PART I
A NEW MODEL FOR MAURITIUS COMPANY LAW
1. The 1984 Act was based on the model provided by the Australian Uniform Companies Act of 1961. This was an improved version of the UK Companies Act 1948 and served as a model for a number of other Commonwealth jurisdictions including Singapore and Hong Kong. It might, therefore, be seen as natural to continue to look to Australia and the UK for an appropriate model for up-dating the 1984 Act. However, those Commonwealth jurisdictions, which have recently examined their companies' legislation, have rejected developments in the UK and Australia as no longer providing an appropriate model for other jurisdictions. For example, the Review of the Hong Kong Companies Ordinance at para.8.1 states:
“As Professor Gower sadly notes, UK companies legislation is no longer in a state to serve as a model to other jurisdictions. Commonwealth and other jurisdictions which have traditionally relied heavily on the UK as the source of their companies law have deliberately broken away or been orphaned. Canada made the break over 20 years ago; the resulting federal legislation used the US model Business Corporations Act as its starting point. On to this American stalk was grafted the then most highly desirable aspects of UK companies law. Although showing its age somewhat and currently the subject of a comprehensive review (primarily as a result of the shifting boundaries between companies law and securities regulation), the Canada Business Corporations Act is still a highly regarded corporate law regime.”
2. Australia underwent a major law reform exercise in 1989 with the production of the Australian corporations' law of that year. It is already being rejected as an appropriate model in Australia itself, being regarded as too dense and detailed in its approach with the retention of many provisions from earlier legislation, which were best discarded. Australia has now embarked on a simplification project for its company law and for that purpose is looking primarily to Canada and the adaptations made to the Canadian model in New Zealand as providing the way forward.
3. When considering an appropriate model for Hong Kong, the report concludes at pp.241-243 that the recent New Zealand Companies Act 1993 provides the looked-for balance by taking the more progressive features of the North American, and particularly Canadian legislation and in adapting them to a form of company law which had its roots in the UK Companies Act 1948. The review cites from a South African company law commentator in (1993) 14 The Company Lawyer 224, 228:
“The New Zealanders are not ‘on a frolic of their own’ in this case. In fact, I am of the opinion that the report of the New Zealand Law Commission and its proposed Companies Act have now taken the lead of the countries which were apparently left in the dark when English company law was steered in the specific direction by the EC directives which gave its company law another form.”
The Hong Kong Review then states that:
“The New Zealand checklist provides a useful starting point, to be tailored and considered in the light of the business environment of Hong Kong.”
4. A similar approach has been taken in bringing forward proposals for reform of the Mauritius Companies Act. The New Zealand Companies Act 1993 has been used as a starting point in order to provide the basic model for the legislation and has then been tailored to suit the commercial and legal context of Mauritius.
5. One particular adaptation which is required in Mauritius is the provision of a form of company having features which enable it to be readily adapted for use by proprietors who wish to operate internationally. The reform proposals have been drawn on the British Virgin Islands (BVI) and Bermudan legislation, which has also provided a model for the Mauritius International Companies Act 1994. Features such as provision for continuation and for the incorporation of limited life companies have been introduced into the Mauritius domestic companies regime.
PART II
OUTLINE OF THE MAIN PROPOSED CHANGES
6. Core Company Law to be contained in the Companies Act
6.1 It is proposed that the new legislation be based on the policy that the Companies Act should provide the basic framework for all companies (a “core company law”) with particular adaptation to certain types of company, e.g. private companies and companies limited by guarantee. Those provisions which provide for additional regulation in relation to those companies (and other entities) which offer securities to the public and which provide for the proper regulation of financial markets, are to be contained in a separate statute, the Securities Act. The winding up and other insolvency provisions relating to companies are to be contained in a separate Insolvency Act dealing with individual and corporate insolvency.
6.2 During the interim period pending the enactment of separate securities and insolvency legislation, the provisions of the existing Companies Act dealing with these matters will continue to apply, in particular the following sections of the Companies Act governing the offering of securities to the public and the winding up and insolvency of companies:
- Section 2 – definitions applying to the 1984 Act.
