In brief: An SARL transfer to a third party requires consent from a majority of partners representing at least three-quarters of the shares under Article 58 of Law 5-96. Transfers of SARL shares and shares of unlisted companies must be registered within thirty days, even if exempt from duty. Listed share transfers are not covered by this general obligation. registration duties
The transfer of shares in a limited liability company (LLC) consists of transferring ownership of shares from one partner to another.
The transfer may be carried out between partners or to a third party, that is to say, a person outside the company.
An SARL share transfer must be in writing. Approval depends on the transferee and the articles: it is legally required for a third-party transfer and may be required by the articles between partners or for family transfers covered by Article 56. Enforceability against the company and third parties requires the formalities in Article 16, referred to by Article 61. Amendments to the articles require publication under Article 97 of Law 5-96.
It is important to note that the transfer of LLC shares may have tax consequences for the selling partner. For example, the transfer of LLC shares may be subject to:
- Corporate Tax (if the seller is a company);
- Income Tax (if the seller is an individual).
In both cases, the share transfer requires specific formalities and a well-defined procedure.
Transfer of Shares: Formalities
The formalities for transferring shares are as follows:
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Execution of the transfer deed. The transfer deed may be notarised or under private signature. This deed must include certain information such as:
the names of the seller and the buyer,
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the number of shares transferred
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their unit price and the total price of the shares
- Approval by the partners. Approval for the entry of a new partner is decided at an extraordinary general meeting. The minutes of this meeting must be drawn up and registered with the tax authorities. They are filed together with the transfer deed.
- Updating the articles of association. This update aims to change the identity of the partners in the articles and make the necessary amendments.
- Registration of the deed with the Tax Administration;
- Registration of the transfer deed (and the minutes) at the Commercial Court registry; and
- Publication in the Official Gazette and the Legal Announcements Journal N.B.: It is mandatory to formalise the transfer of shares in writing, under penalty of nullity of the transaction. Art. 16 of Law 5-96
Transfer of Shares in an LLC
The owners of shares in an LLC are in principle free to sell, pledge, or transfer their shares. However, this transfer is strictly regulated and requires compliance with a number of steps to be valid.
All shares must be subscribed. Contributions in kind must be fully paid up; cash contributions may be paid up to at least one-quarter, with the balance called within five years of registration. Article 51 of Law 5-96 does not require full payment before every transfer.
The share transfer may involve a third party, a fellow partner, or a spouse, descendant, or ascendant. Depending on the person involved, the formalities differ:
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Transfer of shares to a third party
For this transfer, the law requires the approval of a majority of partners representing at least three-quarters of the share capital. Approval is mandatory for a third-party transfer. The articles may also require it between partners or for family transfers under Article 56 of Law 5-96.
The proposed transfer is notified to the company and each partner in the forms provided by Article 58 of Law 5-96, including registered letter with acknowledgement of receipt. If the company does not exercise its right of pre-emption within thirty days of the last notification, consent is deemed given.
The thirty-day period runs from the last notification to the company and partners. If consent is refused, the partners have thirty days from refusal to purchase or arrange the purchase of the shares; the judge may extend this latter period once, by no more than three months.
Finally, an extraordinary general meeting must be held if the transfer is accepted, for the purpose of amending the articles of association.
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Transfer of shares to a partner
The transfer of shares between partners in an LLC is unrestricted under Article 60 of Law 5-96 on limited liability companies, unless the articles of association provide otherwise.
The articles of association may include an approval clause to prevent disruption to the balance of powers and rights of the partners, so they can maintain their percentage in the share capital.
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Transfer to a spouse, ascendant, or descendant
Under Article 56 of Law 5-96, shares are freely transferable by succession and between spouses, relatives and in-laws up to the second degree, subject to approval clauses permitted by that article.
The exception is where a contrary provision in the articles of association requires prior approval.
Transfer of Shares (or Rather Stocks) in a PLC
Stocks in a PLC are freely transferable. However, although the transfer process is simple, a transfer deed should be drawn up beforehand, even though the law does not require it.
