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Clifford Chance advises on the reform of the legislation taking security in Morocco

23 May 2019

Clifford Chance advises on the reform of the legislation taking security in Morocco

Clifford Chance is proud to have acted as the legal advisor on the drafting of new Act No. 21-18 on security interests over movable assets (the "Act"), which Act fundamentally reforms the Moroccan law on security. The scope of the reform brought on by the Act is ambitious and represents a real step forward for the financing of projects, M&A transactions, and more generally for commercial activities law in Morocco.

With the collaboration of Clifford Chance and the European Bank for Reconstruction and Development, the Ministry of Economy and Finance initiated the reform in 2014 and the draft Act was made available on 18 March 2015 for public consultation. The Act was then unanimously approved by the Finance Committee of the House of Representatives on 1 April 2019 and came into effect on 22 April 2019.

The Act contains a number of innovative measures, going beyond the latest French and OHADA law reforms.

Investors and lenders are now able to enforce Moroccan law governed security in Morocco quickly through out of court proceedings, with the option to take ownership or to arrange for the direct sale to third parties of the pledged asset. On a direct enforcement sale to a third party, other than cases where security is granted over the shares of a listed company where expert determination will apply, the value of the asset may be fixed by mutual agreement, failing which expert determination will apply.

The Act creates a new regime for creditors' representation through local security agents with extensive powers to create, register and enforce security interests (including carrying out statements of claim on behalf of the creditors in insolvency proceedings against the grantor). The Act isolates amounts received by the local security agents in their capacity as such from those security agents' private assets, thereby insulating creditors from local security agents' credit risk. The Act also expressly allows for security to be granted to a foreign entity or person (such as an English law trustee) with that foreign entity or person having similar powers to those granted to the local security agent, bringing Moroccan law in line with international best practice and giving investors and lenders a whole new range of out of country options as to how they structure their security packages.

In summary the Act gives investors and lenders a new flexible and effective security package structuring tool which is in line with the most sophisticated and investor and lender friendly jurisdictions.