No shell company in Mauritius; Hindenburg allegations 'false, baseless': Mauritius

Mauritian financial services minister Mahen Kumar Seeruttun has told the nation's parliament that Hindenburg Research's allegations of the presence of 'shell' companies in the island nation are 'false and baseless' and that Mauritius was in compliance with OECD-mandated tax rules, according to a press release.

The release said US short seller Hindenburg on 24 January alleged that billionaire Gautam Adani used shell companies based in Mauritius to manipulate stock prices of his Indian-listed companies. A shell company is an inactive firm used as a vehicle for various financial manoeuvres.

When a member of parliament (MP) through a written notice question asked the minister about Hindenburg's allegation of use of Mauritius-based entities as conduits for money laundering and share price manipulation for the Adani Group, the minister said the nation's law does not allow shell companies.

"At the outset, I wish to inform the House that the allegations of the presence of shell companies in Mauritius are false and baseless," he said. "According to the law, shell companies are not allowed in Mauritius."

All global business companies licensed by the financial services commission have to meet substance requirements on an ongoing basis and are being strictly monitored by the commission, he said. "So far, there has been no breach that has been found," he said.

He said the financial services commission has taken note of the Hindenburg report but the regulator is bound by the confidentiality clause of the law and cannot disclose details.

"The financial services commission can neither deny nor confirm whether an investigation has been and/or is being conducted. As such, disclosure of information on global business companies would be in breach of section 83 of the Financial Services Act and may have an adverse impact on the repute of our jurisdiction," he said.

Dhanesswurnath Vikash Thakoor, chief executive officer of FSC, had previously stated that an initial assessment of all the entities related to the Adani group in Mauritius was not found to be any non-compliance with rules.

Listing out the requirements for companies registering in Mauritius, the minister said they first have to carry out their core income-generating activities in or from the country.

They must be managed and controlled from Mauritius, have at least two directors resident in Mauritius, maintain at all times their principal bank account in the country, keep and maintain at all times their accounting records at their registered office in Mauritius and prepare their statutory financial statements and cause those financial statements to be audited in Mauritius.

The statement came just before the Hindenburg-Adani issue comes up in Supreme Court. The apex court, which had appointed an expert committee to look into regulatory issues, is likely to take up capital market regulator SEBI's plea for a six-month extension in timelines to probe allegations against the Adani group.

The securities and exchange board of India (SEBI) is assessing the connection between Adani Group and two Mauritian firms - Great International Tusker Fund and Ayushmat Ltd - that participated as anchor investors in the recently cancelled share sale of Adani Group's flagship company.

The conglomerate lost USD 140 billion in market capitalisation at one point after short seller Hindenburg raised allegations of fraud and stock price manipulation against the group. Adani Group, however, has denied all the charges.

"With respect to the allegation of Mauritius being a tax haven, I wish to inform the House that Mauritius strictly complies with the international best practices and has been rated as compliant with the Organisation for Economic Cooperation and Development OECD standards," the Mauritian minister told the Parliament.

Since 2018, Mauritius has reformed its global business framework and tax regime with a view to removing harmful tax practices. "As per the peer review conducted by the OECD forum on harmful tax practices, the OECD is satisfied that Mauritius does not have any harmful features in its tax regimes, thus recognizing Mauritius as a well-regulated, transparent and compliant jurisdiction," he said.

He said the financial services commission monitored the Adani issue closely. "The commission is pursuing its actions within the ambit of the relevant legislations and in line with its current supervisory process. It has been carrying out reviews of all the companies cited in the Hindenburg report."

"And as part of the supervisory review, the financial services commission has requested and received compliance reports pertaining to all the relevant companies, which show compliance with the prevailing legislations in Mauritius. Given the multilayering of those companies cited in the report, the Financial Services Commission continues to monitor the matter diligently," he said.

Also, the commission is collaborating with law enforcement agencies in Mauritius and overseas regulators on the matter.

When the MP asked how he arrived at the conclusion that allegations made in the report are 'false and baseless', the minister said he was referring to the statement made the report with regard to shell companies being registered in Mauritius.

"And this is, like I said in my reply, to be able to be licensed in Mauritius, there are conditions and requirements that need to be satisfied. And those conditions, I have spelled out all those conditions, and based on the fact that these companies adhere to those conditions, then it is unfounded to say that those companies are shell companies" he said.