Setting Up an LLC in Morocco: Capital, Management and Shares (Law 5-96)
The limited liability company (LLC) is the most widely used form in Morocco for launching a commercial activity. It allows you to limit your risk to the amount of your contributions while keeping management flexible. Based on Law 5-96, this guide explains what you need to decide before forming your company.
What is an LLC?
The LLC is formed by one or more persons who bear losses only up to the amount of their contributions (art. 44). That is the central advantage: your personal assets are not exposed beyond what you have invested. When the company has only one person, that person is called the "sole partner" and alone exercises the powers normally vested in all the partners (art. 44).
Note: certain activities are excluded from this form. Banking, credit, investment, insurance, capitalization and savings companies cannot adopt the LLC form (art. 44).
Your company must have a corporate name followed or preceded by the words "limited liability company" or the initials "LLC" (art. 45). This wording, the amount of the capital, the registered office and the registration number must appear on your deeds, letters, invoices and publications intended for third parties (art. 45).
How many partners?
You can create an LLC alone or with others, but the number of partners cannot exceed fifty (art. 47). If the company comes to have more than fifty partners, it must be transformed into a public limited company within two years, failing which it is dissolved (art. 47).
Note: a single-partner LLC cannot, in turn, have as its sole partner another LLC made up of a single person (art. 49).
How much capital should you provide?
Good news: the capital of the LLC is freely set by the partners in the articles of association (art. 46). There is therefore no minimum amount imposed by law. This capital is divided into shares of equal nominal value (art. 46).
Paying up (the actual payment) follows specific rules (art. 51):
- The shares must be subscribed in full by the partners.
- Contributions in kind must be fully paid up from the time of formation.
- Contributions in cash must be paid up for at least one quarter of their amount, with the balance payable in one or more installments within a maximum period of five years from registration.
In principle, shares cannot represent contributions in services (your work alone), except in the particular case of a business or a craft enterprise operated by the company (art. 51).
If the capital set exceeds one hundred thousand dirhams, the funds resulting from the paying up must be deposited within eight days into a blocked bank account (art. 51). These funds can be withdrawn only upon presentation of the certificate of registration in the commercial register (art. 52).
Contributions in kind
If a partner contributes an asset rather than money, the articles of association must include its valuation, based on a report drawn up by a contributions auditor (art. 53). You may, however, dispense with this auditor unanimously, where the value of no contribution in kind exceeds one hundred thousand dirhams and the total of these contributions does not exceed half of the capital (art. 53). In the absence of an auditor, the partners remain jointly and severally liable for the value adopted for five years toward third parties (art. 53).
Drafting the articles of association
All partners must take part in the deed of formation, in person or through a representative holding a special power of attorney (art. 50). On pain of nullity, the articles of association must be dated and state in particular: the identity of the partners, the formation as an LLC, the corporate purpose, the name, the registered office, the amount of the capital, each partner's contribution, the distribution of shares, the duration of the company and the signature of all partners (art. 50).
Management
The LLC is managed by one or more natural persons, who may be chosen from outside the partners (art. 62). In the absence of a provision in the articles of association, the manager is appointed for a term of three years (art. 62).
Toward third parties, the manager has the most extensive powers to act on behalf of the company, and clauses in the articles of association limiting their powers cannot be invoked against third parties (art. 63). The manager may be removed by decision of the partners representing at least three quarters of the shares; removal without just cause may give rise to damages (art. 69).
Managers are liable, individually or jointly and severally, for breaches of the law, violations of the articles of association and management faults, toward the company as well as toward third parties (art. 67).
Shares and their transfer
Shares cannot be represented by negotiable instruments (art. 55). Their transmission follows rules depending on the beneficiary:
- Between partners: shares are freely transferable (art. 60).
- To third parties: the transfer requires the consent of the majority of partners representing at least three quarters of the shares (art. 58).
- By succession or between close relatives (spouses, ascendants and relatives up to the second degree): shares are freely transmissible, unless an approval clause is included in the articles of association (art. 56).
Any transfer of shares must be recorded in writing, on pain of nullity, and made enforceable against the company and then against third parties after publication in the commercial register (art. 61, referring to art. 16).
Partners' decisions
Each partner has a number of votes equal to the number of their shares (art. 72). Ordinary decisions are adopted by the partners representing more than half of the shares; failing that, a second consultation decides by a majority of the votes cast (art. 74). Any amendment to the articles of association, however, requires a majority representing at least three quarters of the share capital (art. 75).
By following these steps — choosing the capital, paying up contributions, drawing up compliant articles of association and appointing the manager — you give your LLC a solid foundation from the moment of registration in the commercial register.