DOING BUSINESS IN MOROCCO (Dec. 2014)

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1 269, boulevard Zerktouni, n 3, 2 ème étage Casablanca TÉL. : +212 (0) FAX : +212 (0) DOING BUSINESS IN MOROCCO (Dec. 2014) With an area of 710,850 km², Morocco is located in the Northwest of Africa. The Moroccan territory has an important maritime facade with 3,500 km of coast. Morocco is a Constitutional, democratic and social Monarchy rueld since 1999 by His Majesty the King Mohamed VI. Fifth economic force of Africa, Morocco, as China, India, Brazil or Poland, is a dynamic emerging country. During the last five years, the Moroccan economy was supported by an average growth of 4,6 % per year. The main part of the economic activity is located on the axis Casablanca - Tangier and it concentrates in particular on Casablanca, Rabat and Tangier. Foreign investments in Morocco have expanded from the traditional domains of textiles, fishing, and agriculture to those presenting greater added value, such as energy, infrastructure, transport, telecommunications, financial services and others. 1. Which kind of corporations can be set up in Morocco? There are two kind of corporations in Morocco: Join stock companies where the shareholders are liable for the Company's liabilities only to the extent of their contribution, that is, up to the value of the shares they own (e.g. : Private limited company (" PLC "), limited liability company (" LLC ") and simplified limited company (" SLC ")) Partnership companies where the predominant aspect is the personal factor ("intuitu personae") and where the partners have unlimited joint and several liability for its social debts (e.g. : General partnership "Société en nom collectif" and Limited partnership "Société en commandite simple"). P A R I S A L G E R C A S A B L A N C A F R A N C F O R T G U A N G Z H O U H O N G K O N G S H A N G H A I M U N I C H Lefèvre Pelletier & Associés Maroc SARL au Capital Social de DHs RC : IF : Patente : CNSS :

2 Most of the time, our clients choose to set up a joint stock company in order to limit their liablity, as shareholders, to their contribution in the share capital. The three most common form of joint stock companies are (i) LLC, (ii) PLC or (iii) SLC. The requisite necessary for the setting up of these companies are the following: Limited Liability Company "LLC" Public limited company "PLC" Simplified Limited Company "SLC" Law n 5-96 as modified and completed by Law n Trading company An LLC cannot be a bank, a finance company, an investment company, an insurance company, a capitalization or a savings company. LLC has a legal personality once it has been registered on the trade register. Applicable law Law n as modified and completed by Law n Trading company. Status A PLC can benefit from public offering. Legal personality PLC has a legal personality once it has been registered on the trade register. Law n as modified and completed by Law n Trading company. A SLC cannot benefit from public offering. SLC has a legal personality once it has been registered on the trade register. -2-

3 Shareholders From 1 to 50 shareholders. At least 5 shareholders. At least 2 shareholders which have to be legal persons with a share capital equal or exceeding an amount of MAD or the equivalent in foreign currencies. Registered capital/contribution (Minimum registered capital / 1 st paid-up capital / Paid-up capital delay) 1 Moroccan dirham ("MAD"). 25% at the registration. Registered capital shall be completely paid-up within 5 years from the registration date. One or several managers appointed by the articles of association or by a shareholders decision by a majority of three quarters MAD ( MAD for company calling for public capital). 25% at the registration. Registered capital shall be completely paid-up within 3 years from the registration date. Corporate governance A board of directors (minimum 3, maximum 12 (or 15 for company calling for public capital)). The Chief Executive Officer (Président Directeur Général) or the Managing Director (Directeur Général) are the legal representative of the PLC; or A management board (maximum 5 (or 7 for company calling for public capital)) and a supervisory board (minimum 3, maximum MAD. Registered capital shall be completely paid-up as soon as the articles of association are executed. The management and organization of the SLC are freely organized by the shareholders in the articles of association subject to the provisions stated in articles 425 and following of the law n The first chairman has to be appointed in the articles of association and then in accordance with the modalities provided for in such articles of association. The chairman may be a legal person. -3-

4 (or 15 for company calling for public capital)). The management board manages the PLC. The Chairman of the management board is the legal representative of the JSC. The chairman is the legal representative of the SLC. The determination of the nominal value of the shares is free. The shares are freely transferable between shareholders. LLC shares may be assigned to third parties only with the prior consent of the shareholders representing at least 3/4 of the shares. A mandatory 3% tax registration fees on the sale price (or 6% for real estate company or companies whose main activity is real estate). Extraordinary shareholders meeting: - Quorum: No; - Majority: one or several shareholders representing more than three-quarter of the shares. Shares (Amount / Assignment / Listed companies) The nominal value of each share shall not be less than 50 MAD (10 MAD for company calling for public capital). Negotiable securities (in the event of registered shares, the articles of association may provide the assignment of shares to third parties only with the prior consent of the PLC). A mandatory 3% tax registration fees on the sale price (or 6% for real estate company or companies whose main activity is real estate). General meetings Extraordinary shareholders meeting: - Quorum: the present or represented shareholders hold at least half of the shares with a voting right (1 st convocation) or a quarter of the shares with a voting right The nominal value of each share shall not be less than 50 MAD. Negotiable securities (in the event of registered shares, the articles of association may provide the assignment of shares to third parties only with the prior consent SLC); A mandatory 3% tax registration fees on the sale price (or 6% for real estate company or companies whose main activity is real estate). The articles of association shall determine the decisions that must be taken collectively by the shareholders and the modalities of such decisions. However, the prerogatives attributed to the ordinary and extraordinary shareholders meetings of the SLC in terms of, inter alia, capital increase/decrease, merger, dissolution, appointment of auditors and -4-

