02.09.2022 | Bh Adviser | Morocco
How to Set Up a Branch or subsidiary in Morocco?
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Why Setting up a Branch in Morocco is a Great Idea
Morocco’s low costs make it a great place for companies that are looking to start their business on a budget or who want to expand their operations into Africa without breaking the bank. The country also offers a highly skilled and educated labour force that can help companies grow at an affordable rate.
In this article, we’ll answer the main questions that foreign companies who want to enter Morocco should ask themselves.
1. Is it better to set up a subsidiary or a branch to enter the Moroccan market?
2. What is the main difference between a subsidiary and a branch in Morocco?
3. Which legal form is more favourable for a Moroccan company?
4. Do I need a Moroccan partner to invest in Morocco?
5. Are there any restrictions on foreign investors in Morocco?
Is it better to set up a subsidiary or a branch to enter the Moroccan market?
When entering the Moroccan market, the first question to ask is whether a subsidiary as an independent legal entity is preferable to a branch without its own legal personality.
What are the main differences between a subsidiary and a branch in Morocco?
The subsidiary and the branch are two useful options for starting a business activity in Morocco. Both are linked to a parent company but have important differences. First and foremost, the subsidiary in Morocco is an autonomous legal entity, separate from the parent company, with its own legal personality (even if the shares of the subsidiary are wholly owned by the parent company). The subsidiary, on the other hand, has no legal autonomy. Therefore, only the subsidiary can acquire contractual rights and obligations in its own name.
No share capital is required to form a branch, but a subsidiary does, although the most common form of corporation, SARL (LLC), does not require a minimum share capital. Registration costs also vary but depend more on the complexity of the process (appointment of directors, company memorandum and articles of association, the composition of the governing body) than on share capital. Another aspect to consider is the liability of the parent company: the parent company is responsible for the obligations of the branch, as the latter is not a separate entity; on the other hand, the liability of the subsidiary shareholders (including the liability) is generally limited to share capital.
Which legal form is more advantageous for a company in Morocco?
Against the background of these significant differences, the choice of legal form for entering the Moroccan market ultimately depends on the specific circumstances of the individual case. In general, from a strategic point of view, the branch can be a first step towards starting an economic activity in Morocco without the need to establish a company. The branch allows the investor to follow the development of the company in small steps. From a purely administrative point of view, the establishment of a branch is easier than that of a subsidiary. Even though the branch is usually associated with higher start-up costs, it also has advantages over the subsidiary, especially with regard to the limitation of liability. In the event of litigation, losses or liquidation, the parent company or, if it exists, the group of companies is usually not affected, unless there are grounds for pass-through liability. A subsidiary in Morocco should be considered directly if the engagement in Morocco is planned for the long term
Is it necessary to have a Moroccan partner to invest in Morocco?
Unlike some other countries in the Middle East-North Africa region, there is no legal obligation in Moroccan law to leave part of the shares in the company to a local partner. Choosing the right local partner is often the biggest challenge because language and cultural barriers make it difficult to assess the situation reliably. On the other hand, cooperation with a local partner who has networks and knowledge of the country is often indispensable.
Are there any restrictions on foreign investors in Morocco?
Generally speaking, no matter what kind of business you wish to start in Morocco, there are no restrictions on foreign investment. Some sectors are special, such as agriculture, fisheries and audiovisual. Although there are no relevant differences between domestic and foreign investments in Morocco, it is necessary to understand and follow the rules of the foreign exchange market, as the possibility of the repatriation of invested capital, capital gains and dividends depends on this. In Morocco, the legal framework for the protection and regulation of foreign investments is contained in the so-called Investment Charter (Charte de Investissement).
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