Shareholders agreement in Morocco: All you should know

A shareholders agreement is a legal document established between the shareholders of an entity. Often established at the time of the company's creation, the partners' agreement or shareholders agreement aims to organize the movements of the shareholders with a view to the proper functioning of the company.

Each shareholder in the company makes commitments to the other ones and writes them down in the shareholders agreement to ensure they are correctly executed.

Behind this simple definition lies a secret document (as long as it is not filed with the clerk of the commercial court), thus requiring fewer administrative steps. This article will enable you to discover more about this document that binds a company's shareholders.

In Morocco, the shareholders agreement is a relatively common document in most companies with more than one shareholder (SARL, SA, SAS, Etc.). Indeed, it provides security to the shareholders as to the future of their relations.

Shareholders agreement in Morocco: what does it stand for?

Not to be confused with the company's articles of association, the shareholders agreement is a legal document aimed at organizing the movements of shares, the mutual commitments of the shareholders, and the company's functioning in general. 

With a contractual character, a shareholders agreement makes it possible to clarify and write the nature of the relations between the signatories and defines the shareholders' roles and responsibilities. You should note that the latter may be signed by some or by all of the shareholders of a company. Once the shareholders become signatories, they are subject to sanctions in the event of non-compliance with the clauses inserted in the shareholders' agreement.

Shareholders agreement in Morocco: What is the purpose of it? Why write one?

Mutual trust and a verbal commitment are often not enough to guarantee a good understanding between the shareholders of a company. The drafting of a shareholders' agreement is often a safer solution to ensure that all company stakeholders are protected in case of a disagreement.

Indeed, disagreements between partners can be frequent. Disagreements can be purely relational problems, misallocation of roles, powers, and competencies, different visions and strategies. There are many reasons why partners may come into conflict.

Therefore, the shareholders must refer to a written text with legal value to resolve their differences and prevent the growth or even the continuity of the company's activity from being blocked.

Nothing is more effective than a shareholders agreement since it aims to define the rules between the shareholders, facilitating, framing, and anticipating the conditions of entry, life, and exit of the partners within the company.

Shareholders agreement in Morocco: When should it be drafted?

Shareholders can draft the agreement at any time. In many cases, the partners draw it up at the creation of the company. Still, Stakeholders can also draw it up during its activity. Thus, the shareholders agreement is not a binding document. Still, it protects each partner from the possible wrong actions of the others. 

However, we strongly advise shareholders of companies such as SARL or SAS to draw one up. We also recommend that all partners be included in the agreement, whether majority or minority shareholders.

Some managers prefer to draw up their shareholders agreement when creating their business. Others prefer to wait until they have raised funds or when the first partner or investor is in the project. They prefer concentrating on the company's development rather than on non-mandatory administrative papers such as the partnership agreement.

The most important thing for the signatories of a partnership agreement is to agree on the obligations and rights of each party.

The shareholder agreement in Morocco: an essential element for the management of your company

The life of a company does not always go as planned. During its activity, the company may encounter some obstacles, like variations in the visions and moods of the shareholders. Also, the number of shareholders may change.  

Even if it is not a binding document, a shareholders' agreement becomes an essential element for more serene management of a company. In addition, this document allows anticipating possible tensions between the shareholders by delimiting the roles of each partner.

In addition to avoiding the risk of litigation, the shareholders agreement also makes it possible to complete the company's status while including the information on the company's administration.

In some cases, the articles of association of a company may be incomplete. This situation may be a deliberate choice: some founders prefer to skip specific problematic issues with a partner they consider indispensable. On the other hand, it may also be a simple oversight.

In any case, as the business develops, the absence of an explicit text setting out the responsibilities, duties, and rights of each partner, such as a partners' agreement, will be felt in the management. Therefore, it is preferable, from the beginning of the company's creation, to clearly state the rules of operation of the company between the partners.

What are the most common clauses in a partnership agreement?

Now that you are aware of the shareholders agreement's central role in the company's life let's see how to draft it.

What are the most common clauses in a shareholders agreement?

Drafting a company's flagship document is no easy task. Indeed, partners are free to include all sorts of clauses in their agreement.

As far as the structure of the shareholders' agreement is concerned, there are several parts. Firstly, there are the clauses relating to the functioning of the partnership agreement, such as the confidentiality clause, the consequences of non-performance of the contract, the scope of the agreement between the partners.

Secondly, there are the clauses relating to the modalities for breaking the partners' agreement and the management of disputes. It is crucial at this level to clearly state the applicable law in the event of a dispute.

