Quick 101: Mauritius Variable Capital Companies

Following the introduction of the Variable Capital Companies Act 2022 in Mauritius in April 2022, Sarwan Ramphul, Head of Private Equity services in our Mauritius office, provides a quick overview of the main features and characteristics of a Variable Capital Company (VCC).

A VCC is essentially a fund scheme which carries out its business through sub-funds and special purpose vehicles (SPVs), with its assets and liabilities segregated and ring-fenced.  The sub-funds and SPVs may have legal personality distinct from the VCC under which they operate.

A VCC Fund is comparable to a Protected Cell Company or an umbrella fund; however, a VCC Fund can accommodate both collective investment schemes (CIS) and/or closed-end funds (CEF) under one structure

Licensing

• A VCC needs to be authorized by the Financial Services Commission (Commission) to operate as a VCC Fund. It also requires the approval of the Commission to create sub-funds and SPVs.  An SPV differs from a sub-fund as it does not operate as a fund but rather as a vehicle ancillary to the VCC and its sub-funds.
• Each sub-fund shall operate as a Collective Investment Scheme or Closed-End Fund, subject to approval from the Commission.

Main Features

• The VCC needs to include “Variable Capital Company” or “VCC” after its name. The name of the sub-fund or SPV needs to include the expressions “incorporated VCC sub-fund” or “incorporated VCC special purpose vehicle” respectively.
• The assets and liabilities of the sub-funds and SPVs are ringfenced so that the assets of a sub-fund or SPV cannot be used to discharge the liabilities of the VCC or any other sub-fund or SPV, including during winding up, administration or receivership. However, the Mauritius Revenue Authority (MRA) may recover any income tax due by a sub-fund or SPV from the VCC.
• The VCC can issue shares in its sub-funds and SPVs, whose proceeds are comprised in the assets attributable to the sub-fund/SPV in respect of which the shares are issued.
• Dividends are paid in respect of shares of a sub-fund/SPV by reference only to the assets and liabilities attributable to that sub-fund/SPV.

Legal Requirements

• The VCC has to disclose that it is a VCC and ensure that agreements, contracts, documents or transactions that refer to its sub-funds/SPVs include the name, whether they have legal personality (if so, the registration number has to be provided), approval number and the fact that the assets and liabilities are segregated.
• A sub-fund/SPV may invest in another sub-fund/SPV. However, a sub-fund/SPV cannot invest in another sub-fund/SPV that has already invested in it.
• Separate records are to be kept for the VCC and each of the sub-fund/SPV and which sufficiently explain their transactions and financial position along with allowing for preparation of true and fair financial statements.
• The VCC may elect to present separate financial statements for its sub-funds/SPVs in accordance with IFRS or any other internationally accepted accounting standards by giving irrevocable notice to the Registrar of Companies and the MRA. Sub-funds / SPVs which have legal personality are required to file financial statements separate from the VCC.
• Where the VCC has made an election to present separate financial statements for its sub-funds/SPVs, each sub-fund/SPV shall be liable to income tax in respect of its own income.

Where the VCC meets the criteria of a Global Business Corporation, it is required to apply for a Global Business Licence. The Commission expects the VCC to appoint the same Company Secretary / Management Company for all of its sub-funds / SPVs.

How We Can Help           

We provide a full range of corporate and fund administration services and can assist with the formation of a new VCC structure or re-domiciliation to Mauritius of an existing fund.