Mauritius Investment Fund: formation, structure, banking

The Mauritius investment fund landscape is primarily governed by the Securities Act 2005 and the Securities (Collective Investment Schemes and Closed-end Funds) Regulations 2008. These statutes provide the legal architecture for two main categories: Collective Investment Schemes (open-ended) and Closed-end Funds (commonly used for private equity). A fund in Mauritius is typically incorporated as a Global Business Corporation (GBC) and must apply for a specific license from the Financial Services Commission (FSC). For sophisticated investors, the Professional Collective Investment Scheme (PCIS) and the Expert Fund categories offer a streamlined regulatory approach, exempting the fund from certain retail-oriented disclosure requirements, provided the minimum subscription levels and investor sophistication criteria are met.

Choosing between a CIS and a CEF depends on the liquidity profile of the underlying assets. CEFs are the preferred vehicle for long-term deployments in infrastructure, real estate, and private equity, where redemption is not permitted at the option of the investor. Conversely, CIS structures are better suited for liquid strategies, including hedge funds and UCITS-like products. Under the current regulatory climate, the FSC has increased its focus on the "fit and proper" status of promoters and the clarity of the investment mandate. Proposing a fund requires a comprehensive Information Memorandum (PPM) that details the investment strategy, risk factors, and the governance framework, including the appointment of a licensed Management Company, a custodian, and an auditor approved by the FSC.

Following the reforms initiated by the OECD’s Base Erosion and Profit Shifting (BEPS) project, Mauritius revamped its tax regime to eliminate "harmful tax practices." The legacy GBL1 license has been replaced by the Global Business Corporation (GBC). A Mauritius fund structured as a GBC is technically subject to a corporate tax rate of 15%. However, under the Income Tax Act, it can claim an 80% partial exemption on foreign-source income, including foreign dividends and interest, provided it meets specific substance requirements. This results in an effective tax rate of 3% or less. Unlike many "zero-tax" jurisdictions, Mauritius' status as a low-tax, treaty-compliant jurisdiction provides it with greater longevity and acceptance among institutional LPs and global regulators.

To qualify for this partial exemption, the fund must satisfy the FSC's core income-generating activities (CIGA) test. This means the fund must be managed and controlled from Mauritius and be able to demonstrate adequate physical presence. This includes employing people (directly or indirectly via a Management Company) and incurring a minimum annual expenditure in Mauritius proportionate to its activities. Furthermore, the fund must be administered by a management company licensed by the FSC, and its board must include at least two resident directors of sufficient seniority and professional standing to exercise independent judgement. For funds targeting African markets, the ability to leverage Mauritius' extensive DTAA network remains a primary driver for selection, despite the increased focus on substance.

The FSC has established clear guidelines for the "Management and Control" of GBC entities. This is not a "brass plate" jurisdiction; the regulator expects the mind and management of the fund to reside in Mauritius. In practice, this means that board meetings must be held in Mauritius, and at least two directors must be resident in the country. These directors are expected to provide more than just a signature; they must demonstrate an understanding of the fund’s strategy and participate in the decision-making process. For many international founders, this involves a partnership with professional resident directors provided by a management company, complemented by the founder’s own appointees.

Operational substance also extends to the fund’s service providers. A Mauritius fund is required to appoint a local administrator, a local auditor, and, in most cases, a local custodian. The administrator handles the NAV calculation, registrar services, and statutory filings, ensuring that the fund remains in good standing with both the FSC and the Registrar of Companies. While the investment advisor can be located overseas, the actual investment management function—if licensed in Mauritius—must have its own local substance. Xavion Capital notes that for larger funds, the FSC increasingly prefers to see a dedicated physical office space and direct employees, rather than sole reliance on the management company’s infrastructure, to bolster the fund's tax residency status in the eyes of foreign tax authorities.

Mauritius has successfully navigated its way off the FATF "Grey List" and the EU "Blacklist," a testament to its commitment to strengthening its AML/CFT framework. This has significantly improved the banking reality for fund managers. However, the onboarding process for a Mauritius fund remains thorough and time-consuming. Banks such as Mauritius Commercial Bank (MCB), SBM Bank, and international players like Investec or Standard Bank, require exhaustive documentation on the fund’s UBOs, the source of wealth of the promoters, and the expected flow of funds. The "Know Your Customer" (KYC) requirements are strictly aligned with international standards, and any ambiguity in the ownership structure can lead to significant delays.

For funds engaged in cross-border activity, particularly in high-risk jurisdictions, the bank will require a detailed explanation of the transaction monitoring and compliance protocols the fund has in place. It is often advisable to maintain a multi-banking strategy, utilizing a local Mauritian bank for operational expenses and regulatory capital, while using a global Tier-1 bank for the fund’s primary custody and transactional needs. At Xavion Capital, we emphasize that the banking relationship should be initiated concurrently with the FSC application. Waiting until the license is granted to start the banking dialogue is a common mistake that can delay the fund’s first closing by several months. The choice of bank often dictates the ease with which LPs can remit capital and how efficiently the fund can deploy its dry powder.

One of the unique advantages of Mauritius is the Variable Capital Company (VCC) structure, introduced via the Variable Capital Companies Act 2022. Mirroring successful models in Singapore and Luxembourg, the Mauritius VCC allows a single legal entity to operate multiple sub-funds and cells. This structure is particularly attractive for fund managers running diverse strategies—such as a mix of private equity, real estate, and liquid hedge fund strategies—under one umbrella. Each sub-cell can have its own distinct investment objective, investors, and assets, while the legal "ring-fencing" ensures that the liabilities of one cell do not attach to the assets of another.

The VCC can be structured as either a Collective Investment Scheme or a Closed-end Fund, and a single VCC can even host both types of structures simultaneously across different cells. This provides immense flexibility and cost-efficiency, as the administrative burden and regulatory reporting can be consolidated at the VCC level while maintaining asset segregation. Furthermore, the VCC can elect to have a separate legal personality for each of its sub-funds, or it can operate as a single legal entity where the sub-funds are simply segregated accounts. This innovation has positioned Mauritius as a direct competitor to traditional "offshore" hubs like the Cayman Islands or BVI, offering a more modern, regulated, and tax-treaty-compliant alternative for fund managers who require a sophisticated, multi-cell vehicle for global capital raising.