- Section 35 – authorised mutual funds
- Sections 36-47 – prospectuses
- Section 146 – Register of substantial shareholders
- Sections 177-182 – takeovers
- Section 183 – acquisition of shares of dissenting members
- Sections 201-301 – winding up
- Section 320 – offences relating to liquidation
- Section 321 – inducement to be appointed liquidator
- Section 322 – interference with books of any company being wound up
- Section 325 – offering of shares or debentures from door to door
6.3 The core company law contained in the proposed legislation provides the basic framework for the incorporation, internal management and receivership of all companies, what can colloquially be called provisions for the birth, life and ill health of all companies with provisions for the death of the company being contained in the Insolvency Act.
6.4 The proposed Bill would regulate company activity to the extent it is necessary to protect against abuse of the company form. The more detailed regulation which is required from only that limited group of companies which offer securities to the public is to be contained in a separate statute which would cover not only that small group of companies but also other entities, regardless of their form, e.g. unit trusts and other collectives investment schemes which offer securities to or seek investment from the public. Additional safeguards are required in the public interest in the case of this latter group of companies and other entities which are not required of companies generally.
6.5 Separate legislation has been enacted to deal with the incorporation and management of exempt offshore companies. These companies are now governed by a separate Act called the International Business Companies Act 1994 which deals with the special needs of that group of companies. This leaves the Companies Act as a vehicle for providing the core company law provisions for domestic companies, including companies described in the Mauritius Offshore Business Activities Act 1992 as “offshore companies”.
7. Reservation of company names
7.1 In order to facilitate approval of names proposals will be made in the law to provide a new procedure which will require application to be made to the Registrar prior to incorporation or prior to any change of name for the proposed name of the company to be reserved. The Registrar on approving the proposed name will by notice to the applicant reserve the name for registration within 20 working days following the date of the notice.
8. One-step incorporation
8.1 It is proposed that a simple form of incorporation be introduced which would enable a company to be incorporated on the filing of a single application. All that will be required for incorporation will be the filing of this application together with the necessary consents from the proposed directors and secretary and a notice of reservation of the proposed company name. It will not be necessary to submit a constitution at the time of incorporation. If a company is to depart from the standard requirements set out in the proposed Bill, then, either on incorporation or subsequently, it will need to file a separate constitution setting out the departures from the proposed Bill.
9. Incorporation of one person companies
9.1 The present Companies Act requires a company to be incorporated with two shareholders and requires a company to have at least two directors. However, since the earliest Companies Act, companies have been able, through the use of nominees, to incorporate with only one effective shareholder.
9.2 Proposals will be made that the new legislation recognises reality and permits companies to operate with one shareholder. Difficulties that may be caused by the death or incapacity of a sole shareholder are resolved, by requiring that a sole director before resigning must call a meeting of shareholders to appoint a new director or directors.
10. Removal of need to state objects
10.1 Section 15(4) of the Companies Act 1984 requires the objects of the company which shall not exceed four, to be expressed in clear and concise terms in the memorandum stating the business or businesses which it is formed to carry out . This has not proved to be a meaningful provision. It was intended to ensure that companies stated their objects in a concise and clear way but companies have been able to readily circumvent this provision. In other jurisdictions, in particular Canada, Australia and New Zealand, a company is not required to set out any objects in its memorandum but has all the powers of a natural person. The provision in the UK Companies Act is to similar effect.
10.2 It is proposed to remove the existing s.15(4) and to provide that a company has the rights, powers and privileges of a natural person. This would not preclude a company from stating specific objects in its constitution if it wished to limit the capacity of a company in this way.
11. Replacing the Memorandum and Articles of Association by a single constitution
11.1 The English-based company law systems have required a company to have two constituting documents, a Memorandum of Association and Articles of Association, the former defining the objects of the company and whether it is a private company and stating the company’s share capital. The Articles of Association set out the internal regulations of the company on such matters as the rights and obligations of shareholders, appointment and powers of directors and secretary, the holding of company meetings and use of the common seal (if any).
