For nearly two decades, Morocco has been widely commended for its ongoing efforts to support and attract investment. Accordingly, the kingdom’s institutions are amending and adopting several measures to modernise its legal framework and thereby increase its appeal as an investment destination. In turn, the state is supporting major private sector players in Morocco in the formation of industrial conglomerates, and facilitating the expansion of these firms across the African continent.

Government strategy has focused on creating a favourable investment climate in a variety of sectors, including aeronautics, automotive and agribusiness. The incentives provided to foreign investors have enabled the country to retain its position as the highest-ranking economy in North Africa in the World Bank’s “Doing Business 2018” report.

This modernisation of the kingdom’s legal framework also supports Morocco’s political willingness to increase its influence across the African continent. This willingness to engage and cooperate with regional powers was illustrated by Morocco’s re-entry into to the African Union in 2017, after a break of more than 30 years.

CORPORATE LAW: Since the early 1990s the Moroccan legislature has launched numerous reforms in the field of corporate law to not only develop a healthier business environment, but also grant reassurances to companies intending to invest in the kingdom. The latest reform in relation to corporate law was Law No. 78-12 enacted by Dahir (royal decree) and Law No. 1-15-106 of July 29, 2015 supplementing and amending the reference Law No. 17-95 of August 30, 1996 regarding joint-stock companies – which are the main corporate entity available and in use in Morocco.

RECENT CHANGES: One of the major recent amendments to this law relates to the simplification of the procedures required to establish a company in Morocco as well as the running of its day-to-day operations, transparency and high-level governance procedures. These reforms seek to implement best practices in the concerned area, in particular through the adoption of the following guidelines:

• All operators are now allowed to supply financial statements and auditor’s reports electronically, though this is not yet enforceable due to technical issues which are expected to be resolved in the first half of 2018.

• The legislature has introduced a new obligation for all publicly listed companies to provide all the necessary and relevant information with regard to its ordinary general meeting three weeks prior to said meeting.

• It has become mandatory for publicly listed companies to put in place an audit committee. The committee reports to the board of directors or the supervisory board and is tasked with following up on issues relating to the preparation and control of the company’s accounting and financial information. In addition, the audit committee is in charge of sharing necessary and relevant information with shareholders, the public and the Moroccan Authority on Capital Markets (Autorité Marocaine des Marchés de Capitaux, AMMC).

• All publicly listed companies must have a website that publishes notices of meetings, reports of the board of directors, or reports of the management board whose contents relate, inter alia, to the structure or amount of the share capital.

• In terms of related-party transactions, the new law applicable to the corporate entity société anonyme (dualist joint-stock company) provides that even if those agreements can be characterised as “basic agreements concluded under market conditions”, this must now be the subject of particular information. Such agreements were not required to be disclosed under the previous applicable provisions, contrary to all other related-party transactions which are required to be authorised by the board of directors. Therefore, these agreements will no longer be hidden from the directors or shareholders of the company and will have to be brought to the attention of the board of directors or to the auditor and the These new measures are intended to ensure better accounting and legal traceability of various corporate activities and procedures applicable to joint-stock companies in Morocco.

Other minor but important amendments introduced by Law No. 78-12 relate to:

• The extension of the deadline for the submission of financial statements, from one to two months, as of the date of the ordinary general meeting which approved the annual accounts.

• The abolition of the mandatory appointment of a vice-chairman in joint-stock companies with a management board and a supervisory board.

• The convening of the general shareholder’s meetings by the management board instead of the supervisory board in the société anonyme. Overall, this long-awaited reform aims to modernise the legal framework that underpins Moroccan economic development.

FURTHER TO GO: It can be argued that these reforms remain somewhat limited in terms of updating the legal framework to the highest standards available. To fully conform to international and European best practice, it could also have been decided to extend several provisions of Law No. 78-12 to cover both limited-liability companies and simplified-limited companies – notably regarding basic and standard corporate activities – for example the time limit for filing summary statements with the registry of the Commercial Court. Other reforms are also possible in respect to sophisticated transactions, especially those regarding preferred shares and complex securities.

Nevertheless, all of the amendments that were adopted can be considered indispensable in the provision of a greater clarity and in the translation of international best practices to Moroccan law.

