In brief: Transferring shares in Morocco differs significantly between a PLC (SA) and an LLC (SARL). LLC transfers require partner approval by three-quarters majority and strict written formalities, while PLC stocks are freely transferable unless the articles of association provide otherwise. Both are subject to registration duties with the tax administration.
The transfer of shares in a limited liability company (LLC) consists of transferring ownership of shares from one partner to another.
The transfer may be carried out between partners or to a third party, that is to say, a person outside the company.
In Morocco, the transfer of LLC shares is governed by the provisions of Article 122 of the Moroccan Commercial Code. It provides that any share transfer must:
- Be approved by the other partners of the company;
- Be registered at the registry of the competent Commercial Court;
- Be the subject of legal publication (Official Gazette and legal announcements journal).
It is important to note that the transfer of LLC shares may have tax consequences for the selling partner. For example, the transfer of LLC shares may be subject to:
- Corporate Tax (if the seller is a company);
- Income Tax (if the seller is an individual).
In both cases, the share transfer requires specific formalities and a well-defined procedure.
Transfer of Shares: Formalities
The formalities for transferring shares are as follows:
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Execution of the transfer deed. The transfer deed may be notarised or under private signature. This deed must include certain information such as:
the names of the seller and the buyer,
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the number of shares transferred
-
their unit price and the total price of the shares
- Approval by the partners. Approval for the entry of a new partner is decided at an extraordinary general meeting. The minutes of this meeting must be drawn up and registered with the tax authorities. They are filed together with the transfer deed.
- Updating the articles of association. This update aims to change the identity of the partners in the articles and make the necessary amendments.
- Registration of the deed with the Tax Administration;
- Registration of the transfer deed (and the minutes) at the Commercial Court registry; and
- Publication in the Official Gazette and the Legal Announcements Journal N.B.: It is mandatory to formalise the transfer of shares in writing, under penalty of nullity of the transaction. Art. 16 of Law 5-96
Transfer of Shares in an LLC
The owners of shares in an LLC are in principle free to sell, pledge, or transfer their shares. However, this transfer is strictly regulated and requires compliance with a number of steps to be valid.
First, the shares must be fully subscribed by the partners and fully paid up. Only such shares may be transferred.
The share transfer may involve a third party, a fellow partner, or a spouse, descendant, or ascendant. Depending on the person involved, the formalities differ:
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Transfer of shares to a third party
For this transfer, the law requires the approval of a majority of partners representing at least three-quarters of the share capital. This is the only transfer that requires an approval procedure.
First, the proposed transfer must be notified to the partners by registered letter with acknowledgement of receipt. Following this, the manager convenes an ordinary general meeting within eight days of the notification. The agenda will cover the share transfer, specifying the selling partner.
This general meeting will allow the other partners to participate in the proposed transfer. They may confirm or reject the proposal within 30 days. In both cases, the decision must be notified to the seller by registered letter with acknowledgement of receipt.
Finally, an extraordinary general meeting must be held if the transfer is accepted, for the purpose of amending the articles of association.
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Transfer of shares to a partner
The transfer of shares between partners in an LLC is unrestricted under Article 60 of Law 5-96 on limited liability companies, unless the articles of association provide otherwise.
Furthermore, the articles of association may include an approval clause to prevent disruption to the balance of powers and rights of the partners, so they can maintain their percentage in the share capital.
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Transfer to a spouse, ascendant, or descendant
Under Article 58 of the same law, “shares are freely transferable by way of succession and freely assignable between spouses, relatives, and in-laws up to and including the second degree.”
The exception is where a contrary provision in the articles of association requires prior approval.
Transfer of Shares (or Rather Stocks) in a PLC
Stocks in a PLC are freely transferable. However, although the transfer process is simple, a transfer deed should be drawn up beforehand, even though the law does not require it.
Unlike the LLC, the transfer of securities within a PLC is subject to simpler rules. Nevertheless, the articles of association may provide for stricter conditions by including, for example, an approval clause. This obviously does not include transfers to a spouse, parent, or ascendants and descendants.
This clause stipulates that any stock transfer remains subject to the company’s approval. As with the LLC, notification must be made by registered letter with acknowledgement of receipt.
Approval Clause
The approval request contains the buyer’s information (surname, first name, address), the number of stocks to be transferred, and the price. Its purpose is to submit the proposed transfer to a third party to the prior authorisation of the other shareholders.
The approval process continues with a favourable or unfavourable response from the company, which must be notified to the seller.
Article 253 of Law 17-95 on public limited companies provides that in the event of a refusal by the company, the Board of Directors must arrange for the stocks to be purchased — either by a shareholder or a third party, or with the seller’s consent, by the company itself.
- There may also be a clause preventing any shareholder from transferring their stocks for a specified period. This is a lock-up clause.
- There is also a pre-emption clause which stipulates that the transfer is automatically offered on a preferential basis. It gives every partner priority in acquiring the stocks being sold.
Failure to comply with any of these clauses results in the nullity of the deed.
After obtaining the company’s approval, if required, the transfer is registered with the tax authorities.
Conclusion
Ultimately, the law governs each method of transferring securities, whether in a PLC or an LLC, so that the company retains control over itself. It is simpler in a PLC because, in principle, stocks can be transferred without a written deed, unless the articles of association provide otherwise.
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Frequently Asked Questions
Is approval required to transfer LLC shares to a third party in Morocco?
Yes, the transfer of LLC shares to a third party requires approval by a majority of partners representing at least three-quarters of the share capital. The proposed transfer must be notified to partners by registered letter, and the partners have 30 days to confirm or reject the proposal.
Can PLC stocks be freely transferred in Morocco?
In principle, stocks in a PLC are freely transferable without requiring approval from other shareholders. However, the articles of association may include an approval clause, a lock-up clause preventing transfers for a specified period, or a pre-emption clause giving existing shareholders priority in acquiring the stocks being sold.
What formalities are required for transferring LLC shares in Morocco?
The transfer requires execution of a transfer deed, approval by partners at an extraordinary general meeting, updating of the articles of association, registration of the deed with the Tax Administration, filing at the Commercial Court registry, and publication in the Official Gazette and Legal Announcements Journal. The transfer must be formalised in writing under penalty of nullity.
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