11.2 The proposed Companies Bill will adopt the model provided by the New Zealand and Canadian Companies Acts of replacing the Memorandum and Articles of Association by a single Constitution. Provisions will be made to provide that in the case of an existing company the Memorandum and Articles of Association as originally registered or altered including any provisions of Table A or other tables of the Companies Act 1984 are to be the constitution of the company. There will also be provisions to the effect that the Memorandum and Articles are not to be altered unless the company replaces them with a single document into which it consolidates its Constitution. The effect of these provisions is that existing companies may continue to operate with their existing Memorandum and Articles of Association, but when they wish to alter those documents in any way, they will be required to replace them with a single Constitution.
12. Removal of requirement that Memorandum And Articles be embodied in a notarial deed
12.1 Section 19(1) of the present Act repeats the requirements of the 1913 Ordinance which provided for the Memorandum and Articles to be embodied in a notarial deed. The practice of drawing company memoranda and articles is now well established in Mauritius, and standard forms of these documents are readily available to attorneys and others involved in the formation of companies. The present requirement that these documents be notarised puts those involved in the formation of companies to an expense, which is now difficult to justify. In addition, it is proposed that a company need not be formed with a separate constitution, in which case the standard provisions contained in the proposed legislation, covering such things as the appointment of directors, holding of meetings etc, will in effect be the company’s constitution.
12.2 Proposals will also be made to provide that persons who may make out an affidavit that the requirements of the Act have been complied with should include not only a notary, but also an attorney, a person qualified to be an auditor, or a person who is qualified to be secretary of a public company.
13. Ultra Vires transactions
13.1 The Companies Act 1984 removed most of the substance from the early ultra vires doctrine which had proved to be so troublesome for companies operating under the English-based system of company law. The proposed law will remove the last vestige of this doctrine by the provision referred to earlier declaring that companies are to have all the powers of a natural person with full capacity to carry on or undertake any business or activity or do any act or enter into any transaction.
13.2 By conferring this full legal capacity on companies, the way is open to remove altogether the constraints imposed on companies by the ultra vires doctrine. It is no longer appropriate that a company should remain affected by that doctrine in its dealings with third parties. As a matter of internal management, however, companies would be free to impose restrictions on directors in the company constitution.
13.3 Directors who act in excess of the limitation on their authority imposed by the constitution would be exposed to liability to shareholders and proposed unauthorised action could be restrained by means of an injunction. Third parties who act in good faith would not, however, be prejudiced or affected by internal breaches of authority.
14. Private Companies
14.1 The proposed legislation will not go as far as the New Zealand Companies Act in its statement of core company law. The New Zealand Act, in providing a statement of core company law, removes all distinction between public and private companies. It is considered that this distinction remains relevant in Mauritius and that the division between public and private companies is a convenient one. This is the approach, which has been recommended in the review of the Hong Kong Companies Ordinance.
14.2 In the present Act the particular exceptions which relate to private companies are scattered throughout the substantive provisions. Provisions will be made to group those sections together and provide a core statement of the particular features of a private company. In substance, however, these provisions will not change the character of a private company from that which is set out in the existing Companies Act.
14.3 Private companies will continue to be prohibited from offering shares or debentures to the public, will be able to dispense with the holding of company meetings by passing resolutions by means of entry in the company minute book, and exempt private companies will not be required to appoint a qualified auditor or a qualified secretary and will be entitled to file only a summary statement of accounts with the Registrar.
14.4 The proposed legislation will retain the distinction between exempt and non-exempt private companies in the same form as in the existing legislation.
15. Share Capital – No Par Value Shares
15.1 The Companies Act 1984, like the UK Companies Act 1948 and all earlier English-based systems of company law, required all companies to issue shares of a fixed amount. Each share was required to be designated with a nominal value. Following the lead given by Canada, many English-based company law jurisdictions now permit the issue of shares without par value. These are shares which are not designated by any defined monetary sum.
15.2 The attractiveness of this form of share capital is that it avoids misleading the investor and others dealing with the company by referring to a nominal monetary figure which, although it indicates the sum initially contributed to share capital, may later bear no resemblance to the market value or asset backing of the share. It also avoids the misleading designation of a dividend as a percentage of the nominal value when that percentage may bear no resemblance to the amount of dividend payable per share having regard to the market value or asset backing of the share.
