“The end of an epoch: “Serving as the boardroom stooge could land you jail time.”

By Nikhil Boolell | Practicing Barrister at Temple Law

1. Restoring the independence of the Central Bank

a. The sacrosanct principle of the Central Bank’s establishment is that it should be independent in the pursuit of its objects. Uncannily, “easier said than done” here applies.

b. Mauritius is no exception to other jurisdictions. Our law provides that the Central Bank is the country’s macroprudential authority. Amongst a plethora of functions revolving around the dissemination of economic indicators, the Central Bank must notably: conduct monetary policy, regulate credit and currency, promote an orderly and balanced economic development, and juggle with foreign exchange reserves.

c. Whilst there is little solace found in the statutory underpinning of the Central Bank as regards the meaning of “independence” (it is not defined in the dictionary part of the statute, the moreso, the word “independently” appears in the Bank of Mauritius Act at section 3(3) singularly).

d. There is no doubt that a well governed Central Bank will deploy the means to resist the nefarious pressures that will often be imposed by Government, which is inevitably dictated by the external influences of the meandering political hotchpotch.

e. Put simply, resisting the undue interference of elected politicians very much lies at the core of what is meant by “independence”. As an admissible standard of the autonomy of the Central Bank, it is therefore critical in today’s context that a decoupling of the Central Bank’s governance from politics be seen to happen. For instance, the Central Bank should not be seen to prop up an ailing Government, a remarkably common global trend of Central Banks since the Pandemic.

2. As the FCC investigations run their course, it seems now that the MIC was either a stupid or a devious idea

a. The world of banking and finance has suffered a short, sharp shock considering the numerous convocations and headline arrests caused by the FCC. The consequence is that it appears that the former Governor of the Central Bank and the former Minister of Finance are now daggers drawn at each other. It is elementary that both are perfectly entitled to a defence, a strategy and legal representation of their choice.

b. Yet, this is not where the issue lies. The irony of this situation is that it took only a few hours of prodding by the FCC for questions to manifestly be raised on the manner in which affairs were being run over the past years at the highest levels of the state. The reputation of Mauritius as a jurisdiction of choice for doing business and as a gateway to Africa will without doubt be left smeared from these events.

c. The poor judgment of the MIC and its board in advancing finance haphazardly will have to be scrutinised. After all, the MIC is a wholly-owned subsidiary of the Central Bank whose sole capital is made up of the funds of the Central Bank only.

d. Again, one must not forget that the MIC was established as a result of an amendment brought to the Bank of Mauritius Act at its section 6(1)(y)), pursuant to the Covid 19 (Miscellaneous Provisions) Act 2020. This amendment brought in the context of the Pandemic was intended to alleviate hardship on the population.

e. The operative words of the said change to the law are “to facilitate economic development”.

“(y) with the approval of the Minister, subscribe to, hold and sell shares of, provide capital to or invest in, any corporation or company set up for the purposes of facilitating economic development.”

The Hansard shows that the amendment was purely brought in the context of the Pandemic. Extract from the Hansard: Mr Speaker, Sir, let me start with the COVID-19 (Miscellaneous Provisions) Bill (No. 1of 2020). The object of this Bill is to amend a number of enactments to cater for the impact of COVID-19 in various sectors, mitigate the hardship on the population and facilitate recovery. Moreover, the Bill also seeks to enhance our preparedness, in general to face a COVID-like situation in the future. In fact, the bill is amending 56 enactments and I shall now provide a brief outline of these proposed amendments.
(…) Clause 2 of the Bill is amending sections 6, 46 and 47 of the Bank of Mauritius Act, to allow the Bank to inter alia – (i) invest with the approval of the Board, such amounts of foreign reserves as the Board may determine, in any corporation or company set up for the purpose of facilitating economic development…
(…) Mr Speaker, Sir, these amendments to the Bank of Mauritius Act are being brought to provide financial support to Government, in the implementation of various initiatives to address the negative impact of COVID-19, including assistance to employees in enterprises and individuals in the informal sector, and to support economic recovery. Across the world, Central Banks, such as the Federal Reserve Banks and the Bank of England, have been providing financial support to Government, as well as to private enterprises and the household sector in the wake of the COVID-19 pandemic.

