The appointment of a legal auditor in Morocco is mandatory for S.A. The law 17-95 has set up a general regulatory framework to guarantee the reliability of financial information. Indeed, the statutory auditor in Morocco has a legal audit mission. He must certify that the summary statements reflect a true and fair view of the […]
The exchange regime for foreign investment in Morocco enables foreign (or non-resident) investors to convert their investments. Indeed, this regime allows non-residents who have invested money in Morocco to recover their investments as well as the generated profits. Upsilon Consulting is chartered accountants firm. Who are we ? First of all, note that the exchange […]
LLC in Morocco : the preferred legal vehicle for investors LLC is the most used legal form for the establishment of a company. Indeed, it represents about 90% of the volume of company creation. The success of the LLC form in Morocco is in no way to chance. In fact, the LLC form offers tax […]
A branch in Morocco is an independent establishment that is part of a group. Unlike a subsidiary, a branch does not have a separate legal personality. The branch in Morocco has, by law, a certain degree of management and executive autonomy.
A foreign company can carry on business in Morocco without creating a company under Moroccan law.
It should be noted that a branch is considered under tax law as a permanent establishment which has tax obligations, particularly with respect to corporate income tax.
Branch in Morocco
The branch office in Morocco is legally an emanation of the legal personality of its parent company. As a result, it may execute contracts entered into by the parent company and be liable for such obligations. Thus, a contract, for example, won by a multinational company in its name, can be executed by its branch which is legally considered as the same entity. It :
Does not have an independent legal personality;
Can contract and execute on behalf of the parent company;
Is legally confused with the parent company.
However, the responsibility of the parent company remains fully engaged by the actions of the successor.
Read also: La succursale – CasaInvest
How is the creation of a branch in Morocco?
Because the branch depends on an existing parent company, its creation is quite simple.
It does not require the creation of a new legal entity and therefore does not need the establishment of statutes.
First of all, the branch in Morocco must obtain a certificate relating to its name. Then, a report of the management bodies of the parent company must be drawn up. This minute must contain certain mandatory information:
Name of the branch: A branch in Morocco must first obtain a negative certificate;
Head office of the branch in Morocco: It should be noted that branches can benefit from a domiciliation ;
Legal representative in Morocco who must be named in the minutes of incorporation.
Then, the minutes of incorporation of a branch in Morocco are registered with the tax authorities.
In addition, the branch must within fifteen days file the minutes to the clerk office of the court. An extract of this deed containing certain information (the date of the deed, the names, first names and domiciles of the former and new owners, the nature and head office of the fund …) is registered at the commercial register.
After that, according to article 37 of the Commercial Code, the branch must be registered in the local commercial register of the place where the business is subject to the law. In addition, proof of registration must be filed with the local register of the place of the branch with a specification from the commercial register of the principal place of business.
The branch office must register the business within three months of opening the branch.
Finally, there is the obligation to advertise in a newspaper of legal announcements and in the official bulletin, to join the CNSS and to inform the exchange office.
What is the legal status of a branch?
As indicated above, the branch does not legally have its own legal personality. In all cases, its assets and liabilities are attached to those of the parent company. All the assets and profits at its disposal go directly to the main company, which can dispose of them as it sees fit.
What is the tax status of the branch?
For tax purposes, profits made by a branch in Morocco are taxed in Morocco.
It is subject to corporate income tax according to the terms of common law and to general income tax.
In addition, the branch must keep its own accounts despite the fact that it has no equity capital.
Regarding its corporate status, generally the manager is a person from the parent company who is in charge of managing the branch. He is directly attached to the main company and is therefore subject to its corporate law. However, employees are governed by the labor laws of the country in which they work.
This means :
- Work or services invoiced by a permanent establishment are not subject to any withholding tax.
- As far as VAT is concerned, it is subject to the common law system.
In addition, branches in Morocco carrying out projects limited in time may opt for a flat-rate scheme. In this case, they are taxed at a flat rate of 8% of the market amount.
What are the differences between a branch and a subsidiary?
