Investing in Morocco: What you need to know

Table of contents:

Is it necessary to have a Moroccan partner to invest in Morocco?

Unlike some other countries in the Middle East-North Africa region, there is no legal requirement in Moroccan law to give part of the shares in the company to a local partner. Selecting the right local partner is often the biggest challenge, because language and cultural barriers make it difficult to reliably assess the situation. On the other hand, cooperation with a local partner who has networks and knowledge of the country is often indispensable.

Are there any restrictions for foreign investors in Morocco?

In general, foreign investment is not subject to any restrictions, regardless of the type of business you wish to establish in Morocco. Some sectors are an exception, such as agriculture, fishing and the audiovisual sector. Although there are no relevant differences between local and foreign investments in Morocco, it is considered necessary to know and respect the rules of the foreign exchange market, as the possibility of repatriating investment capital, capital gains and dividends depends on this. In Morocco, the legal framework that protects and regulates foreign investments is set out in the so-called Investment Charter (Charte de l'Investissement).

What are the main differences between a subsidiary and a branch in Morocco?

The subsidiary and the branch are two reasonable options for starting a business activity in Morocco. Both are related to a parent company but have important differences. First and foremost, the subsidiary in Morocco is an autonomous legal entity, separate from the parent company, with its own legal personality (even if the shares of the subsidiary are fully owned by the parent company). The subsidiary, on the other hand, has no legal autonomy. Therefore, only the subsidiary can acquire contractual rights and obligations in its own name.

No share capital is required to establish a branch, but it is required for a subsidiary, although no minimum capital is required for SARL, the most common corporate form. The cost of incorporation also varies but depends more on the complexity of the process (appointment of directors, articles of incorporation, composition of boards) than on the share capital. Even though the subsidiary usually involves higher start-up costs, it also has its advantages over the branch, especially in terms of limitation of liability. In the event of litigation, losses or liquidation, the parent company or, if it exists, the group of companies is usually not affected, unless there are grounds for pass-through liability. A subsidiary in Morocco should be considered directly if the involvement in Morocco is planned for the long term.

What types of companies do we have in Morocco?

If you feel like a commercial agency or a simple branch office is not suitable for the needs of entering the Moroccan market, there are a wide range of companies available which are in principle familiar to us from continental European law. Moroccan corporate law provides for the following corporate forms:

the joint stock company (regulated by Law No. 17-95) on the one hand and the other forms of companies regulated by Law No. 5-96, namely
the general partnership
the limited partnership
the partnership is limited by shares,
the limited liability company
the holding company,
the simplified joint-stock company formerly regulated by Act No. 17-95.

The companies differ, first of all, according to whether they are partnerships (unincorporated) or corporations (legal entities). But there are differences with regard to the number of partners required, the maximum life of the company, the content of the articles of association and the minimum share capital required for incorporation.

What are the most common types of companies used by foreign entrepreneurs investing in Morocco?

The most commonly used companies in Morocco are the limited liability company (Société à Responsabilité Limitée, SARL) and the joint stock company (Société Anonyme, SA). The simplified joint stock company in its new regulation is likely to rival the previous stars in the family of the corporation in the future due to its flexibility.

What are the characteristics of a Moroccan joint stock company?

A joint stock company is a commercial company whose capital is divided into tradable shares representing the capital contributions of its shareholders. The latter, also called shareholders, must be at least five persons and are liable for the company's debts only with the contributed part of the capital. The formation of a joint stock company requires a minimum share capital of MAD 3,000,000 if the company is listed; otherwise, the required capital is reduced to MAD 300,000. The company's articles of association must be in writing and signed by all shareholders. Two main bodies govern the company: the shareholders' meeting and the board of directors. Law No. 17-59 not only establishes the basic characteristics of the joint stock company, but also requires a number of obligations related to transparency and external control, non-compliance with which entails penal consequences for the company's administrators.

Due to its characteristics and requirements, which are much more complex than those of the SARL, the SA is usually activated for large business projects.

What are the characteristics of the limited liability company in Morocco?

The limited liability company is the most common type of company in Morocco. It is a commercial company and acquires legal personality after registration in the Commercial Register. The number of partners can vary from a minimum of one (in this case it is a sole proprietorship) to a maximum of 50. If there are more than 50 shareholders, the company must be transformed into a joint-stock company. The shareholders are free to determine in the articles of association the amount of the original share capital contributed. There is no longer a minimum. The share capital must be deposited in a blocked bank account if it exceeds MAD 100,000, from which it cannot be withdrawn until the company is registered in the Commercial Register. Contributions by partners may also take the form of contributions in kind, in which case they are valued by an auditor (commissaire aux comptes).

Except in exceptional cases, the liability of the partners is limited to the capital contributed.

The articles of incorporation/bylaws of the SARL must be in writing, legalized and contain at least the type of activity / corporate purpose, the registered office and tax domicile of the company, the identification of the managing director(s). Non-partners may also become directors of a SARL. If the company is not a sole proprietorship, the shareholders must specify in the articles of association the liability regime to which they are subject.

What are the characteristics of the simplified joint stock company in Morocco?

The simplified joint stock company was introduced in 2021 and offers new flexibility for creative business start-ups. For the most part, it is left up to the shareholders themselves to decide how they want to structure their company.

Unlike the classic stock corporation, no share capital is required. Furthermore, only at least one shareholder is required. The SAS enjoys great flexibility regarding its internal organization, which the management can determine by statute. Only a chairman is obligatory. An auditor is only required if the turnover exceeds the threshold set in a regulation. Shareholders are also free to determine the frequency of board meetings and shareholders' meetings in the articles of association. Shares may be assigned; the articles of association may provide for the inalienability of shares for a period not exceeding ten years. An authorization clause is possible.

What formalities are required for the incorporation of a company in Morocco?

In order to reserve the preferred company of the company, it is necessary to obtain a certificat négatif.
The articles of association are the key to the proper functioning of the company. This is where the most attention is required because mistakes in the internal rules of the company can literally hinder its work forever or until its dissolution if the shareholders cannot later agree on rectifications. The law establishes some mandatory rules that are not at the disposal of the shareholders. Other rules are amenable to derogation.
As proof of the company's domicile, the authorities require the submission of a lease agreement in the company's name or a provisional domiciliation agreement, the latter being valid only provisionally for six months.
After filing the registration with the competent regional tax directorate, the latter issues a tax certificate indicating, among other things, the type of activity carried out by the company and the date of commencement of activity, as well as the tax address and number.
To obtain the legal personality of the company, it is necessary to register it in the Commercial Register.
This allows the existence of the company to be declared to the tax authorities. This administrative procedure, which can be carried out at the local sub-directorate of the Tax Administration or at the regional investment centers, consists in assigning a tax identification number to the company, which must necessarily be indicated on all invoices, reports, and documents of the company.
In order to be effective vis-à-vis third parties, the establishment of the company must be published in a local newspaper or magazine and in the Official Gazette.
Before hiring employees, the company must register with the Labour Inspectorate and join the National Social Security Fund.
Companies are required to open a current account with a Moroccan bank.

The handling of the above procedures, is not of enormous complexity (except sometimes the drafting of the articles of association), but they require many signatures, stamps, legalizations in an often very time-consuming procedure which can however be streamlined when given the necessary attention to the process. Please do not hesitate to contact us if you are planning to invest in Morocco. As an international law firm with its own offices in Morocco, we are mainly working with foreign companies and are very familiar with their particular challenges and needs.