In brief: A civil company in Morocco is a non-commercial legal entity used for real estate management, liberal professions, or agriculture. Governed by the Dahir of Obligations and Contracts, it offers flexible statutes and no minimum capital, but partners bear unlimited liability in proportion to their shares.
Civil companies can be an ideal structure for a number of professions whose activity is of a civil nature. Indeed, the Moroccan Commercial Code considers a company to be commercial either:
- First, by its legal form. Thus, an LLC (SARL) or a PLC (SA) are commercial by their form;
- Second, by its business purpose. Thus, regardless of its form, a company is considered commercial as soon as it carries out a commercial activity.
What Are the Possible Activities of a Civil Company?
One of the key criteria for qualifying a company as civil lies in its activity. Thus, the main fields of a civil company are:
- First, agriculture
- Second, real estate. It should be noted that this does not refer to property development but rather to holding real estate assets for rental purposes.
- Third, liberal professions (notaries, chartered accountants, lawyers, doctors, architects…)
- Fourth, intellectual and artistic activities
Furthermore, it should not be forgotten that a civil company by its form may carry out a commercial activity. In that case, it loses its civil character unless the activity is carried out on an ancillary basis.
It may happen that certain civil liability companies engage in commercial activity. In such cases, this activity must be carried out solely on an ancillary basis.
However, it should be noted that the use of civil companies is tending to decline. Indeed, the legislator tends to impose increasingly more rules on these companies. For example, SCI (civil real estate companies) have recently been required to register in the commercial register. Understanding the legal forms of companies in Morocco is essential before choosing a civil structure.
The Most Common Types of Civil Companies
- SCI - Societe Civile Immobiliere (Civil Real Estate Company)
- SCP (Professional Civil Companies)
- SCEA (Agricultural Operating or Activity Civil Companies)
Civil Companies: Management Modes
Management may be statutory or non-statutory, carried out by a partner or entrusted to a third party, whether a natural person or legal entity.
Unless otherwise provided for in the articles of association, the manager is appointed by a decision of the partners representing more than half of the company shares.
The appointment of the manager must be subject to the following formalities:
- Publication notice in a legal gazette,
- Filing at the commercial court registry of two certified copies of the appointment decision,
- Update of the commercial register extract,
Termination of the manager’s duties occurs following these events:
- Expiry of the term when the articles of association have provided for a fixed-term mandate, renewable by decision of the partners,
- Resignation notified to the partners,
- Removal by a decision of the partners representing more than half of the company shares, unless otherwise provided for in the articles of association.
Note: Termination of duties must be subject to the same publicity formalities as those carried out upon appointment.
Manager’s Powers
In relations between partners
- Sole management: The manager may perform all management acts required in the company’s interest.
- Joint management: The managers exercise these powers separately, except for the right of each to oppose a transaction before it is concluded.
The articles of association may, however, provide for other methods of administration.
In relations with third parties
- Sole management: The company is bound by acts falling within its corporate purpose.
- Joint management: Each manager separately holds the power to bind the company within the limits of the company’s corporate purpose.
Any objection raised by one manager against the acts of another manager has no effect on third parties, unless it is established that they were aware of it. Companies should also be aware of the rules governing regulated agreements in Morocco when managers enter into contracts with the company.
Manager’s Obligations
The manager must render an annual account of their management through a report on the company’s activity, specifying:
- Profits earned or projected,
- Losses incurred or anticipated.
- Liability of managers
Civil Liability of Civil Companies
Managers are liable to the company and to third parties for:
- Breaches of laws and regulations applicable to civil companies;
- Violations of statutory provisions;
- Management errors.
criminal liability of directors
In the absence of specific provisions regarding the liability of civil company managers, they are criminally liable under ordinary law: fraud, breach of trust, etc.
Partners of Civil Companies
Individual partners of civil companies do not have merchant status. However, a commercial company, regardless of its form, may be a partner in a civil company.
Partners are indefinitely liable for the company’s debts in proportion to their shares in the share capital as of the date the debt becomes due or as of the date of cessation of payments.
A partner who has only contributed their labor is liable to the same extent as the partner with the smallest capital contribution.
All partners may make a contribution in labor, in which case the company is formed without share capital.
Collective Decisions
Consultation Methods
Partners may be consulted:
- At a general meeting,
- By written consultation if the articles of association so provide,
- By the consent of the partners expressed in a private or notarized deed.
Partners may only be represented by another partner if the articles of association so provide.
Majority Rules
It is for the articles of association to provide:
- The applicable majority rules
- The number of votes each partner holds
In the absence of provisions in the articles of association, all decisions are taken unanimously.
Drafting and Keeping of Minutes
Each consultation of partners at a general meeting or by written consultation must result in the drafting of minutes, signed by the partners present and represented, and recorded in a numbered and initialed register by a judge of the commercial court or the district court, or by the mayor or deputy mayor of the municipality where the registered office is located.
Furthermore, the law requires the company to keep this register at its registered office.
Transfer of Shares in Civil Companies
Approval Clause
The transfer of shares to third parties must, with certain exceptions, receive the approval of the partners.
The articles of association may alternatively grant this approval power to the managers. Furthermore, they may also waive the approval requirement for transfers made to partners or to the spouse of one of them. For a comparison of share transfer rules across different company types, see transfer of shares: PLC vs LLC.
Unless otherwise provided for in the articles of association, transfers to ascendants or descendants of the transferor are not subject to the approval procedure.
Formalities and Enforceability of Transfer
The partners must record the transfer of shares in writing.
The transfer is enforceable against the company after service by a bailiff or acceptance by the company in an authentic deed.
However, if the articles of association so permit, enforceability must be achieved by transfer on the company’s registers.
To make the transfer enforceable against third parties, the relevant parties must file the authentic deed recording the transfer at the Registry of the Commercial Court.
Frequently Asked Questions
What is a civil company (société civile) in Morocco?
A civil company is a legal entity formed by two or more partners for a non-commercial purpose, such as managing real estate assets, professional activities, or agricultural operations. Unlike commercial companies, civil companies are governed by the Dahir of Obligations and Contracts (DOC) rather than the Commercial Code.
What are the advantages of creating a civil company in Morocco?
Civil companies offer flexibility in their statutes, no minimum capital requirement, simpler formation formalities compared to commercial companies, and favorable tax treatment in certain cases. They are particularly popular in Morocco for real estate asset management (SCIs) and for professional partnerships.
How are partners in a civil company liable in Morocco?
Partners in a civil company have unlimited joint liability for the company’s debts, proportional to their share in the capital. This means each partner can be held personally liable for company obligations beyond their contribution, unlike shareholders in an LLC or PLC who benefit from limited liability.
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