TerraLex Cross-Border Guide to Cross-Border Guide to Business Investment in Africa

The two (2) most used legal forms of companies are: 1. the limited liability company (Société à Responsabilité Limitée) ; and 2. the joint-stock company (société anonyme).

A limited liability company (“LLC”) is a trading company which is an intermediate type between a partnerships company and capital company.

The LLC is formed by one or several shareholder(s) liable for losses only to the extent of their contributions.

The LLC is the form of company mostly used for small and medium size enterprises as well as family-owned companies, the capital of which is not contemplated to be publicly held. The management of an LLC has the advantage of not being constraining and costly since the entire management of the company can be handled by one or more manager(s) having full power and authority to engage the company and act on its behalf.

The joint-stock company (“JSC”) is formed by at least five (5) shareholders whose liability is limited to the amount of their contributions.

The JSC is the form of company mostly used by companies with a very large number of shareholders and for companies that contemplate entering into projects of a substantial size.

One of the main advantages of a JSC is that it provides strong guarantees to investors and bankers.

In addition, law 19-20 dated July 14, 2021, introduced the simplified joint stock company (société par actions simplifiée) into Moroccan law.

The simplified joint stock company is formed by one or several shareholders liable for losses only to the extent of their contributions.

The simplified joint stock company is regarded as a more flexible alternative to the traditional joint stock company. The simplified joint stock company allows for the manipulation of its corporate governance but requires one President (individual or legal entity) which will be the legal representative of the company. It can be set up a board of directors within a simplified joint stock company.

Finally, for a local presence in Morocco, an investor can set up a branch (succursale). A branch is a business entity that operates as an extension of the foreign parent company. It has no independent moral personality but remains fiscally imposed to the Moroccan territory. As such, it remains subjected to local registration and reporting requirements.

• Law no. 5-96 dated February 13, 1997 (as amended from time to time) governing general partnerships, limited partnerships, partnerships limited by shares, limited liability companies, simplified joint stock companies, and joint ventures (“Law 5-96”);
• Law no. 17-95 dated August 30, 1996 (as amended from time to time) governing joint stock companies (sociétés anonymes) (“Law 17-95”); and
• Law no. 15-95 dated August 01, 1996 (as amended from time to time) forming the Commercial Code (the “Commercial Code”).

Law 5-96 and Law 17-95 contain the principal rules for joint-stock companies and limited liability companies. These laws contain various requirements associated with these entities such as: the incorporation, management, financial reporting, corporate governance, transfer of shares and penalties.

The Commercial Code provides further guidance on the incorporation of the aforementioned business entities with the competent commercial trade registry and the publicity requirements to be registered as legal entities in Morocco. Furthermore, the Commercial Code contains provisions governing the insolvency procedures of the companies.

The registration of joint stock companies and limited liability companies can be accomplished before regional investment centers (Centre Regional d’Investissement or CRI). These centers are usually a one stop shop where you submit all the relevant legal documents to register with the tax authorities, the commercial register, and the national social security fund. The time it takes to fully register a company using a regional investment center will take approximately 15 days to a month.

Foreign investors can also choose to register their company without the use of a regional investment center. In this case, the foreign investor would first have to register with the tax authorities to obtain a professional tax ID. Next, they would have to register with the local commercial registers by submitting the relevant legal documents with the competent local commercial court. Finally, after the company is registered with the local commercial register and has a valid registration number, the company would have to register with the national social security fund and complete its publicity formalities in a newspaper of legal notices and the Official Gazette. This process, done independently can take approximately 3 to 6 weeks.

For both cases, foreign investors would have to provide the relevant authorities the necessary documentation to register a company. This includes but is not limited to:

• A negative certificate reserving a valid corporate name to be obtained electronically;
• A valid address for the company (based on a domiciliation certificate or a lease agreement);
• Articles of Association with valid legal provisions depending on the business entity to be incorporated; and
• For certain cases, a certificate of freezing of funds from the bank attesting that the amount of the share capital has been transferred.

Limited Liability Companies have no minimum share capital requirement. Joint Stock Companies have a minimum share capital of MAD 300,000 and MAD 3.000.000 for listed companies.

Simplified Joint Stock Companies have no minimum share capital requirement.