There are several differences to mention in the case of a branch :
- A subsidiary is a legal entity separate from the parent company. As such, it has legal personality. However, the branch does not have such independence;
- The subsidiary will be incorporated as a company under Moroccan law. The subsidiary will be incorporated as a company under Moroccan law. Consequently, it will be subject to the obligation to hold shareholders’ meetings and/or must have an auditor. Moroccan law fully applies to the activities of the company according to its legal form. The branch office is exempt from these obligations;
- Unlike the company, a branch has no share capital;
- The subsidiary (company) is managed according to its form by a manager or a board of directors. In a branch, a legal representative has local powers but remains under the guardianship and responsibility of the parent company’s managers;
- In a company, the financial liability of the partner (parent company) is in principle limited to the subsidiary’s share capital contribution. However, in a branch the exposure of the parent company is unlimited;
- Upon liquidation of the subsidiary, the applicable procedures are those given by Moroccan law. A branch is closed by decision of the parent company’s management bodies.
In fine, a branch is a permanent establishment of an existing company. It is created with the aim of extending and representing the parent company elsewhere.
It has several advantages such as the simple formalities for its creation or an economic advantage insofar as its capital is minimal for its creation and its extension abroad.
Establishing a branch in Morocco is a good choice. Indeed, being a country in which companies find their place, the branch can be a step for the establishment of a company wishing to expand abroad.
If you have a project to create a branch: Contact us.
Investors who wish to establish a company in Morocco can find it frustrating when they do not know the formalities. Why establish your company in Morocco In Morocco, the practice of an industrial, commercial, artisanal activity or any service providing activity, can be carried out: Either individually as a natural person or under the auto-entrepreneur […]
The public limited company (PLC) in Morocco is used in companies listed on the stock exchange or in entities carrying out large scale projects. It provides, thanks to its mode of operation, more security and control over the investment.
In fact, governed by Law 17-95 on public limited companies, it is the second most used legal form in Morocco after the limited liability company. It is a capital company which concerns important projects and has binding regulations. The law imposes the form of a public limited company for certain economic activities such as: banks, mortgage companies and investment companies.
Characteristics of the Public Limited Company
Public limited companies are legally considered as commercial companies, and this, regardless of their actual purpose. It has a success that is not insignificant and represents the archetype of capital companies. Its characteristics are as follows:
There are 2 main types of public limited companies, amongst others: the monistic PLC, called classic public limited company, with a single supervisory body, i.e., the board of directors, and dualist PLC with a management and supervisory board.
There are other forms of public limited companies such as: the open and the closed public limited company, the public limited company and the non-public limited company, and the listed and the non-listed public limited company
In public limited companies, we speak of shareholders. To be legally able to incorporate a public limited company, there must be at least five (5) shareholders. These shareholders can be both natural persons and legal entities, resident or not in Morocco.
- In the monistic P.L.C (Public Limited Company), one shareholder at least must be a natural person, since the Chairman of the Board of Directors must be a natural person and a shareholder.
- In the case of a dualist P.L.C, two shareholders at least must be natural persons, since the Chair and Vice-Chair of the Board must both natural persons and shareholders.
Commercial capacity and responsibility
In the public limited company in Morocco, commercial capacity is only required for the directors and founders of the company.
As far as liability is concerned, as in the case of the limited liability company, it is limited to the amount of shareholders’ contributions.
Capital and contribution
The share capital of a public limited company in Morocco is set at three million dirhams (MAD 3,000,000) in the case of public offering and three hundred thousand dirhams (MAD 300,000) for the opposite and it is divided into shares.
As far as contributions are concerned, their legal processing depends on their nature:
– First, cash contributions must be subscribed in full and paid up for at least one quarter at the time of incorporation, the remainder within three years from the date of incorporation;
– Second, contributions in kind must be subscribed for in full and fully paid up, they must be evaluated by a contribution’s auditor;
– Finally, industrial inputs are not allowed.
One statutory auditor, at least, must be appointed in every public limited company in Morocco.
However, companies making a public offering are required to appoint at least two statutory auditors.
