Introduction: Hybrid issuance in Morocco sits on a moving legal border between debt and equity
Morocco has now reached a stage where hybrid debt is no longer a theoretical concept discussed only in boardrooms or by investment bankers in Casablanca Finance City. The market has seen landmark transactions, and the recent USD 1.5 billion hybrid issuance by OCP has confirmed something practitioners have sensed for years: Moroccan issuers, especially large groups with international funding needs, are looking for instruments that behave like debt for some purposes and like equity for others.
That tension is the whole story. An issuer wants the tax deductibility and funding flexibility of debt, but also the balance-sheet strength and rating benefits associated with quasi-equity. Investors, for their part, want yield, protections, and clarity on ranking, conversion, coupon deferral and loss absorption. Regulators want disclosure, market integrity and, in the banking sector, prudential solidity. The result is a legal construction that works in practice, but often through careful drafting rather than through a dedicated statutory regime.
In plain English, and this matters, Moroccan positive law does not contain a formal standalone definition of a “hybrid bond”. You will not find a neat article in the law saying: this is what a hybrid obligation is, here is its legal regime, here are its tax consequences. Instead, Moroccan law borrows from existing categories: ordinary bonds, convertible bonds, bonds with subscription warrants, subordinated debt, and, in banking regulation, instruments that may count as regulatory capital. The legal engineer builds the instrument by combining these categories and documenting the economics with precision.
This is why the subject is more delicate than it first appears. A badly structured transaction can trigger three major risks. First, a qualification risk: is the instrument truly debt, quasi-equity, or something the law does not comfortably recognize? Second, a tax risk: are the coupons deductible under the General Tax Code, or could the tax administration recharacterize them as non-deductible distributions? Third, an operational and regulatory risk: can the file pass AMMC review smoothly, or will the issuer lose months clarifying points that should have been settled upstream?
The OCP transaction is revealing for another reason. It shows the maturity of the Moroccan market, but also its limits. As financial press analysis, including commentary published by Medias24, has pointed out, hybrid debt remains easier for sovereign-linked or top-tier issuers than for ordinary non-financial corporates. Why? Because legal uncertainty, market liquidity and investor appetite still impose a premium on complexity. A blue-chip group can absorb that. A mid-sized issuer, often, cannot.
This article explains how hybrid bond issuance under Moroccan law actually works. Not in abstract terms, but through the real legal architecture: Law No. 17-95 on public limited companies, Law No. 44-12 on public offerings, AMMC disclosure rules, tax treatment under the CGI, and, for banks, the additional layer of Bank Al-Maghrib supervision. We will also look at the rights of bondholders, the role of the masse des obligataires, the practical timelines, the common drafting mistakes, and the reasons why the Moroccan framework still feels, frankly, more artisanal than codified.
For entrepreneurs, legal teams, students and investors, the core takeaway is simple: hybrid bonds in Morocco are legally possible, increasingly used, but still heavily dependent on structuring discipline. The law opens the door. It does not walk you safely through it.
1. The basic legal framework: company law, securities law and AMMC regulation
Law No. 17-95 on public limited companies remains the starting point
Any serious discussion of émission obligataire hybride droit marocain begins with Law No. 17-95 relating to sociétés anonymes, as amended in particular by Laws No. 20-05 and 78-12. This is the cornerstone text for the issuance of bonds by Moroccan companies. The key provisions on bonds are found in Articles 292 to 348. These articles govern who may issue bonds, under what corporate approvals, and with what consequences for bondholders.
The first point is basic but decisive: in Moroccan law, the standard vehicle for issuing bonds is the société anonyme (SA). That immediately excludes many operating businesses incorporated as SARLs from direct access to bond financing. In practice, when a non-listed group wants access to debt capital markets or a quasi-equity instrument, the usual structural solution is to use or create an SA holding company.
Article 292 of Law No. 17-95 lays the foundation for the issuance of bonds by public limited companies and anchors the legal regime of debt securities in Moroccan company law.
Where hybridity enters the picture is that the same law also recognizes instruments that already blur the debt-equity line, especially convertible bonds and other securities giving access to capital. The law therefore does not use the label “hybrid bond” as such, but it undeniably contains legal tools from which hybrid instruments can be built.
