MAURITIUS Law and Practice Contributed by: Gilles Athaw, Jason Barbe, Deeviya Rughooputh and Sushika Ramlugun, Bowmans
5.7 Rules Governing the Priority of Competing Security Interests In the event of insolvency, the Mauritian Insolvency Act 2009 provides the following ranking of claims of preferential creditors: • cost of the liquidator; • costs of compromises by the company with its creditors under the Companies Act; • payments made pari passu with first-ranking fixed and floating charges and mortgages inscribed for more than three years; • first-ranking fixed and floating charges and mort- gages inscribed for less than three years; • other secured creditors; and • all other unsecured creditors who have been proved in the bankruptcy or winding-up. When competing security interests arise, they are treated equally unless the lenders and the same bor- rower contractually vary their priority over the security by way of a subordination or intercreditor agreement. The subordination or intercreditor agreement will gen- erally provide that the junior lender will not receive payments from the borrower until the senior lender has been paid. The contractual provisions of a Mauritian law-gov- erned subordination agreement will survive the insol- vency of the borrower and will be recognised and given right in an insolvency procedure. 5.8 Priming Liens Under the laws of Mauritius, the most material secu- rity interests that arise by operation of law are special liens. These special liens confer a right on a creditor to be preferred above other creditors, including creditors under a mortgage deed. The most material special lien is the one which is granted to any bank established in accordance with the provisions of the Banking Act. Following a loan, an advance, or other banking facility provided by the bank, a special lien will be granted to the bank on the sum standing to the credit of all accounts of the borrower. Another special lien that arises by operation of law is the special lien granted to the seller of an immovable
such a guarantee could be restricted where it amounts to providing financial assistance. 5.4 Restrictions on the Target The laws of Mauritius restrict a target from providing a loan or guarantee or any form of security where the purpose of such a loan, guarantee or security is for the acquisition of the target’s own shares. In these circumstances, specific conditions must be adhered to by the target before it is permitted to provide any Except for the aforementioned restrictions, there are generally no other restrictions in connection with, or significant costs associated with, or consents required to approve, the grant of security or guarantees. 5.6 Release of Typical Forms of Security A security is generally released only when the secured obligation has been paid in full and all facilities which gave rise to the secured obligation have been ter- minated. However, when dealing with the release of mortgages and fixed and/or floating charges, an addi- tional procedure is required to ensure that the security is erased from the public registers of the Conservator of Mortgages. The erasure is formalised by a letter from the secured party to the Conservator of Mortgag- es confirming the discharge of the secured obligation, the release of the security and requesting the erasure of the security from the registers of the Conservator of Mortgages. such financial assistance. 5.5 Other Restrictions In respect of pledges and assignments, the secured party is required to return all documents delivered to it at the time of perfection of the security (which include share certificates, blank transfer forms or, in some instances, the bordereau), and counterparties will update their internal records to reflect the dis- charge and release. By way of exception, the parties can also mutually agree to release the security before the discharge of the secured obligation. This can be done by way of a release agreement entered into between the parties providing for the release of the security. The same pro- cedures as discussed above will apply for the release of that security.
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