We discussed in a previous article about the unfavourable position of prejudiced shareholders, more often being minority shareholders in Global Business Companies (GBCs), who do not benefit from the protection provided for in the Companies Act 2001 as regards prejudiced shareholders (https://plcj.net/en/prejudiced-shareholders-gbc-mauritius/).
The Finance (Miscellaneous Provisions) Act 2020 (Finance Act) which was adopted on the 7th August 2020 added a new subsection (n) to Section 143 (Duties of Directors) of the Companies Act 2001, which might be of interest to these minority shareholders.
Indeed, it is now the duty of a director of a company “to act at all times in a manner which is not, oppressive, unfairly discriminatory, or unfairly prejudicial to shareholders.”
The terms used in the new subsection clearly reflects the principle of prejudiced shareholders of Section 178 of the Companies Act 2001, and these provisions apply to GBCs unlike Section 178 which provides for protection and remedies to prejudiced shareholders which provisions don’t apply to GBCs.
Whereas this addition is a welcoming gesture to reinforce the protection of shareholders in GBCs, it is still a limited one in so far as:
- The duty of a director to always act in a manner which is not oppressive, unfairly discriminatory or unfairly prejudicial to the shareholders is a duty owed to the company and not to the shareholders (Section 143 (5) of the Companies Act 2011). Although a prejudicing act or behaviour of a director can be appreciated towards a shareholder, the duty being owed to the company means that an action shall eventually be entertained by the company and not by the shareholders.
- The penalty for a breach of this duty is a fine not exceeding 100,000 rupees and imprisonment for a term not exceeding 12 months upon conviction. Although these penalties are of a deterrent nature, there remains for the prejudiced shareholders of GBCs, seeking for remedy as shareholders, the same old uncertainties as regards to available action (same old alternatives to Section 178 such as a civil action based on tort against the director and/or the company?).
We therefore conclude that the amendments brought by the Finance Act is a step towards the enhancing protection of prejudiced shareholders in GBCs but it is clearly not sufficient. In our opinion, enabling the provisions and remedies provided by section 178 of the Companies Act 2001 to the benefit of shareholders in GBCs would align the treatment of these shareholders to those of domestic companies. We indeed find no more rationale for maintaining the current exemption which leads in our mind to a discriminatory and unwarranted treatment towards foreign investors choosing to carry out their activities through GBCs in Mauritius.
PLCJ Team – 20th October 2020