The key articles on bonds and hybrid-like securities
The articles practitioners most often work with are Articles 292 to 348 for bonds generally, and Articles 316 to 330 for obligations convertibles en actions. These provisions are not decorative. They determine the corporate mechanics, including when an extraordinary general meeting is required, the role of the board, the rights attached to the instrument, and the protection of existing shareholders where conversion or subscription rights may dilute capital.
For corporate approvals, one must also return to the rules governing extraordinary general meetings, particularly Articles 109 to 112 of Law No. 17-95. In Morocco, this is not a mere technicality. If the instrument may lead to capital increase, conversion, or issuance of securities giving access to the share capital, then the issuer must be meticulous on quorum, majority and delegation. A weak corporate paper trail is one of the easiest ways to complicate an AMMC review.
Articles 109 to 112 of Law No. 17-95 govern the extraordinary general meeting, whose approval is generally required for securities affecting share capital or granting access to it, including convertibles and similar hybrid structures.
Law No. 44-12 on public offerings: when the issuance targets the market
Company law is only half of the picture. If the transaction involves a public offering, the regime of Law No. 44-12 relating to public offerings and the information required from legal entities and bodies making a public offering becomes central. This law organizes who may access the market, under what transparency obligations, and with what documentation.
For a public hybrid issuance, the issuer must comply with the conditions applicable to public offerings, including disclosure obligations, financial statements, and the preparation of a prospectus to be submitted to the Autorité Marocaine du Marché des Capitaux (AMMC). Concretely, even if the law does not single out “hybrid bonds”, a sufficiently innovative instrument will attract closer scrutiny because AMMC will want the prospectus to explain, in clear legal and financial terms, exactly what investors are buying.
This is where the distinction between public placement and private placement matters. A non-listed Moroccan SA may still issue debt privately, but if it crosses into the territory of public offering, the full disclosure framework applies. In practice, many mid-market issuers explore private placements precisely because a public hybrid issuance can become expensive, document-heavy and slow.
The historical foundation: the 1993 reform and the rise of market regulation
The historical regulatory basis of the Moroccan capital markets architecture lies in the Dahir portant loi n°1-93-212 of 21 September 1993, which originally framed the powers of the CDVM, now replaced by the AMMC. That text matters because it marks the transition from a more bank-centered financing environment toward a regulated capital markets ecosystem with supervisory oversight, disclosure obligations and investor protection rules.
Today, the AMMC is the gatekeeper for public market transactions. In market language, issuers do not simply “seek authorization”; they prepare a file to passer en visa. That expression is used every day in Casablanca and Rabat. And rightly so, because the AMMC visa is not cosmetic. It is the regulatory milestone that allows the market process to move forward.
The normative role of the AMMC and Circular No. 03/19
For hybrid instruments, the most operationally important text is often not the statute itself, but AMMC Circular No. 03/19 relating to the preparation of the issuance prospectus. This circular structures the content of the prospectus, the financial disclosures, the risk factors and the legal information to be provided. For ordinary bond issues, the exercise is already detailed. For instruments financiers hybrides AMMC, the drafting burden is heavier because every unusual feature must be explained carefully.
Coupon deferral, subordination, optional call dates, conversion triggers, write-down mechanics, replacement capital covenants, ranking in insolvency, tax uncertainties, accounting treatment: all of this must be disclosed in a way that is technically accurate and understandable to investors. That sounds obvious. In practice, it is where many files become messy.
For listed issues, the General Regulations of the Casablanca Stock Exchange also enter the equation, particularly on admission conditions, post-issuance disclosure and market transparency. The listing of debt securities on la Bourse de Casa can improve visibility and potentially broaden the investor base, but it also adds another compliance layer.
The result is a framework that is functional but fragmented. Moroccan law has no dedicated statute on hybrid bonds. It relies instead on company law, public offering law, AMMC circulars, stock exchange rules, accounting standards and, where relevant, banking regulation. That works for seasoned issuers with strong advisers. For others, the legal uncertainty is real.
2. The legal anatomy of hybrid instruments available under Moroccan law
Convertible bonds (OCA): the clearest statutory hybrid
If one instrument best illustrates obligations hybrides Maroc from a legal standpoint, it is the obligation convertible en actions (OCA). Moroccan law expressly regulates convertibles in Articles 316 to 330 of Law No. 17-95. The logic is straightforward: the investor initially holds a debt claim, but may convert that claim into shares according to a pre-agreed conversion ratio and timetable.
