Faced with the emergence of new parties (start-ups, the multiplication of SMEs, etc.) and the evolution of the Moroccan economy, the amendment of the rules of the simplified joint-stock company (named initially “société anonyme simplifiée”), an in-between of the joint-stock company (“société anonyme”) and the limited liability company (“société à responsabilité limitée”), had become necessary. It must be pointed out that the simplified joint-stock company, which is usually used for joint-ventures between Moroccan and foreign companies had struggled to convince many in Morocco, given the widespread use of the limited liability company (out of a total of 830,000 companies registered in Morocco, nearly 780,000 companies are limited liability companies [1]).
The cause of this was the persistence of certain legal constraints which did not completely simplify the operation of the company:
- the former simplified joint-stock company could only be set up by legal entities, with a minimum of two shareholders, each of whom had to have a minimum capital of two million dirhams (or an equivalent amount in foreign currency);
- the legal representative of the former simplified joint-stock company had to be a natural person, which, without being a real obstacle, is a constraint for large groups which prefer to appoint legal entities as directors to simplify their international governance; and
- the company had to be incorporated with a minimum share capital of 300,000 dirhams which restricted the use of the simplified joint stock company to projects requiring a certain level of equity.
It is in this context that law n°19-20, promulgated by dahir n°1-21-75 of July 14, 2021, removed the former simplified joint stock company (by simply repealing all of the provisions relating to it) and introduced the new simplified joint stock company (“société par actions simplifiée”) (commonly referred to as “SAS”) generally inspired by its French counterpart.
This development has been unanimously greeted by the legal practitioners, satisfied to finally have a flexible corporate form, as well adapted to a Moroccan entrepreneur as to an international joint-venture.
Indeed, the new SAS regime solves all the constraints of the former simplified joint stock company: no minimum share capital, possibility to register a single shareholder company (without any capitalization condition for the said shareholder), possibility to designate legal persons as directors and total freedom to organize the governance of the company through the articles of association.
Nearly two years after the enactment of law n°19-20, what is the assessment of the SAS?
Although no statistics are available on the number of simplified joint-stock companies registered since the enactment of law n°19-20, we have observed that, in practice, most international groups now prefer the simplified joint-stock company when setting up a company in Morocco, regardless of the structure of their investment.
First, for a greenfield investment with a wholly owned subsidiary, the SAS may mirror in its articles of association rules specific to the group’s policy: clauses limiting the powers of the president, specific procedures for the approval of certain decisions, existence of certain expert committees (corporate social responsibility, conformity, investments, etc.). These rules could previously be implemented in a shareholders’ agreement, outside the articles of association, but with a major drawback: in law, article 11 of law n°17-95 provides that between shareholders, no evidence is admissible against the content of the articles of association, which means that the scope of a shareholders’ agreement whose content derogates from the articles of association is not binding in the event of a dispute between shareholders.
In addition, in the context of a joint venture, the shareholders of a SAS may organize a governance structure which includes collegial bodies, such as audit committees, strategic committees or financial committees. These committees, whose members do not have the status of executives, can oversee the action and decisions of the executives, and offer, in addition to the implementation of internal counter-powers, multiple advantages:
– first, since the articles of association can freely set out their governance, the procedures can be very flexible (consultations by simple email, videoconference, limited notice or convocation period, etc.);
– second, unlike the members of the board of directors in a joint-stock company, the members of statutory committees are not required to hold shares in the company, which simplifies the management of the shareholding;
– third, as the legal representative is generally appointed by the local partner, the existence of committees responsible for controlling his action and/or authorizing the conclusion of certain acts makes it possible to secure the governance of the company for the foreign partner without the need for the latter to hold a corporate mandate in the company and to incur the associated liability.
Finally, as the SAS is a company whose shareholders’ liability is limited (as opposed to a partnership), it allows for the issuance of complex securities, i.e. securities giving access to the share capital or giving the right to the allocation of a debt security, such as bonds convertibles in actions (obligations convertibles en actions), stock warrants (bons de souscriptions d’actions)or bonds with warrants to subscribe for shares (obligations à bon de soucripion d’actions).
The ability of an SAS to issue these complex securities, without being subject to all of the formalities specific to joint-stock companies, is a key element in the structuring of certain private equity transactions, for example in the context of the acquisition of equity interests by investment funds.
In these transactions, complex securities can serve three main purposes:
- to diversify the terms of financing for the investor and the associated risks, by providing financing partly in equity and partly in debt (less risky but also less lucrative than equity financing);
- securing a principal equity investment by being able to raise its equity stake in certain circumstances, in particular via convertible bonds or ratchet mechanisms (a mechanism for protecting investors by correcting the value of the investment); and
- to build loyalty among executives/key persons by granting them securities giving access to the company’s ownership, through warrants.
Although the SAS cannot make a public offering, this double characteristic – flexibility of governance and capacity to issue complex securities – makes the SAS a particularly useful investment vehicle for entrepreneurs and investors.
Despite its advantages, some technical difficulties relating to the implementation of SAS in Morocco remain.
The first, legal in nature, is the uncertainty regarding the status of the initial simplified joint stock companies that were already registered at the time of the enactment [2] of law n°19-20. The provisions of law n°17-95 relating to the initial simplified joint-stock companies were repealed by law n°19-20 without any transitional measures, so that these companies no longer have any legal basis, and therefore, the status of these companies, as well as the validity of their corporate acts adopted since the entry into force of law n°19-20, remain uncertain. Faced with this uncertainty, however, practice has quickly opted for a pragmatic solution, consisting of formally transforming these initial simplified joint stock companies into SAS.
A second, more practical difficulty is that many administrations have still not updated their information systems and therefore cannot issue certain documents to an SAS, as this legal form is not recognized in the system. For example, the DirectInfo barometer provided by OMPIC only includes statistics relating to limited liability companies and joint stock companies [3]. There is no doubt that these practical concerns will be resolved quickly.
While not strictly speaking a difficulty, it should be noted that the decree relating to the turnover thresholds above which the appointment of a statutory auditor is required in a SAS has still not been adopted, which is regrettable in terms of the completeness of the SAS regime, but obviously perfectly unproblematic for all the companies concerned. The fact remains that these companies can in any case choose to appoint an auditor.
In conclusion, the SAS convinces most practitioners in terms of substance and form. Now it needs to convince the majority of entrepreneurs and investors: for comparison, in 2021 in France, 65% of the creations of company concerned the SAS [4].
Written by Ali Bougrine, Fabien gagnerot and Sarah Akouz.
[1] http://barometre.directinfo.ma (last visited March 20th, 2023)
[2] Title XV of law 17-95 relating to the initial simplified joint stock company
[3] http://barometre.directinfo.ma (last visited March 20th, 2023)
[4] https://www.insee.fr/fr/outil-interactif/5367857/details/60_ETP/1.61_DCE/61C_Figure3 (dernière visite le 20 mars 2023)