This position is generally covered by chartered accountants, which is justified mainly by the fact that chartered accountants are, by virtue of their training and experience, the most qualified for this function.
The company’s shares and purpose
Shares of the public limited company in Morocco are negotiable or freely transferable securities and, as such, may be listed on the stock exchange.
Securities issued by public limited companies are: shares, investment certificates and bonds. Allotment or subscription rights are included in them.
The nominal amount of a share cannot be less than fifty (50) dirhams. However, for companies whose securities are listed on the stock exchange, the minimum of the nominal amount is set at ten (10) dirhams.
As far as the purpose of a public limited company is concerned, there is no restriction.
Name and registered office
The name of the company is freely chosen by the company and may be taken either from the nature of the activity, or just a denomination of pure fantasy or imagination.
The registered office determines or refers to the domicile of the company, which is why it must be fixed in the articles of association.
PUBLIC LIMITED COMPANY in MOROCCO: How it works
In order to incorporate a public limited company, it is essential to know the intricacies of this legal form that is distinguished by its rules of operation and governance.
Incorporation of the public limited company (P.L.C)
To incorporate a public limited company in Morocco, you need to:
- Have a registered office and a company name
- Have a negative certificate
- Draw up the articles of association (either by the chartered accountant or by the law firm)
- Transfer the capital to a bank account
- Register the company with the tax authorities
- Preparation of subscription forms
- Drawing up subscription/payment declarations
- Filing of incorporation deeds and registration formalities at management level regional tax office
- Registration in the commercial register
- Affiliation to the CNSS
- Official publication in an official bulletin
The managers of a Public Limited Company
The directors of the company differ according to its form:
In the monistic P.L.C: it is the board of directors which manages the company. It is composed of:
- Three members at least and twelve at most. The law increases this figure to 15 members when the company makes a public offering.
- In addition, in the case of a merger, the number of members may exceed the limit up to the total number of directors who have been in office for more than six months in the merged companies.
In the dual P.L.C: there are the directors (or members of the management board) and the supervisory board.
Composition of the Management Board:
- The number of members may not exceed five. The law increases this figure to 7 members when the company makes a public offering.
- Management Board exercises its functions under the supervision of the Supervisory Board.
- Members of the Management Board are appointed by the Supervisory Board.
- The term of office of the management board shall be determined by the articles within the limits between two and six years.
Composition of the Supervisory Board:
- Three members at least and twelve at most
- Fifteen members if the shares of the company are listed on the stock exchange
- In the event of a merger, the number of twelve and fifteen may be increased up to the total number of directors in office for more than six months in the merged companies.
- A member of the supervisory board cannot be a member of the management board.
- The members of the supervisory board are appointed by the articles of association at the incorporation of the company. During the life of the company, they are appointed by the Ordinary General Meeting.
- The term of office of the members of the supervisory board may not exceed six years.
The management bodies of a public limited company are:
- First, the Board of Directors,
- Secondly, in the dual form, the Executive Board and the Supervisory Board.
- Finally, the ultimate power is in the hands of a shareholders’ meeting.
In dealings with third parties: two management forms can be distinguished:
- First, in the monistic form, the law gives power to the board of directors;
- Second, in the dualist form, the law assigns powers to a board of directors. A supervisory board controls its action.
These two bodies have the broadest powers to act in all circumstances on behalf of the company.
In addition to the ordinary, extraordinary and mixed general meetings that take place in the limited liability company (L.L.C), the limited public company has also a «special» assembly, which brings together holders of particular securities, other than shares (such as the meeting of bondholders).
OGM: This is the meeting where all decisions are made, except those involving changes in the articles of association
The quorum required by law is:
- At the first meeting, one or more shareholders, present or represented, owning at least one quarter of the shares with voting rights.
- No quorum is required for the second meeting.
EGM: it is the only assembly that allows decisions leading to statutory amendments such as:
- Modification of registered office
- Change of management (in the case of a manager registered in the articles of association)
- Increase or decrease in share capital
- Redistribution of shares
- Modification of the corporate purpose …
The law requires a quorum for this meeting as follows:
- At the first meeting, one or more shareholders, present or represented, owning at least half of the shares with voting rights.