This is hybridity in its purest legal form. Before conversion, the investor is a creditor. After conversion, the investor becomes a shareholder. The debt is extinguished, and the company’s capital is diluted. That is why an extraordinary general meeting is generally required, along with a special report from the statutory auditors where the law so requires. Existing shareholders’ preferential rights and dilution issues must be anticipated from the outset.
Articles 316 to 330 of Law No. 17-95 provide the Moroccan legal regime for convertible bonds, including the conditions of issuance and the consequences of conversion into shares.
In structuring practice, the difficult points are rarely the existence of the instrument itself. The law allows it. The friction lies in the drafting of anti-dilution adjustments, corporate events clauses, early redemption mechanics and conversion windows. The law remains relatively silent on some of these details, which means the transaction documents must do the heavy lifting.
Bonds with share subscription warrants (OBSA): a double instrument
The obligation à bons de souscription d’actions (OBSA) is more sophisticated. It combines a bond with a warrant granting the right to subscribe for new shares at a fixed price. Unlike an OCA, where the creditor chooses whether to convert the bond itself into shares, the OBSA separates the debt instrument from the equity option. The investor may keep the bond and, separately, exercise the warrant.
Legally, this creates a dual analysis. The bond remains debt. The warrant is a security giving access to capital. This distinction matters for corporate approvals, accounting treatment and prospectus drafting. In economic terms, the OBSA may be attractive where the issuer wants to reduce the coupon thanks to the equity upside embedded in the warrant. In legal terms, however, the documentation becomes more complex because the warrant component must be described and valued separately.
For Moroccan issuers, obligations à bons de souscription Maroc can be useful in growth financing or pre-IPO contexts, but they require discipline. Existing shareholders need to understand dilution scenarios, investors need transparency on exercise terms, and the AMMC will expect the prospectus to distinguish clearly between the bond leg and the warrant leg.
Redeemable in shares bonds (ORA): possible but sensitive
The obligation remboursable en actions (ORA) pushes the logic further. Here, the reimbursement itself occurs in shares rather than cash. Economically, the instrument may look debt-like at issuance but is designed to settle into equity. This can be useful in group reorganizations, bridge financings or strategic transactions where cash preservation is a priority.
But attention toutefois: ORA-type structures raise sharper legal and valuation issues. If the reimbursement in shares is mandatory, one may ask whether the instrument is truly debt in substance or merely deferred equity. That question does not have a fully settled answer in Moroccan law because, again, the statutes do not provide a dedicated, detailed regime for every modern structured instrument. The more the instrument departs from ordinary debt economics, the greater the need for careful legal and tax analysis.
Subordinated debt and mezzanine financing: hybridity through ranking
Not every hybrid instrument gives access to capital. Many are hybrid because they sit lower in the creditor waterfall and absorb more risk than ordinary debt. This is the case for subordinated debt and, more broadly, mezzanine financing under Moroccan law. Here the hybrid feature lies primarily in the subordination clause, the long maturity, possible payment-in-kind features, and sometimes profit-linked remuneration.
Moroccan law does not provide a standalone code section called “subordinated debt regulation”. In practice, the legal qualification comes from the contract and from the general freedom to organize ranking among creditors, subject of course to mandatory insolvency rules and public policy. The ranking clause must therefore be drafted with precision. If the issuer later faces distress, the wording of subordination becomes decisive.
From an accounting perspective, practitioners often look to the CGNC and to market practice to assess whether the instrument may be presented as quasi-equity. But accounting presentation does not settle legal qualification, and legal qualification does not automatically settle tax treatment. This is one of the recurring traps in financement hybride entreprise marocaine: the same instrument can be viewed differently by accountants, tax authorities, prudential regulators and investors.
Perpetual or undated bonds: legally possible, but not legally comfortable
Can a Moroccan company issue a perpetual bond? In practice, yes, particularly in a hybrid or regulatory capital context. But the answer is more nuanced than a simple yes. No general statutory provision in Moroccan company law gives a full dedicated regime for perpetual corporate bonds outside specific regulatory contexts. So legality is not the only question. The real question is whether the instrument is documented in a way that preserves its debt character while managing tax and investor protection concerns.