CASABLANCA STOCK EXCHANGE: One of the main amendments affecting the financial sector was the promulgation of Law No. 19-14 relating to the Moroccan stock exchange, brokerage firms and financial investment advisers enacted by Dahir No. 1-16-151 of August 25, 2016.

The enactment of new regulations covering the capital markets segment has been welcomed, since the Casablanca Stock Exchange was still operating under a legal framework dating from 1993. With the ambition of becoming a regional financial centre in Africa, this reform has brought about the transformation of the AMMC and the revised organisation of the Moroccan stock exchange.

The amended legal framework offers a substantial range of new possibilities including the setting up of new markets, thus encouraging the emergence of new drivers of growth. The rating will therefore no longer be divided into three groups, but rather split into two markets, thereby enabling a distinction between companies with large and small market capitalisation. The main market, which is dedicated to large companies, will consist of four subdivisions, two of which will be reserved for the trading of equity securities, one of which will be reserved for mutual funds – including index funds and real estate funds – and the one for debt securities.

The Casablanca Stock Exchange is also intending to update market access rules by introducing a minimum float requirement instead of a minimum capital requirement to be listed on the bourse. This approach should improve the overall float of the stock market and the liquidity issues from which the market has been suffering for years. Indeed, the Moroccan marketplace has about 75 listed companies with a fairly soft pace of initial public offerings (IPOs). Market transactions, on the other hand, remain insignificant which limits the liquidity for the holders of shares listed on the exchange.

ALTERNATIVE MARKET: The alternative market, namely the second market referred to in the new regulations, will include two groups for equity and bond transactions. The access rules will be less demanding than those required for the previously mentioned first market. The reform concentrates on small and medium-sized enterprises to enable them access to financing resources.

The programme also includes the creation of sub-funds reserved for the negotiation of collective funds, notably exchange-traded funds and real estate funds. Management companies can therefore offer trading services for financial instruments not authorised to trade on the regulated market. In addition, it will be possible for foreign companies without a registered office in Morocco to enter the stock market. Furthermore, the obligation to make a public offering in national currency will be abandoned, thus allowing the possibility to pay in foreign currency. This measure will be promoted by the Casablanca Finance City Authority – an administrative body tasked with attracting international investors. In fact, Casablanca Finance City – an international financial centre set up in Morocco – is now one of the most dynamic hubs in the MENA region.

EMPOWERED OMBUDSMAN: Law No. 19-14 also aims to give more weight to the AMMC, increasing the powers of this ombudsman in order to enhance the security and integrity of public offerings, among others, resulting in greater confidence from international investors in the local stock market. The authority will then be entrusted with supervising all services and investment-advice activities. This new legal framework will concern the definition and characteristics of investment services.

In this context, and depending on the nature of the activities carried out by the investment advisers, the latter will only be authorised to operate as such after having obtained the relevant approval from the AMMC. Therefore, anyone wishing to practise as a financial advisor in certain regulated activities must first obtain a professional permit from the regulator prior to commencing any professional activities. This includes portfolio or wealth management advice, financial management, financial engineering, investment advice and advice on IPOs. It should be noted that among the various advisers operating in this field, the consulting companies, unlike stockbrokers, may not receive funds or securities from their clients. They may only receive stock-exchange orders and forward them to the relevant companies for execution. Existing companies advising on financial investments will have to comply with Law No. 19-14 within one year of the law entering into force. This is in turn dependent on the publication of the implementation decree which is expected to take place in early 2018. Until this time, the former Dahir No. 1-93-211 of September 21, 1993 still applies.

NEW INVESTMENT CHARTER: To provide a legal framework and incentive structure suitable to the current economic environment and to encourage domestic and international investment, a new Investment Charter was promulgated as part of Law No. 60-16 of July 2016. This charter updated and expanded the regulations and incentives laid out in the previous Investment Charter enacted by Law No. 18-95 of November 1995. Several of the incentives provided for in the original charter were extended to cover all companies.

The aim of the new Investment Charter is to fill all existing gaps in the previous framework. The intention behind the new charter is not to replace all pre-existing provisions and legislation provided in the original charter. Instead, the new legal framework unites, complements, reinforces and clarifies the entire arsenal of incentives outlined in the original charter, thereby providing investors with greater transparency. The primary concern of the legislation is to establish a “clear and unique incentives” framework. This new structure aims to provide measures covering all aspects of investment; ranging from subsidies for land financing, training and research and development, infrastructure, construction, and equipment. The framework takes into account the specificities of investment needs, with these being dependent upon, inter alia, the sectors of activity as well as the location, and the financial and social importance of the investment.

