In brief: Regulated agreements in Morocco are contracts between a company and its directors or major shareholders (5%+ stake). They require prior board authorization (SA) or general meeting approval (SARL), plus a statutory auditor’s special report. Non-compliance risks nullity and civil liability.
With over 15 years of experience advising on corporate governance, statutory audits, and regulated agreement compliance, Upsilon Consulting’s chartered accountants provide authoritative guidance on these procedures.
Regulated agreements refer to transactions that a company may have with individuals who have a direct relationship with its management. Indeed, within a company, certain individuals who have a direct connection to it must comply with strict regulations for all agreements entered into with that company.
These agreements, which are contracts between a company and a third party, are classified into three categories: prohibited agreements, regulated agreements, and ordinary (free) agreements.
Understanding the regime governing regulated agreements is essential for any director, shareholder, or corporate law professional in Morocco. This guide covers the definition, legal framework, approval procedure, the roles of the various stakeholders, and the consequences of non-compliance.
For a consultation on your specific situation, Contact Upsilon Consulting.
Regulated agreements: Definition
Regulated agreements are agreements entered into between a company and certain of its directors or shareholders, as well as those concluded by the company with a business that has common directors.
These are agreements that are neither prohibited nor ordinary. They require prior approval from a competent body of the company, namely the board of directors for an SA (public limited company) or the shareholders’ meeting for an SARL (limited liability company). This regime applies to both PLCs with a management board and those with a supervisory board.
The individuals covered by this regime include:
- A director or member of the supervisory board
- A chief executive officer or deputy chief executive officer
- A shareholder holding at least five percent of the share capital or voting rights
- Any intermediary, meaning anyone acting on behalf of any of the above persons
Distinction between the three types of agreements
Moroccan corporate law distinguishes three categories of agreements. It is crucial to differentiate them properly to avoid any legal risk.
Prohibited agreements are those strictly forbidden by law. For example, directors (natural persons) are prohibited from borrowing from the company, obtaining overdrafts on current accounts, or having the company guarantee their personal commitments. This prohibition extends to spouses and ascendants and descendants of directors. Any prohibited agreement is null and void by operation of law (Article 62 of Law 17-95 for the SA).
Ordinary agreements (also called free agreements) are those relating to routine operations concluded under normal conditions, meaning on the same terms as those applied to third parties. They require no prior authorization and no special report.
Regulated agreements fall between these two extremes. They are not prohibited, but they are also not routine operations. They must follow a specific authorization and oversight procedure.
Legal basis: SA and SARL
Public limited companies (SA) — Law 17-95
Regulated agreements in public limited companies are governed by Articles 56 to 59 of Law 17-95 on public limited companies. These provisions establish the procedure for prior authorization by the board of directors, the role of the chairman, and the obligations of the statutory auditor.
The law requires that any direct or indirect agreement between the company and one of its directors, chief executive officers, or shareholders holding more than 5% of the capital be submitted for prior authorization by the board of directors.
Limited liability companies (SARL) — Law 5-96
For SARLs, Article 64 of Law 5-96 governs regulated agreements. The manager or, where applicable, the statutory auditor, presents a report to the general meeting on agreements entered into between the company and one of its managers or shareholders.
The procedure is simpler than for the SA: there is no prior authorization by the board of directors (since the SARL does not have one), but the report must be presented at the annual ordinary general meeting, which then votes on these agreements.
This legal framework promotes:
- Informing the shareholders of a company;
- Transparency of acts concluded by the company;
- Shareholder oversight of company management.
Approval procedure in the SA
The approval procedure for regulated agreements in an SA follows several precise steps.
Step 1: Informing the board of directors. The person concerned by the agreement must inform the board of directors of the agreement they intend to enter into with the company. They cannot participate in the vote on authorization.
Step 2: Prior authorization by the board. The board of directors deliberates and either grants or refuses its authorization. The chairman of the board plays a decisive role at this stage.
Step 3: Notification to the statutory auditor. The chairman of the board is required to inform the statutory auditor within thirty days of all regulated agreements authorized by the board.
Step 4: Special report by the statutory auditor. The statutory auditor examines the agreements and drafts a special report for the ordinary general meeting.