A perpetual instrument with discretionary coupons, deep subordination and no credible repayment expectation may look, economically, much closer to equity than debt. That may be precisely what the issuer wants for rating or prudential reasons. Yet the more “equity-like” the instrument becomes, the stronger the risk of fiscal recharacterization. If the tax administration concludes that the so-called interest is in reality a distribution linked to profits or a disguised capital contribution, deductibility may be challenged.
This is why, in Morocco, the legality of perpetual or deeply subordinated instruments is often less problematic than their qualification. The law is not expressly prohibitive. It is simply underdeveloped. And that underdevelopment creates uncertainty.
A practical comparison of the main Moroccan hybrid tools
Concretely, the instruments most often discussed under the umbrella of titres hybrides droit des sociétés maroc fall into a few families. The OCA is expressly regulated and leads to conversion into shares. The OBSA combines debt and a detachable equity option. The ORA settles in shares and therefore carries stronger quasi-equity traits. Subordinated bonds remain debt but rank behind senior creditors. Perpetual subordinated instruments move even closer to capital, especially where coupons are deferrable or non-cumulative.
For a Moroccan issuer, choosing among these tools depends on the objective. If the goal is future equity access, the OCA or OBSA may fit. If the goal is to strengthen the balance sheet without immediate dilution, subordinated or perpetual debt may be more attractive. If the issuer is a bank seeking regulatory capital treatment, then the prudential criteria imposed by Bank Al-Maghrib become the true reference point.
One field anecdote illustrates the point. In one transaction, the legal debate did not concern whether conversion was permitted in principle; it concerned how to adjust the conversion ratio after a bonus issue and whether a change-of-control event should trigger investor protection through early redemption or enhanced conversion rights. Moroccan law gave the framework, but not the answer. The documents had to build it from scratch. That is often how hybrid work is done in Morocco: not by relying on a complete legal regime, but by drafting around its silences.
3. The issuance process: from corporate approval to AMMC visa and settlement
Step 1: internal corporate decisions
The first stage of any émission d'obligations au Maroc procédure is internal. For ordinary debt, the board may in some cases act within the limits of the law and the articles of association. For hybrid instruments that may affect share capital, however, an extraordinary general meeting is usually unavoidable. This is especially true for OCA and OBSA structures, because they involve or may involve future issuance of shares.
Under Articles 109 and following of Law No. 17-95, the extraordinary general meeting must satisfy the required quorum and majority thresholds. The meeting must approve the principle of the issuance, its ceiling amount, its main terms, and where relevant delegate implementation powers to the board of directors or management board. Delegation is possible, but only within legally framed limits. In practice, the resolutions must be drafted with enough precision to reassure both AMMC and investors that the issuer is not improvising.
For unlisted companies, this stage often takes longer than expected. Shareholders may agree on the financing principle but hesitate over dilution, subordination, coupon deferral or call mechanics. It is common for legal counsel to rewrite the resolutions several times before the file is stable enough to move.
Step 2: preparing the AMMC file
Once the corporate approvals are in place, the issuer, its legal counsel, auditors and arranging bank prepare the dossier for the AMMC. Under Circular No. 03/19, this includes the prospectus, constitutional documents, board and shareholder resolutions, audited financial statements, legal opinions, auditor comfort letters or attestations where required, and the transaction documents. If the instrument is listed or intended for broad placement, disclosure standards tighten further.
In practice, preparation alone often takes 4 to 6 weeks for a relatively straightforward transaction and significantly longer for a structured hybrid. Why? Because hybridity multiplies disclosure issues. The prospectus must explain not just the coupon and maturity, but also ranking, optionality, loss absorption, tax assumptions, accounting treatment and event-driven mechanics.
For secured issues, there is another practical point often ignored in purely financial commentary: if the issuance is backed by security interests such as mortgages or pledges, Moroccan notarial practice may become relevant. Certain related acts, especially those involving real estate security or formal perfection requirements, may require the intervention of a Moroccan notary and registration steps with the relevant authorities, including the Conservation foncière where real property is involved.
Step 3: drafting the prospectus for a hybrid instrument
The prospectus is the legal and commercial backbone of the transaction. Under the AMMC framework, it must provide a fair, accurate and comprehensive picture of the issuer and the instrument. For a hybrid issue, the risk factors section is particularly sensitive. Generic drafting will not do. The AMMC expects specificity.
