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18 May 2020
BY Anne Sophie Lenette

Mauritius: companies in financial difficulty and the COVID-19 (Miscellaneous Provisions) Act, 2020

Due to the global Coronavirus (COVID-19) pandemic and its effects on the Mauritian economy, on 15 May 2020, the Government of Mauritius enacted the COVID-19 (Miscellaneous Provisions) Act 2020 (the “Act”) which is intended to amend a number of existing laws so as to cater for the changes and impacts brought by the pandemic on the country, including the financial distress that certain companies are and/or will be facing during the pandemic.

Duty of directors on Insolvency

Pursuant to the amendment brought by the Act to section 162 of the Companies Act, 2001 (the “CA”), during the COVID-19 period (ie, the period ending the 1 June 2020 or such further period as may be prescribed), the Registrar of Companies may determine that the duty of directors on insolvency will not apply (the “CA Period”). Such duty entailed that a director who believed that the company would be unable to pay its debts as they fall due would have had to call a meeting of the board of directors to consider whether the board should appoint a liquidator or administrator to the company.

Before the amendment brought to the CA by the Act, if a director

  • had failed to comply with the above duty;
  • at the time of such failure the company was unable to pay its debt; and
  • the company was subsequently placed in liquidation,

the court would have been entitled, on the application of the liquidator or of a creditor of the company, to make an order that the director be liable for the whole or any part of any loss suffered by creditors of the company as a result of the company continuing to trade.

In effect, the amendment to the CA discharges a director of his liability via a vis creditors for not putting the company into liquidation or administration during the CA Period, when the company was insolvent.

Resolution to wind-up a company

Some important amendments have also been bought to the Insolvency Act, 2009 (the “IA”). One of these concerns the resolutions passed by the shareholders of a company to wind-up the company (the “winding-up resolution”). The Act provides that, except for companies holding a global business licence (“GBC”), a winding-up resolution passed during the COVID-19 period or three months after (the “resolution period”), will be deemed not to have been passed and will be void. In essence, sections 100 and 137 of the IA have been amended to prevent the passing of a winding up resolution during the resolution period.

Also, as regards voluntary administrations, the Act amends the IA to prevent the creditors of the company at a watershed meeting to resolve to wind-up a company. A “watershed meeting” is a creditors’ meeting called by the administrator to decide the future of a company and, in particular, whether:

  • the company and the creditors should execute a deed of company arrangement;
  • the administration should end and the control of the company should be returned to the directors; or
  • the company should be put in liquidation.

Accordingly, during the resolution period, the only way of putting a domestic company (as opposed to a GBC) into liquidation, is by way of a winding-up order made by the court.

Creditors’ meeting

In line with the above amendments, the Act provides that the provisions of the IA dealing with the creditors’ meeting in the context of a creditor’s voluntary winding up, namely section 142 of the IA, will not apply during the resolution period.

A further amendment made to the IA in respect of creditors’ meeting relates to the first creditors’ meeting held by the administrator of a company in voluntary administration. Normally, when a company is put in voluntary administration, the administrator must, within 10 days of the start of the administration, hold a first creditors’ meeting to decide whether to appoint a creditors’ committee and decide whether to replace the administrator. With the amendments brought to the IA , where such period of 10 days expires, or falls wholly or partly, during the COVID-19 period, the first creditors’ meeting will now be held within a period of 30 days after the COVID-19 period lapses.

Statutory demand

A statutory demand is a formal demand to pay, which is issued by a creditor to a company in respect of an amount owed by it. Failure to comply with a statutory demand will create a presumption of inability to pay debts which is a ground for a winding-up petition.

Prior to the Act, the minimum prescribed amount for a statutory demand was of MUR100 000. Such minimum prescribed amount has now been increased to MUR250 000.

Furthermore, prior to the Act, the IA required the debt to be paid within one month of the date of service of the statutory demand. With the amendment brought to the IA such delay to pay the debt has been extended to two months.

Pursuant to section 181(2) of the IA, within 14 days of the date of service of the statutory demand an application could be made to the court to set aside the statutory demand. The 14 days has been extended to 28 days.

The effect of these amendments is that companies are given more time to pay debts exceeding MUR250 000 and creditors cannot put a company in liquidation for sums of less than MUR250 000.

It is apposite to note that the amendments made to the IA in respect of a statutory demand are not restricted in time and do not apply for the COVID-19 period only. Such amendments are permanent.

Appointment of receivers

The IA has also been amended so that during the COVID-19 period, no receiver or receiver and manager can be appointed under any instrument in writing. Any such appointment by instrument during the COVID-19 period shall be of no effect and shall be void.

The only way for a lender under an instrument to appoint a receiver during the COVID-19 period would be to apply to the court for such appointment.

Effective date

The above amendments to the CA or the IA will have a retroactive effect and will be deemed to have come into operation and become effective on 23 March 2020.

For a summary of recent legislative amendments introduced in Mauritius in relation to COVID-19, please click here.

Reviewed by Thierry Koenig SA, head of ENSafrica (Mauritius).

For more information, please contact:

Anne Sophie Lenette
Associate | Mauritius
+230 5728 7199

COVID-19, also known as the Coronavirus, is an infectious disease caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) that was declared a pandemic by the World Health Organization on 11 March 2020. The disease has since been reported in over 190 countries.