Introduction to the Country
My hope is that countries like Morocco will have investment to create work, so people dont have to leave.
Tahar Ben Jelloun (Writer & Poet)
The Kingdom of Morocco has a population of approximately 34 435 719 million people (July 2008 estimate).
The Kingdom of Morocco has a constitutional monarchy with an elected parliament. The Chief of State is King Mohammed VI (since 23rd July 1999).
The legal system is based on French common law and customary law, with Sharia law applying to family matters.
The Moroccan economy is considered to be a relatively liberal economy, regulated by the law of supply and demand. Since 1993, the country has privatised certain sectors of the economy. In comparison with a few years ago, economic growth is far more diversified, with new service and industrial centres developing, such as Casablanca and Tangiers. In addition, the agricultural section is in the process of being rehabilitated, which in combination with good rainfalls led to sectorial growth of over 20% in 2009.
The services sector accounts for over half of GDP with an additional quarter deriving from industry comprising construction and manufacturing. The sectors of the economy which recorded the highest growth are tourism, telecoms, information technology and textile sectors.
The economic system of the country presents several facets. It is characterised by a large opening towards the outside world. However, France remains the main trading partner of Morocco. France is also the primary creditor and foreign investor in Morocco. In the Arab world, Morocco has the second largest nonoil GDP, after Egypt, since 2005.
The main resources of the Moroccan economy are agriculture, phosphates and tourism. In addition, fish sales and seafood are an important resource. Industry and mining contribute to a third of the annual GDP. Morocco is the worlds thirdlargest producer of phosphorus and the price fluctuations of phosphates on the international market greatly influence Moroccos economy. Tourism and workers remittances have played a critical role since the Kingdoms independence. The production of textiles and clothing is part of a growing manufacturing sector that accounted for approximately 34% of total exports in 2002, employing 40% of the industrial workforce. The government wishes to increase textile and clothing exports from $1.27 billion in 2001 to $3.29 billion in 2010.
Finance and Tax matters
(a) Financial assistance
(i) Does the concept of financial assistance exist
Please contact us for further information.
(b) Lending restrictions/banking monopolies
(i) Any restrictions applicable to the importation of capital by lenders?
No such restrictions or requirements are applicable.
(ii) Requirement for the lenders/security agent to be registered in the jurisdiction?
There is no requirement pertaining to the registration of the lender in the jurisdiction.
(iii) Can foreign lenders lend into the jurisdiction?
(c) Restrictions relating to repatriation of dividends
(i) Are there any restrictions relating to repatriating dividends?
There are no restrictions pertaining to the repatriation of dividends in KoM. However, investors are obliged to inform the Moroccan Exchange Office (Office des Changes) within 6 months following their investment.
(i) Are there any restrictions on the convertibility of the jurisdictions currency?
Moroccan Dirham is not a convertible currency.
(e) Interest payments
(i) Are there any restrictions on the payment and compounding of interest? If so, does this also affect both local and foreign lenders?
There are no restrictions on the payment and compounding interest, as commercial and financial interests are freely negotiable.
(i) Are there any withholding tax issues in relation to interest payments and fees to foreign lenders or payments received under any agreements?
There is a withholding tax charge applicable at the rate of 10%.
(ii) List of double taxation treaties.
- United Arab Emirates;
- United States of America;
- United Kingdom;
- Switzerland; and
(iii) Lender risks in respect of tax liabilities/tax domiciliation as a result of providing debt and/or taking/enforcing security interests
The lenders must ensure that applicable withholding tax is duly paid by the borrower as it has joint liability with the borrower regarding the payment of withholding tax. In addition, no tax is applicable to the enforcement of security interests through judicial proceedings.
(iv) Can loan repayment / enforcement proceeds be treated negatively from a tax perspective for the lenders?
Loan repayment / enforcement proceeds cannot be treated negatively from a tax perspective for the lenders.
