involved in this practice area is ever growing and this can be seen in the expansion of the local branch of STEP which currently has more than two hundred members and a growing number of student members. The presence in Mauritius of several service providers with an international network and established local corporate trustees is also an indicator and assurance of competent, efficient and quality service to clients.
Mauritius has a hybrid legal system inherited from the French and English legal systems and accordingly the Mauritian courts often follow the judicial precedents and decisions of the United Kingdom and other Commonwealth courts; in this regard it is worth mentioning that Mauritius has retained the Judicial Committee of the Privy Council as its final court of appeal.
The advantages of using Mauritius
Mauritius stands apart from other finance centres in that it is a jurisdiction which has a broad network of tax treaties and therefore provides the opportunity for using trusts both for tax and non-tax benefits.
A Mauritian trust can elect to be tax resident in Mauritius and hold a global business licence. Thus, a Mauritian trust can avail itself of treaty benefits and therefore be tax efficient, for example, by the elimination of capital gains tax on disposal of assets in a country with which Mauritius has a double taxation avoidance agreement. It is also useful to note that the income of a Mauritian charitable trust, which may be of perpetual duration, is exempt from income tax as long as its purposes are within the different heads of charities defined under the Trusts Act.
Trusts whether Mauritian or foreign are not registered in a public registry in Mauritius and this can be a further comfort as regards confidentiality. Pursuant to Mauritian law a trustee is under a duty and obligation not to disclose any information to any person not legally entitled to such information except where ordered by a Mauritian court or a judge in chambers.
Under the Trusts Act, the terms of a Mauritian trust may provide for the appointment of a managing trustee and a custodian trustee. The managing trustee has the role and function of managing the trust property, without being vested with the trust property, which is vested in a custodian trustee. Such a trustee can be located in a jurisdiction other than Mauritius. Where the custodian trustee is of the opinion that the direction of the managing trustee cannot be complied with, it may apply to the court in Mauritius for direction.
Another very important provision of the Trusts Act is that forced heirship judgments of other jurisdictions cannot be enforced in Mauritius. It is also important to note that an asset protection trust set up under Mauritian law can afford protection against claims from creditors, protection against litigants in a succession dispute and protection against consequences of a failing marriage. Under the Trusts Act, no action shall lie against the trustee of a Mauritian trust after more than two years from the date of transfer or disposal of the assets to the trust.
Compared to other countries where there may be a restriction on accumulation periods as regards accumulation of income, the terms of a Mauritian trust may authorise the accumulation of all or part of the income of a Mauritian trust for a period lasting up to the duration of the trust. The duration of a trust, other than a purpose trust, can be a maximum of ninety nine years, on the other hand, a Mauritian purpose trust (charitable or non-charitable) can have perpetual duration.
It is a well known fact that the concept of a trust developed during the medieval period when the motivation was more for the protection of property for the benefit of family members. Over time, the use of trusts has evolved and now extends to other purposes such as asset protection, legitimate tax planning and family and estate planning amongst others. The concept, though very much accepted by common law countries, does not find much interest in civil law countries as settlors are very often reluctant to lose control of the assets they own in favour of a trustee.
In keeping with the trend of modern trust law, the Trusts Act contains provisions for the appointment of a protector. It is trite law that a trustee should not surrender control and conduct of the affairs of a trust simply by following instructions from a settlor. Therefore an effective way of giving a settlor comfort is by appointing a protector and granting him powers, such as the powers of appointment and removal of trustees and other powers as can be set out in a trust deed. Thus the protector can fulfil a number of key roles and, amongst others, ensure that a trustee exercises its powers and discretion as provided under a trust deed so as to help protect the interests of the beneficiaries.
The Trusts Act also provides flexibility for the operation of Mauritian trusts. For example, a Mauritian trust can have a maximum of four trustees one of which has to be a duly licensed corporate trustee in Mauritius. However it is possible for a Mauritian trust to have co-trustees and for the local trustee to delegate the exercise of some of its functions to one or more of those co- trustees.
The use of Private Trust Companies
Mauritius has regulations in place which allow for the setting up of private trust companies ("PTC's") which are useful vehicles to consider in the planning and establishment of trust structures for wealthy families. Rather than transferring assets to a professional trustee company, certain families may prefer to establish their own corporate trustee (a PTC) to act as the trustee of the trusts which they plan to create.
Depending upon the circumstances of the individual client, a variety of factors may influence such a decision: these may include a desire to retain a measure of control in relation to the structure being created; a wish to preserve confidentiality; or a focus on ensuring that the trustee will have a working knowledge in relation to the assets held within the structure (such as a family business) and will be able to respond speedily whenever commercial decisions need to be taken. Quite often, a Mauritian purpose trust is used to hold the shares of the PTC so as to orphan the structure.
The Limited Partnership Bill was passed in the Mauritian parliament last month. The reform of the finance industry is continuing so as to meet the new requirements of clients and also to strengthen the regulatory framework to preserve the integrity of the jurisdiction. Limited partnerships are a favoured structure for use in private equity and venture capital schemes, collective investment schemes, structuring joint ventures, holding property interests, estate planning and asset protection and tax and financial planning. A draft Foundation Bill has also been circulated and is expected to be passed by the Mauritian parliament in the near future. It is expected that Mauritian foundations should be attractive especially to clients from countries with a civil law system.
It is obvious that Mauritius is a well regulated, cost effective and efficient jurisdiction not only to set up and administer trusts but also to structure and manage collective investment schemes and global business companies for various commercial purposes. Mauritius scores well in the survey of ease of doing business by the World Bank and is ahead of several European countries in this regard. The availability of qualified people, an excellent infrastructure, a strong STEP membership and an increasing number of students for the trust professional examinations, together with a modern trust law, makes Mauritius a place which should be considered by advisors when looking for a well regulated jurisdiction to set up trusts for their clients where a quality and value for money service is required.
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.