The law seeks to prevent the assets of the company being used to assist a third party who wishes to acquire or hold a beneficial interest in that company. In this respect, the assets of a company should be preserved for the benefit of that company’s creditors and the company’s shareholders. In Mauritius, such financial assistance is restricted under the Companies Act 2001 (the “Act”).

The Act provides that a company may have financial assistance for the purpose of the acquisition of its own shares where the company’s board has previously resolved that (a) giving the assistance is in the interests of the company, (b) the terms and conditions on which the assistance is given are fair and reasonable to the company and to any shareholders not receiving such assistance and (c) the company will satisfy the solvency test immediately after giving the assistance.

In addition, the Act provides that a company shall not give financial assistance for the acquisition of its own shares in the event the amount of the financial assistance approved by the company’s board exceeds 10 per cent of the stated capital of the company. In such circumstances and prior to the financial assistance being made by the company, a certificate would be required to be obtained from an auditor to confirm that he has inquired into the company’s state of affairs and he is of the view that the board’s opinion that the company will satisfy the solvency test, after giving the financial assistance is not unreasonable in all circumstances.

It is to be highlighted that the provisions of the Act relating to financial assistance does not apply to a distribution to a shareholder, issue of shares by the company, repurchase or redemption of shares by the company, compromises with creditors or where the ordinary business of a company includes the lending of money by the company in the ordinary course of business.

Locations

Mauritius

Services

Corporate

Type

Insight

Share
Twitter LinkedIn Email Save as PDF
More Publications
14 May 2024

What are the tools to aid the arbitral process to combat the undesirable effects of parallel litigation?

The fundamental aspect of arbitration as an alternative dispute mechanism is that despite parties’...

29 Apr 2024

Appleby Mauritius Quarter One Newsletter 2024

As we navigate through this dynamic year, Appleby's first Mauritius newsletter of 2024 sees our team...

29 Apr 2024

Receivership: an enforcement mechanism for lenders

In a world of business, unforeseen circumstances can often arise that lead a company to financial di...

29 Apr 2024

The JCPC reaffirmed the exception to the bank secrecy rule

Further to the oral judgment of the Judicial Committee of the Privy Council (JCPC) on 06 July 2023 a...

26 Apr 2024

Regulation of Moneylending in Mauritius

Moneylending is a crucial credit device in the world of financial services which plays a significant...

26 Apr 2024

Katra Holdings Ltd v Standard Chartered Bank (Mauritius) Ltd [2024] UKPC 8 - case summary

The Privy Council set aside an appeal challenging a winding up order of a Mauritian company, Katra H...

26 Apr 2024

Statutory Demands - a Review of Recent Decisions

INSOLVENCY - The bankruptcy division of Mauritian Supreme Court re-affirms the test to determine the...

26 Apr 2024

Directors' Duties in the face of insolvency

The duties of directors in relation to companies in Mauritius are laid out under the Companies Act 2...

16 Apr 2024

Absence of assets in Mauritius – not a bar to the recognition and enforcement of foreign judgment

On 12 April 2024, the Mauritian Supreme Court confirmed in Hobler v Harker 2024 SCJ 159, that an app...

12 Apr 2024

Maximising Efficiency in Fund Termination Through Liquidating Trusts in Mauritius

When it comes to terminating a fund licensed under the laws of Mauritius (Company), one of the key r...