Financial Crime World

Here is the article rewritten in Markdown format with proper headings, subheadings, and bullet points:

Morocco’s Financial Regulations Under Fire: New Clarifications Emerge

Rabat, Morocco - In a move aimed at clarifying the country’s financial regulations, Morocco’s Minister of Finance has issued new guidelines regarding the holding of regulated assets by insurance companies. The changes come into effect on July 28th, 2022.

New Guidelines for Insurance Companies

According to Article 27 of the Order of the Minister of Finance and Privatisation No. 1548-05 of October 10, 2005, modified by Order No. 3120-10 of November 16, 2010, insurance companies were previously prohibited from holding securities governed under foreign law. However, a recent amendment to Article 38 of Circular No. 01/AS/19 of January 2, 2019 has removed this doubt.

  • Legal advisors are being urged to review their opinions on the capacity of insurance companies to subscribe to foreign rights securities.
  • Banks and insurers may need to amend contracts intended to market such securities to the latter.

Usury Laws Get Update

Morocco’s Usury Law No. 103-12 has been amended in 2021, allowing the Minister of Finance to set a maximum interest rate for banks and financial institutions. As of April 1st, 2023, this rate is capped at 12.94%.

Disclosure Requirements Remain Unclear

  • There are no specific rules or laws regarding the disclosure of certain financial contracts.

Taxation Takes Center Stage

Key Implications for Foreign Lenders and Investors

  • Payments on principal are not subject to taxation.
  • Interest payments made overseas to non-resident lenders are taxed at a rate of 10%.
  • Double taxation treaties may apply, reducing or exempting the withholding tax.

Guarantees and Security: A Complex Web

Types of Security Interests

  • Real estate
  • Shares
  • Receivables
  • Bank accounts

Perfection Requirements

  • Mortgage deed must be signed before a Moroccan notary to be valid.
  • Pledges may be established by notarial deed or private deed.
  • Non-possessory pledges require registration with the National Electronic Registry of Moveable Security Rights.

No Floating Charges in Morocco

  • Unlike other jurisdictions, Morocco does not recognize floating charges as a security interest.
  • Instead, security arrangements are made on an asset-by-asset basis, subject to relevant perfection requirements.

Downstream and Cross-Stream Guarantees Unrestricted

Permitted Guarantee Arrangements

  • Downstream guarantees (local companies granting guarantees or securities to secure bonds issued by their subsidiaries)
  • Upstream and cross-stream guarantees (provided they do not impair the company’s corporate benefits or infringe statutory objects provisions)

Other Restrictions Apply

Additional Requirements for Guarantees

  • Approval from the board of directors is required unless the managing director has been delegated authority within a fixed limit.
  • A Moroccan company in the form of a société anonyme cannot grant financial assistance for the acquisition of its own shares by a third party.

Release of Security Interests: A Delicate Process

Types of Release Requirements

  • Pledges and cautionnements automatically lapse upon full satisfaction of secured liabilities.
  • Non-possessory pledges require filing a release notice with the Registre National Electronique des Sûretés Mobilières.
  • Mortgages must also meet formal requirements to be released from the land register.

Priority of Competing Security Interests

Ranking of Security Interests

  • The priority of competing security interests is governed by the DOC, with privileges ranking in priority over other securities and among themselves according to the nature of the debt as established by law.
  • Contractual subordination is commonly used, although there are no specific provisions under Moroccan law authorising such arrangements.

Priming Liens: A New Concern

As Morocco’s financial regulations continue to evolve, foreign lenders and investors would do well to stay informed about these changes and their implications for business operations in the country.