Choosing a legal structure for a small or medium-sized business: SARL vs SAS


Choosing the right legal structure is a crucial step for any business, especially for small and medium-sized enterprises (SMEs) in Morocco. The majority of Moroccan SMEs prefer the limited liability company (SARL) form, due to its simplicity and low operating costs. However, changes in the legal framework have recently introduced the simplified joint stock company (SAS), offering entrepreneurs new options and innovative prospects. This article takes an in-depth look at the advantages and specific features of the SARL and SAS, highlighting the significant differences that can influence entrepreneurs’ decisions.

The SARL, the classic structure for SMEs in Morocco, is appreciated for its operational flexibility. Its operation requires only a manager, eliminating the need to set up a board of directors. This, coupled with the absence of any obligation to appoint an auditor, makes it an economical option. The SARL can be set up by a single individual or legal entity, offering great flexibility in the shareholder structure with no minimum share capital requirement.

 Act no. 19-20 supplementing and amending Act no. 17-95 on public limited companies introduced the SAS into the Moroccan legal landscape, widening the choice of structures available to SMEs. Henceforth, the articles relating to the SAS are set out in articles 43-1 et seq. of the same law. The liability of SAS partners is limited to the amount of their capital contributions, thus providing additional protection. A distinctive feature of the SAS is its flexible corporate governance, allowing the partners to define the operating rules. This flexibility makes it possible to personalize governance and separate power from capital, offering an adaptability rarely found in other structures.

Comparative study: SARL/ SAS

Legal representation of limited liability companies (SARL) and simplified joint stock companies (SAS):

SARLs are managed by one or more natural persons, generally designated as manager(s), with broad powers to act on behalf of the company. In the case of co-management, each co-manager has the same powers. However, it is advisable to specify in the Articles of Association whether a single signature is sufficient to bind the company, or whether a co-signature is required.

The SAS is managed by one or more individuals or legal entities, and is represented vis-à-vis third parties by a Chairman, whose powers are very broad, “within the limits of its corporate purpose”. Clauses in the articles of association limiting the powers of the Chairman are not enforceable against third parties. An SAS can have only one chairman, ruling out co-chairmanship. However, there are ways of circumventing this rule, such as appointing a SARL with two co-managers as chairman of the SAS, or introducing a rotating chairmanship. In addition to the chairman, the SAS may have other statutory officers, whose legal status is set out in the articles of association. By way of example, an officer may be appointed as managing director. The latter will exercise his mandate under the conditions defined in the bylaws. Such officers must appear on model J. An important feature is that the chairman and statutory officers of the SAS may be legal entities, which is not the case for the manager of the SARL.

Concrete example – SAS presided by a legal entity:

A concrete example illustrating the flexibility of the SAS is the possibility of having a legal entity as president. This can be advantageous for groups of companies, offering an alternative to

groups, offering an alternative to management fees for transferring funds from subsidiaries to the parent company. For example, appointing the parent company as “chairman” of its subsidiaries incorporated as SAS may justify a portion of the amounts paid by the subsidiary to the parent company, without any particular formalities in the event of a change of management at parent company level.

Management of regulated agreements

 This differs between SARLs and SASs, with a degree of flexibility offered by the SAS in the absence of a statutory auditor. In a SARL, agreements with managers or partners require a report by the manager or the statutory auditor, presented to the partners.

In a SAS, on the other hand, a report on agreements with the Chairman or executive officers is presented by the statutory auditor, without any obligation to present it to the partners in the absence of a statutory auditor. In fact, it is specified that regulated agreements only apply to agreements with the Chairman or senior management, leaving a legal vacuum with regard to agreements with associates. Thus, the legislation does not seem to explicitly govern agreements between the SAS and its associates, creating a notable gap in the regulatory framework.

The drafting of the Articles of Association thus becomes a key element in defining the terms and conditions of agreements with associates, filling the existing legislative void and ensuring clear and equitable governance within the SAS.

Company shares : 

Introduction to Share Structure in SARLs and SASs:

The nature of a company’s shares is of strategic importance in defining its capital structure. For limited liability companies (SARLs) and simplified joint-stock companies (SASs), the legal provisions governing shares have distinct characteristics. A closer look at these provisions, particularly those relating to SARLs and SASs, reveals significant differences that influence entrepreneurs’ capital structure choices.

SARL shares – Non-negotiable nature:

In SARLs, Articles 54 and 55 of Law 5-96 clearly state that shares may not be represented by negotiable securities. Moreover, an SARL is explicitly prohibited from issuing securities. This provision reflects a more traditional approach, rooted in the stability and confidentiality of relations within the SARL.

