Introduction

The Finance (Miscellaneous Provisions) Act 2024 has introduced significant changes to shareholder protection under the Companies Act 2001. Pursuant to these amendments, Sections 178 and 179 are now applicable to companies holding a Global Business Licence (GBCs).
Mauritius, as an international financial centre, has attracted a lot of international investors using the jurisdiction to structure their investments into Africa and other regions. These foreign investors are in most cases required to incorporate a GBC or an Authorised Company (AC). Before these amendments, prejudiced shareholders of such types of companies did not benefit from the same level of protection that shareholders of a domestic company do. This article explores the mechanisms under these sections, the previous limitations for GBCs and AC and the benefits of recent amendments.

Mechanisms Under Sections 178 and 179

Section 178 of the Companies Act 2001 provides a legal remedy for shareholders who believe that the company is being managed in a way that unfairly harms their interests. To seek relief under this section, the claimant must demonstrate that the company's conduct is oppressive, discriminatory, or prejudicial. This involves showing that the company’s actions have significantly undermined the shareholder’s interests or failed to adhere to fair practices.
When the Court finds that a company’s conduct meets these criteria, it has the authority to issue various remedial orders, designed to rectify the situation. These include ordering the company or a third party to purchase the claimant’s shares, which provides an exit strategy for the affected shareholder. The Court may also impose financial compensation for any losses suffered as a result of the company’s conduct. Additionally, the Court can regulate future company operations to prevent ongoing harm, amend the company’s constitution to address structural or procedural issues, or even appoint a receiver to manage the company temporarily. In severe cases, the Court might order the company to be liquidated if the situation is deemed irreparable. Last but not least, the Court has the power to invalidate any improper actions or decisions made by the company or its Board and correct inaccuracies in the company’s records.
Section 179 governs the process for amending a company’s constitution when such amendments are mandated by the Court. Once the Court issues an order for a change in the
constitution, these changes must be complied with and cannot be altered without further Court approval. The amendments carry the same legal weight as if they had been approved by a shareholder resolution. The company’s Board is required to file both the Court’s order and the updated constitution with the Registrar within 14 days, ensuring that the changes are officially recorded and legally binding.

Previous Limitations for GBCs and ACs

Before the recent amendments, Sections 178 and 179 did not apply to companies holding a Global Business Licence or those classified as ACs. Shareholders in these entities had to pursue derivative actions under Section 170 of the Companies Act. Derivative actions allow shareholders or directors to seek Court permission to initiate or continue legal proceedings on behalf of the company. This process is more complex and time consuming, requiring the Court to evaluate the likelihood of success, cost-effectiveness, and prior actions taken by the company.
To pursue a derivative action, shareholders have to apply to the Court for permission. They must demonstrate that the company or its subsidiary either intended to avoid engaging in proceedings or that it was in the company’s best interest for the shareholder to manage the proceedings. The company or subsidiary have to be notified, giving them an opportunity to participate in the legal process and indicate their intentions regarding the proceedings.

Benefits of the 2024 Amendments

The section of the Finance (Miscellaneous Provisions) Act 2024 which amends the Companies Act came into operation on the 27 July 2024 and now includes GBCs and ACs under the protections offered by Sections 178 and 179, reversing the previous exclusions. This change simplifies the process for shareholders by allowing them to directly seek relief under Section 178 for oppressive, unfairly discriminatory or prejudicial treatment, rather than navigating the more complex derivative action process. It ensures that shareholders across all types of companies have access to consistent legal remedies, promoting fairness and accountability in line with the principles of corporate governance.
The inclusion of GBCs and ACs under these provisions enhances shareholder rights and provides a clearer, more accessible pathway for addressing grievances related to prejudiced treatment. Since the application of Section 178 is subject to the constitution of the relevant company, shareholders and more specifically minority shareholders of GBCs and ACs should
review their constitutions and compliance practices to align with these new legal standards and ensure that their constitution allows them to benefit from this additional protection.

Conclusion

The 2024 amendments significantly enhance shareholder rights by bringing GBCs and ACs under the same protections previously reserved for domestic entities. This comprehensive approach not only simplifies the process of seeking justice but also ensures that all shareholders are uniformly protected, fostering a more equitable corporate environment and reinforcing the position of Mauritius as an international financial centre to structure investments.