The approval clause under Article 253 of Law 17-95 does not apply to successions or transfers to a spouse, ascendant or descendant up to the second degree. It cannot subject the negotiability of listed shares to company approval.
Unlike the LLC, the transfer of securities within a PLC is subject to simpler rules. Nevertheless, the articles of association may provide for stricter conditions by including, for example, an approval clause. The approval clause under Article 253 of Law 17-95 does not apply to successions or transfers to a spouse, ascendant or descendant up to the second degree. It cannot subject the negotiability of listed shares to company approval.
Approval Clause
The approval request contains the buyer’s information (surname, first name, address), the number of stocks to be transferred, and the price. The clause requires company approval by the body designated in the articles. No reply within three months of the request constitutes approval.
The approval process continues with a favourable or unfavourable response from the company, which must be notified to the seller.
Article 254 of Law 17-95 requires the board of directors or management board to arrange a purchase within three months of refusal, by a shareholder or third party or, with the seller’s agreement, by the company to reduce its capital. If no purchase occurs, approval is deemed given, unless the court grants a single extension for the same duration.
- There may also be a clause preventing any shareholder from transferring their stocks for a specified period. This is a lock-up clause.
- There is also a pre-emption clause which stipulates that the transfer is automatically offered on a preferential basis. It gives every partner priority in acquiring the stocks being sold.
In an SA, the articles may subject transfers of registered shares to a third party to company approval under Articles 253 and 254 of Law 17-95. A clause subjecting the negotiability of listed shares to such approval is void.
Transfers of SARL shares and shares of unlisted companies must be registered within thirty days, even if exempt from duty. Listed share transfers are not covered by this general obligation.
Conclusion
In an SA, the transfer contract must be distinguished from transfer of the security: registered securities are transferred against third parties by entry in the transfer register. Bearer securities authorised in public offerings are transferred by book entry between accounts. Applicable approval clauses must also be respected.
Ultimately, the law governs each method of transferring securities, whether in a PLC or an LLC, so that the company retains control over itself. In an SA, the transfer contract must be distinguished from transfer of the security: registered securities are transferred against third parties by entry in the transfer register. Bearer securities authorised in public offerings are transferred by book entry between accounts. Applicable approval clauses must also be respected. *
PUBLIC LIMITED COMPANY IN MOROCCO: How It Works
Frequently asked questions
Is approval required to transfer LLC shares to a third party in Morocco?
An SARL transfer to a third party requires consent from a majority of partners representing at least three-quarters of the shares under Article 58 of Law 5-96. The proposed transfer is notified to the company and each partner in the forms provided by Article 58 of Law 5-96, including registered letter with acknowledgement of receipt. If the company does not exercise its right of pre-emption within thirty days of the last notification, consent is deemed given. The thirty-day period runs from the last notification to the company and partners. If consent is refused, the partners have thirty days from refusal to purchase or arrange the purchase of the shares; the judge may extend this latter period once, by no more than three months.
Can PLC stocks be freely transferred in Morocco?
In an SA, the articles may subject transfers of registered shares to a third party to company approval under Articles 253 and 254 of Law 17-95. A clause subjecting the negotiability of listed shares to such approval is void.
What formalities are required for transferring LLC shares in Morocco?
An SARL share transfer must be in writing. Approval depends on the transferee and the articles: it is legally required for a third-party transfer and may be required by the articles between partners or for family transfers covered by Article 56. Enforceability against the company and third parties requires the formalities in Article 16, referred to by Article 61. Amendments to the articles require publication under Article 97 of Law 5-96. An SARL share transfer is registered within thirty days. It becomes enforceable against the company by service, acceptance in an instrument with an authenticated date, or deposit of a copy at the registered office against the manager's certificate. Enforceability against third parties also requires publication in the trade register. Amendments to the articles are filed with the court registry and published in a legal announcements journal and the Official Gazette.