(g) Stamping costs
(i) Details of stamp duty costs
Registration and stamp duties are payable depending on the type of security interest. In general, any deed that requires registration must be stamped on each page with a 20 dirham (approx. 2,5 USD) stamp. Mortgages regarding real estate and pledges on movables are subject to a 1% tax registration
Security, Enforcement and Insolvency
(a) Overview of security regime
(i) Can a security interest be obtained over a companys assets, e.g.:
(A) accounts receivable (book debts); Yes.
(B) inventory (stock in trade); Yes.
(C) shares of a company (issued and authorised); Yes, subject to any preliminary approval if provided in by laws or shareholder agreement.
(D) equipment; Yes.
(E) real property; Yes.
(F) insurances; Yes, under delegation mode.
(G) project contracts. Yes, subject any restrictive third parties preliminary approvals.
(ii) Can shares of a project company validly be pledged and enforced under an English law share charge?
No. Enforcement should be made in Morocco and under applicable Moroccan laws.
(iii) Can a company grant a security interest in order to secure its obligations (i) as a borrower under a credit facility, and (ii) as a guarantor of the obligations of other borrowers and/or guarantors of obligations under a credit facility?
(iv) If the borrowings to be secured are under a revolving credit facility, are there any special priority or other concerns?
There are no special priority or other concerns regarding security under a revolving credit facility.
(v) Can the relevant security interests be granted to a security agent or trustee on behalf of the lenders from time to time?
(vi) Are any steps required to ensure that a transferee of a lender will receive the benefit of the relevant security interests?
Valid notice to the borrower should be organised.
(v) Please indicate the claims that would have priority over the relevant security interests.
The following claims would have priority over the relevant security interest; tax, social security contribution and salaries of the project employees.
(vi) Is there a public security registry?
Yes: for a trade registry certificate or any document dealing with any finance arrangement in place.
No: for guarantees, indemnities or suretyships given by or for the benefit of a project company.
(vii) Formalities in respect of security creation:
(A) Statutory perfection requirements;
Are any governmental or other consents or filings (consider exchange control and similar regulations, perfection, etc.) required?
In general, the foreign exchange authority must approve any project regarding the international transfer of funds are to be implemented.
(B) Any other formalities.
Are any other formalities (for example, notice to creditors, shareholder approvals, notarisations, etc.) required?
Yes, but depending the type of deeds. Generally, official documents must be notarized/legalized.
(C) Steps for perfection and length of time taken
What steps are required to register or otherwise perfect security in the jurisdiction and how long do these steps typically take?
Judicial proceedings generally consist of a public auction sale of the secured asset is necessary by law. The proceeds are delivered to the claimant creditor after the auction.
(D) Any significant financial costs or significant time delays required to create and perfect the relevant security interest?
Are there any significant financial costs (including stamp tax, registration, notarial fees, etc.) or significant time delays which would be required in order to create and perfect the relevant security interest?
There are generally stamp and registration costs for any security document to have the document dated and make it binding.
(b) Insolvency and enforcement regime
(i) Is there a court or similar register that can be searched in respect of proceedings and insolvency actions ?
There is a Trade registrar that can be searched to attain information regarding proceedings and insolvency actions.
(ii) Summary of the different options for an insolvency related process.
Generally, insolvency process commences when court orders the entity that is unable to pay its creditors. Therefore, the entity enters into the two step insolvency procedure: First, the initial 6 month period is renewable if reorganization is possible under the control of a receiver and of a court judge. Second, if such reorganization becomes impossible, the entity is subject to liquidation of its assets. To pay its creditors, first ranking the privileged (tax, social security and employees), secured (creditors benefiting of any registered security) and unsecured creditors.
(iii) Are summary or expedited proceedings available?
There are no expedited proceedings available.
(iv) Are any governmental or other consents required in connection with:
(A) the enforcement of a security interest in shares;
In general, foreign exchange authority approval is required.
(B) the enforcement of a security interest in other assets;
Same as above.
