FATCA/CRS: what is Passive Non-Financial Entity (Passive NFE or Passive NFFE under FATCA regulations terminology)?

FATCA/CRS require that every entity be classified pursuant to FATCA/CRS definitions. Everything from a school to a factory to a bank has to determine its classification. One type of classification is a Passive Non-Financial Entity (Passive NFE or Passive NFFE under FATCA regulations terminology).

A Passive NFE must report Controlling Persons. However, it is not always clear who should be identified as the Controlling Person. The parameters include the following natural persons who exercise control over the Passive NFE:

  • A natural person who holds, directly or indirectly, more than a certain percentage of the beneficial interests of the entity.
  • A natural person on whose behalf a transaction is being conducted.
  • Those persons who exercise ultimate effective control through indirect means.

Each jurisdiction sets out a percentage ownership threshold that is currently in the range of 10% to 25%. If no one individual satisfies the ownership threshold (including after looking up through the Passive NFE’s ownership structure), the next step in the analysis may be to look at who exercises ultimate effective control through indirect means. It is clear under both FATCA and CRS that this individual may be a senior managing official.

W-8 & W-9’s, Self-Certifications and FI Reporting

FATCA requires U.S. Persons to be reported by an FI to the appropriate tax authority. CRS requires FIs to report persons who are resident in Reportable Jurisdictions to the local tax authority. However, even if the Controlling Person is not ultimately reportable by the FI to the tax authority, the Passive NFE must still report personal data about the Controlling Person to the FI through an IRS form or a self-certification.

  • The personal data under FATCA includes:
  • Name
  • Address
  • US Tin / DOB

The personal data under CRS includes:

  • Name
  • Residence address
  • Jurisdiction(s) of residence
  • Tax ID Number
  • Date of birth
  • Place of birth
Information on beneficial owner- As per Finance (Miscellaneous Provisions Bill 2019)

Information on beneficial owner- As per Finance (Miscellaneous Provisions Bill 2019)

All companies will have to keep an updated records of the information on the Beneficial Owner (BO) or Ultimate Beneficial Owner (UBO) (names and addresses) and actions taken to identify a BO or UBO in accordance with the above new definition.

The information will also have to be conveyed to the Registrar of Companies (ROC) within 14 days from the date on which any entry or alteration is made in the share register.

Changes In The Definition Of Beneficial Owner

2018 – all other entities to keep and disclose their beneficial owner in the register and file with the Registrar (Mandatory Requirement)

2019 – prescribed % of aggregate voting power to be determined by Regulations – 20%

Registrar empowered to disclose the information in specific circumstances(investigation or inquiry)

2019 – Companies Act 2001 Amended by the Finance (Miscellaneous Provisions) Act 2019 (GN No 13 of 2019) :

Beneficial Owner and Ultimate Beneficial Owner redefined as natural person with direct and indirect ownership.

Filing Obligation By Companies

  1. Any Beneficial Ownership information must be lodged with the Registrar within 14 days from the date on which any entry or alteration is made in the share register  
  2. The share register must be kept by a company for a period of at least 7 years from the date of the completion of the transaction, act or operation to which it relates
In line with international best practices, the law provides a modern vehicle for domestic and international investors to invest in and from Mauritius.

In line with international best practices, the law provides a modern vehicle for domestic and international investors to invest in and from Mauritius. 

The Act provides for a core statement of company law that applies to all companies whether domestic or those with a global business licence.

NEW BUSINESS – APPROPRIATE DOMESTIC STRUCTURE

What type of entities can be incorporated by the Registrar of Companies in Mauritius?

One who wishes to set up an entity in Mauritius should like to consider the following options:

Is a Public Company appropriate for the proposed business or the setting up of a Private Company best suits the vision of one’s business?

Basically, most businessmen start by setting up a Private Company with much less than 25 shareholders. Then if the number of shareholders increases to 25 or more, the Company automatically falls under the category of a Public Company, where the individual has the obligation in accordance to the Companies Act 2001 to make an application to the Registrar of Companies for the Company to be converted from a private company to a public company.

The following is one important aspect of a Private Company:

1.A private company is limited to 25 shareholders and cannot offer shares to the public. Companies can have a limited or unlimited life.

As per the Companies Act, one also has to decide on the following options:

  • 2. To set up a “Company limited by guarantee” means a company having the liability of its members limited by the memorandum 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.
  • 3. To set up a “Company limited by shares” means a company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them.
  • 4. To set up a “Company limited by shares and guarantee” which entails the above both characteristics.
  • 5. To set up an “Unlimited company” means a company not having any limit on the liability of its members.