The prospectus should address, among other things, the possibility of coupon deferral, the subordinated ranking in insolvency, the conditions of conversion or write-down, the circumstances of any issuer call option, the impact on existing shareholders, the tax treatment, and the rights of the masse des obligataires. If the instrument is innovative, accounting treatment should also be explained, because investors often want to know whether the issuer will present the proceeds as debt, equity or a split instrument.
One recurring issue concerns step-up clauses. Issuers sometimes want the coupon to increase after a certain date if the instrument is not called. Economically, that is understandable. Legally and fiscally, however, an aggressive step-up may suggest that the issuer always intended repayment, which can weaken the quasi-equity narrative. This is exactly the kind of point that should be tested before the file is submitted.
Step 4: AMMC review in the real world
Officially, review timelines are framed by the regulatory process. In practice, issuers should assume a more flexible reality. For a hybrid issue, 6 to 12 weeks of AMMC review is a reasonable working range, but real-world delays can diverge from theoretical timelines by 30% to 50%, especially during active market periods or where the legal qualification of the instrument raises unusual questions. Any practitioner who has been through a few files knows this.
Questions from the AMMC often focus on clarity of the trigger events, investor information, accounting classification, and the consistency between the prospectus and the contractual terms. This is where many teams discover that what looked commercially elegant is not always regulator-friendly.
An anonymized example from practice says a lot. A hybrid issuance file was initially pushed back because the loss absorption clause described the consequences of a trigger event but did not define with enough precision the mechanism that would activate that trigger. The AMMC wanted more than broad language. It wanted operational certainty. The clause had to be rewritten, renegotiated with arrangers and aligned with international market wording. The result: roughly three additional months before the deal could move. These are not academic delays. They affect market windows, pricing and management credibility.
Step 5: placement and settlement through Maroclear
Once the visa is granted, the transaction moves to placement and settlement. Securities are generally dematerialized and processed through Maroclear, Morocco’s central securities depository. ISIN codification, central deposit arrangements and settlement mechanics must be coordinated in advance. On a listed or broadly placed issue, the operational timetable becomes tight very quickly.
Placement may be public or targeted at institutional investors, depending on the structure. In Morocco, institutional demand often comes from insurers, pension funds, UCITS and banks. Their legal and internal investment constraints matter. A deeply subordinated or innovative instrument may require more investor education and, in larger transactions, often a credit rating.
Step 6: post-issuance obligations
The story does not end at closing. The issuer remains subject to ongoing obligations, including disclosure duties, compliance with covenants, interactions with the representative of the bondholders’ masse, and, where listed, continuing market information requirements. If terms need to be amended later, the role of the masse des obligataires becomes central.
As for cost, there is no statutory minimum issue size, but market economics are clear. For a public issue, the transaction rarely makes financial sense below roughly MAD 200 million to MAD 300 million. For a complex hybrid, legal fees often range from MAD 150,000 to MAD 500,000, statutory auditor costs from MAD 50,000 to MAD 150,000, rating costs where relevant from MAD 200,000 to MAD 600,000, plus AMMC fees, Maroclear charges and arranger commissions. Overall issuance costs commonly land between 1% and 2.5% of the amount raised.
From the first internal decision to settlement, a realistic global timetable is often 4 to 8 months. Less in a very clean deal. More if the instrument is innovative, tax-sensitive, or prudentially regulated.
4. Tax treatment of hybrid bonds in Morocco: the issue many boards underestimate
Interest deductibility is the main attraction
For many issuers, the tax driver is simple: if the instrument is treated as debt, the coupon may in principle be deductible as a financial expense under Article 10 of the Moroccan General Tax Code. That is one of the reasons hybrid financing is attractive. It may strengthen the balance sheet while preserving the fiscal treatment of borrowing.
Article 10 of the CGI governs deductible charges, including financial expenses, subject to the applicable tax conditions and anti-abuse principles.
But that principle is not automatic. Deductibility depends on the instrument truly qualifying as debt from a tax standpoint, on the remuneration reflecting arm’s-length conditions where related parties are involved, and on the broader tax context of the issuer. If the instrument is too equity-like, the tax position becomes fragile.