The new investment charter focuses on four areas. The first deals with the common law regime, which sets out a comprehensive framework promoting the business climate for all investment projects.

The second area defines a non-targeted cross-sectoral supply intended for investment projects covering all sectors and regions that do not benefit from a specific framework of incentives.

The third encompasses the specific regime to support development strategies at the regional and sectoral levels. Lastly, the fourth area reserves special or “tailor-made” treatment for projects classified as “exceptional”, such as investment programmes of at least Dh1bn (€92.6m) or more.

Other benefits are incorporated into the framework, and some incentives that were previously limited to certain sectors are extended to all investment projects, regardless of the nature of their activities. For instance, the state can now support up to 10% of the cost of a project instead of 5%, as was the case under the previous charter.

Specifically, the new Investment Charter contains five principal key measures to encourage investment:

• No corporate income tax for the first five years, following the establishment of a new industrial company.

• The establishment of a regional free zone.

• The granting of free zone-advantages to large exporting companies even when they are not located in a free zone.

• Recognition of the status of indirect exporters – a measure intended for subcontractors of major exporting groups.

• The establishment of diversified support for less-favoured regions to stimulate industrial investment in these locations and to promote balanced territorial development.

MINISTRY REORGANISATION: As part of the new charter the Ministry of Industry, Trade, Investment and Digital Economy undertook the reorganisation of the ministry-based promotion agencies in December 2017. The country’s export development agency Maroc Export, the Moroccan Investment Development Agency and the Casablanca Fair and Exhibition Office were merged into a single agency called the Moroccan Agency for Investment Development and Export. The purpose of this merger was to pool the efforts of these three promotional bodies, which had hitherto been somewhat dispersed, in order to achieve greater coherence and efficiency. In addition to these mergers, under the framework of the charter a General Directorate for Trade, a General Directorate for Industry and an agency dedicated to the development of the digital economy and e-governance have also been created.

The Ministry of Industry, Trade, Investment and Digital Economy has recently taken measures to obtain feedback on the new Investment Charter from manufacturers and other professionals and to gather proposals and suggestions about how the charter can be improved in the future. To meet these objectives a campaign was successfully launched on social media, especially LinkedIn, in August 2017, using the hashtag #fikrainvest.

EXCHANGE OFFICE: The exchange system in Morocco is regulated by the Office des Changes, through a regulation passed on December 31, 2013. This regulation offers specific incentives for foreign investors, especially in relation to the free repatriation of dividends following an investment in Morocco. The general regulation is expected to be amended shortly and shall henceforth be amended every two years. This is to avoid companies having to conform to new provisions every year. Moreover, the Office des Changes is committed to cooperating with the operators and the country’s banks in order to ensure that all parties comply with the new norms and regulations. The new regulation is intended to be more transparent due to its more efficient and unified structure. It comprises 239 pages instead of the previous 425 pages and contains 214 articles as opposed to the 807 of the old regulation. It also contains several provisions allowing for the simplification of its content and execution, especially with regards to the domiciliation of import titles, bank account reports and all formalities in connection with the importation of services.

As a result of the new regulation Moroccan operators may now take advantage of the Portnet system for the domiciliation and discharge of import titles. Furthermore, Moroccan operators are now exempt from the domiciliation obligation relating to technical assistance contracts and franchise contracts. Moroccan banks are now able to issue loans through the use of services located inside their currency account. In addition, the new regulation enables further flexibility for importing countries, due to a prepayment ceiling unification system.

Consequently, the obligation for businesses to repatriate resale proceeds, before the payment of its sale price, and the object of the international transactions no longer applies.

LIBERALISATION: However, in order to facilitate the relationship between a parent company and its subsidiary, the regulation foresees the liberalisation of transfers, with respect to the compensation due by Moroccan entities to the parent company in return for the provision of foreign personnel.

Under the regulation the time frame for product repatriation for export services has been increased by 30 days, from 60 to 90 days. This change was introduced for the purpose of harmonising the requirement stipulated by the Office des Changes with common international practice, particularly those of other African countries.

