Entrepreneurship and finance: Understanding companies

The recent controversy surrounding Planet Earth Institute Ltd, a charity venture registered in London, has shown how there is a marked ignorance of the concept of companies, their structures, objectives and purposes. News on Sunday visits the types of companies. 

To start an enterprise, one can work as a self-employed or incorporate a company. The process of creating a company in Mauritius has been simplified in 2001 with the new Companies Act. This legislation caters for all types of companies, be it domestic or global. All companies and self-employed persons must have a Business Registration Number, as per the Business Registration Act.

The Companies Division, which has been in constant evolution during the past decade, is today made up of the Registrar of Businesses and Registrar of Companies, now jointly referred to as Corporate and Business Registration Department (CBRD). It is now very technologically advanced, such that almost all of its services are provided online. One can register a company, reserve a name, search a company’s details or even pay an annual licence fee from the comfort of one’s desk. 

Limited by shares

A company limited by shares means a company formed on the principle of having the liability of its shareholders limited to any amount unpaid on the shares respectively held by the shareholder. The law does not specify any minimum share capital amount. A company can also be created by a single person (one-person company). A company is referred to as a ‘small private company’ if the annual turnover does not exceed Rs 10 million. A public limited company can sell shares to the general public and can also be listed on the Stock Exchange. 

Limited by guarantee

A company limited by guarantee means a company formed on the principle of having the liability of its members limited by its constitution to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up. 

Limited by both shares and guarantee 

A company limited by shares and by guarantee means a company formed on the principle of having the liability of its members who are shareholders, limited to the amount unpaid, if any, and to those who have given guarantee, limited to the amount they have undertake to contribute.

Limited Life Company

A limited life company is one where its constitution limits its life to a period not exceeding 50 years from the date of its incorporation. However, this period may be extended to a maximum of 150 years. Its constitution contains the specific matters as laid down in the law. 

Dormant Company

A dormant company is one which has no significant accounting transaction during a certain period of time. A significant accounting transaction excludes the payment of bank charges, licence fees and any compliance costs.  A company may declare itself to be dormant by passing a special resolution which it must file with the Registrar of Companies within 14 days of the date of resolution.

Foreign Company 

A foreign company may set up in Mauritius but it must, within one month of establishing a place of business in Mauritius, register a branch of the foreign company in Mauritius. 

Foundation

A Foundation may be formed in Mauritius or elsewhere, for the purposes provided in its charter, including the carrying out of the objects specified in it. A Foundation may also be established by means of a will. The objects of a Foundation may be charitable or non-charitable, or both; for the benefit of a person or a class of persons, or to carry out a specified purpose, or both.

Partnership

A ‘partnership’ is an association of two or more partners formed for a specific purpose."Societés", commonly called ‘partnerships’ are governed by The Code de Commerce (Amendment) Act, Act 21 of 1985. There are different types of partnership: ‘Societé Commerciale’, ‘Societé en nom collectif et en commandité’ and ‘Societé Civile’. Some of the distinct features of a partnership is its duration and the name of a societé commerciale and of a ‘societé en nom collectif’. The duration (durée) of a partnership is determined in the deed (status) but does not exceed 99 years. However, the partners may, at any time before the duration comes to an end or at the end of the duration, either renew or extend or dissolve the Partnership.

Limited Partnership

A Limited Partnership is a business structure where two or more Partners have agreed to carry any lawful business in Mauritius or from within Mauritius with persons outside Mauritius or both in Mauritius and from within Mauritius with persons outside Mauritius with a view to make profits. The Limited Liability Partnership is a new financial vehicle introduced as recently as 2016. 

Relevant legislations

• Business Registration Act 2002
• Code de Commerce
• Companies Act 1984
• Companies Act 2001
• Insolvency Act 2009
• Limited Partnership Act 2011
• Limited Liability Partnerships 2016

BRN

The ‘Business Registration Act’ proclaimed in 2016 stipulates that any business carried out by a person for the purpose of profit or gain must be registered under this Act. However, the term ‘Business’ excludes the business of a craftsman who exercises his craft from his own domestic premises and does not have any business premises. It also excludes any religious, charitable or educational organisation and any person engaged in the cultivation of land of an extent not exceeding 4.2208 hectares (10 arpents).

NGOs

In Mauritius, we have non-governmental organizations (NGOs) which have as objectives social welfare programmes. NGOs are not able to derive revenue as they do not trade. Their main sources of income include membership fees, donations, subscriptions, organising of mini events such as fancy fairs, bring and buy, and CSR funding. Social entrepreneurship cannot be easily undertaken by NGOs in Mauritius because of their structure. Indeed, a revamping of the NGO structure in Mauritius is long overdue to revalorize NGOs and provide them the tools to become financially independent. 

The British system

Our Company Law is a hybrid system, having been inspired from the Companies Act of UK, Singapore and Hong Kong. The UK system also contains similar forms of companies, like ours, such as limited company, public limited company, limited partnership etc. However, the British system goes one step further and includes non-profit making company. For example, charity ventures or philanthropic organizations can be registered as Community Interest Companies at the Companies House in the UK. In our system, non-profit making entities are referred to as NGOs (Non-Governmental Organisation) and fall under the ambit of the Registrar of Associations, unlike in the UK where NGOs can be registered companies, hold a company registration number and have ‘Directors’, though non-remunerated. In Mauritius, members of NGOs are referred to as ‘Office Bearers’.   The main type of company used for non-profit making ventures is the ‘‘Company limited by Guarantee without Share Capital’. Such a vehicle is used in the UK mainly by charitable institutions, sports or other clubs, and nonprofit-making ventures such as research and education, etc.

Global Business

Commonly known as offshore sector, the global business started in the early 90s and is today an important pillar of our economy. Today, it comprises of sophisticated products such as global collective investment schemes, close-ended funds, expert funds, specialised collective investment schemes, CIS management, investment dealers, amongst others. Global Business Companies (GBCs) are supervised and regulated by the Financial Services Commission (FSC).  There are two types of GBCs based on the category of license, namely Global Business Category 1 companies and Global Business Category 2 companies.

GBL1

The Category 1 Global Business Company (GBL1) is a tax-resident company managed and controlled from Mauritius. The GBL1 is commonly used as holding companies for international operations. It is also notably used for holding intellectual properties and for the management and administration of Global Funds. A GBC1 can also undertake business in any foreign currency (subject to approval), and must have at least 2 Directors who are resident in Mauritius, maintain its principal bank account in Mauritius and maintain its accounting records at its registered office in Mauritius.

GBL2

The Category 2 Global Business Company (GBL2) is a flexible structure designed to notably hold and manage private assets outside of Mauritius. The GBL2 is not a tax resident in Mauritius and does not benefit from double taxation relief under tax treaties. A GBL2 may either be limited by shares or by guarantee, and may also be structured as a Limited Life Company. A GBL2 must have at all times its Registered Agent in Mauritius.