15.3 In several jurisdictions companies are permitted to issue both par value and no par value shares with the ability to convert par value shares into no par value shares. The operation of a dual system gives rise to the possibility of confusion and increased complexity in the presentation of accounts. For those reasons, some Canadian Provinces and the New Zealand Companies Act 1993 provide only for the issue of no par value shares and have required all existing companies to convert their capital into shares of no par value and re-register under the proposed legislation. Although this would be the tidiest approach to the introduction of a no par value system of shareholding, it is considered that the costs of conversion which would be imposed on many small companies in Mauritius could not be justified.
15.4 Proposals will be made for the introductions of no par value shares and permit a company to issue shares which are not designated with any monetary value. The proposed legislation, in this respect, aligns domestic companies with offshore companies approved under the Mauritius Offshore Business Activities Act 1992, and with companies incorporated under the Mauritius International Companies Act. Provisions will be made to permit companies to continue to have share capital in the form of shares with par value, as under the existing Companies Act, but any particular class of shares must have either a par value or be issued without par value. It would not be permissible, and would be confusing, for the same class of shares to have some shares designated with a par value and some which carry no par value.
16. Purchase by companies of their own shares and holding of treasury shares
16.1 The Finance Act 1999 introduced earlier this year, provided for a significant series of amendments to be made to the Companies Act in order to provide for companies to have the ability, subject to certain safeguards, to purchase their own shares and to hold the shares as Treasury Shares. The amendments bring Mauritius company law into line with that of other comparable jurisdictions and will enable companies in Mauritius to adopt significantly more flexible forms of capital structure. The limited provision for self-purchase of shares in S. 57(4) of the Act has not worked well and a more comprehensive and clearly expressed set of rules was needed. The new procedure of self-purchase and holding of treasure shares introduced by the Finance Act 1999 will be incorporated into the proposed new legislation.
17. Redeemable Shares in financing by a company of the purchase of its shares
17.1 Consequential changes are required to the provisions of the Companies Act relating to redemption of shares in the financing by a company of the purchase of its shares. Provisions will be made to permit the company to redeem its shares or to assist in the financing of the acquisition of its shares where the solvency test is satisfied, the appropriate directors’ resolution is passed, and appropriate disclosure statement is made available to the shareholders. Similarly, in the case of financing or assisting in the purchase of its own shares the company will be required to satisfy the solvency test, with again an appropriate authorising resolution from the directors and a disclosure statement to shareholders. The proposed law will provide an opportunity for shareholders to apply to the Court for an injunction to restrain the funding or assistance where that is considered to be prejudicial. The Court will be given power, in appropriate cases, to direct the disenfranchising or forfeiture of the shares in question where the transaction has proceeded in willful disregard of the safeguards to be provided in the law.
18. Reduction of capital
18.1 Following the new provisions in the existing Companies Act for the self-purchase of shares, a more flexible regime to provide for reduction of capital will be required.
18.2 Any distribution made to a shareholder at a time when the company did not immediately after the distribution satisfy the solvency test should be recoverable by the company from the shareholder unless received in good faith and without knowledge of the company’s failure to satisfy the solvency test and the shareholder has altered his or her position in reliance on the validity of the distribution and it would be unfair to require repayment.
19. Shares carrying disproportionate rights
19.1 The Companies Act in ss.67 to 70 includes provisions which were designed to require a public company or subsidiary or holding company of a public company to confer equal voting rights on all shares other than preference shares of a strictly defined type. In particular, participating preference shares were to carry an equal vote with the ordinary shares and a phase-in period of two years after the commencement of the Act was given for the restructuring of existing participating preference shares in order to bring them into conformity with the Act. The constitutionality of those provisions was challenged before the Courts but upheld by the Privy Council in Government of Mauritius v. The Union FLACQ Sugar Estates Co Ltd and Government of Mauritius v. Medine Shares Holding Co.
19.2 The time has come to review those provisions. Since 1984 a Stock Exchange has been established in Mauritius and there has been time to consider the impact of these sections on the wider market for shares created by the Exchange. The policy of these provisions was to increase greater shareholder democracy within Mauritius, but the practice of companies issuing shares with limited voting rights and in seeking structures which will maintain the closely held nature of many companies continues. The Exchange has to some extent been inhibited in its ability to list new public offerings of shares because of disinclination on the part of companies to allow the public to participate if this will require the enfranchisement of those shares with the possibility of a loss of control. The tendency is, therefore, for companies to continue to be highly geared and rely on loan rather than equity capital and to issue forms of preference rather than equity shares which need not carry voting rights. It would seem that the objective of encouraging greater shareholder democracy within Mauritius is itself being inhibited by the provisions which were designed to foster it and that objective will need to be pursued in other ways.
