The new Companies Law was issued by Royal Decree No. (M/132), introducing fundamental changes to how companies are formed, managed, and held liable. The biggest mistake many business owners make is treating the new law as a minor revision of the old one — when in reality it has redrawn the rules of the game in several sensitive areas. Most importantly: the law granted existing companies a period not exceeding two years from its effective date to bring their status into compliance. Here are nine key provisions you need to know before it's too late.
1. New Company Forms
The law limits company forms to five: general partnership, limited partnership, joint stock company, the simplified joint stock company, and the limited liability company. The notable addition here is the simplified joint stock company — a flexible form designed specifically to suit startups, investment funds, and ventures needing flexibility in capital structuring without the full complexity of a traditional joint stock company.
Practical rule: if you're founding a startup or planning investment rounds, study the simplified joint stock company carefully before defaulting to a familiar form.
2. The Single-Person Company Is No Longer a Rare Exception
The law expressly permits forming a company by the sole will of a single person. This means a solo entrepreneur can establish an independent legal entity with a separate financial liability without needing a nominal partner — a once-common practice that later became a source of disputes. The law also permits establishing non-profit companies within a regulated framework.
3. The Trade Name Is Now More Flexible
The trade name is no longer as restricted as before. It can be:
- Derived from the company's purpose.
- A distinctive, creative name.
- The name of one or more current or former partners or shareholders.
But note: if the name includes a former partner's or shareholder's name, you must obtain their consent — or their heirs' consent if they have passed away. And the name must always be accompanied by an indication of the company's form.
4. Legal Personality Is Tied to Registration, Not the Contract
One of the most practical points: a company acquires its legal personality after its registration with the Commercial Register, not merely upon signing the contract. As long as the company is in the formation stage, anyone acting on its behalf before registration is complete may bear liability personally, in all their assets, and jointly toward third parties if the formation procedures are not completed.
Why does this matter to you?
Do not sign major contracts "in the company's name" before its registration with the Commercial Register is complete. Until then, it is you — not the entity — who may bear the obligation personally.
5. Partners' Agreement and Family Charter: A Formal Protection Tool
One of the law's most notable introductions is the express recognition of the partners' agreement and the family charter as binding instruments. Partners may enter into an agreement regulating their relationship with one another or with the company, including the mechanism for heirs to join. For family businesses specifically, the family charter allows regulation of:
- Family ownership and its governance.
- The family member employment policy.
- Profit distribution and the disposal of shares or quotas.
- A dispute resolution mechanism before disagreements escalate into conflicts.
This charter may form part of the constitutional contract or the bylaws, provided it does not contradict them or the law.
6. Duties of Care and Loyalty on Directors
The law expressly imposes on the company's manager and board member a duty of care and loyalty, the most prominent elements of which include:
- Exercising functions within the powers granted.
- Acting in the company's interest and avoiding conflicts of interest.
- Disclosing any direct or indirect interest in the company's business and contracts.
- Not exploiting the company's assets, information, or investment opportunities for personal benefit.
- Not accepting any benefit from third parties connected to their role in the company.
These are not theoretical principles: breaching them opens the door to liability and claims for compensation — and even to annulling contracts concluded under an unauthorized conflict of interest.
7. Directors' Liability Is Now Clearer and Stricter
The manager and board members are jointly liable to compensate the company, partners, shareholders, or third parties for harm resulting from breaching the law, the constitutional contract, or the bylaws — or from their errors, negligence, and shortcomings. Any provision exempting them from this liability is deemed null and void.
That said, the law provides a balance: a dissenting member who recorded their objection expressly in the meeting minutes is not held liable for a decision taken by majority.
A practical tip for board members
If you object to a decision you consider unlawful or harmful, an oral objection is not enough. Request that your objection be expressly recorded in the meeting minutes — this is what legally protects you from joint liability.
8. Protecting Minority Partners Through the Liability Claim
The law grants one or more partners or shareholders representing five percent of the capital — or a lower percentage if the constitutional contract so provides — the right to file the liability claim reserved to the company if the company fails to file it, subject to conditions: the objective must be the company's interest, the claim must be on a valid basis, and the claimant must act in good faith. Management must be notified of the intention to file at least fourteen days in advance.
9. The Compliance Period: Don't Delay
The law did not leave existing companies without a grace period, but it set it clearly: a maximum of two years from the effective date to bring their status into compliance. The Ministry of Commerce and the Capital Market Authority — each within its scope — will determine which provisions companies are subject to during this period.
Delay is not in your interest: reviewing your constitutional contract or bylaws early lets you incorporate the new protection tools (partners' agreement, family charter, allocation of powers) calmly rather than rushing near the deadline.
A Quick Checklist for Your Company
- Is your current company form still the most suitable, or would a new form (such as the simplified joint stock company) serve you better?
- Is your constitutional contract or bylaws compliant with the new law's provisions?
- Do you have a written, binding partners' agreement or family charter?
- Are managers' powers, duties, and the conflict-of-interest disclosure mechanism clearly documented?
- Do your meeting minutes properly record objections and voting?
- Have you started the countdown on the compliance period?
Conclusion
The new Companies Law is not merely a cosmetic update — it is a rebuilding of the rules of governance, liability, and formation flexibility. Companies that engage with it early as an opportunity to put their internal house in order will be in a stronger position than those who wait for the deadline to approach. The golden rule: don't wait until the final year of the period to review your company's documents — review them now, while you can do so calmly.
How does LEXIUM help?
We review your company's documents (constitutional contract or bylaws) in light of the new Companies Law, identify gaps and risks for you, and draft what is needed — whether partners' agreements, family charters, or amendments — to bring your status into compliance safely and within the statutory period.
Disclaimer: This article is for general informational purposes only and does not constitute legal advice. See our full disclaimer.