Morocco collection profile

In theory, companies based in the country have an obligation to submit financial statements to the Tax Authorities, and become publicly available from the Moroccan Office of Industrial and Commercial Property (OMPIC) approximately 10 months after the accounting closing date. Listed companies or companies involved in public offerings must also publish their financials every six months, along with auditor’s reports. Otherwise, direct contact with companies may also help obtain data. In practice, however, it remains difficult to obtain information on domestic companies in Morocco because financials are not systematically communicated and a significant number of companies tend to minimize their real levels of revenue and profit, by transmitting understated financial statements. In addition, the obligation to have certified accounts in Morocco only applies to limited companies and to limited liability companies declaring MAD 50M (i.e. around EUR 4,8M) or more of revenue, which remains marginal comparing to the overall number of companies in Morocco. As a result, financial information is unlikely to reflect the real operations of a company.

Allianz Trade allocates each company a grade reflecting its solvency and how it conducts business. Grades represent a core of Allianz Trade’s knowledge and analyses, and help clients identify and avoid risk. Data is continuously monitored to offer the most up-to-date information to support management decisions

Liability for business debts is determined by legal structures, which are described as follows:

• Sole Proprietorship is available for small businesses managed by an individual and for which no commercial structure is necessary. In this case, the owner is held liable for all business debts. 
• Two or more individuals may also decide to share ownership and responsibilities through Partnerships, in which case the partners may be jointly and individually liable for the actions of the other partners. Limited Liability Partnerships (Société en Commandite Simple) may alternatively offer limited liability to the partners.
• Private Limited Liability Companies (Société à Responsabilité Limitée, SARL) represent the great majority of businesses in Morocco. This type of company no longer requires minimum capital funds while the partners’ liability is limited to their contribution. Public Limited Companies (Société Anonyme, SA) are rather used for larger structures willing to divide their capital (at least MAD 300,000, i.e. around EUR 28,740, or MAD 3,000,000, i.e. around EUR 287,400 when Initial Public Offerings are put in place) into tradable shares. In these entities, the shareholders’ liability is limited to the value of their shares.
• Foreign companies may alternatively settle in Morocco through Branch Offices which provide no liability limitations to the foreign parent company. Joint Ventures would take the form of a contract drafted for this purpose and cannot undertake any legally binding action as they do not have legal status.

The legal framework of Morocco is based on French law as well as on Islamic principles and traditions. The judiciary is composed of Proximity Courts (juridictions de proximité) in charge of settling disputes between individuals, Courts of First Instance dealing with all civil matters, Commercial Courts dealing with business disputes, Appellate Courts dealing with civil and administrative matters, and the Court of Cassation. In practice, this multi-layered system however remains influenced by the executive power and it is criticized for its lack of organization, efficiency and transparency.

The previous allowed to the creditor to get late payment interest if the invoices were not paid on time. 

The new law 69/21 replaces this with a monetary penalty payable to the Treasury. In case of non-compliance with payment deadlines: 

• A fine equivalent to the Bank Al-Maghrib key rate applies automatically for the first month of delay. 
• An additional 0.85% is added for each subsequent month or fraction thereof.

Collection costs are not usually charged to the debtor. In fact, only the court fees paid can be claimed from the debtor during legal proceedings. 

This means that creditors often have to absorb these costs, which can affect their profitability. Therefore, companies must carefully assess the potential recovery costs when establishing their credit and payment policies.

Contractual Retention of Title (RoT) agreements, aiming at preserving the creditor’s ownership over goods until the related invoice has been paid in full are recognized in Morocco and therefore provide creditors with a right to have the goods returned during insolvency proceedings. In addition, RoT provisions may also be triggered during the pre-legal action phase (amicable settlement) or during the legal action phase (procédure en restitution).