To make it simpler, below are the tabular distinctions between the types of structures to enabling businesses to make informed decisions commensurate with their business objectives:

Base erosion and profit shifting, occurs when multinationals exploit tax legislative gaps between countries to reduce or eliminate the taxation of profits.

In 2013, the Organisation for Economic Co-operation and Development and G20 countries jointly developed an action plan to address base erosion and profit shifting by multinational enterprises. Essentially, base erosion and profit shifting, or BEPS, occurs when multinationals exploit tax legislative gaps between countries to reduce or eliminate the taxation of profits.

As part of their plan, the OECD and G20 finalized 15 BEPS Actions in late 2015. The actions are intended to “equip governments with domestic and international rules and instruments to address tax avoidance, ensuring that profits are taxed where economic activities generating the profits are performed and where value is created.”

Since the release of the BEPS Actions, the pace of change as regards tax rules worldwide has been dizzying. In the last five years, over 135 countries — known as the OECD/G20 Inclusive Framework — have worked together to implement BEPS recommendations. According to the OECD website: more than 250 tax regimes that facilitated base erosion and profit shifting have been changed or eliminated; more than 85 countries have signed the multilateral BEPs convention (which closes tax loopholes in thousands of tax treaties); and more than 2,000 bilateral relationships for country-by-country exchanges are now in place.

The bottom line is that corporate groups with international supply chains and operations are increasingly facing myriad new and changing domestic and international tax rules. The most significant changes include recent and ongoing proposals to fundamentally reshape the taxation of the digital economy. It’s critical for multinationals to understand that these proposals will go way beyond the tech sector and affect virtually all multinational businesses.

As we enter a new decade, and more and more countries implement BEPS recommendations, the global tax landscape will continue to change. In this period of uncertainty, the boards, CFOs and indeed all corporate stakeholders of multinationals must prioritize achieving tax compliance while remaining tax efficient.

Some new and upcoming country-specific rules on digital taxation

While the OECD’s BEPS recommendations have provided the catalyst for many countries to revisit their own tax rules, not all OECD guidelines are adopted consistently across all jurisdictions. Many countries have continued to act unilaterally to protect their tax bases and make changes to account for the evolving global, digitalised economy. Here’s a list of examples of some unique, country-specific tax rules that primarily address digital commerce:

  • The U.S. base erosion and anti-abuse tax (BEAT). This new minimum corporate income tax was introduced under the Tax Cuts and Jobs Act (TCJA) of 2017. It looks to curtail large multinationals with a U.S. presence from shifting profits to lower tax jurisdictions.
  • Australia’s diverted profits tax (Australia DPT). Widely referred to as the “Google tax,” Australia’s DPT has been in effect since 2017 and looks to prevent multinationals from shifting profits made in Australia to other jurisdictions to avoid paying tax. It imposes a 40 percent tax rate on diverted profits.
  • The UK’s diverted profits tax (UK DPT). Introduced in 2015 and amended in 2018, the UK’s DPT — like Australia’s — targets large groups (typically multinational enterprises) that shift profits outside the UK. The specifics of the two DPTs, however — including rates and penalties — are distinct.
  • France’s digital services tax (France DST). France unilaterally implemented its DST last July, retroactive to 1 January 2019. It imposes a 3 percent tax on revenue generated from digital services, and applies to companies with annual revenues of more than 750 million euros worldwide and more than 25 million euros in France.
  • The UK’s digital services tax (UK DST). The UK’s DST will go into effect in April 2020. It will impose “a new 2 percent tax on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users.”

All of the above tax rules look to combat base erosion and profit shifting. It’s critical to understand, however, that they are being implemented at different times, with different levels of application, by different countries.

BEPS Pillar Two: The “GloBE” proposal

Many tax authorities, experts and even business leaders have recognized that our current patchwork system of country-specific tax laws that allows for base erosion and profit shifting in a global, digital economy is not sustainable. In language outlining the policy objective of its new digital services tax, UK tax authorities speak to the need for a unified approach, acknowledging that the UK’s DST is a stopgap measure: “The [UK] government still believes the most sustainable long-term solution to the tax challenges arising from digitalisation is reform of the international corporate tax rules and strongly supports G7, G20 and OECD discussions on the different proposals for reform. The government is committed to dis-applying the digital services tax once an appropriate international solution is in place.”