The risk of recharacterization is very real
This is where hybrid structuring becomes delicate. A perpetual instrument, especially one with remuneration linked to profits, broad coupon discretion, no realistic maturity and deeply subordinated ranking, may be viewed by the tax administration as closer to a capital contribution than a genuine loan. If that happens, the so-called interest may be treated like a dividend or a non-deductible appropriation of profits.
Moroccan tax law does not provide a neat, dedicated set of tests for hybrid bonds. So practitioners must reason by analogy, substance and documentation. The prospectus, board reports, contractual terms and financial presentation should all support the intended qualification. If the issuer publicly markets the instrument as “equity-like” to rating agencies but claims pure debt treatment for tax purposes, the inconsistency can become uncomfortable.
Withholding tax on bond income
The income paid on fixed-income securities is also subject to Moroccan withholding tax rules. The exact rate depends on the status of the investor and the applicable tax provisions. In the user’s editorial brief, the practical reference point highlighted is Article 73 of the CGI, including the rates commonly associated with products of fixed-income investments. In cross-border cases, double tax treaties may reduce the effective burden for foreign investors, especially those based in France, Spain or Gulf jurisdictions, subject of course to treaty conditions and beneficial ownership requirements.
For international placements, tax gross-up clauses and treaty relief mechanics should be considered early. It is much easier to clarify withholding assumptions in the term sheet than to renegotiate them after pricing.
Specific issues for OCA and OBSA
Convertible and warrant-linked instruments create additional tax questions. During the life of an OCA, the coupon may be deductible as debt service, but conversion itself changes the legal nature of the investor’s position. For OBSA, the valuation and treatment of the detachable warrant can create accounting and tax complexity because the warrant has its own economic value distinct from the bond.
These are not impossible issues. They simply require anticipation. If the issuer is counting on a particular tax outcome to justify the economics of the transaction, that outcome should be stress-tested before launch.
Use the tax ruling mechanism when the structure is ambitious
One practical recommendation deserves emphasis: for an innovative hybrid issue, especially one that is perpetual, profit-linked or highly subordinated, it is prudent to consider a tax ruling request under Article 234 of the CGI. In Morocco, the use of advance tax rulings remains less systematic than in some jurisdictions, but the tool exists and can materially reduce uncertainty.
Article 234 of the CGI allows taxpayers to seek an advance position from the tax administration on the tax treatment of a contemplated operation.
Concretely, few issuers do this unless the transaction is large or unusual. Yet for a hybrid issue, where the line between debt and capital is precisely what is in question, a prior ruling can be worth far more than its procedural inconvenience.
5. Moroccan banks: a special case under Bank Al-Maghrib supervision
Prudential law adds a second legal layer
For banks and credit institutions, hybrid issuance is not governed only by company law and AMMC rules. It is also shaped by Law No. 103-12 relating to credit institutions and assimilated bodies and by the prudential framework of Bank Al-Maghrib. This changes the entire analysis, because the instrument may be designed not merely to raise funding, but to qualify as regulatory capital.
In this area, the reference text is Bank Al-Maghrib Circular No. 14/G/2013 on regulatory capital, which reflects Basel III logic in the Moroccan context. Here, legal drafting must satisfy prudential eligibility criteria: permanence, loss absorption, subordination, and in some cases broad discretion on distributions.
AT1 and Tier 2 instruments in Moroccan banking practice
Additional Tier 1 instruments are the clearest banking example of genuine hybrid capital. They are typically perpetual, subordinated, and capable of absorbing losses, whether through write-down, write-up mechanisms, or conversion features depending on the structure. Tier 2 instruments are also subordinated but generally have a more debt-like profile, including finite maturity.
For a Moroccan bank, issuing such instruments is therefore not just a matter of passing an AMMC visa. The bank must first ensure that Bank Al-Maghrib accepts the instrument for prudential purposes. In practice, this means a dual-track process: discussions with BAM on regulatory eligibility and with the AMMC on market disclosure. That duality often adds 2 to 4 months to the timetable.
This is one reason why banking hybrid issuances are often executed by institutions with strong in-house regulatory teams and external counsel familiar with both droit bancaire and droit boursier marocain obligations. One skill set without the other is not enough.
What about participative finance and sukuk?
