Amal AUTAR, the Executive Director of MITCO Group had been invited in his capacity as Chairman of the Mauritius branch of the Society of Trusts and Estate Practitioners (STEP) to write an article on the ‘Mauritius as a Trust and Estate Planning jurisdiction’.
From humble beginnings, we have come a long way and no doubt, the reputation of Mauritius as a leading IFC in the region is already well established. Be it as the most efficient tax route to India, preferred Gateway for investment into (and out of) Africa and last but not least, as a Trust and Estate Planning and Private Wealth Management Centre for Africa.
Mauritius has consistently earned international accolades and number one ranking in Sub Saharan Africa in major international indices such as World Banks Ease of Doing Business, Global Competitiveness Report, Mo Ibrahim Index of African Governance and Transparency International, just to name a few.
Undoubtedly, the main factors which have contributed to the success of Mauritius as an IFC of substance have been a robust regulatory framework, political to good governance, attractive fiscal regime coupled with the network of Double Tax Treaties, large pool of qualified professionals and to some extent, lower costs of doing business.
However, undeniably the global environment has changed dramatically over the last five years and this has led to a paradigm shift in the trust industry. We are evolving in a new era with increasing challenges - such as FATCA, CRS, BEPS, increased transparency, public register of trusts - which will definitely have an impact on the future of IFCs and Mauritius will be no exception.
Against such challenges, entirely new ways of trust, estate and succession planning solutions will therefore emerge, and fresh opportunities will certainly present themselves. Therefore, Mauritius must be geared to wave on those opportunities through the right policies and strategies so that it remains on par with - or even more competitive than - other IFCs. In short, we have to re-imagine and shape our future.
The trust and estate planning industry has been dynamic and innovative since its creation in 1992 with the enactment of the Offshore Trusts Act 1992 which has since been replaced by The Trusts Act 2001. Our trust legislation which allows for the setting up of Private Trust Companies. In fact, for more sophisticated individuals and possibly those who would feel more comfortable retaining a degree of control over the trust assets (of whatever type), a Private Trust Company (PTC) may be appropriate.
Over the last decade professional trustees in IFCs have become far more cautious in the way they exercise their powers. This is for two reasons. First, as trusts mature, there have been a number of actions against trustees by creditors, beneficiaries and settlers, which have highlighted the trustees' duties to these parties and the consequences of following the settlors' instructions blindly without considering the other interesting parties. Second, there have been a number of mandatory guidelines issued by regulatory authorities detailing how the responsibilities of trustees should be fulfilled.
The result of these developments is that where a trust has been set up to hold assets other than a simple investment portfolio - for example the family business or the family home - the simplest transactions become complicated as the trustee seeks legal advice and/or indemnities from beneficiaries and potential beneficiaries. Trustees are reluctant to make new investments in non-standard assets.
Furthermore, another trend is for wealthy families to take more control over the management of their wealth by establishing family offices which look at all aspects of wealth management and inheritance planning for the family.
Basically, a Private Trust Company (PTC) is a company formed to act as trustee to a limited number of trusts, either for the benefit of a single family, or for the benefit of different branches of a family or for distinct (but related) family groups. The administration of the PTC is outsourced to licensed service providers. It is the Directors of the PTC that carry out their duties on behalf of the company which will be the trustee of the trust(s). The Board of Directors may be drawn from the Settlor's own family, his close advisers or others. Usually, at least one Director is provided by the chosen licensed trust company in order that he may fulfil his duties under the law but also provide practical and technical advice to the Board.
A trust company owned by the 'family' can afford to be more flexible in its decision taking compared to a third party trustee which might need to seek indemnities from all beneficiaries before major decisions, The involvement of the settler or a close family member or close personal advisors on the board of the trust company will allow the actions of the trustee to be closely monitored by the family.
There is no public register of Directors or Shareholders of the PTC. The confidentiality of information provided to the Financial Services Commission for the purposes of licensing is specifically protected by law. There is no registration of the individual underlying trusts.
The family owned PTC will be more comfortable for underlying trusts to hold higher risk assets such as trading companies than a third-party trustee would be.
However, it is worth noting that the Financial Services Commission (FSC) is very clear that the responsibility for ensuring compliance with the terms of the licence rests with the appointed Licensed Management Company. The PTC has to provide a list to the FSC annually of the trusts for which it acts.
With a view to further diversifying our product spectrum, the Financial Services Act has been amended in 2015 to provide for the Overseas Family Office which caters for the domiciliation of High Net Worth single family and multifamily offices. Fuelled by the wealth boom, cross border investments and population growth in Africa, Middle East, India and China, the number of high net worth and ultra-high net worth families, has skyrocketed. Built on traditional and cultural values. most businesses in those regions tend to be family run. The number is growing fast at an estimated 8% per annum. One can see the importance of family businesses to the stability and growth of those economies.
This offers an opportunity to Mauritius to attract the family wealth management business as it already has a well-established reputation as an IFC of repute and substance, a high-end tourism destination, a successful Integrated Resort Scheme (IRS), political stability, a pool of qualified professionals and last but not least, cost efficiency.
There are a number of classic location available including New York, London, Monaco, Geneva and Hong Kong. The new international financial centres of the Middle East are now gearing up by introducing family office legislation to fill the geographical void between Geneva and Hong Kong.
This is where Mauritius can step in. When looking to decide where to set up the private office, families in India, China and the Middle East will inevitably look at Mauritius given its strategic geographical location and acting as a Gateway between Asia and Africa. Mauritius is just four hours behind Hong Kong and the same number of hours ahead of GMT. Accordingly, for a family based largely in Africa, Asia or the Middle East, we are very much at the centre of their world.
Professional Trustees in Mauritius have all the expertise needed to provide a complete range of trust, tax and wealth management services to high net worth Families. In one central office, dedicated to serving the family, all the financial affairs can be managed and all the 'concierge type' travel. hotel and other arrangements taken care of. Mauritian Trust companies have built up considerable expertise in advising clients on global trust and estate planning, business succession and administration of trust (including PTCS) and Family Office.
Finally, Mauritius has also promulgated a Foundations Act since 2012 to cater for the setting-up of Private Foundations in Mauritius.
Undoubtedly, the strategy for the future growth of Mauritius will be geared towards Africa. The recent amendment to the Indo-Mauritius DTA has been the wakeup call and has prompted the industry to re-engineer their business model and marketing strategy with focus on the African continent.
It is estimated that Africa is home to around 165,000 high net worth individuals (HNWIs) with a combined wealth holding of US$860 billion and this number is set to increase at a rate of 7% as a result of continuous economic development and urbanisation. The wealth of these families is often intrinsically linked to the underlying family businesses and professionals assigned to manage this wealth need to not only maximise investment profitability but to also meet the estate and succession planning needs of the patriarchs of those families, while ensuring sustainability and growth of the family enterprise.
Mauritius would therefore have to maintain its leverage on its fiscal and non-fiscal inherent advantages and reposition itself into a high value jurisdiction to tap into the tremendous opportunities that the increase in wealth across the continent will create. The future of Mauritius as the 'Shining Star in the Indian Ocean' is promising.