The OECD’s ongoing BEPS work informs and reflects this widely accepted belief. As we discussed in a previous post, the OECD’s current work plan on the taxation of the digital economy is divided into two pillars:

  • Pillar OneThis examines the allocation of taxation rights and profit allocation between countries, and the associated tax nexus.
  • Pillar Two. This is referred to as the Global Anti-Base Erosion Proposal, or “GloBE.” It proposes to provide countries with a right to “tax back” when other countries have not imposed a minimum level of tax or not exercised their taxation rights.

In November 2019, the OECD issued a public consultation document on Pillar Two. As the OECD recognizes, notwithstanding its wider BEPS recommendations, the GloBE proposal “seeks to comprehensively address remaining BEPS challenges by ensuring that the profits of internationally operating businesses are subject to a minimum rate of tax.” The consultation document emphasizes that the GloBE proposal, like Pillar One, addresses challenges posed by the digital economy, but “goes even further and addresses these challenges more broadly.”

The GloBE proposal consists of four rules:

  • An income inclusion ruleThis effectively taxes the income of a foreign branch or controlled entity if that income was not subject to a minimum rate of tax.
  • An undertaxed payments ruleThis denies a tax deduction (or imposition of a de facto sourced-based withholding tax) for a payment to a related party if the associated income was not subject to a minimum rate of tax.
  • A switch-over rule. This would be introduced to treaties that would permit a residence jurisdiction to switch from a tax exemption to a tax credit method, when profits attributable to a permanent establishment are not subject to a minimum rate of tax.
  • A subect-to-tax rule. This would complement the undertaxed payments rule by subjecting a payment to source-based taxation and adjusting eligibility for treaty benefits on certain items of income when the income is not subject to a minimum rate of tax.

As the consultation document points out, Pillar Two “represents a substantial change to the international tax architecture.” Indeed, while there is consensus that the international tax framework needs to be updated to address current economic realities like the digital economy, getting countries to give up any element of their sovereign right to levy tax (which also serves as a driver of inward investment) remains problematic. For example, the European Union’s Common Consolidated Corporate Tax Base (CCCTB) — originally proposed in 2011 and revised and re-proposed in 2016 — calls for a single set of rules governing how EU corporations calculate and apportion tax across the EU. Yet it has encountered resistance, especially from smaller EU member states that may lose tax revenues if the proposal is put into practice.

The task of implementing the GloBE proposal is even more daunting than implementing the CCCTB, since the GloBE proposal engages all 36 OECD members, the G20 and 70 percent of the remaining countries around the world. And, of course, Pillar Two is only a part of a much broader rewrite of the international tax “rulebook.” As this collective effort is evolving, individual countries continuously shore up their own tax bases on a unilateral basis, while others continue to use “race-to-the-bottom” tax measures to attract inward investment.

Corporate taxation is, in short, undergoing profound changes. More than ever, multinational enterprises must monitor and remain abreast of country-specific tax changes and new tax requirements. They should also regularly review their corporate legal structures and internal and third-party supply chains against these implemented and proposed unilateral and global tax law revisions.

Finally, this process should not be seen as negative. Rather, multinationals should be mindful of the potential for operational efficiencies and tax opportunities (or tax-leakage reduction) that may be identified when performing these reviews. Even if tax savings aren’t immediately forthcoming, the reviews will at the least provide the boards, C-suites and stakeholders of multinationals with a higher level of tax assurance. This will in turn drive up the value of the multinational group by lowering tax-related risk, one of the main business expenditure outflows.

Effective from 1 September 2020, contribution to the National Pension Fund (“NPF”) has been abolished and replaced by the Contribution Sociale Genéralisée (“CSG”)

Effective from 1 September 2020, contribution to the National Pension Fund (“NPF”) has been abolished and replaced by the Contribution Sociale Genéralisée (“CSG”). Pursuant to the Contribution Sociale Genéralisée Regulations 2020 (“CSG Regulations”), every participant is liable to CSG every month. Contribution to CSG is calculated as follows:

1 “domestic service” means employment in a private household and includes employment as a cook, driver, gardener, garde malade or maid.