Morocco’s participative finance framework also opens interesting perspectives. Under the evolution of Law No. 103-12 and the broader development of Islamic finance instruments, one can imagine structured sukuk with hybrid economic features. The market remains less developed than the conventional bond market, but the potential exists, especially for issuers seeking investor diversification and Sharia-compliant structuring alternatives.
For now, however, the legal engineering remains demanding. Hybrid sukuk would require alignment not only with AMMC and corporate law, but also with the relevant participative finance and Sharia governance standards. In other words, the concept is promising, but still underexploited in Morocco.
6. Practical constraints and drafting pitfalls: what market commentary often understates
Secondary market liquidity remains a structural weakness
A hybrid bond is only as attractive as the market willing to hold and trade it. In Morocco, one persistent challenge is the limited liquidity of the secondary bond market. Institutional investors often buy to hold. For ordinary debt, that is manageable. For complex hybrids, illiquidity affects pricing, investor appetite and the coupon the issuer must offer.
This matters because legal complexity has a cost. If the market is shallow, investors demand compensation for uncertainty. That is one reason why many hybrid issues remain the domain of large, well-known issuers rather than mid-sized corporates.
Covenants are more important than many issuers think
In hybrid instruments, covenant drafting is critical. Financial ratios, cross-default, negative pledge, restrictions on distributions, replacement capital language, change-of-control protections and event-of-default clauses all require careful calibration. Too much investor protection, and the instrument starts to look like ordinary debt rather than quasi-equity. Too little protection, and investors discount the issue or walk away.
There is no universal Moroccan template. Each deal must be negotiated against the issuer’s profile, sector and leverage. This is where experienced counsel adds value. The legal work is not to copy an international precedent, but to adapt it to Moroccan company law, AMMC expectations and local investor practice.
Ratings are not always legally mandatory, but often commercially necessary
A credit rating is not systematically required by law for every issuance. Yet for larger transactions, especially above roughly MAD 500 million, a rating becomes almost unavoidable in market practice. It helps institutional investors assess risk and may support pricing discipline. In Morocco, rating discussions often involve local and international methodologies, and for hybrids the analytical treatment can materially affect the issuer’s objectives.
If the agency grants partial equity credit, the issuer wins on leverage optics. But the more the instrument is marketed as equity-like to achieve that result, the more tax and legal consistency must be watched. Again, the same tension returns.
Step-up and call clauses need special care
Issuers love optionality. Investors price it. Regulators examine it. Tax authorities may question it. A call option allowing the issuer to redeem the instrument after a certain period is common, especially in perpetual hybrids. A step-up clause increasing the coupon if the bond is not called is also common. But these features are not neutral.
If the call is too economically compelling, the market may treat the instrument as de facto dated debt. If the step-up is too sharp, the tax administration may see the instrument as ordinary debt wearing a hybrid costume. There is no magic formula, but there is a drafting principle: call and step-up mechanics should support the commercial purpose of the instrument without undermining its intended legal and accounting profile.
The rights of the bondholders’ masse are central in a hybrid deal
Moroccan law recognizes the masse des obligataires as a legal collective body formed by the holders of a bond issue. The relevant regime appears in Articles 320 and following of Law No. 17-95. In hybrid transactions, the masse is particularly important because the instrument may include terms that are more likely to be amended over time: coupon deferral arrangements, covenant resets, subordination clarifications, maturity extensions or restructuring mechanics.
Articles 320 et seq. of Law No. 17-95 organize the legal regime of the bondholders’ masse, including its representation and powers in relation to the bond issue.
If the issuer later needs to renegotiate terms, the powers of the masse and its representatives become decisive. This should not be treated as boilerplate. In a hybrid issue, the governance of bondholder rights is part of the instrument’s legal safety net.
Common mistakes seen in Moroccan hybrid structuring
The same errors come back often. First, issuers underestimate how much time it takes to reconcile the board’s commercial wishes with AMMC-grade legal drafting. Second, the prospectus sometimes explains the economics but not the legal mechanics, especially for trigger events or subordination. Third, teams focus on corporate and securities law but leave tax analysis too late. Fourth, they forget the post-issuance life of the instrument: the masse, disclosure duties, covenant monitoring and operational settlement details.