The Moroccan Foreign Exchange Office’s General Instruction (“FEO Instruction”), as amended from time to time, is the main foreign exchange legislation governing the flow of funds into and out of Morocco. The most notable provision is the free convertibility regime allowing the foreign investor to freely repatriate the revenues generated from its investment in Morocco made in foreign currency, corresponding liquidation proceeds and investment disposal proceeds.

To benefit from this convertibility regime, the foreign investor is required to comply with a certain number of reporting obligations regarding the investments.

The FEO Instruction also contains rules and restrictions on foreign investments, imports and exports, reporting and compliance, and currency exchange.

Moroccan law does not impose any restrictions on the nationality of the managers, directors or of any executive of a Moroccan company. They can be foreigners. Managers/directors are not required to be resident in Morocco.

Law No. 19-20 dated July 14, 2021, modifying and completing Laws 5-96 and 17-95 established a 60-40 gender quota in a joint stock company’s board of directors of a publicly listed company. From January 1, 2024, a 30-70 gender quota must be respected by companies.

• Tax returns: Companies are required to submit their annual tax returns to the relevant regional tax authority (Direction Régional des Impôts).
• Annual financial statements and annual returns. All forms of companies are required to approve their annual financial statements in a general assembly meeting and file their financial statements alongside the minutes of the annual general meeting with the competent trade registry.
• Social security reports. All companies have to withhold social security contributions from their employees every month and report them to the national social security fund.

Companies carrying out some regulated activities could be subject to other specific reporting obligations.

The Moroccan Labor Code established by Law No. 65-99 dated September 11, 2003, is the main regulation governing labor relations in Morocco. It covers a wide range of labor issues that apply to both Moroccan nationals and foreign workers such as: employment contracts, working hours, social security, labor unions, and foreign work permits.

Under Moroccan law, the existence of a work relationship between a foreign employee and a Moroccan employer is subject to the existence of a specific employment agreement. In accordance with article 516 of the Moroccan Labor Code "Any employer who wants to hire an employee with a foreign nationality shall obtain an authorization from the governmental authority in charge of labour. This authorization is granted in the form of a "seal" on the employment agreement". Article 517 of the Moroccan Labor Code further specifies that "the employment agreement reserved to foreigners shall comply with the model set by the governmental authority in charge of labor".

Based on the above:

1. Each seconded employee or third country national ("TCN") shall conclude an employment agreement for foreigners in compliance with the standard model (the "Employment Agreement for Foreigners") set by the Ministry in charge of labor (the "Ministry"). It is to be noted that the Employment Agreement for Foreigners is a "short" form of employment agreement which contain only the most relevant information pertaining to the employment; and
2. The employer shall request for each seconded employee a work authorization with the competent service within the Ministry in the form of a "seal" by the Ministry on the Employment Agreement for Foreigners. In this regard, the request of the work authorization shall, except for some categories of foreigners (i.e., top management, Tunisian, Algerian, and Senegalese) and subject to the discretion of the Ministry, include the certificate (attestation) delivered by the National Agency for Promotion of Jobs and Skills (ANAPEC). The latter certificate aims to establish the absence, amongst the local skills, of individuals having the ability to fulfil the position subject of the recruitment by the employer. In the absence of a precise legal text pertaining to the "attestation", the Ministry assesses, case by case, the requests for work authorizations.

Basically, the procedure to obtain a work permit lasts about 2 months from the date of the submission of a complete request. There is no limit or quota on obtaining work permits.

Foreigners are allowed to own land in Morocco as long as it is not an agricultural land. Such land is usually reserved exclusively for Moroccan nationals. To acquire agricultural land, foreigners would have to either lease the land for an extended period of time or acquire the land with the consent of the provincial or communal authorities (which is rarely granted).

Morocco has signed a plethora of bilateral investment treaties with countries from all the continents including France, the United States of America, Portugal, China, Hungary, South Korea, Ivory Coast, and Senegal. Most of the bilateral investment treaties cover investment incentives for foreign investors as well as fiscal provisions limiting double impositions. Morocco has also signed Free Trade Agreements with the United States, Turkey and the European Union granting customs advantages fostering a better investment climate in Morocco.

Morocco is also part of various multilateral treaties that have been conducive to bringing foreign direct investment to the country, notably the World Trade Organisation (WTO) convention and its GATTS protocols. Morocco signed and ratified the WTO convention and the first, fourth and fifth GATS protocols. These agreements aim to facilitate cross-border trade in services, promote fair competition, and ensure that countries have the flexibility to regulate services sectors in the public interest.