(C) the enforcement of a guarantee (sovereign or otherwise)
Same as above.
(v) Do lenders inherit all environmental liabilities when they become owner of the shares upon enforcement (or at any other time)?
The entity and the shareholders have the duty to comply with all environmental liabilities.
(vi) Can security interests be enforced by both private sale and public auction, and is it necessary to appoint a court or other official to carry out the enforcement?
Corporate, Insurance and Employment matters
(a) Corporate vehicle
(i) Project company incorporation:
(A) Type of corporate vehicle
Limited Liability Companies (LLC) are the most appropriate type of corporate vehicle. LLC can be incorporated in KoM within 14 days.
(B) Issues relating to thin capitalisation
A company must have a minimum of Euro 1,000 in share capital.
(C) Requirement to have indigenous shareholdings
No requirements apply in KoM.
Please indicate any prescriptive requirements or limitations in respect of incorporating a special purpose company such as:
(I) Thin capitalisation requirements
Euro 900 in share capital and approx. Euro 29,000 for a stocks company.
(II) Can a limited liability company be established?
(III) Is it possible to use a foreign company or a branch of a foreign company to act as project company?
(D) Estimated timescale for incorporation in the country. Are there any specific fees or other costs payable to governmental authorities in respect of incorporation?
The estimated time period for incorporation of a company is 14 days.
(E) Are there any specific fees or other costs payable to governmental authorities in respect of incorporation?
The fees payable are approx. 6.000 MAD (Euro 500).
(b) General corporate issues
(i) Is a private company free to lend and/or issue guarantees?
(ii) Are there any restrictions on dividend distribution?
There are no restrictions on dividend distribution except when such dividends are fictitious.
(i) Mandatory insurance: are there any insurances which the project company or the Project is required to have by law (or regulations or similar)?
The project company or project is required to have worker accident insurance and the mandatory illness contribution.
(ii) Is there any minimum requirement to place the insurance with local insurers or any other similar restrictions? If so, can reinsurance be lawfully placed internationally?
There is no minimum requirement to place the insurance with local insurers or any other similar restrictions. However, reinsurance can be placed internationally with special approval from the foreign exchange authority.
(iii) Are there any restrictions in respect of granting security rights over the insurances or reinsurances?
Please contact us for further information.
(i) Legislative/regulatory issues: is there any legislation or regulation impacting on foreign employees, in particular the conditions relating to work and residence permits? Please give an indication of the process and costs in relation to obtaining work and residence permits.
An expatriate employee is required to obtain a registration certificate; it is a title of stay, issued to expatriates living in Morocco for more than three (3) months.
The residence certificate, after an expatriate has resided in morocco for four years.
The procedure for the application, for a certificate of registration or residents permit, is as follows:
In order to do that, an expatriate must contact the police prefecture of Rabat providing a file, which contains:
- Three (3) certified copies of the foreigners employment contract;
- Three (3) certified copies of their passport: page with the picture, page of the eventual visa and page in where appears last entrance date toMorocco;
- Three (3) copies (of which one is certified true copy) of the lease contract in the expatriate name (two (2) copies of the certified true copy);
- Three (3) copies (of which one is certified true copy) of the Lydec contract (or any other state control) in the expatriate name (two (2) copies of the certified true copy).
- If the expatriate is domiciled by the employer, the employer must provide a guarantee certificate which eliminates the requirement of the above two items.
- Two (2) registration request slips (printed white);
- Three (3) registration request slips (card form);
- Eight (8) pictures;
- Special bill stamp of 60 MAD (~ 6 â¬).
- Please note that these documents are valid for every residents permit. For the married persons, the same list is to be provided for the spouse and for children of more than sixteen years old.
After the filing of these documents in the police prefecture, foreign department, a receipt is issued to the applicant waiting for the establishment of the residents permit at the level of DGSN (Direction Generale de la Surete Nationale, or General Direction of the National Safety) in Rabat.