The most common payment methods are as follows:

• Bank transfers are among the most popular payment means for international transactions as they are fast, secured, and supported by an increasingly developed banking network internationally and domestically. For export transactions, transfers are usually guaranteed through an Export Credit Insurance policy, which helps minimize the risk of sudden or unexpected customer insolvency. 
  Allianz Trade’s worldwide network of risk offices monitors the financial well-being of customers and grants them a specific credit limit up to which clients may trade and claim should something go wrong. 
• Alternatively, Standby Letters of Credit (a bank guarantees the debtor’s credit quality and repayment abilities) are often used in relation to export shipment transactions because they constitute reliable guarantees which can be triggered as a ‘payment of last resort’ if the client fails to fulfil a contractual commitment. 
• Also, irrevocable and confirmed Documentary Letters of Credit (a debtor guarantees that a certain amount of money is made available to a beneficiary through a bank once certain terms specifically agreed by the parties have been met) are increasingly relied upon.
• Bank guarantees are fairly available at a reasonable cost, however requesting personal guarantees from business partners may also help secure transactions efficiently. In practice, it is possible to make advance payment (deposit) of an invoice and this is formalized by a payment receipt, not by a deposit invoice.
• Checks are very often used as payment methods but may also constitute efficient debt recognition titles insofar that the failing debtor may be prosecuted. 
• Bills of exchange, although less common nowadays, also constitute an attractive means of payment because they are a source of short-term financing by means of discounting, instalment, or transfer.

Amicable settlement opportunities should always be considered as an alternative to formal proceedings, which are lengthy and costly in Morocco. In practice, individual and informal pre-legal collection methods are more successful than ordinary formal proceedings, especially when the process is handled by professionals capable of conducting on-site negotiations with a strong personal dimension. Legal dunning ought to start with a registered Demand Letter recalling the debtor’s obligation to pay the principal together with late payment interest (as contractually agreed or taking a legal rate as a reference). It is essential to obtain a payment installment agreement or, at least, a debt recognition document as these will then allow the creditor to obtain an enforceable Injunction Order.

Morocco remains a highly dynamic region in constant need of investment. The Moroccan law is mainly inspired by French legislation, and judicial proceedings are in constant evolution and modernization. If the amicable phase fails and provided that the debt is certain and undisputed (i.e. when the creditor has the means of payment returned unpaid by the debtor), fast-track proceedings allow requesting a Payment Order from the President of the Commercial Court along with garnishment of the debtor’s assets from the court, without the need for a court appearance. If the court finds the request legitimate, the debtor will be ordered to pay immediately. 
If the claim is disputed, the case will be reviewed through an ordinary lawsuit. Law 02.23, adopted in July 2024, amends the Civil Procedure Code and aligns it with Law 38.15 organizing the judiciary (effective January 2023). These laws clearly define the legal organization of the kingdom and the various procedural deadlines. As far as damages are concerned, plaintiffs can seek compensation for the amount of damages they believe they have suffered and include penalty to compel the debtor to pay as soon as possible.

It is strongly advisable to conduct legal actions with the support of a qualified lawyer, known as being reliable and trustworthy. Allianz Trade is in a strong position to provide the support of its network of specialized practitioners.

Invoices, statement of account, delivery notes, means of payment unpaid, sales conditions (if available), shipping documents and any other evidence of the commercial transaction. Please note that all debates are conducted in Arabic and that, although documents written in French are admissible, documents drafted in other languages (English included) must translated in Arabic.

Claims in Morocco must be brought to court within five years, starting from when the loss or damage caused by the wrongful act (or omission) was – or ought to have been – discovered.

Penal complaints relating to bounced checks must be made within four years, and the injunction to pay based on the check or bill of exchange as title of payment should be enforced within three years.

Precautionary measures help protect the creditor’s interests against any diversion of property by the debtor. Provisional measures are ordered when the proof of debt is provided to the court by the creditor. When the creditor has filed for an injunction to pay (i.e. when the creditor possesses unpaid means of payment), the judge may authorize garnishment of bank accounts, receivables, as well as garnishment in the hands of third parties. The competent court for this kind of action is the one where the debtor’s business is based. Garnishment orders are awarded without the presence of the debtor and could be pronounced the same day as the demand.

Decisions rendered in first instance may be appealed against by the parties within 15 days of notification. The proceedings must however be admitted by the Court of Appeal, which verifies the existence of questions related to legal or factual aspects. Appeal against decisions rendered in second instance is also possible before the Court of Cassation within 30 days. The deadlines stated above are normally be doubled for applicants residing abroad.