Also, the shareholders' agreement should include clauses relating to the management of the shares and the functioning of governance: from the rules for the distribution of dividends, the decision-making and voting rights, the methods of appointing managers, their remuneration, and the clauses for the exit of shareholders.

You can even add to this list the definition of the investment policy, the constitution of the board of directors, a non-competition, and a non-employment clause. You should also indicate the duration of these.

The non-competition clause in the shareholders agreement is intended to prevent one or all of the company's shareholders from working for another competing company in the same sector.

However, this non-competition clause must be limited in time and space and provide a financial counterpart. Not all partners in the company are necessarily subject to this clause. You must expressly stipulate this clause in the partners' agreement.

However, it is essential to note that it is possible to determine the shareholders' agreement's duration by setting a specific end date or referring to a particular event.

A shareholders' agreement can also be defined for an indefinite period. In this case, the shareholders agreement can be terminated at any time and unilaterally between the partners if necessary. Therefore, a clause for the joint exit of one or more partners can therefore be included when drafting a partners' agreement.

Other clauses are potentially essential in a partners' agreement, but this depends on the managers and their needs.

What should be included in a shareholders' agreement?

First, it is essential to emphasize the need to have additional clauses for the possible amendment of your partnership agreement. To do this, the signatories can conclude an amendment to the contract.

The signature of the shareholders' agreement by all the company's shareholders is not compulsory for the amendment to be valid. Still, it must be signed by all the signatories registered on the agreement.

Still, it is preferable to indicate the sanctions provided for non-compliance with the clauses of the shareholders' agreement by clearly inserting the amounts of damages and interest and the terms of the cancellation and resolution of the contract.

In the event of the death of one of the company's shareholders, it is critical to provide for the conditions under which who will take over the shares and rights of the shareholder in question. This is because in the event of the death of one of the shareholders, and without a specific clause in the shareholders' agreement, the heirs of the deceased will take over their shares and functions within the structure.

What are the consequences if the shareholders agreement is not respected?

The partners' agreement is a written document with a solid contractual value. Non-compliance with the commitments can give rise to sanctions ranging from a conviction or a fine to the expulsion of the shareholder who signed the agreement. Therefore, in non-compliance with the agreement, the agreement must clearly state the consequences and sanctions in the shareholders' agreement.

Assuming that the shareholders have taken care to provide for contractual sanctions, the penalties are determined according to the general law of culpable violation of contractual obligations.

If the penalties are deemed too abusive, the sanctioned shareholder may then bring the matter to the competent court, depending on the company's domicile. The judge will then decide whether to enforce or reduce the penalty provided for in the pact in correlation with Moroccan law.

Before a shareholder can make a conviction or claim for damages, he must prove the shareholders' agreement's breach.

Moreover, the force of the partners' agreement allows the execution of specific commitments in case of manifest refusal. Indeed, the case law provides for the forced implementation of the contract concluded between the company's shareholders.

Conclusion

In conclusion, we can say that the shareholders' agreement is a contract concluded between at least two shareholders of the company and which completes the initially drafted articles of association. This legal importance gives it a contractual character.

In other words, failure to comply with the shareholders' agreement may lead to several consequences. Those consequences range from the breach of the shareholders' agreement to the forced exit of the signatory at fault, including financial penalties for the signatory shareholder concerned when the damage caused is proven.

On the one hand, the shareholders' agreement is binding. It offers each signatory the possibility of being granted compensation in the event of a breach of the contract clauses. Therefore, it makes it possible to organize the professional relations between the shareholders by clearly defining the roles and responsibilities of each of the signatory partners.

On the other hand, the shareholders' agreement is a document aimed at protecting the company's stakeholders.

Although drafting a shareholders' agreement is not compulsory, it offers many advantages insofar as it allows the anticipation of possible disputes between partners. In addition, the partners' agreement is a private, confidential document that is inexpensive, if not free, to draft.

You can easily dispense with the legal services of lawyers for its drafting if you have a relatively clear idea of the clauses you wish to include. However, if it is your first partnership agreement or if you are not entirely sure what you want to have, we advise you to be accompanied by a representative of Moroccan law.

In addition to discretion, a shareholders' agreement is also characterized by its flexibility, offering freedom of drafting. It can be signed either by all the partners or only by some of them.

When drafting a shareholders' agreement, the company's shareholders can insert as many clauses as they wish, such as the breach of contract, the pre-emption clause, the transfer of shares, and intellectual property.