In a recent judgement delivered by the Commercial Division of the Supreme Court in Atelier Etude Limousin & Ors vs BPCE International Et Outre Mer & Anor 2014 SCJ 166 the court confirmed the prevailing practice that foreign companies could be granted fixed or floating charges by Mauritian entity as security for a financing.

The Supreme Court confirmed the validity of the Institutions Agréées Regulations 1988 (the Rules) under which a body corporate not registered in Mauritius and not having a place of business in Mauritius is stated to be an Institution Agrééeand may validly be granted and inscribe a fixed or floating charge. Also, that receivers and managers appointed by such foreign entities pursuant a fixed or floating charge was valid. The argument which was brought forward before the Supreme Court was that the Regulations was ultra vires Article 2202-02 of the Civil Code and that a foreign entity had to be a foreign banking or financial institution in order to be able to inscribe a fixed or floating charge in Mauritius. This argument was rejected by the Supreme Court. The decision is welcomed by the Mauritian practitioners who have for over two decades relied on these Regulations to structure transactions and secure an impressive number of financing particularly in the Financial Services Sector.

The judgment also confirms one of the views we had expressed in a newsletter circulated following the introduction of the Insolvency Act 2009 (the Act) in relation to the appointment of receivers following the introduction of a new definition of “charge”. The definition of the term “charge” in the Act is extremely wide and includes: “a right or interest in relation to property owned by a debtor, by virtue of which a creditor of the debtor is entitled to claim payment in priority to other creditors”.

In our then newsletter we had stated “any document under private signature (whether done in Mauritius or overseas or governed by Mauritius law or any foreign law, whether inscribed at the Conservator of Mortgages or not) will now qualify as a “charge”. The protection afforded by the mandatory provisions as to the formalities under the Code and the inscription at the Conservator of Mortgages are done away with in so far as Insolvency procedures are concerned. The new definition of “charge” also has repercussions as regards the possibility of appointing a receiver over the assets of a company. Under the Act, receivers may be appointed  by any person entitled to the benefit of an instrument that creates a charge . The consequence, in practice, of the new definition of a charge under the Act, is that a receiver over the assets of a company may be appointed by anyone (including any individual, whether a Mauritian citizen or a foreigner) pursuant to any document under private signature which entitles a creditor of the debtor to claim payment in priority to other creditors. The Financial Institutions will have to re-assess the risks on various trade financing in the light of this new risk”.