Participant means a person:

i. who enters into, or works under an agreement or a contract of apprenticeship, other than a contract of apprenticeship regulated under the Mauritius Institute of Training and Development Act, whether by way of casual work, manual labour, clerical work, or otherwise, and however remunerated;

ii. employed on a part-time or full-time basis, whether in a position which is of permanent nature or on a contract of fixed duration; and

  1. includes

a public sector employee;

a share worker as defined in the Workers’ Rights Act 2019;

a non-citizen employee;

a person employed in the domestic service;

a person aged 65 and above;

a person performing atypical work as defined in the Workers’ Rights Act 2019;

an executive director of a company;

a self-employed; but

  1. does not include

a non-citizen employee employed by an export manufacturing enterprise who has resided in Mauritius for a continuous period of less than 2 years, including any period of absence which does not exceed 9 consecutive weeks or during which he maintains a residence in Mauritius;

a non-citizen holding a work permit and employed by a foreign contractor engaged in the implementation of a project which is funded by a foreign State up to not less than 50% of the estimated project value, from grant or concessional financing, as the Minister may determine;

a person taking part in a training scheme set up by the Government or under a joint public-private initiative with a view to facilitating the placement of jobseekers in gainful employment;

a non-executive director of a company

CSG Reporting Obligations

Penalty under CSG

It is the obligation of the employer or the self-employed, as the case may be, to retain both participant’s and employer’s CSG contributions and remit same to the MRA.

A penalty of 10% applies on any unpaid CSG. The penalty is capped at a maximum of 25% of the amount of the additional CSG claimed under an assessment.

Any unpaid CSG is also subject to interest of 1% per month or part of the month during which the CSG remains unpaid.

An employer is not entitled to recover any arrears of CSG, penalty and interest subsequently paid to the MRA from the participant.

Cessation of business

Written notice should be submitted to the MRA where an employer becomes aware that he will cease to carry on any trade, business or occupation, whether voluntarily or otherwise, giving particulars of the cessation date.

The employer should submit its monthly or annual CSG return and pay any CSG or penalty payable with 15 days from cessation date.

The Inland Revenue Service of Singapore (“IRAS”) informed in a media release today, that the reciprocal FATCA IGA signed between #Singapore and the #US in November 13, 2018 will enter into force on January 1, 2021.

In addition, the #IRAS released updates their CRS FAQs adding C.14 “Depository Accounts held by a payment service provider that provides e-money issuance and/or account issuance services under the Payment Services Act 2019” and D.7 “Controlling Persons: Equity Interest holders in the case of a trust that is a SGFI “while removed FAQ H.1.

  1. The reciprocal Foreign Account Tax Compliance Act Model 1 Intergovernmental Agreement (reciprocal FATCA IGA) between Singapore and the United States of America, signed on 13 November 2018, will enter into force on 1 January 2021.
  2. The reciprocal IGA provides for the automatic exchange of information with respect to financial accounts under the US’ Foreign Account Tax Compliance Act. This new reciprocal IGA will supersede the current non‑reciprocal IGA when it enters into force. This does not affect Reporting Singaporean Financial Institutions’ obligations under the current IGA.
With the Foundations Act 2012, Mauritius added Foundations to its list of wealth management structures available to choose from.

With the Foundations Act 2012, Mauritius added Foundations to its list of wealth management structures available to choose from. Well-known for its economic and political stability and dynamic business regime, setting up a Foundation in Mauritius provides many benefits. This article will highlight the features and basics of a Mauritius Foundation as well as the advantages, which the Mauritian jurisdiction offers.

What is a Foundation?

A Foundation is a legal entity that combines the features of a Trust and a Company. Its legal structure and functions are similar to those of a Trust, but is administered as a Company. Foundations are interesting to clients who may be unfamiliar with the concept of Trusts, particularly in civil law countries. The Mauritian Foundation can opt to have a legal identity thus having a certificate of registration and hold assets in its own name.

Foundations in Mauritius can be used for:

  • Charitable causes;
  • Estate and succession planning;
  • Asset Protection;
  • Wealth management;
  • Asset holding;
  • Tax planning;
  • Pension schemes; and
  • Housing intellectual property.

A Foundation is one of the preferred private structures used by High Net-Worth Individuals to cater for their succession and inheritance planning, private wealth management, limited liability status and asset-holding strategies. Setting up a Foundation in Mauritius, a reputable offshore jurisdiction, can provide numerous advantages to a Founder as well as Beneficiaries.

Why choose to set up a Foundation in Mauritius?

Mauritius is one of the best jurisdictions for corporate as well as personal structuring in Africa. Indeed, the country ranks 1st on the continent for ease of doing business, is an internationally compliant, cost-effective, and transparent jurisdiction.

