Acquisition of business in Mauritius – how to avoid the traps.

While reading the news or browsing through online forums and other social media, one often comes across sad stories of foreigners getting trapped after buying what promised to be a lucrative business venture. Victims are often investors who want to invest and settle down in Mauritius. And often they end up with little choice than to pack up and return to their home country empty-handed. Once home they start from scratch all over again as all funds and assets have been spent up while pursuing their Mauritian dream.

For such people Mauritius then, with reason in some cases, becomes a land full of evil-minded businessmen. It is of course unfair to generalize and categorize Mauritius as crook-island, but the blow can be so hard at times that such negativity can be understood.

Let me reassure you that Mauritius is far from being as bad. Our island is not full of sharks circling around and around (even if we’re surrounded by the ocean!). I often say it: foreign investors often tend to be naïve, they are not totally wrong either. Often the warmth and genuine smile of a Mauritian are enough to hook you. Careful though, for we are not of those saints who remain closed to the wonders that money can buy. Mauritians are normal human beings with the same weaknesses as anyone else and we get tempted with money as much as any person would. So, if we have to blame anyone, let’s blame human nature.

It is therefore paramount that you do your homework well before buying a business entity. Make sure that you know the rules in the country, and before you even consider depleting your piggy bank, be certain that the business proposals you get are clean and straight forward enough. This is no big news if you are a proven business person. But sadly, this is how a lot of first-timers have lost all their fortune. If you are a beginner, double check everything that you hear and see and be twice as careful when negotiating a deal. Remember, you are new to this world and, you are doing business on foreign land.

The story usually begins with an online advert. This is when Mark Twain’s paradise island starts to sing sweet and hypnotizing words to your ears. One often surrenders to these songs and will not find peace until the perfect business offer is found. Just a few mesmerizing words by email, coupled with a few snapshots and photos of the business venture you grow so keen on, are all it takes for you to move over and start breaking into your savings. So far are you from thinking that bad things can happen in heaven. Let me share a few tried and tested tips on how to spare yourself from the devil’s claws.

Number one: Do not base yourself on a mere proposal document or the words of the seller. Try to come across to check out all the information yourself and assess the whole venture with minimal influence from the other side. Crooks in Mauritius have a well developed sense of speaking beautifully and sending you conveniently-angled photos. Needless to say that they also master the art of selling in every sense of the word. I will take it even further to say that they will not hesitate to sell their heart if the gains are good enough. Can you picture them? Gentle and understanding eyes, so much warmth in their smile and soon becoming that long awaited best friend that you (and even your precious family) ever wanted. Behold, this is not what you need to be looking out for when closing a deal. Is this all it takes to let thousands, if not millions of dollars or pounds go down the drain? If you think this is not it, then refrain from blindly trusting all the information you are being flooded with. Stay away from emotional ties – we Mauritians are good in developing these. At the beginning, place a fair enough distance between you and the seller. Do not hesitate from asking all the questions that you have, even if some of them can be a bit embarrassing. The person is selling a business off as he/she is leaving? Where to? Why? To which country ? Double check the responses. After all, you are the one who will foot the bill and you are entitled to the answers.

List down your questions alongside all the elements that need to be double checked. For instance, screen the title deeds of all assets, trade licenses, and lease documents (if the commercial space is on rent). In the latter case, ensure that you touch base with the landlord and seek his/her approval for you to take over the rental. Refrain from betting on luck and good fortune but adopt a rather scientific approach based on rationality. I am here only re-iterating the importance of being cautious to prevent any unpleasant surprise afterwards. I certainly know of a few cases where the land lord rejects the new business owners after a few months on the grounds that was not aware that the rental of premises was taken over by someone else. And it’s already too late! Let me remind you that the Non-Citizens (Property Restrictions) Act imposes strict conditions on acquisition of immovable property by foreigners. Most business take-overs are done through the transfer of lease agreements, and not acquisition of the building space that is being used by the enterprise. Take note that the business seller will always claim that the landlord is aware of the sale and is supporting it totally. Nothing beats getting direct confirmation though. Ideally, you must aim to get written acceptance from the landlord, or better still, a promise to lease signed by the latter.

Mauritius is known for its flexibility when it comes to statutory obligations. There is no real accounting framework per se but chartered and/or certified accountants must have completed a professional qualification in the field. Most common in Mauritius are the Association of Chartered Certified Accounts or the Association of Chartered Accountants. Simplicity and ease of business what makes the island a preferred business destination Your tax return has four pages, and now it simply needs filling a wizard-based form on the web. Having said this, all companies are responsible for proper record-keeping. Authorities indeed have the right to visit your office for a surprise check. It is common practice for small and medium enterprises not to maintain their books properly nor follow the rules. Getting the required paper trail then becomes almost impossible. I’m sure what I just said may come as a surprise to you, but this is what you will find in most cases down here. So then, what to do to know the real financial position of the company? I would strongly advise you to hire an auditor or consultancy firm to get this fundamental side of your deal sorted out. They will ensure that all debtors and creditors are known, identify any form of mortgages on the company; dig out any unpaid bills as well as any gaps in tax returns or other statutory obligations (these can be subject to huge penalties). Rest assured that the seller will facilitate this exercise, and pay off any pending bills if he indeed has nothing to hide.

As a consultant, I am unfortunately disadvantaged in contrast to the business seller, given that the latter has often already won the other party’s heart over by the time they come to me. A few of my clients have even been reluctant to get into the details of the deal with me, since they trust the seller fully. This then becomes quite a barrier and prevents us to work towards effectively protecting the interest of our client.

These few precautions to be taken before closing a deal are of course not exhaustive. I simply aim to draw your attention to the fact that it is certainly possible to counter check information that you get at different levels and from different sources. There are of course many more areas to scrutinize before taking the big leap. Another example would be the human resources. Check whether each and every staff member has a written contract. Whether the tax on salaries is effectively being withheld and remitted to revenue authorities. Check the social declarations and remittances.

Last but not least, remember, you are buying a business for its potential, not for what it is. Finding a successful business at a low price is hardly possible these days. Instead, try to switch your focus on the ones that can be transformed into a highly lucrative affair. Do ensure that you pin down a long term vision for your new business venture coupled with the right blend of measures. If you are indeed someone with experience in transforming non-performing enterprises, then a company in a bad state is not to be ruled out at first sight. Mauritius luckily has a wide range of experts who can guide you through the purchase and later the management of your new enterprise.

As ending note, I would like to simply re-iterate the following: When considering a business venture, you need to keep your wise and astute hat on. Do what you would in your own country, but never downplay the effects our Mauritian culture can have on your decision making process! You shouldn’t be seduced by the smile & warmth of a Mauritian crook. The government has several very competent bodies and institutions that are able to assist foreigners willing to invest, work, live or relocate to Mauritius. You also have the choice to hire experts (and you have a very wide choice) to help you turn your dream into reality.

So be wise and consult whenever needed.

Gibson & Hills Ltd is at your service, should you have any questions pertaining to investment and relocation to Mauritius.

So be wise and consult whenever needed.

Gibson & Hills Ltd is at your service, should you have any questions pertaining to investment and relocation to Mauritius.