Shares in a SAS – Free transfer subject to the Articles of Association :

By contrast, the SAS, as a joint-stock company, takes a more flexible approach. The transfer of SAS shares is free by default, unless otherwise specified in the Articles of Association. Unlike the SARL, there is no statutory approval procedure for the SAS under Law 5-96. However, the freedom of contract that governs the SAS allows restrictions to be placed on the free transferability of shares in the articles of association.

The nature of shares in SARLs and SASs reflects their respective capital structure philosophies. The SARL favors stability and confidentiality of relationships, while the SAS opts for a more flexible approach, emphasizing the contractual freedom of associates. These nuances need to be taken into account when choosing a legal structure, depending on the specific needs of each company.

Issuance of securities :

Issuance of securities within the SAS framework:

The SAS offers significant latitude when it comes to issuing composite securities, providing essential leverage in structuring complex operations such as capital investments. These securities, with their diverse characteristics, open up strategic and financial prospects for companies, particularly when investment funds are involved. The flexibility offered by the SAS in this area is particularly advantageous, freeing it from the restrictive formalities usually associated with public limited companies (SA).

Strategic objectives of Compound Securities :

The use of these instruments in private equity transactions aims to achieve three main objectives:

Reinforce Management Confidence: By granting securities such as BSAs to executives, the SAS encourages confidence by offering direct access to the company’s capital.

Diversification of financing options: For investors, issuing composite securities enables diversification of financing sources, combining elements of debt and equity to manage risk.

Investment protection: OCAs and ratchet mechanisms offer protection mechanisms, allowing equity participation to be relisted in specified circumstances, thus protecting core equity investments.

This flexibility in issuing securities is a major asset for SAS, helping to create innovative financial structures tailored to the specific needs of companies and investors.

The SAS as a subsidiary-building tool:

The SAS is a particularly well-suited strategic choice for filialisation, offering a flexible structure that meets the specific needs of companies wishing to create and own subsidiaries. This model is particularly advantageous in the case of a company newly created in Greenfield, where the subsidiary is 100% owned.

Customized Articles of Association for Group Policy:

The SAS allows for extensive customization of bylaws, providing an ideal framework for incorporating specific rules linked to group policy. This proactive approach enables the parent company to define key parameters for the management of its subsidiary. Elements that can be included in the bylaws include:

Clauses limiting the powers of the Chairman: The SAS offers the possibility of introducing clauses limiting the powers of the Chairman, thus clearly defining the scope of his actions and preserving consistency with the group’s overall strategy.

Specific procedures for approving decisions: Customized bylaws enable specific procedures to be established for the approval of important decisions, ensuring governance in line with the Group’s strategic orientations.

Existence of Specific Thematic Committees: The Articles of Association can provide for the creation of thematic committees dedicated to crucial areas such as Corporate Social Responsibility (CSR), compliance, investments, and other strategic aspects. These committees reinforce the specialized management of issues specific to the subsidiary.

The SAS, as a spin-off tool, thus enables precise adaptation of the organizational structure, facilitating the implementation of governance mechanisms in line with the Group’s objectives and values. This statutory flexibility strengthens the Group’s ability to exercise strategic control over its subsidiaries, while offering a degree of operational autonomy.

Joint venture:

In the context of a joint venture, the partners of a SAS can set up a governance structure based on collegial bodies such as audit, strategic or financial committees.

In addition to providing internal checks and balances, these committees can monitor the actions and decisions of management:

– By-laws governing their operation can be freely drawn up, and procedures can be extremely flexible.

– Shareholder management is simplified, as members of statutory committees are not required to hold shares in the company.

– The existence of committees responsible for overseeing the legal representative secures the company’s governance for the foreign partner, without the need for the latter to hold a corporate office in the company and incur the associated liability

Share capital increase:

In an SAS, the partners enjoy extensive freedom to organize their decision-making, defined by the Articles of Association. The bylaws must specify a number of points, such as how decisions are to be taken by the partners, how General Meetings are to be convened, the majority required, any quorum, and the division of powers between the partners and the Chairman.

Although none of the articles 43-1 et seq. requires certain decisions to be taken by ordinary or extraordinary general meeting (as was the case with the former article 436 of Law 17-95 on simplified joint stock companies), it would be prudent to take certain decisions by means of a general meeting (capital increase, capital reduction, merger, liquidation, etc.), and more specifically those involving amendments to the articles of association. As a result, SAS bylaws need to be very precise on all these issues, and must leave no stone unturned, since Law 5-96 leaves SAS partners entirely free to decide how they wish to make their decisions.

This is a major advantage over the SARL, since the partners can introduce a high degree of flexibility into the way the company operates, which will undoubtedly contribute to faster, less formal decision-making.

