Corporate Governance Chapter 5 Chapter 5 them might feel about influencing board decisions. The Companies Act, for example, requires a quorum at meetings to protect the rights of minority shareholders. However, a company’s constitution can override the requirement. 777. 778. 779. 780. 274 Insider trading. The 1988 Stock Exchange Act prohibits insider trading in Mauritius. The Securities Act of 2005 has replaced it in order to plug loopholes. The Securities Act of 2005 prohibits insider trading and prescribes punitive measures. Stakeholders informed the CRM that they know of no one who has been convicted of insider trading. However, the CRM did not find any provisions that specifically prohibit abusive self-dealing. Related-party transactions are relevant to Mauritius, because a small number of shareholders control the largest companies in the country. Most stakeholders say that the Mauritian stock market is limited to a privileged group of people and corporate investors. These, they claim, wield enough power to manipulate share prices to their advantage. Conflict of interest. The Companies Act of 2001 spells out instances of conflict of interest for shareholders and directors of companies. Directors, for example, may not compete with their companies or become directors or officers of competing companies unless their own companies approve. In cases where directors are interested in transactions to which their companies are party, they must disclose this interest. Furthermore, they must disclose the nature, extent and monetary value of the interest. They must also register all these interests with company secretaries. They could face prosecution if breaches of the appropriate laws occur. Capacity building for directors and shareholders. The CRM was informed that the MIoD has finally been established in Mauritius to train directors and shareholders and to familiarise them with their fiduciary duties and responsibilities. It is important that this training covers situations that can lead to conflicts of interest, particularly cross-shareholdings. It should also establish a qualification criterion for directors and endeavour to improve their skills in all aspects of corporate governance. GBL companies. GBL companies are important components of the Mauritian economy. They contribute about 4 per cent to the country’s GDP. GBLs fall into two categories: GBL1 and GBL2. There are no minimum requirements for establishing a GBL in Mauritius. The FSC, which supervises GBLs, told the CRM that they now require Corporate Governance GBLs, which are financial services providers, to have minimum capital requirements. Further, GBL2s have no reporting requirements and they are not subject to any taxes. However, GBL1 companies are subject to Mauritian taxes. Previously, it was difficult to determine whether they are corporate governance compliant. The CRM was told that, as part of the FSC’s new Risk-Based Supervisory Framework, corporate governance is now a requirement of the companies it supervises. The CRM was also told that one of the huge challenges the financial services regulator faces is capacity and that staff turnover in the sector was high because of the scarcity of skills in the sector. Rights of stakeholders 781. Consumer protection. The CSAR reports that laws, like the Consumer Protection Act of 1991, the Fair Trading Act of 1979 and the Hire Purchase and Credit Sales Act of 1964, protect consumers adequately in Mauritius. The Mauritian government even has units within the Ministry of Consumer Protection and Citizens Charter to protect consumers. It does so by enforcing existing consumer protection laws. However, stakeholders said that there were indeed consumer protection laws in place, but that enforcement was lenient. The CRM was also informed that there were few enforcement officers. 782. Employees. The Mauritian government has just replaced some of its outdated labour laws. For example, the Employment Rights Act 33 of 2008 has just replaced the Labour Act 50 of 1975. It became operational in February 2009. Similarly, the Employment Relations Act 32 of 2008 has replaced the IRA 67 of 1973. The latter governed employment relationships in Mauritius and served as the country’s benchmark. The former emphasises the processes for collective bargaining and the framework for conducting these processes. 783. However, stakeholders informed the CRM that there were indeed laws in Mauritius to protect employee rights, but that they are not enforced. Furthermore, the laws that are enforced, are not enforced effectively. They also noted that the employment laws were employerfriendly and employee-hostile. For example, there is no minimum wage or minimum wage act to protect employees from exploitation. Trade unions in the country have also complained about the challenge they face with the Public Gathering Act that forbids them to demonstrate and which contravenes the relevant International Labour Organization (ILO) convention. Trade unions also refute the assertion made by public officials that there is a cordial relationship 275