What are the key rules/laws relevant to M&A and who are the key regulatory authorities?
Mergers and acquisitions are governed principally by the Companies Act 2001, Securities Act 2005 and the Competition Act 2007.
The institution and regulatory bodies regulating mergers and acquisitions are Registrar of Companies (ROC), the Financial Services Commission (FSC) and the Competition Commission.
What is the current state of the market?
The M&A environment is currently very healthy and can be said to be quite active.
Which market sectors have been particularly active recently?
Recently there have been some changes within the financial services sector with considerable private equity investment into fiduciary businesses and mergers between insurance companies, constructions companies and financial service providers. Furthermore, applications for sandbox licenses that capture bitcoins and cryptocurrencies have begun to feature on the market.
What do you believe will be the three most significant factors influencing M&A activity over the next 2 years?
1. the robust regulatory framework for non-banking financial institutions and capital markets in Mauritius;
2. the continuing consolidation within the fiduciary sector; and
3. government policy.
What are the key means of effecting the acquisition of a publicly traded company?
Control of a Mauritius company can be acquired by:
a takeover offer made by the offeror to the target company’s shareholders. In this regard, Mauritius has recently introduced the Securities (Takeover) Rules 2010 which has replaced previous legislation on takeovers. It is to be noted that the term “effective control” is defined as “the holding of securities by any person, either individually or together with a person acting in concert, which will result in that person, either individually or together with a person acting in concert, having the right to exercise, or control the exercise of, more than 30% of the rights attached to the voting shares of the company”;
a scheme of arrangement duly approved by the Supreme Court of Mauritius;
a legal merger which involves two or more companies being merged by an order of the Supreme Court of Mauritius (but in practice this approach is rarely used). The procedures for mergers involve fairly straightforward corporate actions and shareholder resolutions;
an amalgamation of two companies to become one company (being one of the original companies or an entirely new company). The procedures for amalgamations involve fairly straightforward corporate actions and shareholder resolutions; or
stock exchange transactions by which the control of public listed companies can be obtained principally through the purchase of shares on the securities exchange through normal market operations or through cross-trade.
What information relating to a target company will be publicly available and to what extent is a target company obliged to disclose diligence related information to a potential acquirer?
The Companies Act 2001 makes provision for the public inspection of a company’s records upon service of a written notice being served on the company in this respect. The records that can be inspected are –
1. the certificate of incorporation or registration of the company;
2. the constitution of the company, if it has one;
3. the share register;
4. the full names and residential addresses of the directors;
5. the registered office and address for service of the company; and
6. copies of the instruments creating or evidencing charges which are required to be filed with the ROC.
The following information in respect of a Mauritius company is available from the Mauritius ROC:
information on the Company including its registered office and the details of its directors;
details of shares and shareholders;
details of charges granted over the assets of the company.
However, the above information are publicly available only in relation to domestic companies, whereas information on global business companies are available upon the written authorisation of the relevant company.
A search can also be undertaken at the Registry of the Supreme Court to ascertain if any order has been made or proceedings commenced for the winding up of the company.
Annual accounts of global business companies are not publicly available as these are filed with the FSC and searches at the FSC are not allowed.
If the company is listed on an exchange, copies of its annual accounts, interim reports and regulatory news announcements can be obtained.
To what level of detail is due diligence customarily undertaken?
A potential offeror would usually obtain as much information from public sources as possible before approaching the target company with a list of financial, legal, regulatory and operational due diligence questions and requests.
What are the key decision-making organs of a target company and what approval rights do shareholders have?
The shareholders of the target company decide whether or not to approve the proposed acquisition but depending on the method of acquisition, board approval and an order granted by the Supreme Court of Mauritius may also be necessary. Where an entity involved is licensed in Mauritius, the consent of the FSC will likely be required. The offeror may also need to notify the Competition Commission prior to the acquisition if the latter results in acquiring more than 30% of a market.
What are the duties of the directors and controlling shareholders of a target company?
The directors must act in accordance with the provisions of the Companies Act 2001 and other relevant legislations and should always (i) have regard to their fiduciary duties as directors of a Mauritius company without regard to any personal or family interests, (ii) act in the interests of shareholders, employees and creditors and (iii) act in good faith.
The directors and shareholders of the target company must also ensure that they do not commit an offence of market abuse, insider dealing or breach of confidentiality, if the company is a regulated collective investment scheme, breach any relevant regulatory rules or fund documents.
Do employees/other stakeholders have any specific approval, consultation or other rights?
There is no requirement to consult with or obtain the specific approval of employees and creditors. However they may be informed of the proposed M&A.
To what degree is conditionality an accepted market feature on acquisitions?
Conditionality is an accepted feature on acquisitions but in relation to listed GBCs and Reporting Issuers, the provisions of the Securities (Takeover) Rules 2010 must be adhered to. Where the merger or acquisition is going to need to approval of the Competition Commission or the FSC, this should be sought and received before the offer becomes unconditional. This would usually be achieved by making the offer conditional upon, amongst other things, obtaining all necessary regulatory approvals. The offer document must specify the last date when the offeror can declare the offer unconditional.
What steps can an acquirer of a target company take to secure deal exclusivity?
The board of the target company may solicit or recommend other offers. However there are no rules prohibiting the board from agreeing to deal exclusivity, provided that the directors are satisfied that they are acting in the best interests of the company and are fulfilling their fiduciary duties.
What other deal protection and costs coverage mechanisms are most frequently used by acquirers?