19.3 Sections 67 to 70 of the existing Companies Act will, therefore, not be included in the new proposed law and it is proposed that those sections be repealed. One consequence is that it is no longer necessary for the Companies Act to contain a restrictive definition of “preference share” and the present definition will not be included in the amendment to the law.
20. Directors’ duties
20.1 The Companies Act 1984 contains a comprehensive statement of directors’ duties and appears to have provided an appropriate balance between the need on the one hand not to discourage enterprise and initiative on the part of the company director, and at the same time provide protection against misuse by directors of their powers for personal advantage and against indolence or recklessness in their oversight of the company’s affairs. Proposals will be made to retain those provisions.
20.2 One respect in which the provisions relating to directors’ duties have been tightened is by providing shareholders with increased disclosure in relation to self-interested transactions by directors. The proposed legislation will provide that the board of directors is required to keep a register of directors’ interests in which all interests disclosed by directors to the board of directors are to be recorded and can be available for inspection by any director. Under the present Act directors are required to disclose interests at meetings of the board of directors but whether those interests are properly recorded would depend on the quality of the minutes that were kept and it would be difficult to later examine the record of those entries on a co-ordinated basis.
20.3 Provision is also to be made for a self-interested transaction to be avoided by the company at any time before the expiration of three months after the transaction is disclosed to all the shareholders (whether by means of disclosure in the company’s annual report or otherwise). A transaction cannot be avoided if the company receives fair value under it. It is a presumption that a transaction entered into by the company in the ordinary course of business and on usual terms and conditions has been entered into for fair value.
21. Remuneration of Directors
21.1 Significant changes are proposed in relation to the remuneration of directors. These provisions which are based on the corresponding regime in the New Zealand Companies Act 1993 provide that unless the constitution provides otherwise, directors may set their own remuneration but the directors voting in favour of the provision of remuneration or other benefit must resolve that in their opinion the payment or benefit is fair to the company and state the grounds on which it is fair and the remuneration or benefit must be disclosed in the interests register. If the directors fail to make this disclosure or enter into the required resolution, or if reasonable grounds do not exist for the directors’ opinion, then the directors to whom the payment is made or the benefit provided will be liable to reimburse the company except to the extent that the director concerned proves that the remuneration or benefit was fair to the company. In summary, directors will be given considerable freedom to set the terms of their own remuneration, but if the level of remuneration or other benefits received by any director is challenged by shareholders then the director will have to justify the fairness of the provision that has been made.
22. Restriction on appointment of or advertisement of directors
22.1 The Companies Act at present provides only for a written consent to be given on the first appointment of directors being made and a return filed in relation to the first directors under s.115 (6)(viii). Consent is also required where directors are named in the memorandum or articles or in a prospectus or statement in lieu of prospectus. The Act does not, however, provide for written consent to be obtained when a new director is appointed after the first appointment.
22.2 Amendments will be made to address this deficiency by requiring that consent in writing be obtained from a new director on his or her appointment.
23. Indemnity and insurance of company directors, secretaries or employees
23.1 The new legislation will make provision for a company to provide in its constitution for the company to have power to indemnify or insure its directors, secretary or employees in accordance with the limitations provided by the Act. Any indemnity or insurance outside of those provisions will be void. The insurance may cover liability not being criminal liability for any act or omission in that person’s capacity of director, secretary or employee or costs incurred in defending or settling any such claim or costs incurred in defending criminal proceedings brought against that person in that capacity and in which that person is acquitted.
24. Company Secretaries
24.1 The provisions of the present Companies Act in relation to Company Secretaries will be repeated with two changes.
i) Section 111 will be adapted to make provision for the Registrar to approve a particular corporation or firm to be appointed as secretary with the approval continuing to apply to all appointments accepted by that person and firm until the approval is revoked. The corporation or firm appointed will be required, in the case of a public company, to be a corporation or firm, which provides secretarial services through a person or persons qualified in accordance with section 111.
ii) The Secretary is given the right to attend and make representations at any general meeting of the shareholders of the company and for that purpose may at the company’s expense circulate a written statement to shareholders.
