Mauritius: Coronavirus (COVID-19) Impact on Financial Institutions
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The outbreak of the Coronavirus (COVID-19) pandemic and the incidental measures adopted by the Mauritian government represent serious potential impact for financial institutions in general.
Below, we examine the recourses available to borrowers facing financial hardship as a result of the pandemic and its aftermath. We consider only credit facilities, that is, agreements by which financial institutions advance money to their clients for repayment either in instalments or at term.
MEASURES IMPLEMENTED FOLLOWING DECISION OF THE GOVERNMENT/THE REGULATOR
The Mauritian Government has announced several measures to alleviate the obligations of borrowers in response to the Pandemic. These include a selective payment moratorium and interest subsidy on home loans; and the provision of USD-denominated loan facilities for businesses. The primary aim of these measures are to alleviate affected households so that their disposable income may be used for more immediate needs, and to mitigate the foreseeable financial difficulties being faced by businesses, which would in turn contribute to keeping in check the credit-negative effects of the pandemic on banks’ asset quality and liquidity.
The Bank of Mauritius (“BoM”) has required that commercial banks grant a six-month moratorium on the capital repayments for:
In addition, for households earning a combined basic monthly salary of up to MUR50 000, the BoM will bear the interest payable for the period 1 April 2020 to 30 June 2020 on their outstanding household loans with commercial banks.
The capital repayment moratorium and interest relief are not applicable to overdrafts, credit cards and other credit facilities.
RECOURSES AVAILABLE UNDER THE LAW
Given the limited scope of the measures implemented by the government and the BoM, we need to examine the legal recourses under are for borrowers who are not eligible for such measures because of the nature of their credit facility or because they fall outside the income bracket in respect of which interest relief is applicable.
The Borrower’s Protection Act
The Borrower’s Protection Act, 2007 (the “BPA”) regulates credit agreements granted by lending institutions for a sum not exceeding MUR3-million, provided that its repayment terms exceeds 12 months. It applies irrespective of whether the borrower is a natural or a legal person (company, société).
The Code Civil
The Effects of the Pandemic on Credit Agreements
It is probable that the pandemic and/or the national lockdown imposed by the government, will have adverse effects on the borrower’s ability to repay their debt. We are of the view that it might well be open to borrowers to claim either hardship or force majeure as a justification for their inability to discharge their obligations under a credit agreement in these circumstances. Consequently, our advice to lenders would be to remain open to negotiation with respect to any request for varying the payment obligations of the borrower.
For an event to amount to a force majeure under Mauritian law, it must be irresistible, as well as unforeseeable, although irresistibility is often regarded as the main element and foreseeability is factored in when determining whether the event was irresistible. As far as contractual agreements are concerned, contracts, whether a particular event is unforeseeable, is appreciated at the time of the conclusion of the contract, and whether a particular event is irresistible is appreciated at the time of its execution (for a more in-depth analysis of what would constitute a force majeure, kindly contact us).
As such, whether or not the pandemic and the incidental measures adopted by the Mauritian Government amount to either hardship as provided for under the BPA or a force majeure have to be considered on a case-by-case basis, by assessing the impact thereof on each borrower and determining whether or not the borrower is in a position to deal with the consequences thereof.
COVID-19, also known as the Coronavirus, is an infectious disease caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) that was declared a pandemic by the World Health Organization on 11 March 2020. The disease has since been reported in over 190 countries.
No information provided herein may in any way be construed as legal advice from ENSafrica and/or any of its personnel. Professional advice must be sought from ENSafrica before any action is taken based on the information provided herein, and consent must be obtained from ENSafrica before the information provided herein is reproduced in any way. ENSafrica disclaims any responsibility for positions taken without due consultation and/or information reproduced without due consent, and no person shall have any claim of any nature whatsoever arising out of, or in connection with, the information provided herein against ENSafrica and/or any of its personnel. Any values, such as currency (and their indicators), and/or dates provided herein are indicative and for information purposes only, and ENSafrica does not warrant the correctness, completeness or accuracy of the information provided herein in any way.
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