If the target company is not listed, the parties can reach a commercial arrangement.
If the company is listed, Rule 14 of the Securities (Takeover) Rules 2010 shall apply.
Which forms of consideration are most commonly used?
Cash and shares are the most commonly used forms of consideration but loan notes may also be offered.
At what ownership levels by an acquirer is public disclosure required (whether acquiring a target company as a whole or a minority stake)?
There are no prescribed rules regarding public disclosure. Generally, it is up to the parties to decide as and when they want to disclose the offer to the public.
With respect to listed GBCs and Reporting Issuers, a public announcement is required to be published by:
1. The board of the target company when a firm intention is made;
2. The board of the target company when there is undue movement in its share price whether or not a firm intention is made;
3. The offeror when there is undue movement in the target company’s share price before a firm intention is made and the FSC has reasonable cause to believe that such undue movement is caused by the offeror’s actions;
4. The board of the target company when offeror has withdrawn its offer;
5. The board of the target company or the offeror upon the FSC’s direction.
At what stage of negotiation is public disclosure required or customary?
Other than the Listing Rules of the Stock Exchange of Mauritius there is no requirement for public disclosure for non-listed companies.
Is there any maximum time period for negotiations or due diligence?
There are no prescribed rules on this subject-matter.
Are there any circumstances where a minimum price may be set for the shares in a target company?
There are no circumstances where a minimum price may be set for the shares in a private merger or acquisition as this will be a commercial decision to be agreed between the parties. With respect to listed GBCs and Reporting Issuers, the pricing mechanism laid down by Rule 14 of the Securities (Takeover) Rules 2010 shall apply.
Is it possible for target companies to provide financial assistance?
Where a person is acquiring or is proposing to acquire shares in a Mauritian company, the Companies Act 2001 permits the target company and any of its subsidiaries to give financial assistance directly or indirectly for the purpose of or in connection with that acquisition subject to certain conditions.
Financial assistance includes giving of a loan or guarantee or the provision of security.
Which governing law is customarily used on acquisitions?
The laws governing the jurisdictions of both offeror and target company must be complied with.
What public-facing documentation must a buyer produce in connection with the acquisition of a listed company?
Prospectus or similar document (if required)
What formalities are required in order to document a transfer of shares, including any local transfer taxes or duties?
Generally, a transfer of shares needs to be approved by the board of directors of the target company. Pursuant to section 87 of the Companies Act 2001, a company shall not enter a transfer of shares in the share register unless a valid instrument of transfer has been delivered to the company in the form required by law. The share transfer form should be executed and filings must be done with the ROC and a copy of same can be sent to the FSC. The register of members should be updated as regards to the transfer and if relevant, the share certificates should be issued.
Stamp duty is applicable where the company whose shares are being transferred owns immovable property in Mauritius.
Are hostile acquisitions a common feature?
There are no rules preventing hostile takeovers in Mauritius but they are quite rare.
What protections do directors of a target company have against a hostile approach?
There are various methods available to the target company to defend itself against a hostile takeover, including seeking a third party to make an offer for the target company. Provided that the target company’s directors act in a way that they believe, in good faith, would be most likely to promote the success of the target company and to preserve the interests of its shareholders and other stakeholders and they are acting within their powers, there should not be any legal objection to the target company defending itself against a hostile takeover.
Are there circumstances where a buyer may have to make a mandatory or compulsory offer for a target company?
Pursuant to Rule 33 of the Securities (Takeover) Rules 2010, a mandatory offer must be made when the offeror:
holds more than 30% of the rights attached to voting shares of a company and acquires or contracts to acquire additional voting shares of the company;
acquires effective control of a company; or
following a dealing in securities of a company, acquires the right to exercise or control the exercise of more than 50% of the rights attached to the voting shares of the company.
If an acquirer does not obtain full control of a target company, what rights do minority shareholders enjoy?
Generally any prejudiced shareholder can may apply to the Supreme Court for an order under section 169 or section 178 of the Companies Act 2001 on the basis that he considers the affairs of the company have been, or are being, or are, or are likely to be, conducted in a manner that is, or any act or acts of the company have been, or are, or are likely to be, oppressive, unfairly discriminatory, or unfairly prejudicial to him. Additionally minority shareholders may require a company or a third party arranged by the company to purchase their shares if such minority shareholders have voted against a resolution that has been approved by the majority shareholders. The dissenting shareholder of a listed GBC or a Reporting Issuer must do so within 28 days form the day which he was informed of the offeror’s acquisition of 90% or more of the voting shares of the target company.
Is a mechanism available to compulsorily acquire minority stakes?
The Companies Act 2001 provides that where an offer has been approved by of special resolutions of the target company’s shareholders, the minority shareholder who has voted against the offer may require the target company or a third party arranged by the target company to purchase his shares at a fair and reasonable price. The law does not provide for the compulsory acquisition of minority shares. However, in practice, minority shareholders opt for a buy-out.
In relation to listed GBCs and Reporting Issuers, an offeror, who has acquired 90% or more of the voting shares of the target company, may give notice to any dissenting shareholder that he intends to acquire the dissenting shareholder’s voting shares. The notice must be given within 28 days from the last day on which the offer shall be accepted. The offeror shall acquire the shares of the dissenting shareholder on the same terms as for the approving shareholders within 21 days of the issue of a notice. However, the offeror may not acquire these shares if the dissenting shareholder has made an application to the Supreme Court following the issue of the notice until the determination of such application.