25. Secretary’s duty to supervise share register
25.1 A new statutory obligation is proposed to be placed on the company secretary to take reasonable steps to ensure that the share register is kept and that share transfers are properly entered in the register. A secretary who fails to comply with this obligation commits an offence. This provision does not apply to companies whose shares are transferred pursuant to an approved depository system or whose share register is maintained by an agent as referred to in the next paragraph.
26. Keeping of share registry of a public company
26.1 Provision is to be made for the share register, if not kept and maintained by the company itself (in which case the company would be required to appoint a qualified Secretary who would be responsible for the carrying out of that function), to be maintained by an agent. The agent must be a person, firm or corporation which is qualified to be a Secretary of a public company.
27. Private companies need not issue share certificates
27.1 Provisions will be made to relieve a private company from the obligation to issue share certificates in relation to its shares, but a shareholder in such a company may apply to the company for an issue of a certificate in relation to that shareholder's shares. A public company must issue share certificates unless its shares can be transferred under an approved depository system, which does not require the issue of certificates.
28. Management review by shareholders
28.1 A new provision will be included which provides that shareholders are to be provided by the chairman of a company meeting with a reasonable opportunity to question, discuss or comment on the management of the company. Shareholders may pass a resolution relating to the management of the company but unless so required by the constitution that resolution shall be by way of recommendation only and is not binding on the board.
29. Company Accounts
29.1 In the 15 years since the passage of the Companies Act 1984 there have been significant developments in local and international accounting practice. The provisions of the existing Sixth Schedule will be replaced by a requirement that public companies and non-exempt private companies are required to prepare and present their accounts in accordance with international accounting standards and that exempt private companies are required to present their accounts in accordance with accounting practices and principles that are reasonable in the circumstances and having regard to any requirements set out in regulations made under the Act, and under the Mauritius Accounting and Auditing Committee Standards Act 1989.
30. Keeping of accounting records
30.1 The provisions of s151 of the existing Act will be updated and simplified and cover accounting in relation to the supply of services `as well as goods.
31. Financial statements to be prepared within five months of the balance date of the company
31.1 In s 154 of the present Act the date by which the annual financial statements are to be prepared is related to the date by which the company calls its annual meeting. There will be provision for greater certainty as to the date by which the financial statements must be prepared and requires that they be prepared within 5 months after the balance date of the company.
32. No need to appoint an auditor of an exempt private company
32.1 The present Companies Act requires all companies to appoint an auditor but relieves exempt private companies from the requirement to appoint a qualified auditor. It is proposed that an exempt private company need not appoint an auditor (whether qualified or unqualified) if at or before the time for the holding of the annual meeting a unanimous resolution is passed or is signed by all shareholders who would be entitled to vote on that resolution. This would bring the law into line with the practice in the UK and of most English derived jurisdictions on this matter.
33. Access of information by auditor and right to attend shareholders meeting
33.1 An expanded version of the present s172 (6) and (8) providing for the auditor to have access at all times to the books and accounting records of the company and to have the right to attend and be heard at shareholders’ meetings will be included in the proposed law. It will be an offence for the board, and in the case of the provision of information, also for an employee, to fail to comply with these requirements.
34. Disclosure by companies and inspection requirements in separate Part
34.1 Provisions will be made to bring together into a separate Part of the Companies legislation, the requirements for disclosure by companies in the annual report and the annual return and for inspection of company records.
35. Directors’ Report
35.1 The new law will make provision for a more detailed directors’ report containing information for the benefit of shareholders which is in line with comparable requirements in other jurisdictions.
36. Meetings
36.1 Calling of meetings is to be simplified in the proposed legislation. Provision is to be made for a meeting to be called at the written request of shareholders holding not less than 10% of the voting rights entitled to be exercised on the matter in issue at the meeting. Such persons may require the company to circulate a statement of not more than 1,000 words for the purposes of the meeting. Once a meeting has been called under this provision, no further meeting may be convened by any other shareholder until the meeting first called has been held or unless that meeting is not held within a period of 28 days from the date on which it is called. Shareholders who wish to table other items of business at the meeting first called are permitted to do so on appropriate written notice. Application may be made to the Court by the directors or by any persons entitled to call the meeting for the Court to give such directions as it considers appropriate for the orderly calling of the meeting and disposition of business at the meeting.
