In brief: Converting an LLC (SARL) into a PLC (SA) in Morocco does not create a new legal entity and has no tax impact. The operation requires an extraordinary general meeting, a conversion auditor, new articles of association, and trade register filing. Partners must represent at least three-quarters of the share capital.
Converting an LLC into a PLC in Morocco is an operation that falls within the prerogatives of the partners. Indeed, at any time the partners of an LLC may decide to convert it into another form, particularly into a public limited company.
In practice, the conversion consists of amending the articles of association. Moreover, converting the legal form does not result in the creation of a new legal entity.
Indeed, according to Article 2 of Law 05-96: “A duly executed conversion of the company into a company of another form does not result in the creation of a new legal entity.”
Converting an LLC into a PLC: Why?
As we indicated in our previous article, the LLC remains the preferred form for entrepreneurs in Morocco. This is explained by several factors (see the article to learn more).
However, sometimes partners must convert to a public limited company, either voluntarily or because the law requires them to do so. For example, it should be noted that an LLC in Morocco is limited to a maximum of 50 partners. Therefore, if the number of partners exceeds this threshold, the LLC must be converted into a PLC. The law grants the partners a period of 2 years, beyond which the company will be dissolved.
Furthermore, an LLC does not have the ability to make public offerings. Therefore, it may become necessary to convert the LLC into a PLC before:
- listing it on the stock exchange;
- issuing a bond loan
Before proceeding with the conversion of your company, contact Upsilon Consulting to better prepare and carry out this process.
Converting an LLC into a PLC: Legal Framework
Converting an LLC into a PLC in Morocco requires compliance with both formal and substantive conditions.
Formal Requirements
Regarding form, the company can only be converted after a meeting of partners at a general assembly. This is a general assembly of the company that requires the quorum conditions for amending the articles of association. The assemblies must make the conversion decision into a public limited company by the majority required for amending the articles of association of the limited liability company.
The formalities to be followed for converting an LLC into a PLC are, in order:
- OMPIC amendment: update the name assignment to reflect the PLC form
- Minutes registration: register the assembly decision with the tax authorities
- New articles of association: draft in compliance with PLC requirements and register
- Board appointment: appoint a board of directors (or management board and supervisory board)
- Court clerk filing: submit all documents to the commercial court
- Statutory auditor: appoint a statutory auditor if not already done
- Declaration of compliance: draft, register, and file with the court clerk’s office
Furthermore, it should be noted that, in compliance with the provisions of Article 36 of the law on PLCs, the partners must unanimously appoint a conversion auditor.
You can appoint Upsilon Consulting as conversion auditor: Contact us here.
Role of the Conversion Auditor
According to the provisions of the aforementioned Article 36, the conversion auditor ensures that:
The conversion auditors’ report must attest that the net assets of the converted company are at least equal to the amount of its share capital. (…)
It should be noted that the conversion auditor’s report must accompany the file to the court clerk’s office (in two copies).
Finally, the law requires that a legal notice of conversion be published in a legal announcements newspaper as well as in the official bulletin. The publication of an extract of these articles of association is made immediately after filing with the court clerk’s office.
For all your legal work, do not hesitate to contact us.
Substantive Requirements
The managers of the LLC, under Moroccan law, must finalize the decision to convert the company into a public limited company. Then, they must proceed to convene the General Assembly of partners. The decision to change the corporate form must be taken by partners representing at least three-quarters of the share capital.
It is this same assembly that decides to allocate new shares in exchange for the existing equity interests.
These shares can be created as soon as the operation is definitively completed, i.e., once the amended declaration to the trade register has been filed.
However, several actions may become necessary:
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Appointment of a conversion auditor ( )
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Alignment of the articles of association with PLC rules, including:
The amount of share capital
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The number of partners
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The management bodies (board of directors)
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Other aspects
What Are the Effects of Converting an LLC into a PLC?
Converting a limited liability company into a public limited company has consequences on both legal (1) and tax (2) levels.
Legal Effects
The partners of the converted company benefit from their new corporate rights from the date of the conversion decision.
Moreover, since the legal personality of the company is maintained, corporate affairs continue. Obligations towards third parties remain under the new form. No new obligation arises towards third parties.
Thus, a contract validly entered into by the LLC with its partners and managers continues to produce its effects. Therefore, commitments made by the LLC remain enforceable against the PLC. Examples: employment contracts, leases, etc.
The assets of the converted LLC are deemed to belong to the PLC. The same applies to liabilities.
Furthermore, when the conversion decision occurs during the fiscal year, it is not necessary to close the accounts at the date of conversion.
Tax Effects
Converting an LLC into a PLC does not result in the creation of a new tax entity, nor does it modify the tax status.
In addition, both the LLC and the PLC are subject to the same regime regarding Corporate Tax and VAT. Thus, nothing changes for other taxes and duties.
For example, the VAT collected and deductible before conversion continues to be due and recoverable under the same conditions.
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Frequently Asked Questions
Why would a company convert from LLC to PLC in Morocco?
Companies typically convert from an LLC (SARL) to a PLC (SA) when they exceed 50 partners, need to access capital markets, wish to issue bonds, or want to adopt a more structured governance framework with a board of directors. The conversion may also be required by regulation for certain regulated activities.
Does converting from LLC to PLC create a new legal entity in Morocco?
No, converting from an LLC to a PLC does not create a new legal entity. The company retains its legal personality, contracts, and obligations. There is no tax impact, as both forms are subject to the same Corporate Tax and VAT regimes. The conversion is primarily a change in governance structure and legal framework.
What are the main steps to convert an LLC into a PLC in Morocco?
The conversion requires appointing a conversion auditor, holding an extraordinary general meeting to approve the conversion, drafting new articles of association conforming to SA requirements, appointing the board of directors and statutory auditor, and filing the modification with the trade register. The entire process typically takes 1 to 3 months.
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