Legal reserve: SARL and SA in Morocco

Legal reserves for SARLs and SAs in Morocco.

The legal reserve is the amount of profits reinvested in the company within the framework of the minimum capital required by law. Each year, at the Annual General Meeting, the shareholders decide how to allocate the previous year's profits, dividing them between retained earnings, reserves and the legal reserve. The legal reserve is intended to strengthen shareholders' equity. This reserve forms part of shareholders' equity, which is recorded in class 1.

The legal reserve is a requirement for all companies in which the liability of shareholders is limited to their capital contributions. It therefore applies to all joint-stock companies (SA, SAS, SASU and SCA) and limited liability companies (EURL and SARL).

How does the legal reserve work?

 

In the case of a SARLThe legal reserve is 5% of accounting profit, up to a limit of 20% of capital. Article 1038 of the DOC stipulates that: "One-twentieth (5%) of the net profits earned at the end of each financial year must be deducted, before any distribution, and is used to set up a reserve fund, up to a limit of one-fifth (20%) of the capital."

Yet in a SAThe legal reserve is 5% of accounting profit, up to a limit of 10% of capital. Article 329 of Law no. 17-95 relating to sociétés anonymes stipulates that: "Under penalty of nullity of any deliberation to the contrary, a deduction of (5 %) is made from the net profit for the year, less any previous losses, and this deduction is allocated to the formation of a reserve fund known as the legal reserve. This deduction ceases to be mandatory when the legal reserve exceeds one tenth (10%) of the share capital."

In the case of profits only, you must calculate 5 % of the profit and allocate it to the corresponding account when you enter the appropriation of earnings (on the date of the AGM minutes).

There is a limit to the reserve. The reserve is capped at 10 % of share capital for a SA and 20% for a SARL. As long as the limit has not been reached, the allocation of profits must include the 5 % of the legal reserve. In the year in which the limit is reached, you allocate the maximum amount to the legal reserve.

During the life of a company. The share capital may increase or decrease, and the legal reserve must be adapted to reflect these changes. In the event of an increase in share capital, the legal reserve must be topped up to the new threshold of 10% of share capital for a SA and 20% for a SARL. In the event of a reduction in share capital, the portion in excess of the threshold of 10 % of share capital for the SA and 20% for the SARL must be allocated to another reserve or to retained earnings.

Our legal and tax team will be happy to provide you with any further information you may require.

Faithfully yours,

Ilham Taha-Bouamri
Chartered accountant and tax specialist

Remedy your company's difficulties in time

Judicial safeguard procedure You are company director?

Have you noticed that your company is experiencing difficulties?

This newsflash is for you.

In fact, in order to protect yourself in advance, you can diagnose your difficulties early on, hoping for a more favorable outcome to the crisis by taking action as soon as the first signs of difficulty appear.

This prevention procedure, called judicial safeguard procedureThis involves presenting a draft rescue plan and taking initiatives to safeguard your business, enabling you to maintain your autonomy as a company director.

To qualify, the company director must file his or her application with the secretariat of the court clerk's office responsible for the location of the company's registered office.

The application must state the nature of the difficulties likely to jeopardize the company's continued operation, and must be accompanied by a number of supporting documents and a draft safeguard plan including all the commitments necessary to safeguard the company, the means of maintaining business, the arrangements for discharging liabilities and the guarantees granted for the execution of the said plan.

If the court decides to validate the safeguard plan, it sets a time limit for its implementation, which may not exceed five (5) years.

On the other hand, if the head of the company fails to meet the commitments set out in the plan, the court may, on its own initiative or at the request of an aggrieved creditor, and of course after hearing the head of the company and the trustee, decide to terminate the sauvegarde plan and consequently decide on either receivership or compulsory liquidation.

We will be happy to provide you with any further information you may require, or to assist you in carrying out this procedure.

Best regards,

Faithfully yours,

Ilham Taha-Bouamri
Chartered accountant and tax specialist

Immediate increase in SMIG (5%) and SMAG (10%)

On Thursday, September 1, 2022, the Government Council approved draft decree no. 2-22-606 setting the legal minimum wage in industry, commerce, the liberal professions and agriculture.

Morocco has increased its minimum wage 25 times since 1980, reaching a minimum wage of 2,970 dirhams/month from september 2022 and 3,111 dirhams/month in September 2023.

The increase in the SMIG concerns the industrial, commercial and liberal professions sectors, while the increase in the SMAG concerns the agricultural sector.

The new SMIG in Morocco in September 1, 2022 and SMAG have therefore been set by a decree published in the B.O. No. 7125 on September 12, 2022.

The legal minimum wage (SMIG) for one hour's work for the liberal professions and the industrial and commercial sectors will immediately rise from DH14.81 per hour to 15.55 DH on time from from September 2022 which is equivalent to 2,970 dirhams/monthSimilarly, the social agreement provides for a further increase of 5% which will take place in september 2023 to reach 16,29 dirhams/hour, equivalent to 3,111 dirhams/month.

The Guaranteed Minimum Agricultural Wage (SMAG), meanwhile, is on the rise. of 10%moving to 84,37 dirhams for a day's work against 76,70 dirhams previously, from September 2022. A new rise of 5% will be applied from september 2023to reach 88,58 dirhams. Under the social agreement, the SMIG and SMAG are to be aligned by 2028.

Finally, for the public sectorthe minimum wage will rise from 3,300 to 3.500 dirhams per month, under the terms of the social agreement.

Faithfully yours,

Ilham Taha-Bouamri
Chartered accountant and tax specialist