In brief: Business goodwill (fonds de commerce) in Morocco is a set of tangible and intangible movable assets allocated to the operation of a commercial activity. Governed by Articles 79 to 103 of the Code de Commerce (Loi 15-95), it notably includes the customer base, the right to the lease, the trade name and the sign. Its sale is subject to strict formalities: written deed, escrow of the price, creditor opposition, publicity in the JAL and in the Bulletin officiel. Valuation of the goodwill uses several methods (turnover, profit, tax schedule) and the transfer is subject to registration duties.
Definition and legal nature of business goodwill
Business goodwill is a de facto universality grouping all the movable elements that a merchant allocates to the conduct of their activity. It constitutes intangible movable property distinct from its component elements.
Business goodwill does not include real estate (the commercial premises itself falls under real estate law), nor the merchant’s receivables and debts (which remain attached to their person). It is also distinct from the company that operates it: a SARL may own business goodwill, but the goodwill and the company are two distinct legal entities.
Component elements of business goodwill
Business goodwill is composed of elements of two types, each playing a role in the overall value of the goodwill.
Intangible elements
Intangible elements generally constitute the most significant portion of the goodwill’s value:
- Customer base and footfall: an essential and indispensable element of business goodwill. Without a customer base, there is no business goodwill. The customer base refers to all persons who maintain business relationships with the merchant by reason of their personal qualities, while footfall refers to customers attracted by the location
- Right to the lease: the right of the tenant-merchant to renewal of their commercial lease, protected by the provisions relating to commercial leases. This right is often the most highly valued element of the goodwill, particularly in strategic commercial locations
- Trade name: the name under which the merchant carries out their activity, registered with the commercial registry
- Sign: external sign enabling the identification and location of the commercial establishment
- Patents and licenses: industrial property rights protected by OMPIC
- Trademarks: distinctive signs registered with OMPIC
- Administrative authorizations: licenses and approvals required for the conduct of certain regulated activities
Tangible elements
The tangible elements of the goodwill include:
- Equipment and tools: machines, equipment, office furniture, IT equipment and vehicles used for operations
- Merchandise: stock of products intended for sale. Merchandise is part of the business goodwill but is often valued separately during the transfer due to its fluctuating nature
- Fixtures and installations: improvements made to the commercial premises (display windows, shelving, air conditioning, electrical installations)
Valuation of business goodwill
Valuation of business goodwill is a crucial step in any transfer, contribution to a company or pledge operation. Several methods are commonly used in Morocco.
Turnover method
This method consists of applying a multiplier coefficient to the average turnover of the last three financial years. The coefficient varies by sector of activity (from 0.3 to 3 times the annual turnover depending on professional practices). It is simple but does not take into account actual profitability.
Profit method
More relevant, this approach values the goodwill by capitalizing the average net profit of the last three to five financial years. The capitalization rate depends on the risk associated with the activity and the market. For example, an average annual profit of 500,000 MAD capitalized at 20% would yield a value of 2,500,000 MAD.
Tax schedule
The Moroccan tax administration uses sector-specific schedules to estimate the value of business goodwill, particularly in the context of registration duty audits. These schedules serve as a minimum reference and may be challenged by the taxpayer if they can justify a different valuation.
Combined valuation
In practice, professionals recommend combining several methods to obtain a coherent value range. The involvement of a chartered accountant is strongly recommended to carry out a rigorous valuation that is defensible before the tax administration.
Sale of business goodwill (Art. 81-83)
The transfer of business goodwill is subject to strict formalities set out in Articles 81 to 103 of the Code de Commerce, designed to protect the interests of the buyer and the seller’s creditors.
Mandatory information in the deed of sale
Article 81 requires that the deed of sale of business goodwill mandatorily include:
- The name of the previous seller, the date and nature of their acquisition deed and the price
- The status of pledge and privilege registrations encumbering the goodwill
- The turnover achieved during the last three years of operation
- The commercial profits earned during the same period
- The lease details (date, duration, name and address of the landlord)
The omission of this information may result in the nullity of the sale at the buyer’s request, if they demonstrate prejudice.
Escrow of the sale price
The sale price must be held in escrow by a third party (generally a notary, lawyer or chartered accountant) for a period allowing the seller’s creditors to assert their rights. This mechanism protects the buyer against the risk of paying a price that the seller’s creditors could claim.
Creditor opposition (Art. 84)
Article 84 grants the seller’s creditors a right of opposition to the sale price. After publication of the transfer, creditors have a 15-day period to oppose the payment of the price held by the escrow agent. This opposition has the effect of blocking the payment of the price to the seller until the debts are settled or until judicial release.
Publicity of the transfer
The sale must be subject to dual publicity:
- Publication in a journal d’annonces légales (JAL) within 15 days following the date of sale
- Publication in the Bulletin officiel (BO) within the same period
These publications allow third parties, and particularly creditors, to become aware of the transaction and exercise their right of opposition.
Purging of pledges
When the business goodwill is encumbered by pledges, the buyer must proceed with the purging of these registrations. The purging procedure consists of notifying the secured creditors of the sale price and offering them payment of their claims in order of their rank. In the absence of purging, the pledges follow the goodwill into the buyer’s hands.
Contribution of business goodwill to a company
Business goodwill may be contributed in kind when setting up a business or increasing capital. The contribution of goodwill follows the same publicity rules as a sale (publication in the JAL and BO). The contributor receives shares or stock in return.
The valuation of the contribution must be carried out by a contribution auditor in companies where this appointment is mandatory (SA, SARL above certain thresholds). This valuation ensures that the value attributed to the goodwill is accurate and does not prejudice the other partners.
Registration duties
The transfer of business goodwill is subject to registration duties calculated on the sale price or the market value if higher. The applicable rate varies depending on the nature of the transaction:
- Sale of business goodwill: proportional duties on the transfer price
- Contribution to a company: reduced duties under certain conditions, particularly upon company incorporation
The buyer must register the deed with the Direction Générale des Impôts within the legal deadline (30 days from the date of the deed). Late registration results in surcharges and penalties.
Reference text: Code de Commerce (PDF) — Loi 15-95, Art. 79 to 103
Frequently asked questions
Can business goodwill be sold without the right to the lease?
In principle, the right to the lease is an essential element of business goodwill. However, it is possible to transfer business goodwill excluding the right to the lease if the seller owns the premises or if the commercial lease does not permit it. In this case, the value of the goodwill will be significantly reduced, as location is often a determining factor of the customer base.
Is merchandise necessarily included in the sale of goodwill?
Merchandise is part of the business goodwill but is generally valued and invoiced separately from the goodwill price. This separation makes it possible to distinguish elements subject to registration duties (the goodwill itself) from those subject to VAT (merchandise). A contradictory stock inventory is recommended on the day of transfer.
How long does it take to finalize the sale of business goodwill?
The complete transfer process for business goodwill generally takes between 2 and 4 months due to publicity formalities and the creditor opposition period. Publications in the JAL and BO must occur within 15 days of the sale, followed by the 15-day opposition period. Payment of the price to the seller may only occur after the expiration of these periods and any purging of pledges.
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