Step 5: Approval by the OGM. The ordinary general meeting votes on the agreements after reviewing the special report. The interested party cannot participate in the vote.
Types of regulated agreements
Regulated agreements can take a wide variety of forms. Here are the most common examples in practice:
- Loans and advances granted by the company to a director or significant shareholder
- Sureties and guarantees given by the company in favour of a director
- Service contracts between the company and a business managed by one of its directors
- Lease agreements for property belonging to a director and rented to the company
- Exceptional remuneration paid to a director outside the scope of their corporate mandate
- Asset transfers between the company and a related party
- Cash management agreements between companies within the same group with common directors
Special report by the statutory auditor
To ensure transparency in the acts of company directors, the legislator has assigned an important role to the statutory auditor in the specific oversight of regulated agreements. Ultimately, the goal is to prevent potential abuses.
The statutory auditor’s special report must contain:
- A list of all agreements submitted for approval
- The names of the interested parties and their capacity
- The nature and purpose of each agreement
- The essential terms (price, deadlines, conditions)
- An indication of the board of directors’ authorization, where applicable
The statutory auditor examines agreements brought to their attention or those discovered during audits. They verify not only authorized agreements but also any that may have been concluded without prior board authorization.
Furthermore, the statutory auditor ensures that there has been no omission or deliberate concealment of non-routine transactions. They must obtain from the board a representation letter confirming that all agreements have been brought to their attention within the required deadlines.
Consequences of non-compliance
Non-compliance with the regulated agreements procedure has significant legal consequences.
Nullity. Agreements concluded without prior authorization from the board of directors may be annulled if they have caused harm to the company. The action for nullity is subject to a three-year statute of limitations from the date of the agreement.
Civil liability. The interested director or shareholder may be required to compensate the company for any harm suffered. The burden of proving that no harm occurred falls on the interested party.
Criminal liability. In the case of prohibited agreements (as opposed to merely regulated ones), the director may face criminal penalties provided for by law.
It is important to note that rejection of an agreement by the OGM does not automatically render it null and void. Its effects with respect to third parties are maintained, but the director concerned may be held liable for any harmful consequences to the company.
The role of the chartered accountant
The chartered accountant plays an essential advisory role in managing regulated agreements. They support directors and shareholders in:
- Identifying agreements that must be classified as regulated
- Establishing internal monitoring and reporting procedures
- Preparing the documents required by the board of directors
- Coordinating with the statutory auditor for the special report
- Monitoring legal deadlines
A chartered accounting firm like Upsilon Consulting can help you secure your operations and ensure that all related-party agreements comply with Moroccan legal requirements.
For a consultation on your specific situation, Contact Upsilon Consulting.
Conclusion
Regulated agreements are a fundamental corporate governance mechanism in Morocco. They aim to protect the company and its shareholders against potential abuses linked to conflicts of interest between the company and its directors or significant shareholders.
The procedure, whether for an SA (Law 17-95) or an SARL (Law 5-96), imposes obligations of transparency, prior authorization, and oversight by the statutory auditor. Non-compliance with these obligations may result in the nullity of agreements and the liability of the persons concerned.
For directors and shareholders, it is essential to clearly distinguish between prohibited, regulated, and ordinary agreements, and to implement rigorous monitoring with the support of a chartered accountant.
Frequently Asked Questions
What are regulated agreements in Moroccan corporate law?
Regulated agreements are contracts between a company and its directors, managers, or shareholders holding at least 5% of the capital. Unlike prohibited agreements, they are permitted but require prior authorization from the board of directors (for PLCs) or approval by the general meeting (for LLCs), along with a special report by the statutory auditor.
What is the role of the statutory auditor in regulated agreements?
The statutory auditor must prepare a special report for the ordinary general meeting listing all regulated agreements, identifying the interested parties, and describing the nature and essential terms of each agreement. They also verify whether any agreements were concluded without proper authorization.
What happens if a regulated agreement is not properly authorized?
An unauthorized regulated agreement may be annulled if it has caused harm to the company, with a three-year statute of limitations from the date of the agreement. The interested director or shareholder may be required to compensate the company for damages, and in the case of prohibited agreements, criminal penalties may also apply.
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