The 2003 World Bank assessment of the insolvency and creditors rights systems in Morocco against the Principles and Guidelines for Effective Insolvency & Creditor Rights Systems (the Principles) developed by the World Bank commended Morocco for progress achieved in improving creditor rights and insolvency procedures. However, insufficient enforcement was found to be a major impediment to the efficient functioning of the system. Specifically, creditor rights and enforcement procedures, and the legal framework for corporate insolvency were assessed as "largely observant" of the Principles. However, requirements pertaining to courts were found to be between "largely observant" to "materially observant," and the requirements pertaining to insolvency practitioners were found to be "materially non-observant" or "non observant." As stated on the World Bank Global Insolvency Law Database website, after the assessment had been completed, the World Bank and the Moroccan authorities met to discuss the results of the assessment and possible technical assistance from the World Bank. It was noted that the Moroccan authorities were in the process of addressing the shortcomings identified during the evaluation.

General Overview

As part of a joint initiative of the International Monetary Fund (IMF) and the World Bank on monitoring countries' progress in observance of Standards and Codes, the World Bank in 2003 conducted an assessment of the insolvency and creditors rights systems in Morocco using its 2001 Principles and Guidelines for Effective Insolvency & Creditor Rights Systems (the Principles) as a benchmark. The results of the review were presented in the Report on the Observance of Standards and Codes (ROSC) published in September 2006. In assessing the insolvency and creditors rights systems in a country, the World Bank focuses on four areas: (1) creditors rights and enforcement procedures: (2) legal framework for corporate insolvency; (3) regulatory framework for creditor rights and corporate insolvency; and (4) credit risk management and informal corporate workouts. Overall, the World Bank concluded that, since 1996, some progress had been achieved in Morocco in improving creditor rights and insolvency procedures, although insufficient enforcement persists. The IMF, in its 2003 Financial System Stability Assessment, commended Morocco for its modern approach to the bankruptcy of enterprises and the progress achieved since legal reforms began, but cautioned that 'the implementation of the bankruptcy law is hampered by long delays and by the inexperience of magistrates" (p. 35).

The 2006 World Bank report assessed creditor rights and enforcement procedures as "largely observant" of the Principles; however some areas require improvement to reach a higher level of compliance. The report notes that "legal systems provide reasonably modern protections for creditors and credit recovery means in Morocco.... [However] secured creditors are still plagued by inefficiencies in the judiciary that hinder efficient enforcement and recover, but this problem is decreasing" (p. 1). Further, the legal framework for corporate insolvency was found to be "largely observant" of the Principles. The new legal framework for commercial insolvency was introduced in Morocco with the issuance in 1996 of the Commercial Code, which introduced liquidation and reorganization procedures as well as pre-insolvency schemes. The creation of new commercial courts in 1997 was aimed at enforcing the new law. Due to the excessive filings by debtors and a lack of adequately trained professionals, the system does not function effectively enough. However, asserts the World Bank, "the system contains the necessary technical features and tools to make it appropriate when institutional and regulatory aspects will have been improved" (p. 5).

In addressing regulatory framework for creditor rights and corporate insolvency, the World Bank 2006 report noted that the introduction of new commercial courts is a positive development, but "the absence of court performance standards and judicial training are counterbalancing factors that hinder the systems overall efficiency" (p. 1). The World Bank noted other factors contributing to the inadequate functioning of the insolvency system in Morocco, including the absence of a regulatory body in charge of insolvency issues and the lack of competency requirements for insolvency administrators. Thus, with respect to courts, the Principles were found between "largely observant" to "materially observant," and the requirements pertaining to insolvency practitioners were found to be "materially non-observant" or "non observant."

Finally, there are no formal rules for informal workouts, and the tax legislation does not support workouts and restructuring. As stated on the World Bank Global Insolvency Law Database website, after the assessment had been completed, the World Bank and the Moroccan authorities met to discuss the results of the assessment and possible technical assistance from the World Bank. It was noted that the Moroccan authorities were in the process of addressing the shortcomings identified during the evaluation.

The World Bank and the International Finance Corporation compile the Doing Business Index. One of the factors is "Closing a Business." As of 2006, in Morocco, the process takes 1.8 years and costs 18% of the estate value. The recovery rate, expressed in terms of how many cents on the dollar claimants recover from the insolvent firm, is 35.1. For comparison, the regional average and Organization of Economic Cooperation and Development (OECD) countries' average are 3.1 years and 1.4 years respectively, the associated costs 12.1% and 7.1% and the recovery rate 25.7 and 74.0.