Private Equity structures – Mauritius
The Private Equity (PE) activity has grown in relevance over the years to become an ecosystem in its own right. This involves the active participation of fund managers, legal and tax advisors, placement agents, consultants, auditors, administrators, gatekeepers and other market players.
Mauritius has gradually developed its legal framework and fiscal regime within a stable political environment and is today recognised as having the most conducive platform for Private Equity investing across Africa.
PE investment firm
as a company
A private equity investment firm can be established as a private limited company or a public limited company if listing on an exchange is a possibility. Both will hold a Global Business Licence (GBL) to acquire equity and finance the operation of an underlying investment located outside of Mauritius.
Types of Shares
The GBL company may raise funds for its investments through the issue of redeemable ordinary shares, redeemable preference shares and/or other types of shares offering non-voting or restricted voting rights.
This illustration depicts a simple PE structure conducting an LBO acquisition and funding a VC project.
As a Protected Cell Company (PCC)
A private equity investment firm can be established as a PCC in Mauritius. The PCC is a single entity which includes a core and an unlimited number of cells known as protected cells. Each cell may have a distinct objective and investment strategy.
As a Limited Partnership
A private equity investment firm can be setup as Limited Partnership which will be governed by a partnership agreement entered between one or more general partners (GP) and at least one limited partner (LP). The GP is involved in the day to day management of the LP and is liable for all debts and obligations incurred by the limited partnership.
The limited partnership may choose to have a separate legal personality, which means that it shall own the assets of the partnership and shall be taxed in the same manner as a corporate entity in Mauritius. Where the limited partnership is established as a look-through (tax-transparent) vehicle, it will not be subject to income tax as a corporate entity and the limited partners will be taxed in their personal capacity on the profits derived from the limited partnership’s operation.
Fund Licensing Features
In order for a private equity to be recognised as a fund, it has to acquire a CIS licence or a closed-end fund (CEF)
There is one category of CIS which has been predominantly designed to accommodate the operation of a non-listed private equity fund. Such category of CIS allows the private equity fund to:
- Hold more than 10% of illiquid assets
- Implement long lock-in period to prevent early redemption
- Allow initial and subsequent closings through private placements
- Invest in real estate
- Using LBO and senior debt strategies
- Invest in pledged assets
A CEF is entitled to the same exemption as a CIS operating as a private equity fund.
The approval for a CEF is granted to a private equity fund where a listing on a stock exchange is envisaged or where the fund has more than 100 shareholders.
A listed CEF is subject to the reporting issuer rules and regulations and similar rules and regulations apply to a CEF that has gone through a reverse listing by way of a public takeover through an exchange of securities.