Morocco collection profile

Morocco
       

Morocco

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Complexity of collecting debt:

grading
Notable High Very High Severe


Executive summary

  • The average DSO in Morocco remains high and the payment behaviour of domestic companies is degrading with payments taking place between 90 - 120 days on average.
  • The judiciary is a multi-layered system which remains under influence and is critcized for its lack of organisation, efficiency and transparency.  Therefore, commencing legal action would be unreasonable in most cases whilst enforcement judgments would be difficult. In all circumstances, entrusting collection specialists with a strong knowledge of the local market remains the wiser approach.
  • Various insolvency proceedings are available in Morocco but these remain complex, slow and mostly inefficient when it comes to collecting debt.
 
General Information GENERAL INFORMATION arrow-transparent
 
Collection Practices COLLECTION PRACTICES arrow-transparent
Court Proceedings Court PROCEEDINGS arrow-transparent
 
Insolvency Proceedings INSOLVENCY PROCEEDINGS arrow-transparent
 
General Information 

GENERAL INFORMATION

Days Sales Outstanding (DSO)

Despite law n°32-10 of 2011 aiming at restricting payment terms to 60 days, payments in Morocco tend to take place within 90 to 120 days on average. The payment behavior of domestic firms is overall degrading as a result of the worldwide financial context, but public sector debtors are even more worrying insofar as they tend to pay their debts within a year..

 

Late payment interest

According to law n°32-10, interest is due without any notification being required, on the day following the due date mentioned on the invoice. When no specific interest rate was foreseen by the parties, compensation is to be calculated on the basis of the Bank Al Maghrib's reference rate (currently 3%), increased by at least 7 percentage points. In practice, however, tribunals tend to apply the former 6% interest rate. It should be added that legal action aiming at obtaining the compulsory payment of interest must be commenced within one year following the due date (Article 78.3 of law n°32-10).

Collection costs are not usually charged to the debtor.

 
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collection practice 

COLLECTIONS PRACTICES

Orchestrated negotiation first

Amicable settlement opportunities should always be considered as an alternative to formal proceedings which are overly lengthy and costly in Morocco. In practice, individual and informal pre-legal collection methods are often more successful than ordinary formal proceedings, especially when the collection process is handled by professionals capable of conducting on-site negotiations with a strong personal dimension. Legal dunning ought to start with a registered Demand Letter recalling the debtor its obligation to pay the principal together with late payment interests (as contractually agreed or taking a legal rate as a reference). It is essential to obtain a payment instalment agreement or, at least, a debt recognition document as these will then allow the creditor to obtain an enforceable Injunction Order.

 
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Court Proceeding 

COURT PROCEEDINGS

The legal framework of Morocco is based on French law as well as on Islamic principles and traditions. The judiciary, as recently modified, is composed of Proximity Courts (justice de proximité) in charge of settling disputes between individuals, Courts of First Instance dealing with all civil matters, Commercial Courts dealing with business disputes, Appellate Courts dealing with civil and administrative matters, and a Court of Cassation. In practice, this multi-layered system however remains influenced by the executive power and it is criticized for its lack of organisation, efficiency and transparency.


Morocco remains a highly dynamic region in constant need of investment. The Moroccan law is mainly inspired by French legislations, and judicial proceedings are in constant evolution and modernization.


If the amicable phase fails and provided that the debt is certain and undisputed (i.e. when the creditor has the means of payment returned unpaid by the debtor), fast-track proceedings allow requesting a Payment Order from the President of the Commercial Court together with the garnishment of the debtor's assets (saisies arrêts, saisies-conservatoires sur les biens du débiteur) from the court. This process ought to be flexible and fast insofar as the parties do not need to appear. If the court finds the request legitimate, the debtor will be ordered to pay the debt immediately. If the claim is disputed, the case will be considered through an ordinary lawsuit. The Law 1-74-447 approving the text of the Civil Procedure Act, supplemented by Law 42-10 on the organisation of courts and local laws establishing jurisdiction requirements, clearly define the legal organisation of the kingdom and the various procedural deadlines. As far as damages are concerned, the plaintiffs are entitled to seek compensation for the amount of damages they believe they have suffered and include penalty to compel the debtor to pay as soon as possible. It is strongly advisable to conduct legal actions with the support of a qualified lawyer, known in your business circle as being reliable and trustworthy. Euler Hermes is at best to provide the support of its network of specialized practitioners.

 
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insolvency Proceeding 

INSOLVENCY PROCEEDINGS

Various insolvency proceedings are available in Morocco but these often remain slow and inefficient. As a 2013 report of the European Bank for Reconstruction and Development (EBRD) notes, "one of the key practical issues in Morocco is the lack of professional skills and experience of insolvency office holders and judges who handle insolvency cases". Insolvency law in Morocco nonetheless offers two types of prevention mechanisms which operate as long as the business remains solvent. On the one hand, the business must work towards the 'internal prevention' of financial difficulties and has an obligation to set up an internal recovery plan aimed at continuing the business. On the other hand, the 'external prevention' mechanism empowers the Commercial Court to determine whether an amicable settlement procedure should be opened. The debtor is thus placed under the supervision of an external mediator (conciliateur) for three months whilst a compromise is found with the creditors which however have no genuine power to influence to proceedings. Once an agreement is reached with the main creditors, the court actually has a broad power to impose a debt-rescheduling on non-consenting creditors. There seems to be no confidentiality standard attached to this procedure. The law then offers traditional insolvency proceedings which can be initiated by the debtor, a creditor or by the court.

 
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