5 Ordinary shareholders meeting: - Quorum: No; - Majority: one or several shareholders representing more than half of the shares (1 st convocation) and the majority of the issued vote (2 nd convocation). Optional but mandatory when the turnover exceeds 50 million MAD. The twentieth of the net profit shall be allocated to the legal reserve. Such appropriation shall cease once the legal reserve reaches the fifth of the share capital. (2 nd convocation); - Majority: two-third of the shares with a voting right of the shareholders present or represented; Ordinary shareholders meeting: - Quorum: the present or represented shareholders hold at least a quarter of the shares with a voting right (1 st convocation). No quorum is required following the 2 nd convocation; - Majority: majority of the shares with a voting right of the shareholders present or represented. Mandatory. Statutory auditor Companies calling for public capital have to appoint at least two statutory auditors. Dividend policy 5% of the net profit shall be allocated to the legal reserve. Such appropriation shall cease once the legal reserve reaches 10 % of the share capital. approval of annual accounts shall be undertaken collectively by the shareholders. Mandatory. 5% of the net profit shall be allocated to the legal reserve. Such appropriation shall cease once the legal reserve reaches 10 % of the share capital. -5-

6 2. Which are the requisite necessary for the setting up of the relevant corporations? Competent administrations - Centre Régional d Investissements "CRI" is a "one-stop-shop" for potential investors to make setting up a business in Morocco. - CRIs are set up in most of the major cities in Morocco and offer a simple, easy and cheap procedure to incorporate a company. - CRI replaces several administrations: trade register, OMPIC, tax administration, and social security administration. - The Moroccan regulation accepts the incorporation documents (bylaws, minutes, etc.) drafted in Arabic or French in compliance with Moroccan companies law. - Legalization of the signatures. - Either Moroccans and Foreigners can set up a company in Morocco with any specific rule of majority in the share capital. Procedures - Obtaining a "certificat negative" : it is a document by which the central trade register certifies that no other company (in Morocco), bears the same name as the one chosen by the applicant for the company; - Drafting incorporation documents; - Opening a bank account and depositing the amount of paid up capital : the bank issues an attestation that the money has been blocked; - Arranging domiciliation to have a registered address (renting an office, owning flat or house, arranging with a Moroccan company that offers domiciliation services; - Registering the company with the CRI. -6-

7 3. How long does it take to set up a new corporations and which are the approximate costs involved? Deadline The deadline of setting up a company is ranging roughly from 30 to 45 days as from the obtaining of the "certificat négative". Approximate costs - Articles of association's registration tax: 1% of the amount of the share capital; Registration tax of the articles of association appendix : 200 MAD per appendix; - Registration tax of the constitutive general meeting: 200 MAD; - The stamp duties to be affixed on the articles of association, including the appendices, the minutes and the contracts: 20 MAD per sheet; - Trade register registration : 350 MAD; - "Certificat négatif" : 230 MAD. 4. Is there a legal framework which favors (foreign) investments, such as public incentives, young and women entrepreneurship, etc.? - Direct foreign investments are free and opened to any foreigner, resident or non-resident (individuals and companies) and do not require any prior authorization from the Exchanges Office. - Existence of an Investment Code: Investments Charter "Charte d investissements" since 1995 and Exchanges Office Instruction. - The Investment Charter gives the same preference to all sectors except for the acquisition in private property of the agricultural lands and the exploitation of the strategic resources which are protected as the phosphate that are prohibited for foreign investors. - Foreign exchange regulations provides for a convertibility regime. - The Investment Charter offers special contracts with the State to companies whose investment programs are important due to their size, the number of stable jobs, the region in which they will be carried out, etc. Under these contracts, the State can grant a partial exemption

8 from cost of purchasing land, costs of external infrastructure and professional training. - Free Trade Zone : several regions allow exporting companies to be exempted from customs dues, foreign trade and exchange regulation; - Financial offshore place : to set up offshore banks and holdings offshore with 10 percent for company income tax (instead of 30%) during the first 15 years; - Casablanca Finance City : for 3 companies categories (i) financial companies (banks, insurance, asset management), (ii) providers of professional services (financial offshoring, software ) and (iii) local or international branches for companies which provide coordination activities with 8.75 percent for the company income tax. 5. Are there bilateral agreements in place between Italy and Marocco? Agreement between Morocco and Italy to avoid double taxations regarding income taxes - Made in Rabat on June 7 th, 1972 as well as of the additional agreement made in Rabat on May 28 th, This agreement provide inter alia for the following: - Incomes resulting from real estate property are taxable in the contracting State where these properties are situated. - The profits of a company established in a contracting State are only taxable in this State, unless the company exercises its activity in the other contracting State by the intermediary of a permanent establishment which is situated there; in this case, the profits of the company are taxable in the other State but only as far as they are attributable to the permanent establishment. - Dividends paid by a company which is resident of a contracting State to a resident of the other contracting State are taxable in this other State. -8-

9 Agreement between Morocco and Italy concerning the promotion and mutual protection of investments - Made in Rabat on July 18th, This agreement provide inter alia for the following: - In case the investments made by investors of one of the contracting parties would suffer damage because of war, armed conflicts, states of emergency or other similar events in the territory of the other contracting party, these investments receive a just and adequate compensation for the loss suffered from the contracting party on the territory of which the investment suffered the aforementioned loss. - The investors of both contracting parties can be the object of no permanent or temporary measure which limits the right of property, ownership, control or enjoyment of their investments unless the current laws and regulations or a court order has it otherwise(differently). ooooo Contact: Romain Berthon Member of the Paris Bar, partner rberthon@lpalaw.com Tél. :