Fixed and/or Floating Charge: Benefits and Constraints From a Lender’s Perspective in Mauritius

Under Mauritian law, a charge over the assets of a borrower (chargor) stands as the foremost security measure, offering the flexibility of either a fixed, a floating or both a fixed and floating charge over assets in favour of a lender (the lender).

While the legal foundation governing fixed and floating charges in Mauritius draws inspiration from English common law, the specifics of these regulations find expression within the Mauritian Civil Code (“Civil Code”) and are written in French.

A fixed and/or floating charge can only be granted in favour of approved institutions, namely institutions agréées as listed in the Civil Code and in the Institution Agréées Regulations 1988 (the “Regulation”).

While the Regulation provides that an institution agréée is “any body corporate not registered in Mauritius and having no place of business in Mauritius”, such body corporate cannot just be any body corporate. Jurisprudence has imposed a second limb which requires that an institution agréée must further be an “organisme de financement”, ie, a financing institution in their jurisdiction of incorporation. In these circumstances, a foreign bank would also qualify as an institution agréée, but a holding company or trading company may not qualify to the extent that they are not set up as financing institutions.

In order for a fixed and/or floating charge to be valid and enforceable, the charge document is required to be registered with the Registrar General of Mauritius (RG) and inscribed in the public registers kept at the office of the Conservator of Mortgages which is the same office as the RG.

As part of such process, the charge agreement can be submitted online via the e-registry platform for registration with the RG and inscription with the Conservator of Mortgages and upon making the relevant payment, the document is registered and inscribed.

The aforementioned process takes around 5–6 working days. Once registered and inscribed, the charge document will bear a barcode stamp witnessing the inscription and the date thereof.

In order to submit the charge agreement for inscription with the Conservator of Mortgages, it must comply with the following formatting requirements prescribed by law:

Ranking of a fixed and/or floating charge is determined by its date of inscription. As from the moment it is registered and inscribed, a lender, as beneficiary of the charge, will rank in priority to other subsequent secured creditors or unsecured creditors.

Consequently, in an insolvency event of the chargor, such lender will be paid first out of the proceeds of sale of the assets of the chargor by virtue of the order and priority of payment under Mauritian laws.

Multiple fixed and/or floating charges may be granted over the same property of the chargor; thus, in light of the aforementioned general rule, the order will be determined as the date of inscription with the Conservator of Mortgages.

However, when two fixed and/or floating charges are registered and inscribed on the same day, they become concurrent.

The general principle can be derogated from through contractual mechanisms as follows.

Another mechanism is to proceed by way of a double subrogation whereby two lenders subrogate each other into their respective ranks.

While a floating charge covers all present and future movables and immovables of the chargor, as and when they are acquired and without the need for these to be clearly identifiable in the agreement, a fixed charge encumbers specific assets, clearly specified and particularised in the charge document. Contrary to a floating charge, future assets cannot be subject to a fixed charge.

When a chargor provides both fixed and floating charges over its assets to a lender, the charge burdens all the existing and identified assets under the fixed charge as well as all current and future assets of that chargor under the floating charge.

The chargor will neither be able to deal with nor dispose of the assets subject to a fixed charge, save with the prior consent of the lender. The chargor will, however, be able to deal freely with and dispose of any of its assets encumbered by a floating charge during the security period, unless it is contractually restricted to dispose of these without the consent of the lender.

A fixed and/or floating charge has an executory title, ie, no judicial process is required to enforce the charge.

The enforcement process of a floating charge is, however, lengthier than that of a fixed charge as the floating charge will first need to be crystallised into a fixed charge. The process involves the appointment of an usher of the Supreme Court to draw up an inventory of the specific assets over which the charge will be realised, registering the same at the Conservator of Mortgages.

Once the assets have been identified and crystallised into a fixed charge, the lender may proceed to the realisation of the security by way of a power of seizure given to an usher.

It is noteworthy that when a floating charge crystallises into a fixed charge, the fixed charge will not require any new inscription and will automatically take the rank which the floating charge (now converted to a fixed charge) benefitted at the initial time of inscription.