And there is a final practical lesson. For cadre juridique émission obligataire Maroc, you need counsel who understands both company law and capital markets law. In Morocco, those disciplines still sometimes operate in silos. Hybrid instruments punish that separation. If the corporate approvals are perfect but the prospectus is weak, the file stalls. If the market documentation is elegant but the tax logic is inconsistent, the structure remains exposed. The work must be integrated.
7. Where Moroccan law may evolve next
The legal gap is now visible
Moroccan law has made genuine progress in securities regulation and market supervision, but on hybrid instruments it still shows a notable lag behind European standards. There is no dedicated statutory definition of hybrid bonds, no detailed legislative framework for loss absorption clauses outside prudential contexts, and no specific tax regime that clearly addresses the debt-equity boundary for sophisticated instruments.
That does not make hybrid issuance impossible. It simply means that legal certainty depends too much on drafting and regulatory dialogue. For large issuers, this is manageable. For smaller ones, it can be a deterrent.
Possible reform directions
Market participants have for some time expected further modernization of Moroccan capital markets law, including under the umbrella of AMMC reform efforts and broader updates to company law. The timetable remains uncertain, but the need is obvious. At minimum, the law could benefit from clearer rules on hybrid securities, investor rights in structured debt instruments, and the treatment of perpetual and subordinated instruments outside the banking sector.
Comparative inspiration exists. French law, for example, provides a more articulated framework on securities giving access to capital under the Code de commerce, including Articles L.228-91 and following. Moroccan law need not copy that model, but it can certainly learn from systems that provide more statutory guidance and less improvisation.
Best practice until the law catches up
Until a clearer framework emerges, the best protection is still robust documentation. The prospectus, issuance agreement, corporate resolutions, tax memoranda and accounting analysis should be aligned and detailed. Where the law is silent, the documents must speak. That is not ideal from a legal certainty perspective, but it is the current reality of financement hybride entreprise marocaine.
For practitioners, this also creates an opportunity. Hybrid debt remains a niche, but it is a growing one. Issuers that navigate it successfully will usually do so with advisers capable of combining local legal knowledge with cross-border capital markets practice.
Conclusion: a powerful financing tool, still partly handcrafted under Moroccan law
What to remember
Hybrid bond issuance in Morocco is legally feasible and increasingly relevant. But it remains built on a patchwork: Law No. 17-95 for the corporate and bond law base, Law No. 44-12 for public offering rules, AMMC Circular No. 03/19 for disclosure, the CGI for tax treatment, and Bank Al-Maghrib rules for banks. There is no autonomous legal regime for hybrid bonds. That is the first reality.
The second reality is risk. The three major exposures are clear: legal qualification risk, tax recharacterization risk, and execution risk during the AMMC process. The third reality is practical: timelines are often longer than internal teams expect, especially where the structure is novel or the documentation leaves room for interpretation.
A practical checklist for issuers
Before launching a Moroccan hybrid issue, an issuer should at least verify ten points. First, confirm the issuing vehicle is a suitable SA. Second, identify whether the structure is an OCA, OBSA, subordinated note, perpetual note or another variant. Third, secure the right corporate approvals under Law No. 17-95. Fourth, align accounting, legal and tax analysis before marketing begins. Fifth, prepare a prospectus that explains the instrument’s unusual features with precision. Sixth, anticipate AMMC questions rather than reacting to them. Seventh, structure the role of the masse des obligataires carefully. Eighth, assess whether a rating is commercially necessary. Ninth, review withholding tax and deductibility issues, and consider a ruling under Article 234 CGI if needed. Tenth, for banks, engage Bank Al-Maghrib early.
The OCP transaction has shown that hybrid debt is no longer a foreign concept imported into Morocco. It is now part of the financing landscape. But for most issuers, it remains a sophisticated product that should not be approached with standard bond templates.
If you are considering a transaction of this kind, working with counsel experienced in both Moroccan capital markets law and company law is not a luxury. It is usually the difference between a file that passes in good order and one that loses a market window. For related legal support, see also lawyers specialized in Moroccan capital markets law, business lawyers in Casablanca, corporate lawyers in Rabat, tax lawyers for companies in Morocco, banking and finance lawyers in Morocco, and our related practical guide on bond issuance in Morocco. Hybrid financing can be an excellent tool. In Moroccan law, though, it still rewards the careful more than the ambitious.
