Turning east and west for wealth planning

Mauritius has a well-diversified and structured economy and has successfully emerged as a reliable international financial services centre over the past two decades. It has fully collaborated with the Organisation for Economic Co-operation and Development (OECD) and is positively assessed and appraised by the Financial Action Task Force, the International Monetary Fund and the World Bank.

Having made striding efforts and met international regulatory requirements, it is increasingly being used for collective investment schemes in India, China and various African countries. It continues to record good economic growth even with the worldwide slowdown. And Forbes’ eighth annual survey, released in December, shows Mauritius as the only African country among the top 40 economies worldwide for doing business.

Mauritius trusts are now being used by clients from mature European markets as well, despite the fact that clients and families in those markets often favour using succession mechanisms available in the established European centres where wealth has reached third, fourth or fifth generations.

Interestingly, some of the leading corporate trustees in established jurisdictions also use Mauritius to carry out their back-office operations of trust administration, simply because the country has qualified people and excellent infrastructure at a lower cost.

The growth in emerging economies will no doubt produce a new generation of wealthy families and high net worth individuals (HNWI) in these economies, and it is well known that both India and China have seen a huge increase in the number of HNWI.

Mauritius, historically, has attracted private clients from emerging markets who are the first generation of wealthy families and who need to preserve their wealth for their future generations. These clients are typically younger than their counterparts in the developed economies and the dynamic nature of Mauritius’ financial services industry often appeals to them.

International assets

Wealthy families in emerging markets often own international assets. So there is a need for asset consolidation to preserve and protect their wealth for future generations. These families are greatly influenced by personal circumstances, cultural and religious beliefs and other practices.

Mauritius is a country with diverse cultural and ethnic backgrounds with a blend of African and Asian origin. The country is culturally closer to clients from African, Asian and Middle East countries. However, the decision to set up a structure for a family does not rest only on these factors. It will require, first and foremost, the availability of excellent service providers with qualified and experienced professionals who are accessible to the client and who are able to deliver a timely and cost-effective solution.

The two major concerns of clients from Africa, Asia and the Middle East are disclosure of information regarding their trust and the risks of losing control over their assets. It is worth noting that trusts are not registered with any public body in Mauritius and consequently the public does not have access to the records of a trust.

This is important from the perspective of confidentiality. The trustee needs to be licensed by the Financial Services Commission (FSC), which has the obligation to conduct customer due diligence on all its clients according to norms recognised internationally.

Trust law in Mauritius addresses any concern relating to control of assets. Mauritian trust law provides for appointing the office of a protector whose role is to ensure a supervisory function over the trustees’ activities. The protector has powers that can be set out in the trust deed, which can include the power to appoint and remove a trustee.

Furthermore, regulations allow for setting up a private trust company (PTC), which is a company licensed by the FSC and authorised to act as a trustee to a certain number of family trusts. The client can appoint trustworthy individuals on the PTC’s board and can elect to own the PTC through a purpose trust. A PTC structure often gives great comfort to a settlor who is concerned as to control of a trust structure.

Foundations law

For clients from civil law countries who may be averse to trusts, Mauritius has enacted an act for foundations, which is a vehicle with features common to both a trust and a company. Unlike a trust, a Mauritius foundation is an incorporated entity with a separate legal personality. The foundation’s council supervises the administration and the founder may appoint their advisers or designate persons trustworthy enough to form part of the council.

Foundations are suitable for asset protection as they divest ownership of assets from the founder, and are a good alternative to the simple discretionary trust for preserving family wealth for future generations.

However, clients do not choose a jurisdiction simply for its legislation. The quality of advice to set up the wealth planning arrangement, the reputation and track record of the service provider, its international network, and the trust it can place in the service provider or its team, are also important factors.

Mauritius has established a good reputation internationally with the presence of international law firms, a robust and commercially aware regulator and the presence of numerous international banks. Clients can be assured that the jurisdiction has the necessary facilities and resources to ensure that they are adequately protected, receive professional advice and quality service.

It has a network of 39 tax treaties, which are already in force, and nine treaties, which have been signed and are awaiting ratification. It has 13 tax treaties with African countries and a treaty with both India and China among others. No doubt these treaties can enable an optimisation of wealth if proper structures are set up for a family having assets in the various treaty based countries.

Mauritius now plays a vital role in the private client world, where a new generation of ultra high net worth individuals is emerging. The jurisdiction has a good number of private client professionals and the STEP Mauritius branch has more than 200 members and a growing mass of students.

Wealth planners and their clients will find all the essential ingredients necessary for private wealth structures including the rule of law, adequate professional resources and robust asset protection.

Yuvraj Juwaheer is a partner at Bedell in Mauritius