A Foundation in Mauritius may apply for a Global Business Company licence if it wants to fall under the supervision of the Financial Services Commission (FSC) and become tax resident. It therefore has access to the wide network of Double Tax Agreements (DTA) and Investment Promotion and Protection Agreements (IPPA) Mauritius has with other countries. A Foundation may be used for:

  • Charitable purposes, non-charitable (commercial) purposes, or both – many jurisdictions do not allow Foundations that have commercial objectives to operate; and
  • The benefit of a person or a class of persons, to carry out a specific purpose, or both.

Mauritius Foundations are an alternative to Trusts and Private Trust Companies for High-Net-Worth clients willing to stay in charge of their assets while decreasing the annual cost of their structures. Foundations in Mauritius are not liable to tax in case:

The Founder is a non-resident and the Beneficiary is / Beneficiaries are non-resident

The advantages of setting up a Foundation in Mauritius include:

  • Tax exemption:

if the Founder and all Beneficiaries are non-resident; or

  • if the objective of the Foundation is being carried outside of Mauritius.
  • is acquired by depositing a declaration of non-residence with the Director-General of the Mauritius Revenue Authority within three months of the expiry of the income year;
  • Charitable Foundations are automatically tax exempted;
  • Benefit from the network of DTA through tax-resident status;
  • Foundations currently set up in other jurisdictions can re-domicile to Mauritius;
  • A Mauritius Foundation can also re-domicile elsewhere;
  • Members of the Foundation council are not liable to the Beneficiaries

A visual representative of the various parties’ involvement in a Foundation in Mauritius

A few key definitions

Council– Every Foundation require a Council. The Council allocates the assets of the Foundation and performs the tasks required. The Council has the power to delegate functions to officers it assigns, based on the Charter. The Council needs to have a minimum of one member who resides in Mauritius.

Charter– The Charter of a Mauritius Foundation is a set of rules and regulations that it has to abide by. It must contain information such as the name of the Foundation, its registered office, information relating to the Founder, Beneficiaries (if any), amongst others.

Founder– A Founder is a person who empowers a Foundation with its initial assets. However, an individual who endows assets in a Foundation after the latter’s registration does not declare that specific individual as the Founder unless otherwise stated by the Charter or Articles of the Foundation. A Founder can also be a Beneficiary and has no obligation to reside in Mauritius.

Beneficiary– A Foundation can have one or more individuals as Beneficiary, who is subjected to benefit from a Foundation. As such, the right to distribute any Foundation property may be effectuated on behalf of a Beneficiary.

Secretary– Every Foundation is required to have a Secretary. A Secretary can be a Management Company or an individual resident in Mauritius as per the rules of the FSC.

Articles– According to the provisions of the Charter, the Council can in a case to case basis have Articles relating to distribution of assets, identification of any initial or additional Beneficiaries, and how the Council provisions needs to be coordinated.

Protector– A Protector or a Committee of Protectors can be appointed by a Foundation conforming to the responsibilities, rights, functions and remuneration as may be declared in the Charter. The Charter should also highlight the relationship of Protector or Committee of Protectors with the Council whilst in office.

The Financial Services Commission (FSC) has, on 15 June 2020, issued its guidance notes concerning the implementation of a common set of standards for Security Token Offerings (STO)

The Financial Services Commission (FSC) has, on 15 June 2020, issued its guidance notes concerning the implementation of a common set of standards for Security Token Offerings (STO) and the licensing of Security Token Trading Systems in Mauritius in an attempt to position Mauritius as a regional hub of sound reputation in the field of Fintech. The guidance notes also highlight the requirements to comply with Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) laws and codes, data protection laws, and implementation of good market practice for an efficient, transparent and integrated financial market.

Why use Security Tokens to raise capital? 

STOs are seen as lower risk because the securities laws that security tokens have to comply with often enforce transparency and accountability, compared to an Initial Coin Offering (ICO). A security token will also be backed by a real-world asset, which makes it a lot easier to assess whether or not the token is priced fairly in relation to the underlying asset.

STO is also more cost-effective than Initial Public Offering (IPO). With IPOs, the companies would typically pay high brokerage and investment banking fees to get access to a deeper investor base. STOs would still need to pay lawyers and advisors, but they offer more direct access to the investment market and, therefore, typically will not have to pay large fees to investment banks or brokerages. The post-offering administration for STOs is also less cumbersome and cheaper than with traditional IPOs.

Fractional ownership and the ability to trade 24/7 bring additional liquidity to the market, especially with traditionally illiquid assets, such as scarce paintings, property and collectibles.