37. Minority buy-out rights
37.1 The proposed law will introduce a procedure found in the Canadian and New Zealand legislation which empowers a minority which dissents on certain basic changes in company direction to have their shares bought out by the majority at a fair value. The Court may grant an exemption from this requirement in certain circumstances including where there is an impact on the solvency of the company.
38. Interest groups
38.1 It is proposed that for purposes of variation of the rights of a class of shareholders such as under s 71(4) of the present Act, a more tightly drawn definition of “interest group” be included in the proposed legislation in place of the present undefined reference to a “class” of shares. A special resolution passed at a separate meeting of an interest group will be required to approve an alteration of the rights of the group. There will be contained a statement as to the “rights “ which are so affected, which will include voting rights and the right to a distribution and pre-emptive rights on the issue of new shares.
38.2 A shareholder who has cast all his votes against an alteration of the rights of the group (or who refused to sign a written resolution where that is used) may require the company to purchase his shares in accordance with the buy out procedure referred to above in paragraph 38.
39. Enforcement
39.1 A comprehensive set of provisions modelled on those in the Canadian and New Zealand legislation providing for enforcement by shareholders of their rights and obligations in relation to the company and its directors will be introduced. These provisions are designed to overcome the procedural difficulties in earlier case law e.g. the rule in Foss v Harbottle. These enforcement provisions include-
- provision on similar lines to the existing s 186 giving the court power to grant an injunction restraining a company or a director who proposes to engage in conduct that would contravene the constitution of the company or the provisions of the Companies Act.
- a provision modelled on Canadian legislation providing for the Court on the application of a shareholder or director to grant leave to the shareholder or director to bring a derivative action against the company. This is an action brought by the shareholder or director in the name and on behalf of the company. The Court may direct that the costs of the proceeding are to be paid by the company itself.
- The right for shareholders to bring a personal action against the company or against the directors for any breach of duty owed to the person bringing the proceedings as a shareholder..
- Providing for the court, on the application of a shareholder, to require the company or a director to comply with, or take any action that is required by the company or the director under, the constitution of the company or the Companies Act.
40. Power of company to act by an attorney
40.1 Provisions will be introduced to make it clear that a company has power to appoint an attorney to act for the company inside or outside Mauritius to the same extent as if the company were a natural person and the commencement of the liquidation or removal of the company from the register were the death of a person for that purpose.
41. Amalgamations, Reconstructions and Compromises with Creditors
41.1 A comprehensive set of provisions will be introduced to provide for a more straightforward procedure for effecting the amalgamation or reconstruction of companies than is available under the present Companies Act. The provisions which are modelled on the New Zealand and Canadian legislation avoid the need for application to the Court, except where objection is raised by minority interests or unless it is impracticable to achieve an amalgamation or reconstruction without the Court’s assistance.
42. Offshore Companies brought under the Companies Act
42.1 Proposals will be made to include in the companies legislation the provisions in ss.20, 21, 22, 24, 26 and 28 of the Mauritius Offshore Business Activities Act 1992 and redesignate those companies as “external companies”.
43. Features of the Offshore Company made available to Domestic Companies
43.1 It is proposed that new provisions will be made for the continuation in Mauritius of companies which are incorporated elsewhere and also provides for the incorporation of limited life companies.
43.2 It is not proposed that provisions be made relating to the establishment of Cell Companies. The Cell Company is the subject of separate legislation. It is proposed to monitor that legislation and assess the suitability of that form of company structure in the offshore sector before considering making the Cell Company available in the domestic area.
