The Foundations Act 2012 (the Act) creates a legal framework for the registration of foundations in Mauritius. A foundation is a legal entity with hybrid features of a company and a trust, it can be a viable alternative vehicle to a trust for parties coming from civil-law (including Islamic law) countries where the common-law trust concept may not be familiar.
Uses of foundations
Foundations may be used in cross-border structures that fall into two main categories: charitable and non-charitable. Foundations may have a combination of charitable and non-charitable objects.
Mauritius Foundations are an alternative to Trusts and Private Trust Companies for High-Net-Worth clients willing to stay in charge of their assets while decreasing the annual cost of their structures. A Foundation is one of the preferred private structures used by High Net-Worth Individuals to cater for their succession planning and inheritance planning, private wealth management, limited liability status and asset-holding strategies.
Setting up a Mauritius Foundation, a reputable offshore jurisdiction, can provide numerous advantages to a Founder as well as Beneficiaries.
How we can help you in setting up your Mauritius Foundation
As a duly licensed Management Company, Venture Corporate Services (Mauritius) Limited accompanies you in establishing your Foundation in Mauritius, Africa’s leading International Financial Centre.
Our services include:
- Understanding your needs if the establishment of a Mauritius Foundation is right for you;
- Provision of Members of the Council;
- Drafting of Foundation Charter and other related documents;
- Provision of accounting and tax compliance services; and
- Provision of qualified Company Secretary services.
Charitable foundations
A charitable foundation has as its exclusive purpose or object (a) the relief of poverty, (b) the advancement of education, (c) the advancement of religion, (d) the protection of the environment, (e) the advancement of human rights and fundamental freedoms, or (f) any other purpose beneficial to the public in general.
Non-charitable foundations
A foundation may engage in any lawful business, including asset or investment holding and trading. Foundations are commonly used by onshore clients and intermediaries based in civil-law (including Islamic-law) jurisdictions in the following structures:
- Asset protection: an asset-protection foundation allows the founder to protect and preserve assets from future creditors by placing the property into a foundation so that the founder no longer has ownership of the endowed property and the property is therefore not available for creditors.
- Shariah compliance: since foundations (as compared to trusts) are better understood by investors from civil-law jurisdictions, foundations can be useful in Shariah-compliant structures. A Shariah-qualified investment advisor is appointed as a member of the council.
- Asset holding and succession planning: a foundation holds underlying companies, which in turn own diverse assets. Ownership of these assets is no longer with the founder and the foundation can last in perpetuity.
- Investment structure: ownership of the assets passes to the foundation but the founder, as a council member, retains some control. A committee that reviews the investment policy of the structure may be set up and is supervised by the council.
Parties
The ‘founder’ is defined as a person who endows a foundation (i.e. who passes the title in property absolutely to a foundation) with its initial assets. The endowment may be made by a covenant (or otherwise) with or without consideration.
‘Beneficiary’ is defined as a person who is entitled to benefit under a foundation, or in whose favour a power to distribute any foundation property may be exercised. However, a beneficiary does not have any beneficial interest in the foundation. An individual may be a beneficiary of a foundation of which they are the founder.
‘Protectors’, a foundation may have a protector or committee of protectors who are appointed in accordance with the charter and who have powers and duties as specified in that charter.
The ‘Council’ of a foundation administers the property and carries out the objects of the foundation. A council has at least one member ordinarily resident in Mauritius. To avert conflict, any officer or their spouse, or a person in a direct or collateral line of relationship with such a person, may not be a member of a council. The appointment of a person as a member of a council is not valid unless that person, before their appointment, has signed and delivered to their appointer their written consent to be a member.
The council must run the foundation in accordance with the Act, its charter and articles (if any), supervise the management and conduct of the foundation, act honestly and in good faith to promote the best interests of the foundation, and exercise the care, diligence and skill that a prudent person would exercise in comparable circumstances. The charter or articles, if any, may specify the duties and powers of a council and provide additional duties and powers.
The Charter
A foundation’s charter must be in writing and will specify, inter alia, the name of the foundation; the details of the founder; the purposes and objects of the foundation; the endowment of the property that will be the initial asset of the foundation; the beneficiary of the foundation or the way they may be appointed and, if applicable, the way they may be removed; the period, if any, for which the foundation is established; the name and address of the secretary; and the address of the registered office of the foundation.
The charter may also provide for anything else concerning the foundation, including the reservation of rights or powers of the founder.
Where the charter provides that articles shall or may be made by the council, the articles may include provisions (a) relating to the distribution of assets to be made by the council, (b) for the identification of any initial or additional beneficiary, (c) for the identification of the remaining beneficiary on a winding-up of the foundation and the distribution of assets to the remaining beneficiary, and (d) for the regulation of the affairs of the council.
The article is signed by each member of the council.
Registered office and secretary
Every foundation must have a registered office in Mauritius to which all communications and notices are addressed, and which constitutes the address for service of legal proceedings on the foundation. Moreover, every foundation needs to have a secretary, which must either be a management company licensed by the Mauritius Financial Services Commission (the Commission) such as Venture Corporate Services (Mauritius) Limited or a person resident in Mauritius and authorised by the Commission.
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Taxation of foundations
A foundation will be considered non-resident for tax purposes if they are centrally managed and controlled outside of Mauritius and shall be liable to tax only on its chargeable income attributed to its Mauritian source income at the rate of 15 %. The Mauritius Revenue Authority issued a statement of practice (SP/24/21) on 24 August 2021 that provides that a Foundation would have its central management and control in Mauritius when the following three conditions are met:
- The founder is resident in Mauritius; and
- A majority of the beneficiaries appointed under the terms of the Charter or will are resident in Mauritius
A foundation which throughout an income year is centrally managed and controlled outside of Mauritius will not be liable to tax in Mauritius on its foreign source income.
Foundation of a charitable nature are exempt from tax in Mauritius.
Please contact us on office@venturecorporateltd.com for information about Foundations.