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Highlights of the Mauritius Variable Capital Companies Act 2022

Insight 19 April 2022

Highlights of the Mauritius Variable Capital Companies Act 2022

The introduction of the ‘Variable Capital Company’ or ‘VCC’ was announced in the National Budget Speech 2020–2021 to further enhance the competitiveness of Mauritius as a hub for fund management activities and diversify the product base of the Mauritius International Financial Centre.

The Variable Capital Company Act (the “Act”) was introduced to the National Assembly, passed on 12 April 2022 and was gazetted on 15 April 2022.  The Act provides a legal framework for the incorporation, structuring and operations, amongst others of VCCs in Mauritius and shall come into operation on a date to be fixed by proclamation.

A VCC shall be governed by the provisions of the VCC legislation and incorporated under the Mauritian Companies Act 2001 (Companies Act).  A VCC may not operate as a VCC Fund[1], without the authorization of the Financial Services Commission of Mauritius.

[1] VCC fund refers to all the sub-funds of a variable capital company, together with its special purpose vehicles, where applicable.

  • A company already incorporated in Mauritius may be converted into a VCC and a company incorporated in jurisdictions other than Mauritius may be redomiciled in Mauritius as a VCC.
  • A VCC provides for a Fund Promoter to carry out business through one or more sub- funds and special purpose vehicles within one structure providing for economies of scale; each sub fund or special purpose vehicle may opt to have a legal personality distinct from the VCC.
  • The sub funds can be set-up as a stand-alone (single) fund, or an umbrella structure with multiple sub-funds that can be incorporated as Collective Investment Scheme (CIS) and closed-ended funds all within one structure.
  • Each sub fund or special purpose vehicle shall incur liability on its own and shall be segregated ensuring ring fencing of the assets and liabilities of each sub fund in case of insolvency.
  • A VCC may issue shares of varying amounts.
  • The variable capital basis allows for issuance, redemption or repurchase of shares at NAV except for shares issued during initial offers and shares of closed-end funds listed on a securities exchange.
  • Investors shall be entitled to refund in accordance with the number of shares they own in the sub funds or special purpose vehicles, where shares are redeemed or brought back.
  • Cross sub-fund investments and cross special purpose vehicle investments are permitted within the same VCC. The board of the VCC shall determine solvency prior to distribution of dividend.
  • Investors may apply to the Registrar of Companies to reduce the share capital of the sub-fund or special purpose vehicle in which they hold shares subject to the requisite corporate resolution.
  • Economies of scale exist for umbrella structures with multiple sub-funds, including:
  1. Common service providers,
  2. Sharing a board of directors,
  3. A single Money Laundering Reporting Officer or Compliance Officer for all sub funds.
  • Where required, a sub-fund may appoint its own CIS Manager, CIS administrator, custodian or other service provider or a VCC can appoint one CIS Manager, CIS administrator, custodian or other service provider for all its sub-funds.
  • Segregation of assets and liabilities of sub-funds or special purpose vehicle can be achieved through utilization of a cellular structure for the sub-funds or special purpose vehicle, including during the winding up, administration or receivership of the sub-fund, special purpose vehicle or variable capital company.
  • Unless otherwise stipulated, the directors of the variable capital company shall be the directors of each of its sub-funds or special purpose vehicles.
  • A wider choice of accounting standards is allowed, including IFRS or any other internationally accepted accounting standards and the VCC may elect to present separate financial statements in respect of each of its sub-funds and special purpose vehicles.
  • A VCC shall keep separate records for the variable capital company and each of its sub-funds and special purpose vehicles however inspection of company records by shareholders shall not be applicable for VCC.

Further to the VCC Act coming into play, the Income Tax Act 1995 (ITA) has brought significant changes to align with the new Act, as follows:

  • The definition of ‘company’ shall be amended to include ‘a variable capital company, its sub-fund or special purpose vehicle’. VCCs incorporated under the VCC Act shall therefore be treated as companies and shall accordingly be required to comply with income tax requirements under the ITA.
  • Where a VCC shall make an election to present separate financial statements for each of its sub-funds or SPVs, each sub-fund or SPV shall be required to file separate income tax return and be liable to income tax in respect of income derived by each sub-fund or SPV.
  • The ITA shall make provision for the Director-General to recover income tax due by a sub-fund or related SPVs of a VCC from such sub-fund and related SPVs.

The VCC will be a game changer for the Mauritius IFC and cements its value proposition for cross-border investors. It is a legal structure that can be used in both the traditional and alternative investment fund market space. We expect that the VCC will garner interest of private wealth managers and institutional investors due to its capital variability and cost efficiency.

How can we assist?

If you looking to set up a VCC, we can assist in:

  • Arranging for the VCC to be registered
  • Review of the offering documentation
  • Assisting in obtaining a licence or registration
  • Drafting of governance framework between fund manager and VCC

Reach out to Varounen or Rubina directly to find out more on how we can assist you.

Let's talk

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Rubina Toorawa Head of Sanne Mauritius - Mauritius
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Varounen Goinden Director, Head of Business Development, Mauritius & India - Mauritius
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This highlight is for information purposes only. While every care has been taken to make it as comprehensible as possible, it may have omitted information that is useful to a particular reader. You are urged to seek professional advice as may be required and not rely on this highlight as advice or opinion.

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