f. Any borrower must satisfy the MIC that it intends to “facilitate economic development”. It is difficult to reason how this was done, since so much financing was furnished to so very few private organisations.

g. There is now a strong argument that the public outcry which followed the creation of the MIC was justified. The fear that it was set up as a smokescreen vested with the propensity to be utilised as an instrument of corruption is real. The dissonances reported in the press by former office holders of the MIC with respect to the discharge of their duties, whether as Director or Company Secretary, further blurs the line as regards the standards of governance that existed.

h. If it wasn’t for general elections and a change of Government; it would be a case of “drinking wine and feeling fine”.

i. Public opinion has grown increasingly impatient to see institutional reform led by placing men and women with integrity and patriotism, who do not serve selfishly.

j. The ongoing FCC investigations may carry a certain degree of despondency in the public eye. The public opinion hence is already made: there has been pillaging of public finances to the detriment of Mauritian households.

k. Ultimately, the challenge will remain for the DPP and the prosecutors from the Office of the DPP to channel the uphill burden of first securing convictions, let alone seeing to the enforcement of appropriate punishment against any wrongdoers. The test of time will also reveal whether the deployment of skilled foreign assistance in the conduct of FCC investigations in the MIC will serve to crystalize appropriate prosecution against wrongdoing… a tall order dare I say!

3. Metaphorically, why you should not be a kind-hearted Quasimodo in any boardroom

a. As a sitting Director or an office holder in a corporate entity, there is a hefty list of statutory obligations which you are bound to adhere to by law, failing which you could become liable. If you are arrested for any wrongdoing, which includes facilitating or conspiring in an act of fraud, it is worth knowing that your release on bail typically implies that your life will be ruined because:

i. You must fork out for a hefty bail bill and furnish security;
ii. You are on travel restrictions and your passport gets seized – Forget travelling overseas without express permission from the Court;
iii. You have strict daily or weekly reporting obligations to the police station;
iv. You may be called at the police station anytime and must be available to assist the progress of the investigation;
v. You will have to prepare your defence and spend considerable time doing this;
vi. You shall have to make yourself available to the Court each time the case gets called to report progress;
vii. You and your family will face mudslinging;
viii. Your mental health will take a blow; and
ix. There may be further restrictions imposed on you, such as confiscation of your phone or a laptop.

b. The arrests in the MIC investigations have shown that whether you are the CEO of a Board, a Company Secretary or even a professional employed and delegated by a service provider retained by the Board of a Company; you will not be shrouded by the veil attributable to the collective character of corporate liability.

d. More than ever, white collar professionals should ensure they are dutifully discharging their fiduciary duties under the law by upholding the standard of vigilance that is required of them. Being kind hearted and a person pleaser in the boardroom when discharging your duties as an officeholder will only cause disservice to your integrity and open you up to liability.

4. Concluding Remarks

a. The investigations opened by the FCC have paved the way for a new era of accountability of white collar professionals, especially where public finances are involved.

b. There already exists an arsenal of penalties and sanctions under our laws (The FIAMLA, the Companies Act, the FCC Act, the Securities Act…) to tackle corporate wrongdoing. However, the rare prosecution of persons for corporate offences leads to the irresistible inference that little is being done to disrupt economic crime.

c. As corporate fraud perniciously fragments faith in the economy, now is the right time to regain confidence. At a juncture where a National Crime Agency is being set up, it is important to explore the criminal offence of “failure to prevent fraud.” Under the Economic Crime and Corporate Transparency Act, the UK legislator holds to account an entire organisation where its employee, agent, subsidiary or “associated person” commits a fraud or causes economic crime such as dishonest practices in investment and finances.

d. The time is right to reshape corporate culture by transforming it into an anti-fraud culture!

About the Author

Nikhil Boolell is a practicing Barrister in Mauritius at Temple Law. He specialises in Civil and Business Law, and will soon mark ten years at the Bar. He appears regularly before courts and tribunals and is committed to contributing to the public interest through his legal practice. He holds an LLM in International Finance and Law (with Distinction) from King’s College London. He is also a graduate of the University of Exeter and UWC Atlantic College in Wales.