44. Receiverships
44.1 The Companies Act 1984 first made provision in Mauritius for the appointment of a receiver or manager of the property of a company. The ability of a secured creditor, and in particular the holder of a floating charge over the whole of the company’s undertaking and assets, to appoint a receiver to take control of the company’s property and manage and realise it to the best advantage of the secured creditor, has provided a convenient and expeditious way of enforcing the secured creditor’s remedies against the property of the company. Lending institutions who are familiar with the role of the receiver in other jurisdictions have welcomed its introduction in Mauritius. However, the introduction of provisions relating to receiverships has significantly affected the balance of power as between unsecured and secured creditors, particularly those secured creditors who are the holders of a floating charge. The receiver under a floating charge is able to take control of the whole of the company’s undertaking and assets and is in a position where the receiver may cease all trading activity and may dispose of those assets promptly to the best advantage of a secured creditor without any reference to the company or to the unsecured creditors. Concerns of this kind were addressed by the Cork Committee which reviewed insolvency law in the United Kingdom and recommendations made by that Committee were implemented in part in the United Kingdom Insolvency Act 1986. Concerns have also been expressed in Mauritius at the lack of detail and guidance in the present Companies Act as to the appointment and conduct of receivers and the need for a more complete statement of the law relating to receivership in the legislation. It is proposed that these concerns be addressed in a separate Part of the law which will introduce a more complete statement on the nature and operation of the receivership and of the responsibilities of the receiver.
45. Appointment by a chargeholder of its own auditor as receiver
45.1 The question has been raised whether a chargeholder may appoint its own auditor as the company’s receiver. Amendments will be made in the law to address this issue by providing that the chargeholder who has appointed the receiver may not act as receiver. Although in a number of other jurisdictions banks and other lending institutions commonly appoint their own auditor as a receiver, there is a perception of conflict which in Mauritius has frequently been raised as a point of concern. It would avoid any perception of conflict if there was a clear statutory rule on this matter
46. Simple procedure for removal from the register
46.1 It is proposed that the new law adopt the procedure set out in the New Zealand Companies Act 1993 which provides a more straightforward procedure, than the present Act, for removing a company from the register. A separate Part of the proposed legislation will provide a simple and comprehensive process for enabling the Registrar to remove a company from the register and for the Registrar on appropriate application and evidence to restore a company to the register with rights of appeal or review to the Court. An application to restore the company to the register would require the support of a certificate from the Commissioner of Income Tax.
PART III
PROPOSED REVIEW OF THE BANKRUPTCY ORDINANCE 1888
48. Bringing individual non-traders into the bankruptcy regime has advantages both for them and for creditors. The individual has the advantage of being released, upon adjudication, from liability to further Court processes for the recovery of debt, with the opportunity in time, for the individual to be restored to the commercial community. At the same time unsecured creditors are advantaged by a process under which an officer of the Court (the Official Receiver) takes control of all of the property of the individual and distributes that property equally among unsecured creditors, subject only to certain statutory priorities. The fair and proper administration of the debtor’s affairs is facilitated by procedures for the examination of insolvent debtors, lessening the opportunity for concealing and disposing of assets.
49. A complete review of the Bankruptcy Act is also required in order to adapt the legislation to the modern environment and also to take advantage of developments in bankruptcy legislation in other comparable jurisdictions. Some features of other more modern bankruptcy legislation which is not found in the Mauritius Bankruptcy Ordinance are –
- A provision for the examination of the debtor by the Official Receiver. The Bankruptcy Act provides only for the public examination of a debtor by the Court.
- More effective processes for avoiding preferences, i.e. transactions entered into to prefer a particular creditor or creditors. More effective procedures are required for empowering the Official Receiver to challenge and to have set aside mortgages and other securities, gifts and transactions at undervalue entered into prior to bankruptcy at a time when the bankrupt is insolvent.
- Provision for the automatic discharge of a bankrupt on the expiration of three years from the date of adjudication, but with opportunity for the Official Receiver to object and thereby restrain the automatic discharge of any individual bankrupt. This avoids the necessity for applications to be made to the Court for discharge, and in the absence of discharge, the presence in the commercial community of unnecessary numbers of undischarged bankrupts.
- Provisions empowering the Court to act and make appropriate orders in relation to Mauritius assets in the case of bankruptcies originated from outside Mauritius.
- The enactment of a clearer statement of the doctrine of relation back and an updating of the provisions relating to the nature of the property vesting in the Official Receiver, and the definition of property which is excluded from passing to the Official Receiver.
- A simpler procedure for establishing proofs of debt on the part of creditors and for dealing with any appeals to the Court in relation to proofs.
