Over the past 20 years, Mauritius has achieved a positive reputation in the global financial services industry and it is seen as a jurisdiction for structuring investments in Africa, India and China through collective investment schemes and joint-venture companies. Mauritian trusts and their administration are also on the rise, partly because the Trusts Act 2001 of Mauritius (the Trusts Act) is recognised as a modern piece of legislation by leading lawyers. In addition, Mauritian corporate trustees are increasingly providing back-office operational support to the administration of foreign trusts. This is motivated, inter alia, by two factors: the availability of qualified people, and infrastructure at a lower cost, which reduces operational costs, to the benefit of the client.

A trust client will normally look for, inter alia, the following when appointing a trustee in an overseas jurisdiction: a reliable corporate trustee with an established track record; personalised, high-quality and good-value service through competent and dedicated professionals; a respected judiciary; the presence of local professionals specialising in this practice area with reputable track records; and a well-regulated jurisdiction.

The financial services industry in Mauritius ticks all these boxes and has established itself as a modern and reliable financial services jurisdiction not only for the management of global business companies, investment funds and protected cell companies, but also for the setting up and administration of various types of Mauritian law trusts. The number of professionals involved in this practice area is growing and this can be seen in the expansion of the local branch of STEP, which currently has more than 200 members and a growing number of student members. The presence in Mauritius of several service providers with an international network and established local corporate trustees is also an indicator and assurance of competent, efficient and high-quality service to clients.

Mauritius has a hybrid legal system inherited from the French and English legal systems, and accordingly the Mauritian courts often follow the judicial precedents and decisions of the UK and other Commonwealth courts; Mauritius has retained the Judicial Committee of the Privy Council as its final court of appeal.

Mauritius has a broad network of tax treaties, which provides an opportunity to use trusts for both tax and non-tax benefits. A Mauritian trust can elect to be tax resident in Mauritius and hold a global business licence. Thus, a Mauritian trust can avail itself of treaty benefits and be tax efficient, for example, by eliminating capital gains tax on disposal of assets in a country with which Mauritius has a double taxation avoidance agreement. It is also useful to note that the income of a Mauritian charitable trust, which may have a perpetual duration, is exempt from income tax as long as its purposes are within the different heads of charities defined under the Trusts Act.

‘The financial services industry in Mauritius is a modern and reliable jurisdiction for the administration of various types of mauritius law trusts’

Trusts, whether Mauritian or foreign, are not registered in a public registry in Mauritius, and this can offer further comfort for those seeking confidentiality. Under Mauritian law a trustee has a duty and obligation not to disclose any information to any person not legally entitled to such information, except where ordered by a Mauritian court or a judge in chambers.

Under the Trusts Act, the terms of a Mauritian trust may provide for the appointment of a managing trustee and a custodian trustee. The managing trustee has the role and function of managing the trust property, without being vested with the trust property, which is vested in a custodian trustee. Such a trustee can be located in a jurisdiction other than Mauritius. Where the custodian trustee thinks the direction of the managing trustee cannot be complied with, it may apply to the court in Mauritius for direction.

Another important provision of the Trusts Act is that forced heirship judgments of other jurisdictions cannot be enforced in Mauritius. Also, an asset protection trust set up under Mauritian law can afford protection against claims from creditors, litigants in a succession dispute, and the consequences of a failing marriage. Under the Trusts Act, no action shall lie against the trustee of a Mauritian trust after more than two years from the date of transfer or disposal of the assets to the trust.

Compared to other countries where there may be a restriction on accumulation periods as regards accumulation of income, the terms of a Mauritian trust may authorise the accumulation of all or part of the income of a Mauritian trust for a period lasting up to the duration of the trust. The duration of a trust, other than a purpose trust, can be a maximum of 99 years; on the other hand, a Mauritian purpose trust (charitable or non-charitable) can have perpetual duration.

The concept of a trust developed during the medieval period, when the motivation was mainly to protect the property of family members. Over time, the use of trusts has evolved and now extends to asset protection, legitimate tax planning and family and estate planning, among others. The concept, though accepted by common-law countries, does not find much interest in civil-law countries, where settlors are often reluctant to relinquish control of their assets to a trustee.

In keeping with the trend of modern trust law, the Trusts Act contains provisions for the appointment of a protector. It is trite law that a trustee should not surrender control and conduct of the affairs of a trust simply by following instructions from a settlor. Therefore, an effective way of giving a settlor comfort is to appoint a protector and grant them powers of appointment and removal of trustees, and other powers as can be set out in a trust deed. Thus the protector can fulfil a number of key roles and, among others, ensure that a trustee exercises its powers and discretion as provided under a trust deed, to help protect the interests of the beneficiaries.

The Trusts Act also provides flexibility for the operation of Mauritian trusts. For example, a Mauritian trust can have a maximum of four trustees, one of which has to be a duly licensed corporate trustee in Mauritius. However, it is possible for a Mauritian trust to have co-trustees and for the local trustee to delegate the exercise of some of its functions to one or more of those co-trustees.

Mauritius has regulations that allow for the setting up of private trust companies (PTCs), which are useful vehicles to consider in the planning and establishment of trust structures for wealthy families. Rather than transferring assets to a professional trustee company, certain families may prefer to establish their own corporate trustee (a PTC) to act as the trustee of the trusts they plan to create.

Depending on the circumstances of the individual client, a variety of factors may influence such a decision. These may include a desire to retain a measure of control in relation to the structure being created, a wish to preserve confidentiality, or a focus on ensuring that the trustee will have a working knowledge of the assets held in the structure (such as a family business) and will be able to respond speedily whenever commercial decisions need to be taken. Often, a Mauritian purpose trust is used to hold the shares of the PTC, to orphan the structure.

The Limited Partnership Bill was passed in the Mauritian parliament last October. Reform of the finance industry is continuing, aiming to meet the new requirements of clients and strengthen the regulatory framework to preserve the integrity of the jurisdiction. Limited partnerships are a favoured structure in private equity and venture capital schemes, collective investment schemes, structuring joint ventures, holding property interests, estate planning and asset protection, and tax and financial planning. A draft Foundation Bill has also been circulated and is expected to be passed by the Mauritian parliament in the near future. Mauritian foundations are expected to be attractive, especially to clients from countries with a civil law system.

Mauritius is a suitable jurisdiction in which to set up and administer trusts, and to structure and manage collective investment schemes and global business companies for various commercial purposes. It also scores well in the World Bank’s survey of ease of doing business, ahead of several European countries.