A judgment is final and enforceable once all recourse actions have been exhausted. Execution against the debtor can then start. At this stage it is recommended that any action to seize and sell the debtor’s assets is mastered personally, either by the creditor or by a trusted third party (collector, lawyer). Garnishee orders are normally efficient but remain lengthy due to the quantity of procedural steps required.

Most straightforward claims in Morocco may be settled within 12 to 18 months, but more complex cases require additional time before a final and enforceable judgment is rendered, due to additional difficulties occurring as a result of involving experts, witnesses etc.

Domestic courts generally make no difference between domestic and international litigation proceedings, although delays may increase when documents or evidence must be obtained from abroad.

The cost of the procedure is normally borne by the defeated party, but courts may decide to divide costs between parties. Court fees are fairly affordable, typically around 1% of the debt amount, plus small fixed costs depending on the court level and nature of the request.

The use of mediation and arbitration as alternatives to judicial proceedings is traditionally limited for business disputes. However, mediation is increasingly used to resolve issues between banks and clients (excluding delinquency cases) and is becoming a significant way to avoid costly, time-consuming and disorganized legal actions.

In addition to arbitration provisions, large businesses and multinationals operating in Morocco increasingly consider applying foreign law to their contracts. The parties, indeed, are entitled to choose the law applicable to their contract provided that the agreement is characterized by an international connection (for example, one party has elected domicile in another country, or the place of execution is located abroad), and that jurisdiction clause is specifically drafted for this purpose.

In practice, seeking foreign decisions in debt-related disputes remains rare because enforcement can be more difficult than obtaining an enforceable domestic judgment.

Decisions against debtors owning assets in Morocco are generally enforced, as domestic courts recognize foreign judgments even without bilateral treaty, provided an original copy of the foreign judgment and a certificate of non-appeal are submitted. In practice, however, pursuing a domestic judgment remains more effective, and entrusting collection specialists with a strong knowledge of the local market remains the wiser approach. 
Morocco is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, therefore, domestic courts also ought to recognize and enforce decisions rendered through international arbitration proceedings.

Various insolvency proceedings are available in Morocco, but these often remain slow and inefficient. Insolvency law nonetheless offers two types of prevention mechanisms while the business remains solvent. 

• - Internal prevention: the business must work towards the ‘internal prevention’ of financial difficulties and has an obligation to set up an internal recovery plan aimed at continuing the business. 

• - External prevention: the Commercial Court may open an amicable settlement procedure, placing the debtor under the supervision of an external mediator (conciliateur) for three months to negotiate with creditors. Creditors have limited influence, but the court can impose debt rescheduling on non-consenting creditors. There is no confidentiality standard attached to this procedure. 

The law then offers traditional insolvency proceedings which can be initiated by the debtor, the creditor or the court.

Book V of the Commercial Code seems to encompass provisions on prevention of difficulties through out-of-court workouts. In practice, insolvency procedures are rarely initiated, therefore relying on informal workouts may more be efficient.

Judicial Rehabilitation proceedings are only available for debtors that are in a state of cessation of payments but whose financial situation is not irreparably compromised. The court appoints an insolvency judge (juge-commissaire) and an insolvency office holder (syndic) but the company’s directors remain in possession of their management prerogatives. The insolvency office holder is required to prepare a report on the situation of the company within four months, which recommends a rehabilitation plan, the sale of the business to a third party or its liquidation. The procedure is entirely court-driven and there is no direct vote by the creditors on the options available. There seems to be no moratorium in this procedure.

The judgment opening the liquidation procedure renders all debts immediately due and payable. Creditors have two months (four months if they live outside Morocco) to submit their claims. The assets of the debtor company are then sold and the proceeds are distributed among the creditors by the insolvency office holder.

Priority rules apply while redistributing the proceeds of the sale of the debtor’s assets.

The insolvency office holder is entitled to set aside various types of transactions concluded by the debtor during the suspect period (18 months). Payments done in favor of some vendors can be cancelled, and the guarantees offered to secure transactions can be contested.

Obtaining visibility on restructuration plans may take at least one year. In terms of liquidation, the simplest proceedings may be settled in a few months, but more complex cases may last over several years.