- For the second meeting, one quarter of the shares with voting rights.
Dissolution of the Public Limited Company
In general, a public limited company is dissolved when:
- The number of shareholders falls below 5 for more than one year;
- Share capital falls below the legal minimum;
- Shareholders’ equity becomes less than one quarter of the share capital and is not set up within two years with at least a quarter of the share capital.
Its dissolution may also result from other factors such as:
- The end of the term set by the partners (in the absence of renewal
- By the will of the partners;
- The disappearance or extinction of its purpose;
- The cancellation of the company, when the conditions of incorporation are not respected;
- Following a judicial dissolution;
- Application of collective procedure
The tax and social security regime of the Public Limited Company in Morocco
Tax regime of the public limited company in Morocco is similar to that of the limited liability company (L.L.C.). The applicable taxes are:
- Corporate tax
- Value added tax (VAT)
- Also, local taxes such as business taxes and taxes on municipal services.
As far as the social regime is concerned, the directors benefit from the social security and employee pension.
In conclusion it can be said that:
The public limited company is a commercial company by reason of its form whatever its purpose is. It is suitable for large projects because it provides solid guarantees to be asserted to investors and bankers, which is one of its main advantages.
It has a rather burdensome and framed mode of operation, even complicated. This provides an additional security. Still, it is less flexible than the limited liability company. It has a mode of governance that comes in two formats:
- Board of directors and a managing director
- Management board and a supervisory board.
Collective procedures are measures taken to prevent business difficulties.
Indeed, when a company faces events that threaten its operations’ continuity, management should take specific legal measures.
Before it reaches a state of suspension of payments, Moroccan lawmakers have established some preemptive procedures. The Moroccan commercial code outlines the procedures to take.
These procedures, whose purpose is to prevent business difficulties, are called “collective procedures”. These are procedures decided by a judge. They aim to redress or liquidate a company that is experiencing economic challenges. Measures to prevent business difficulties are judicial measures that aim to guarantee the continuation of activity. Besides, they strive to maintain employment while respecting the rights of creditors.
There are three forms of collective procedures depending on the degree of business difficulties encountered, namely:
- First, the safeguard procedure,
- Second, the receivership procedure
- Finally, the judicial liquidation (or liquidation procedure).
Business difficulties – The safeguard procedure
It is a legal recourse open to companies experiencing financial difficulties. It concerns companies that have not reached insolvency but are having problems. This procedure intervenes to protect companies from going bankrupt by suspending debts at the procedure’s opening.
Its purpose is to enable the company to overcome its difficulties to:
- Firstly, guarantee the continuation of its activity,
- Also, maintain employment
- And finally, to settle the company’s liabilities.
Who are concerned, and who can initiate an application for opening a safeguard procedure?
The safeguard procedure concerns :
- Traders who are natural persons
- Commercial companies including P.L.C (Public Limited Company) & L.L.C (Limited Liability Company)
The management of the company can request the opening of a collective procedure.
How does the safeguard procedure work?
The head of the company requests the opening of a safeguard procedure. He files his request at the secretariat of the clerk’s office of the competent court. In this request, he must mention the nature of the difficulties that may compromise the business’s continuity. The application must include any document that can indicate the nature of problems encountered. Moreover, the head of the enterprise must accompany his application with a safeguard plan.
The court rules on the opening of safeguard proceedings 15 days after the application.
With the management’s assistance, the trustee analyzes the situation and draws up a detailed report. In this report, he specifies the financial, economic, and social position of the company. He then proposes the safeguard plan to the court for approval. The court rules either in favor of the safeguard project or on its modification. It can also order the recovery of the company in difficulty or its liquidation by court order.
Business difficulties – Receivership procedure
When a company faces significant financial difficulties, it may be in a state of suspension of payments. Such a state implies the company’s inability to meet its current liabilities. Significant economic problems occur when that its debts exceed its available assets.
Who can initiate an application for opening a receivership procedure?