Additionally, banks are now able to grant currency loans for the financing of import and export transactions, as well as investment transactions. Furthermore, it is no longer necessary to use the services of an intermediary. One other innovation concerns the extension of foreign borrowing and lending transactions, though they remain under limits laid out by the Office des Changes. Several other measures are included in the new regulation,

• The possibility for exporters of services to grant their customers up to 5% of the operating income;

• Liberalisation of hedging transactions in respect to current operations, or to operations that are directly or indirectly related to the activity of a company, or to amounts corresponding to the volume of activity of that company;

• Liberalisation of operations such as the transfer of obtained fees from diplomatic missions or the transfer of the proceeds of subsidies from public bodies to international organisations sitting or represented in Morocco; and

• Liberalisation of the foreign investment operations of funds for collective investment in securitisation (fonds de placement collectif en titrisation, FPCT), collective investment placements in capital (organismes de placement collectif en capital, OPCC) and collective investment placements in real estate (organismes de placement collectif en immobilier, OPCI).

PROPERTY LAW: Land security is a constitutional principle under Moroccan law. However, this is sometimes undermined by property despoilment. To combat this, the legislature has introduced legislation to secure access to property, particularly following a change of ownership. This has been undertaken through Law No. 69-16, which was promulgated by Dahir No. 1-17-50 of August 30, 2017, in order to amend Article No. 4 of the in rem rights code of Law No. 39-08, which was enacted under Dahir No. 1-11-178 of November 22, 2011. This amendment introduces the obligation to obtain an authentic power of attorney for the conclusion of any transaction triggering a change of ownership.

Before this new law, any malicious person with a non-authenticated power of attorney could claim to act for a person in connection with an assignment of real estate property. This situation generated abuse, with some people finding themselves deprived of their real estate assets. Pursuant to the provisions of Law No. 69-16, any power of attorney will now have to be duly established before a public notary or an attorney-at-law admitted before the Court of Cassation. Therefore, a change of ownership can no longer occur without prior confirmation of the identity of the holder of the power of attorney. OPCIs: However, the most significant recent development in relation to property law is the adoption of Law No. 70-14 relating to OPCIs, which was enacted by Dahir No. 1-16-130 of August 25, 2016. OPCIs are regulated investment vehicles whose purpose, as defined by law, is the construction or acquisition of buildings – held directly or indirectly – for the sole purpose of renting them. These investment vehicles may be in the form of:

• Real estate investment company (société de placement immobilier, SPI);

• Real estate investment trusts (REITs);

• Corporations in which investors are both shareholders and corporations; or

• Managed condominiums of assets, where the investor has no right of control, decision-making or intervention with regard to management. At least 60% of the assets of an OPCI must comprise immoveable property, real rights, equity securities of a (predominantly) real estate company or securities of other OPCIs. Furthermore, the two categories of assets – immoveable property and real rights – must be evaluated on at least an annual basis by two independent appraisers.

In addition to these stipulations OPCIs must hold at least 10% cash and liquid financial instruments – except for listed IPOs. Finally, total undeveloped land and buildings under construction may not exceed 20% of the total assets. However, it should be noted that OPCI-FRGs, with light operating rules, may derogate from the latter two provisions.

OPCI LAUNCH: The first OPCIs will be launched in Morocco in 2018. The 2017 finance law provides a tax framework for the operation of OPCIs with specific incentives. Indeed, under the provisions of the 2017 budget, OPCIs benefit from a permanent exemption from taxes on profits from the rental of buildings built for professional use. As long as the buildings are exclusively used for professional use, and they are retained for a period of at least 10 years from the date of their contribution.

In addition to the exemption from corporate tax, OPCIs will also be exempt from taxation on dividends and interest paid. Furthermore, the sums distributed from the levies on the profits of shares or the redemption of shares will also be exempt from taxation. Finally, investments made by these vehicles will not be subject to registration fees.

These incentives will guarantee the fiscal transparency of OPCIs, and will, furthermore, according to professionals, play a crucial role in attracting market interest. The creation of OPCIs is intended to boost real estate investment in two ways. First, they will facilitate access to this type of real estate for private investors, which has hitherto proven difficult. Second, they will facilitate access for companies that suffer from the scarcity and high cost of corporate real estate. According to one study, 40% of companies in Morocco believe that access to land is a severe obstacle to their investments.

