Insolvency and Bankruptcy in Morocco: How Do the Proceedings Work?

Introduction

Insolvency and bankruptcy are critical legal mechanisms that allow businesses or individuals in financial distress to either restructure or liquidate their assets under court supervision. In Morocco, these procedures are governed by Book V of the Moroccan Commercial Code, offering protection to both debtors and creditors. At Legal Morocco, we help navigate these complex legal waters with confidence and clarity.

What’s the Difference Between Insolvency and Bankruptcy in Morocco?

• Insolvency refers to a situation where a debtor is unable to meet their financial obligations.
• Bankruptcy (faillite) is the formal declaration of insolvency by a court, usually followed by liquidation.

Moroccan law distinguishes between different types of insolvency proceedings depending on the financial status and prospects of the debtor.

Types of Proceedings in Morocco

1. Redressement Judiciaire (Judicial Reorganization)
   Designed for businesses that are insolvent but still viable. The goal is to restructure debts and continue operations under judicial supervision.
2. Liquidation Judiciaire (Judicial Liquidation)
   Applied when recovery is no longer possible. The court orders the sale of assets to repay creditors in order of priority.
3. Preventive Settlement (Règlement Amiable)
   A confidential process where a debtor seeks to negotiate with creditors to avoid insolvency. It is only available before actual cessation of payments.

Who Can File for Insolvency?

• The debtor themselves
• A creditor whose rights are jeopardized
• The Prosecutor General or the court may also initiate proceedings under specific circumstances

The General Procedure

1. Filing the Request

The debtor or creditor files a request before the Commercial Court, presenting financial documents proving cessation of payments or financial distress.

2. Opening Judgment

If accepted, the court issues a judgment of opening, appointing:

• A judge-commissioner
• A trustee (syndic) or liquidator
• Optionally, a creditors’ representative

3. Asset Freeze and Management

All enforcement actions stop. The syndic gains control over the company’s management, assets, and financial records.

4. Creditors’ Claims Filing

Creditors must file their claims within two months from the publication of the opening judgment.

5. Observation Period (Redressement only)

The syndic assesses the company’s health. A plan for continuation or liquidation is proposed.

6. Court Decision

The court may:

• Approve a recovery plan
• Decide on liquidation
• Extend observation period

Impact on Creditors

• Creditors are bound to collective proceedings
• Preferential creditors (e.g. employees, tax authorities) are paid first
• Unsecured creditors often recover only a portion of what is owed

At Legal Morocco, we help creditors:

• Declare their claims on time
• Monitor the syndic’s actions
• Challenge fraudulent transfers or unfair preferences

Can Debtors Rebound After Bankruptcy?

Yes. If the debtor complies with procedures and shows good faith, they may:

• Restart business under a new entity
• Regain access to banking and credit
• End bankruptcy effects after a statutory period or judicial clearance

🎯 Why Choose Legal Morocco?

• ✅ Extensive experience in Moroccan insolvency law
• ✅ Representation for both debtors and creditors
• ✅ Bilingual support for international clients
• ✅ Fast, strategic response to protect your interests