The receivership procedure applies to any commercial company in a state of cessation of payments.
For the opening of this procedure, a request must be made by one of the following:
- The head of the company
- A creditor
- The court, on its initiative, or at the request of the public prosecutor or the court’s president.
How is the receivership procedure executed?
When a debtor initiates an application to open a receivership procedure, the court rules on said proceeding after examining the situation. The judgment pronounces the opening of a receivership procedure.
For an interested party to apply for the opening of a receivership procedure, he must complete a declaration of cessation of payments. Then, the interested party files this declaration in the court. Once the court orders the receivership procedure’s opening, the company’s activity continues within a protective framework.
Then there is an observation period, which allows an assessment of the economic situation. Its objective is to analyze the origin, nature, and extent of the difficulties. It aims to study the different possibilities for the company’s recovery.
This procedure results in 4 different outcomes, namely:
- Firstly, to implement a recovery plan. Such a plan aims to allow the company to continue its activity. A continuation helps safeguard the interests of the creditors and ideally maintain jobs. However, it may be necessary to reduce employees or require the departure of the company’s manager.
- Then, the end of the receivership procedure if the company overcomes its difficulties. Indeed, when the company has sufficient funds to reimburse its creditors and settle the proceedings’ costs, the receivership procedure is deemed no longer necessary.
- The partial or total sale of the company
- A court-ordered liquidation if the situation of the company deteriorates during the observation phase. In such a case, the law considers conditions for liquidation to be met. The court can rule in favor of switching from a receivership procedure to judicial liquidation.
Business difficulties – Judicial liquidation
The liquidation procedure concerns companies whose situation is irremediably compromised.
This procedure intervenes when receivership has not been successful. Its objective is to put a definitive end to the company’s activity in difficulty while paying off the creditors.
Who are concerned, and who can initiate an application for opening a Judicial liquidation?
– The liquidation procedure is intended for companies that:
– Are in a state of suspension of payments
– Are virtually incapable to recover
Trades exclusively with small businesses
The court will order the opening of the procedure when it deems that the company’s situation is irrevocably compromised. This opening can be either systematical or at the request of the company’s management, a creditor, or the public prosecutor’s office.
Conduct of the liquidation procedure
The main actors of this procedure are the trustee and the bankruptcy judge.
As soon as the court opens the procedure, the company’s management divests himself of the administration. He also relieves himself of the disposal of his assets. The court appoints a trustee (in French “syndic”) to administer the company.
How is the liquidation executed?
Here, we start with the disposal of assets, which happens like this:
- First, the sale of real estate will take place according to the prescribed forms of real estate seizure. By way of derogation, the bankruptcy judge can set the price and conditions of the sale;
- Then, the production units that make up the movable assets may be subject to:
- Either, a wholesale,
- Or a sale in parts
For movable property, the bankruptcy judge has a choice. He may order their sale either by public auction or by mutual agreement.
Moreover, to promote transparency, the sale of real estate is always done by public auction.
There are two ways to dispose of assets:
First mode: sale in activity
According to this mode, it is an activity or the company’s whole activity that is mainly sold.
Second mode: sale in parts
In this mode, isolated assets are sold, and all employees are laid off.
Then there is the settlement of liabilities. The judgment that opens or pronounces the judicial liquidation leads to the forfeiture of the term. This mode means that debts that had not fallen due become payable.
The liquidation procedure can end in two ways:
- Either all creditors are reimbursed. If the company still has money left, this is called a liquidation bonus, which the partners can distribute to themselves.
- Or, it can be closed for insufficient assets. Indeed, this means that the business no longer has sufficient funds to reimburse all its creditors.
In the second case, the director is liable if the asset insufficiency results from mismanagement.
In conclusion, these procedures aim to protect and prevent bankruptcy and to manage business difficulties better.
Company dissolution / Liquidation : What is it? The notions of dissolution of a company and liquidation of a company are often confused in the minds of readers. However, there is a legal difference between the notions in the Moroccan law. First, note that dissolution is the first step in the process of closing a […]