RISKS & BENEFITS: Nevertheless, there are still some risks regarding the management of OPCIs. First, there is the risk of illiquidity, which is linked to the intrinsically illiquid nature of real estate assets. Moreover, OPCIs face a ceiling on debt determined at 40% of the market value of their assets. While these are valued twice a year, a loss in their value presents a risk of exceeding this ratio.

Even prior to the authorities turning their attention to this new market, real estate professionals have expressed interest. In the second half of 2017 real estate consultants noted strong expectations from various players in these new vehicles. Future players in this sector have even initiated the creation of their own investment vehicles. In early 2016 state-backed Deposit and Management Fund and CIH Bank created Ajarinvest, a company that will manage a collective fund investing in rental real estate. Prior to this, in mid-2015, leading distribution specialist Label Vie created Vector LV, a subsidiary dedicated to the group’s chain stores and commercial spaces.

In short, everything appears to be in place to guarantee the success of OPCIs in Morocco. Nevertheless, some professionals are concerned by potential downsides. They have expressed fear that a lack of real estate assets in the domestic market means there will be insufficient real estate to meet OPCI demand. One might think that this risk is minimal given the size of the professional real estate stock in the kingdom. The Ministry of Economy and Finance values the stock of potential assets for the OPCI market at Dh200bn (€18.5bn), which corresponds to 15% of Morocco’s real estate base. Furthermore, this ratio corresponds to the weight of OPCI in the most advanced markets. Given the volume of projects that will be developed in the future, it seems unlikely that the new sector will be lacking in assets to invest in.

However, real estate professionals have argued that most of these assets do not meet the criteria for future OPCIs. These vehicles generally favour office buildings with occupancy rates (rented shares) of more than 90%. However, according to recent estimates current occupancy rates amount, on average, to between 40% and 50%. While there are shopping centres with higher occupancy rates, the collection of rents remains subject to risk. Furthermore, shopping centre assets that meet all the criteria for future OPCIs are simply not available on the market. Mature products that investors value – which generate secure returns due to their location, the quality of their tenants and their occupancy rate – are rare in Morocco. This is because they tend to be directly held by the developers, who see them as a long-term investments. Nevertheless, the adoption of Law No. 70-14 represents a genuine step forward with regard to property and its acquisition.

LABOUR LAW: In its “Economic Memorandum: Morocco 2040”, the World Bank highlights the improvements made by the Labour Code promulgated by Law No. 65-99 and enacted by Dahir No. 1-03-194 of September 11, 2003. These include:

• Raising the minimum age for employment from 12 to 15 years;

• Reducing the average working week from 48 to 44 hours;

• Calling for a regular review of minimum wages;

• Improving occupational health and safety standards for employees;

• Promoting gender equality in the workplace;

• Encouraging the employment of disabled workers;

• Guaranteeing the right to work, association and collective bargaining; and

• Prohibiting employers from taking action against their employees on the pretext that they are members of a trade union. Nevertheless, the World Bank highlights an important observation made by the High Commission for Planning, namely that the Moroccan Labour Code governs labour relations for only a selection of employees in the labour market, given that only a minority of workers benefit from a social protection system. Furthermore, Morocco has somewhat restrictive laws with regard to the use of fixedterm contracts. While on the one hand Moroccan law permits flexibility in terms of hours worked, on the other overtime and bonuses for night work are expensive compared to international practices.

However, the evaluation of the first 13 years of the application of the Labour Code has revealed numerous shortcomings. These have often served as a source of discord between employers and employees and also between labour inspectors and trade unions. Furthermore, in addition to the first level law on strikes and the Trade Union Act, which have still not been adopted, several amendments to the Labour Code have yet to be implemented.

It should be noted that one of the main endeavours of the administration of Prime Minister Saad Eddine El Othmani, which took office on April 5, 2017, has been to amend the existing Labour Code. Several versions of the new Labour Code have already been proposed by various trade unions, employers’ representatives and other professionals. In light of the above, the adoption of a new Labour Code will certainly help to relieve congestion in the labour courts due to some lack of clarity in the interpretation of certain articles from the current version.