Key takeaways: The contribution audit, merger audit and transformation audit are three special engagements entrusted to a chartered accountant appointed by court order. They aim to protect partners and third parties by ensuring the fairness of asset valuations during structuring transactions: non-cash contributions, mergers and acquisitions, and changes of legal form.
Three Special Engagements, One Common Objective of Protection
Corporate restructuring transactions — non-cash contributions, mergers and acquisitions and changes of legal form — present a major risk: the overvaluation of assets. To protect minority shareholders, creditors and third parties, Moroccan legislation requires the mandatory intervention of an independent auditor responsible for verifying the value of the elements concerned.
These three engagements are distinct from the standard statutory audit. They are one-off, linked to a specific transaction, and subject to specific appointment and reporting rules.
The Contribution Audit
Legal Framework
The contribution audit is governed by:
- Articles 24 and 25 of Law 17-95 for public limited companies (SA).
- Article 53 of Law 5-96 for limited liability companies (SARL).
Its mission: to value non-cash contributions (real estate, goodwill, patents, equipment, receivables, etc.) made during the incorporation of a company or a capital increase.
Appointment of the Contribution Auditor
The contribution auditor is appointed by order of the president of the commercial court upon application by the founders (at incorporation) or by the manager (at a capital increase). The auditor must be registered with the Order of Chartered Accountants (OEC).
The contribution auditor may not be the company’s serving statutory auditor, in order to preserve the independence of both engagements.
Content of the Report
The contribution auditor’s report must contain:
- A description of each non-cash contribution with its characteristics.
- The valuation methods adopted and their justification (market value, earnings value, adjusted net asset value, market comparables).
- The proposed value for each contribution and any adjustments.
- A reasoned opinion on the value attributed to the contributions and on the corresponding share or stock consideration.
Filing and Deadlines
The report must be filed with the commercial court registry at least 3 days before the extraordinary general meeting (EGM) called to approve the contributions. Partners may inspect the report at the registered office.
Exception for SARLs: The Exemption
Law 5-96 provides for an exemption from the contribution audit for SARLs when the following two cumulative conditions are met:
- The value of each non-cash contribution does not exceed 100,000 MAD.
- The total value of non-cash contributions does not exceed 50% of the share capital.
In this case, the partners may unanimously decide not to appoint a contribution auditor. However, they then become jointly and severally liable for 5 years for the value attributed to the contributions, which represents a significant risk.
Recommendation: Even when the exemption is available, it is strongly advisable to engage a chartered accountant to value the contributions. This provides legal security for the transaction and avoids subsequent disputes.
The Merger Audit
Legal Framework
The merger audit is provided for by Article 233 of Law 17-95 for public limited companies. It applies to merger transactions (absorption or creation of a new company) and demergers.
Mission of the Merger Auditor
The merger auditor intervenes to verify:
- The relative values attributed to the companies participating in the transaction.
- The fairness of the exchange ratio for shares or partnership interests proposed to the partners.
- The valuation methods used to determine the exchange ratio and their relevance.
Common Valuation Methods
The merger auditor generally analyses several approaches:
| Method | Principle | Advantages |
|---|---|---|
| Adjusted net asset value | Revaluation of assets and liabilities | Simplicity, objectivity |
| Earnings value | Capitalisation of future profits | Takes profitability into account |
| Discounted Cash Flow (DCF) | Discounting of future cash flows | Forward-looking approach |
| Market multiples | Comparison with similar transactions | Market reference |
The auditor must ensure that the exchange ratio results from a coherent weighting of these methods and does not disadvantage the shareholders of any of the companies involved.
Merger Auditor’s Report
The report is made available to shareholders at the registered office at least 30 days before the EGM called to vote on the merger proposal. It contains an opinion on the fairness of the exchange ratio and flags, where applicable, any particular valuation difficulties encountered.
The Transformation Audit
Legal Framework
Article 221 of Law 17-95 requires the intervention of a transformation auditor when a company changes its legal form (for example, from an SARL to an SA or vice versa).
Verification of Net Assets
The core mission of the transformation auditor is to verify that the company’s net assets are at least equal to the share capital. This verification protects partners and creditors by ensuring that the transformation does not conceal an undercapitalisation situation.
If net assets are less than the share capital, the transformation cannot proceed as is. The company must first carry out a capital reduction or rebuild its equity.
Auditor Liability: Civil and Criminal
Civil Liability
The contribution, merger or transformation auditor incurs civil liability in the event of negligence in the valuation. If a negligent overvaluation or undervaluation causes damage to partners or third parties, the auditor may be ordered to pay damages. Professional liability insurance is essential.
Criminal Liability
Fraudulent overvaluation of non-cash contributions constitutes a criminal offence. An auditor who knowingly certifies values known to be inaccurate faces criminal prosecution for complicity in fraudulent overvaluation of contributions, punishable by imprisonment and fines.
Frequently Asked Questions
Can the contribution auditor be the same person as the statutory auditor?
No. To guarantee the independence of each engagement, the contribution auditor must be a different person from the company’s serving statutory auditor. The two are appointed separately.
What happens if the partners reject the value proposed by the contribution auditor?
The general meeting may decide to adopt a value lower than that proposed by the auditor. However, it may not adopt a higher value without engaging the joint and several liability of the founding shareholders (in the case of an SA) or all partners (in the case of an SARL).
Is the exemption from the contribution audit common for SARLs?
In practice, the exemption is frequently used for small SARLs with low-value non-cash contributions (IT equipment, office furniture). However, given the risk of joint and several liability, many chartered accountants recommend having the valuation carried out even below the legal thresholds.
Planning a non-cash contribution, merger or transformation? Entrust your engagement to Upsilon Consulting for rigorous support that meets legal requirements.