Large foreign investments are governed by the Investment Charter, which is designed to encourage the development and promotion of foreign investments by creating tax and customs incentives. Such tax incentives are generally provided under an investment convention (convention d'investissement) entered into between the Moroccan government and foreign investors.

Industrial Acceleration Zones: Foreign investments with an industrial nature can benefit from complete corporate tax exemptions for a certain period of time by establishing themselves in Industrial Acceleration Zones.

Companies in Morocco are subjected to various tax impositions which include: - Corporate Income Tax: Depending on the company’s profit, the Corporate Income Tax ranges from 12.5% to 32%

• Professional Income Tax: Employees of companies are taxed on revenue which ranges from 10% to 38%.
• Value added tax (VAT): Most of the businesses in Morocco are subjected to VAT at a rate of 20%.

Law no. 104-12 on the freedom of prices and competition dated 30 June 2014 (as amended from time to time). This law aims enforcing competition rules, ensuring fair market conditions, and safeguarding consumer interests by addressing competition issues related to anticompetitive practices, mergers and acquisitions and restrictive trade practices.

Yes. Please note that Morocco signed and ratified the New York Convention on the recognition and enforcement of foreign arbitral awards. This was further codified by Law No. 95-17 relative to Arbitration and Mediation Act of the Kingdom of Morocco. This law sets out the alternative mechanisms of dispute resolution in Morocco and enforceability provisions for arbitral awards rendered abroad.

Pursuant to article 79 of Law No. 95-17, international arbitral awards shall be recognized in Morocco provided that such recognition is not contrary to national or international public order rules.

The investment charter governed by Law No. 03-22 dated December 9, 2022, ensures favorable investment conditions in Morocco by allowing and encouraging the signing of investment agreements directly with the State of Morocco that give fiscal and customs advantages to the foreign investors. Morocco is also a signatory to various bilateral treaties protecting investors from those countries.

Morocco has a healthy investment climate with a growing percentage of foreign direct investments from a year-to-year basis. This is mostly due to the country’s initiatives led by his Majesty, King Mohamed the VI that emphasize attracting foreign investment through sustainable development and regional competitiveness.

Morocco has become a major regional player in the renewable energy sectors. The country’s green energy plan has created various tax and investment incentives making the renewable energy sector, especially green hydrogen, a very desirable sector to invest in.

Morocco also has various investment opportunities in the services sector, IT sector, Logistics, and manufacturing sectors. It must be noted that export-oriented industries are favored by Moroccan investment regimes.

Basically, the procedure to obtain a work permit lasts about 2 months from the date of the submission of a complete request. There is no limit or quota on obtaining work permits.

Morocco leads the African automotive sector with a production capacity of 700.000 vehicles. Investment is encouraged by the Moroccan government by removing certain taxes in the first five years for the companies located in the free zones export. Morocco leads the African automotive sector with a production capacity of 700.000 vehicles.

Finally, during recent years the Moroccan aeronautics sector has shown an outstanding dynamism and remarkable growth. The development of varied sectors, especially in wiring, mechanics, sheet metal work, composites, and mechanical assembly, has made Morocco a preferred destination for subcontracting in aeronautics.

Morocco has undergone through a rapid modernization of its infrastructure. Consequently, Morocco boasts one of the biggest ports in the Mediterranean and first in Africa called Tanger Med port. Additionally, Morocco has a pretty solid road and railway infrastructure with the country having the only bullet train in the continent connecting the two major economic cities of the Kingdom: Casablanca and Tangier.

Morocco’s geographical position gives it a strong advantage as it is closely connected to Europe and has access to both the Mediterranean Sea and Atlantic Ocean.

Burdensome bureaucracy continues to be a challenge to investment in the Kingdom of Morocco. Additionally, difficult barriers of entry to certain sectors such as the Insurance and Banking sector keeps additional investment at bay. To mitigate such risks, it is best to conduct due diligence on the area and sectors of the Moroccan economy a foreign investor would like to invest in.

Hiring specialized local counsel and service providers who know the structure and particularities of the Moroccan economy enable the investor to mitigate risks when entering the Moroccan market.