This receipt must be controlled every month in case the residents permit was not issued by DGSN yet within 30 days.
It is recommended to take steps of registration also in the General Consulate of the delegates country of origin.
It is necessary to draft an employment contract. The file must be submitted to the ministry of employment work administration â immigration department Rabat.
Documents to be provided are:
- Work certificate of the headquarters, listing different occupied functions;
- Estrangement Certificate in due form issued by the headquarters;
- Certified true copies of certificates and diplomas;
- Certificate of last employers otherwise certificate of the latest employer;
- Certified true copy of the pages of the passport: page with the picture, page of the eventual visa and page in where appears last entrance date toMorocco;
- Yellow printed form in five (5) copies said printed form of foreigners employment contract supplemented by the company inMorocco, signed by the employer and by the concerned person;
- White printed form said âjob visaâ in two (2) copies supplemented and signed by the expatriate;
- Important remark: the expatriate does not need the ANAPEC certificate (Agence Nationale de Promotion de lEmploi et des Competences, or National Agency for the Employment and Competences Promotion). However, their expatriation period cannot exceed 3 years.
- For the first request, the visa relating to employment contract will be granted for one (1) year period.
The ANAPEC will have to issue a certificate certifying the absence of national candidates for the occupied position.
Foreign employee can be seconded or expatriated.
Hence, the seconded remains tied to the social regime of his country of origin. In that case, a certificate of the social regime office of his country of origin is compulsory and must appear in the personal file of the expatriate. On the other hand, the expatriate will raise Moroccan obligatory regime. In that definite case, he will have to be affiliated to the National Office for Social Security (Caisse Nationale de Sucurite Sociale or CNSS).
There are some sensitive employment sectors such as the army, defense, nuclear research, where foreign persons are not permitted to work.
(a) Land registry: is there a land registry (or similar) in the country that can be searched to confirm whether a project company has granted of any mortgage, charge, option assignment, lien or other encumbrance over the whole or part of the properties or assets of a company?
There is a land registry in Morocco.
(b) Landlords rights: please indicate whether there are any rights which accrue to the landlord (or the government or any other bodies) that may override the terms of a land lease or threaten the rights of a project company particularly any right of repossession or acquisition. Any land property can be subject to expropriation for public utility.
Landlords do not have the right to unilaterally amend any lease agreements.
(c) Direct agreement: are you aware as to whether a direct agreement in respect of a lease has been previously been provided to lenders on other transactions?
With regard to major projects, the Moroccan State can provide direct agreements as an incentive to the lenders.
(d) Forfeiture rights: do relief from forfeiture rights exist and would the lenders be entitled to rely on such rights?
Forfeiture exist should the lender is in continuing default under its obligations toward the landlord. Forfeiture rights do exist in the event that the lender is in continuous default regarding his obligations to the landlord.
(e) Is there any additional legislation governing property rights?
(f) Are there any formalities with which lenders need to comply when enforcing security over land?
The judicial auction sale of the property is mandatory.
International law and arbitration
(a) Supra-national treaties
(i) List all Bilateral Investment Treaties to which the country is party.
- United Kingdom;
- United Arab Emirates;
- United States of America;
- Czech Republic;
- Belgium and Luxembourg.
(ii) Please confirm whether the country is a signatory to the Energy Charter Treaty.
KoM is an observer of the Energy Charter Treaty.
(i) Please advise any requirements and restrictions applicable to the choice of arbitration roles and place of arbitration etc.
Arbitration is commonly chosen in international investment agreements. However, arbitration is not well developed in KoM despite the adoption of a new legislation in November 2007.
(ii) Please confirm whether foreign arbitral awards / decisions are enforceable in the country (i.e. is the country a party to the New York Convention on the Recognition of Foreign Arbitral Awards)?
Since 1959, KoM is a signatory to the 1958 New York Convention relating to the enforcement of foreign arbitral awards.