The Court of Civil Appeal of the Supreme Court of Mauritius has recently opined in the case of Essar Steel Ltd v Arcelormittal USA LLC [2020 SCJ 191

Essar Steel Ltd v Arcelormittal USA LLC

The Court of Civil Appeal of the Supreme Court of Mauritius has recently opined in the case of Essar Steel Ltd v Arcelormittal USA LLC [2020 SCJ 191] that the directors of a company, which has been placed in administration retain no residual power to initiate proceedings on behalf of the company. The Chief Justice, in delivering his judgment in this case referred to the detailed provisions of the Insolvency Act with regard to the functions and powers of the administrator and the functions and powers, if any, of the directors of a company which has been placed in administration. According to the provisions of the Insolvency Act, it is expressly provided that as soon as an administrator is appointed, a director is not entitled to exercise or perform any function or power or exercise an administrative act as an officer of the company, except with the prior written approval of the administrator or with authorization of the court. It is the administrator who is vested with the power to manage the property and affairs of the company.

The court went on to distinguish instances where a company is placed in receivership by the appointment of a receiver manager and instances where the company is placed in administration by the appointment of an administrator. The court opined that the appointment of an administrator entirely supersedes the powers of the company and the authority of the directors in the conduct of its business and management of its assets.

The court of civil appeal concluded that in the absence of the prior written approval of the administrator or authorization of the court as expressly required under the Insolvency Act, there is no basis for the directors to claim that they retain a residual power to initiate proceedings on behalf of the company to challenge the appointment of an administrator. Whilst dismissing the appeal, the court ordered the directors who initiated the appeal to personally bear the costs of the case.

On 31 August 2020, the Mauritian Financial Services Commission (“FSC”) published the licensing criteria for Peer-to-Peer (“P2P”) lending. Prior to this, P2P Ooperators were operating under the regulatory sandbox licensing.

On 31 August 2020, the Mauritian Financial Services Commission (“FSC”) published the licensing criteria for Peer-to-Peer (“P2P”) lending. Prior to this, P2P Ooperators were operating under the regulatory sandbox licensing.

The Financial Services (Peer to Peer Lending) Rules 2020 came into force on 15 August 2020.

What is P2P lending?

P2P lending is an emerging Fintech practice that enables a person to lend funds through an online portal or electronic platform, whereby a P2P operator facilitates the access to finance by matching borrowers and lenders on its online platform.

The three important pillars of P2P lending

  1. A platform, operated by a P2P operator that is a corporate body established in Mauritius;
  2. A borrower with a detailed project that needs financing; and
  3. A lender agreeing to provide funds in its own name.

How does P2P lending operate?

A P2P operator will consider a request to borrow from any person provided that the funds being sought by the person are applied for to finance a project. The P2P website will prominently disclose a description of the borrowers’ project and funds will be made available to borrowers only after the required total funding has been pooled or raised for any project. This means that if the borrower does not obtain 100% of the funds, it does not get any of the money.

Once a lender agrees to provide funds in its own name, the lender and the borrower enter into an agreement through a P2P lending platform operated by a P2P operator. P2P operators must provide a cooling off period of two business days to borrowers and lenders during which they may cancel their written agreements without the imposition of any penalty.

Limits and restrictions of P2P lending

  1. The borrower

The following entities cannot apply for a P2P lending licence:

  • A collective investment scheme and closed-end fund, as defined in the Securities Act 2005;
  • A public listed entity or any of its subsidiaries;
  • A person that proposes to access a P2P lending platform for further lending to other persons; and
  • Any other scheme as may be determined by the FSC.
  1. The lender

The activities of a lender on a P2P lending platform must exclude deposit taking business, in any form.

  1. The P2P operator

The P2P operator has no carte blanche in regards to the activities it can undertake on the P2P lending platform. It is restricted from carrying out the following activities in its own name:

  • Deposit taking business, in any form;
  • Lending; and
  • Providing or arranging for any credit enhancement or guarantee.
  1. The amount
https://www.ensafrica.com/Uploads/1%20-%20borrower%20lender.JPG

This limit does not apply to sophisticated investors (as defined in the Securities Act 2005) when they lend in any other currency through P2P operators to borrowers that are not resident in Mauritius.

It is to be noted that the reimbursement period for the lending through P2P lending platforms must not exceed 84 months.

Obligations of the P2P operator

There is an exhaustive list of obligations that the P2P operator has to fulfil: