New rules to ease access to credit in Morocco

Recent legal developments in the kingdom have been marked by the reform of the pledge regime introduced by Law No. 21-18 relating to security over moveable assets, which entered into force on April 22, 2019.

In a effort to ensure better access to financing for companies, the reform broadened the guarantees they are able to give to their creditors, in particular real estate security interests. It also adapted the pledges regime to existing practices and introduced certain new mechanisms relating to pledging.

Covered Areas

First, Law No. 21-18 extended the areas of pledges, which now cover all property, whether real or personal property, or intangible assets. Thus, the new Article 1170 introduced in the Moroccan Civil Code, or Dahir (royal decree) des Obligations et des Contrats, specifies that the pledge relates to an asset whether it is a movable or immovable asset, or an intangible right. It confers on the creditor the right to be paid on this asset in preference to all other creditors, in the case of the debtor’s failure. Moreover, the same article clarifies the terminology by making a clear distinction between a gage (pledge with dispossession) and a nantissement (pledge without dispossession). It is specified that a gage requires the dispossession of the pledged asset, unlike a nantissement, which does not require the grantor to be dispossessed of the asset.

The reform goes further by establishing the possibility of constituting a pledge to secure an existing or future claim, whether fixed or variable in amount, or to secure a contingent or conditional obligation. It also strengthens the contractual freedom of parties, who may now mention in the contract only the general description of the pledged asset or agree on the replacement of the pledged asset.

In a bid to boost the attractiveness of the pledges, the new provisions allow the parties to provide for partial enforcement of the pledge, subject to the principle of proportionality between the value of the pledged or secured asset and the part of the obligation performed.

OBG would like to thank Dentons Sayarh & Menjra Law Firm for its contribution to THE REPORT Morocco 2020 The Commercial Code is not undone, since Law No. 21-18 enshrines certain pledging practices, including those relating to the pledge of business assets, the pledge of certain products and materials, or the pledge of bank accounts and securities, among others. The new law also enshrines the practice of giving a mandate to a pledge agent. This new mechanism gives the option for creditors, in the context of a pledge, to appoint a pledge agent to manage their securities on their behalf, from their creation to their enforcement.

Advantages

However, the real good news for creditors lies in the flexibility of the enforcement procedure of the pledges. This is the result of the establishment of a judicial attribution of ownership of the pledged property to the creditor in the event of non-payment of the claim, and the options allowing a creditor to proceed with the sale of the pledged or mortgaged asset or to become its owner, without recourse to judicial intervention, in case of a debtor’s failure and provided that these two options are provided for contractually. Both elements allow creditors to no longer be hostage of the uncertainty surrounding the sale by auction to enforce their security rights.

Lastly, with the objective of protecting creditors, Law No. 21-18 established a national electronic registry of moveable security rights, the management of which is entrusted to the Department of Justice. Thus, a pledge without dispossession will be effective against third parties only by registration in the national electronic personal property security registry.

By enshrining existing practices and establishing new mechanisms for the enforcement of personal property security rights, the reform introduced by Law No. 21-18 will create more legal certainty when establishing pledges, contributing to the development of investment in Morocco and facilitating access to credit.