The crowdfunding landscape in Morocco is undergoing a transformation with the introduction of a comprehensive legal framework. Designed to facilitate fundraising for startups and small businesses, these regulations cover donation, loan, and investment-based crowdfunding activities. In this guide, we’ll break down the essential aspects of Morocco’s crowdfunding regulations, making it easier for you to navigate this exciting new opportunity.
Section 1: The Regulatory Landscape
Morocco’s regulatory authorities, BAM (Bank Al-Maghrib) and AMMC (Autorité Marocaine du Marché des Capitaux), have just issued a set of circulars to govern crowdfunding activities. These regulations aim to nurture crowdfunding as a financing avenue for small-scale projects, SMEs, and individual entrepreneurs.
1.1 Crowdfunding Categories and Authorized Caps
- Donation: You can raise funds for your project through donations, with an authorized cap of up to MAD 450,000 (43,615.22 USD). This category is ideal for projects that rely on community support and goodwill.
- Loan: If you prefer a lending model, you can raise up to MAD 3 million (290,768.11 USD) through loans from the public. This option suits businesses looking for debt-based financing without traditional banks.
- Investment: For those seeking equity investment, crowdfunding allows you to raise up to MAD 5 million (484,613.52 USD) from individual investors. This can be a game-changer for startups seeking equity capital.
Section 2: The Approval Process
To start your crowdfunding journey in Morocco, you’ll need to apply for approval from BAM and AMMC. Here’s what you need:
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2.1 Approval Application Dossier
- Founder’s Identity and Company Details: Provide comprehensive information about yourself as the founder and details about your company, including its purpose and address.
- Share Capital Information: Detail the composition and distribution of your company’s share capital among different shareholders, with identification for each.
- Strategic Objectives and Market Research: Showcase your company’s strategic objectives and share insights from market research. This helps demonstrate your business’s viability.
- Five-Year Business Plan: Present a five-year business plan outlining pricing policies and growth strategies, providing a clear roadmap for your project’s success.
- Anti-Money Laundering and Counter-Terrorism Financing Measures: Implement systems to combat money laundering and terrorism financing while safeguarding your project’s integrity.
- Data Protection Measures: Ensure the protection of personal data in line with regulatory requirements.
- Project Selection and Monitoring Policies: Outline your company’s policies for selecting projects, monitoring their progress, and prioritizing contributor interests.
Section 3: Contracts and Agreements
Before commencing fundraising, several contracts and agreements need to be in place:
3.1 Service Agreement with Depositary Institution
- Account Opening Agreement with Domiciliary Bank: Open an account for the Specialized Financing Company (SFC) with a domiciliary bank, adhering to specified clauses.
- Financial Rights and Obligations: Define financial rights and obligations for all parties involved.
- Professional Confidentiality: Ensure that the institution maintains professional confidentiality.
- Fund Return Modalities: Establish clear modalities for returning funds to contributors, especially in cases where fundraising goals aren’t met.
- Dispute Resolution Principles: Lay out principles for resolving disputes amicably.
3.2 Contracts with Project Holders
- Loan, Donation, or Investment Category Contracts: Depending on your chosen crowdfunding category, create contracts with project holders that include project details, financing amounts, and contributor contributions.
- Declaration of Acceptance: Include a declaration by all parties acknowledging the platform’s regulations and specific financing conditions.
- Risk Disclosure: Clearly communicate the risks associated with non-guaranteed financing, emphasizing potential capital loss, project failure, and lack of liquidity.
Section 4: Information Disclosure
Transparency is key in crowdfunding:
4.1 Information for Project Contributors
- Regular Updates: Provide regular updates on the project’s status, including the total contributions collected, remaining amounts needed, retractions, and key dates.
- Post-Fundraising Information: After the fundraising period ends, share details about progress compared to forecasts, fund utilization, and projected activity for the next 12 months. Additionally, disclose revenue, expenses, and profitability achieved.
4.2 Mandatory Reports to BAM and AMMC
- Annual Activity Report: Submit an annual activity report along with internal or external audit reports and financial statements.
- Compliance Reports: Report on checks conducted and actions taken to ensure ethical compliance.
- Technical Incident Reports: Notify authorities of any technical incidents related to your crowdfunding operations.
- Any Other Relevant Information: Share any additional information related to your company’s organization and operation as per regulatory requirements.
Section 5: Looking Ahead
With the regulatory framework in place, the approval process is set to begin, particularly for donation-based platforms. Entrepreneurs who lack access to traditional banking or government support programs should explore crowdfunding as an option. However, the long-term success of crowdfunding in Morocco remains uncertain and will depend on various factors.
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Morocco’s new crowdfunding regulations offer exciting prospects for startup founders and entrepreneurs. By understanding the legal framework, approval process, contracts, and information disclosure requirements, you can make informed decisions and harness the potential of crowdfunding to raise up to $480K for your projects. As the industry evolves, it’s essential to stay informed and adapt to the changing crowdfunding landscape in Morocco. Embrace this opportunity, and your startup could thrive in this innovative financing ecosystem.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert.
As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard