Changes to Listings on the Stock Exchange of Mauritius

Malcom Moller

30th Aug 2012

The Stock Exchange of Mauritius Ltd has sought to create unique products and services for its niche offshore market in Africa by introducing a new Chapter 18 (namely Chapter 18 in its Listing Rules), to cater for the listing of specialised debt instruments and Africa-focused Exchange-traded funds.

The Stock Exchange of Mauritius Ltd (“SEM”) was incorporated in early 1989 under the Stock Exchange Act 1988, as a private limited company responsible for the operation and promotion of an efficient and regulated securities market in Mauritius and became a public company on 6 October 2008.

SEM Today
SEM is now a member of the World Federation of Exchanges “WFE” (formally the FIBV). As a full member of theWFE, SEM has been acknowledged by its peers to meet the highest regulatory and operational standards. For example, in March 2010, SEM was designated by the Cayman Islands Monetary Authority (CIMA), an approved Stock Exchange by virtue of its membership of the WFE for the purposes of CIMA’s Mutual Funds Law, Banks and Trust Companies Law, Insurance Law, Companies Management Law and Securities Investment Business Law. Furthermore, as from 31 January 2011, SEM has also been designated by the United Kingdom’s Her Majesty’s Revenue and Customs (HMRC).as a “recognised Stock Exchange” under Section 1005 (1) (b) Income Tax Act 2007. As a result of this development, securities admitted to trading and listed on the Official Market of the SEM will meet the HMRC interpretation of “listed” as set out in Section 1005 (3) (a) and (3) (b) Income Tax Act 2007.

The SEM will be regarded as a ‘recognised Stock Exchange’ for Inheritance Tax purposes.This designation confers several potential benefits for SEM. For example, UK pension schemes will be permitted to hold securities listed on the official market of the SEM, giving companies and funds listed access to a larger market of sophisticated, well-capitalised investors.

The designation reinforces SEM’s attractiveness as a listing venue for global funds and specialised products. Securities listed on the official market of the SEM may be held in tax advantaged Individual Savings Accounts (ISA’s) and Personal Equity Plans (PEP’s) by UK investors. Holders of debt securities satisfying the Eurobond exemption and listed on the official market of the SEM are exempted from withholding tax on distributions underlying these debt securities. Inheritance tax advantages may accrue to UK holders ofsecurities listed on the Official Market of the SEM.

Growing interest in the SEM has led to inclusion in special indexes launched by index and data providers like Standard & Poors, Morgan Stanley, Dow Jones and FTSE to track the performance of emerging markets, thus, positioning SEM as one of the leading exchanges in Africa and a viable listing alternative to other listing jurisdictions, backed by Mauritius’ reputation as one of Africa’s most stable and consistently high-performing economies.

Chapter18
As part of its global strategy to gradually move away from an equity-based domestic exchange to a multi-product internationally oriented exchange, SEM, has introduced a new Chapter 18 (namely Chapter 18 in the SEM’s Listing Rules), to cater for the listing of specialist companies and specialist debt instruments, targeting qualified investors. This path represents a major shift for SEM from a domestic-equity-focused exchange to a multi-product-internationally-focused exchange aiming for listing of specialised debt instruments, Africa-focused exchange-traded funds and other structured products.

The Rules
Under the new Chapter 18 rules, a Global Business Company (“GBC1”) is now entitled to list on the SEM’s official market without a three-year track record requirement provided that:

i) it is able to demonstrate satisfactory experience in the management of its business and its sustained viability through a solid business plan;

ii) a market capitalisation of Ks20 million (approximately, USS7 million);

iii) compliance with all other relevant disclosure requirements; and

iv) adherence to the quarterly reporting requirements. For the purposes of any listing, a GBC1 entity may have less than 200 shareholders and less than 25% in public hands.

Similarly the issuer of any special debt instrument being listed need not have a three-year track record provided that the nominal value of debt is greater than Rs25 million (approximately USS9 million) and the issuer of debt instrument complies with other relevant disclosure requirements, including the quarterly reporting requirements. Holders of the specialist debt instrument may be less than 100. Unlike in other jurisdictions, there is no requirement under Mauritius law to appoint registered sponsors for the purposes of a listing and issuers may use their own internal resources to ensure pre and post-listing obligations.

Introduction of the Chapter 18 rules by the SEM is strategically aimed at attracting substantial foreign direct and indirect investment as well as international foreign players and issuers into Mauritius, via the global business sector and further consolidating Mauritius’ reputation as an international financial service of substance. The new rules will position SEM as a viable listing alternative to other listing jurisdictions and a fund-raising platform par excellence for investments into Africa and Asia.

The ability of GBC1 entities to now list on the SEM’s official market further enhances the appeal of such companies to those investors who are only entitled to invest in listed products. More importantly, in order for a GBC1 to avail itself of the low tax rate prevalent in Mauritius and benefits under the comprehensive network of double taxation treaties Mauritius has with other countries, a listing on the SEM is an important way of demonstrating business substance.

Mauritius’ regulatory and legal systems (British Common Law and Civil Code) have evolved “over the years”, not only facilitating business, but also allowing it to flourish and has earned a reputation as a world-class centre of commerce, featuring a business-friendly environment, a stable government, growing economy, an unmatched collection of affordable talent and intellectual capital in the financial services sector. Mauritius is a truly leading offshore financial centre in Africa, with a sterling reputation and legislatively independent, making it an ideal hub for international business.

Published by Appleby – Finance – Offsure Summer 2012