On the other hand, the SARL follows more formal rules, defined in articles 71 et seq. of Law 5-96. These rules impose a time limit for convening the meeting, which must be convened by registered letter, and a meeting convened by the manager or the statutory auditor.

Resolutions are passed by one or more partners representing at least half of the shares. If this threshold is not reached at the 1st meeting, the associates are convened a second time and decisions are taken by a majority vote, regardless of the number of votes cast; amendments to the bylaws are decided by associates representing at least three-quarters of the share capital. In addition, article 71 of Law 5-96 allows SARL partners to take certain decisions (with the exception of the annual approval of company accounts) by written consultation, without convening a general meeting. However, this option must be provided for in the company’s articles of association. Unfortunately, articles 43-1 et seq. of Law 5-96 do not contain any specific provisions concerning shareholders’ decisions to be taken at a general meeting.

Approval of transfer of shares :

For SAS :

In a SAS, shares are generally freely transferable, without any legal approval procedure being required under Law 5-96. However, the contractual freedom inherent in the SAS allows restrictions to be included in the Articles of Association, such as the inalienability of shares for a maximum period of ten years, or a prior authorization procedure for any transfer. The Articles of Association must clearly define the term “transfer” and specify the body responsible for approving transfers, as well as the procedure to be followed if approval is refused. Unlike other legal forms, approval may even be required between partners, thus introducing a dimension of intuitu personae within the SAS.

For SARL :

The SARL requires approval by the partners for any transfer of shares to third parties. This process involves notification to the company and the partners, with a right of revendication within thirty days in the event of refusal of approval.

“Shares may only be transferred to third parties with the consent of a majority of associates, representing at least three-quarters of the shares. When the company has more than one shareholder, the proposed transfer is notified to the company and to each shareholder, either under the conditions set out in articles 37, 38 and 39 of the French Code of Civil Procedure, or by registered letter with acknowledgement of receipt. If the company has not made known its right of revendication within thirty days of the last of the notifications provided for in this paragraph, consent to the transfer is deemed to have been given. If the company refuses to consent to the transfer, the associates are obliged, within thirty days of such refusal, to acquire the shares or have them acquired at a price set as specified in article 14. Any clause to the contrary is deemed unwritten. At the request of the manager, this period may be extended once by order of the president of the court, ruling in summary proceedings, without this extension exceeding three months”.

The SARL requires specific formalities for registration with the clerk’s office of the commercial court and for legal publicity (Bulletin officiel and journal d’annonces légales).

Delegation of powers in the case of a sole shareholder :

Chairman in a SAS :

In a SAS, the Chairman may delegate the power to perform certain acts, subject to the provisions of the Articles of Association. This delegation is not subject to any specific formal requirements imposed by law.

Manager in a SARL :

On the other hand, in a SARL with a single shareholder, the managing partner, as sole shareholder, assumes full responsibility for the management of the company. Personal assets are separate from company assets, guaranteeing a clear separation.

Comments :

The sole partner of a SARL cannot delegate his management powers, which can pose challenges, particularly when the partner is based abroad, limiting his ability to give proxies.


The choice between a Société à Responsabilité Limitée (SARL) and a Société par Actions Simplifiée (SAS) in Morocco is of crucial importance for entrepreneurs, particularly SMEs. Traditionally, the SARL has been the predominant structure due to its simplicity and low operating costs. However, the recent introduction of the SAS offers an innovative alternative, widening the field of possibilities for entrepreneurs.

A comparative study of the SARL and the SAS reveals significant differences in the way they operate, their legal representation, the management of regulated agreements, the nature of company shares, the issuance of securities, and their suitability for spinning off. The SARL, with its emphasis on stability and confidentiality, stands out for its classic structure, while the SAS, with its flexible governance and contractual freedom, offers a degree of adaptability rarely equaled.

The SAS also stands out as an ideal strategic tool for spinning off companies, allowing for extensive customization of bylaws to integrate group policy. The statutory flexibility of the SAS facilitates the implementation of governance mechanisms aligned with the group’s objectives and values, while ensuring a degree of operational autonomy.

When it comes to increasing share capital, the SAS gives associates considerable freedom to organize their decision-making, in contrast to the more formalized rules of the SARL. This statutory freedom is a major advantage over the SARL, enabling faster, less formal decision-making.

In conclusion, the choice between SARL and SAS depends on the specific needs of each company. The SARL remains a stable, cost-effective option, while the SAS offers considerable flexibility and adaptability. Entrepreneurs will need to carefully weigh up the advantages and specific features of each legal structure to make an informed decision in line with their business ambitions.

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