Major Changes on Corporate Law in Azerbaijan
Changes to the Civil Code of the Republic of Azerbaijan
On 25 April 2017, the President of the Republic of Azerbaijan signed a decree approving the Law on Amendments to the Civil Code of the Republic of Azerbaijan (the Amendments to the Civil Code).
The Amendments to the Civil Code are designed to regulate various matters in relation to corporate legislation in the Republic of Azerbaijan.
Firstly, the Amendments to the Civil Code incorporate "Public Interest Entities" into the Civil Code, in accordance with the Law on Accounting of the Republic of Azerbaijan.
Additionally, the Amendments to the Civil Code reflect some of the following key changes and additions:
- Subsidiaries and dependent companies cannot purchase the shares (participatory interests) of their parent companies.
- Shareholders (participants) of a limited liability company or a joint stock company shall have the right to request changes or additions in the agenda of the general meeting.
- The chair of the board of directors in an LLC shall call and chair board meetings at least once per quarter. The procedure of decision-making and other issues related to board meetings is determined in the Civil Code (eg, simple majority requirement).
- The board of directors of LLCs and JSCs having more than 50 participants (shareholders) shall establish an audit committee in order to prepare and implement an internal audit policy and organize the audit control. The audit committee is subordinated to the board of directors of the company. The rules for the establishment of an audit committee, its members and activities are determined by the law and the company's charter.
- The Amendments to the Civil Code also set out rules in relation to the implementation of internal audits and requirements for the members of an audit committee.
- Apart from the annual accounts and balance sheet, JSCs shall also publish additional information annually, such as financial performance during the reporting period, attracted funds, profitability of share capital and dividend policy, size and source of investments, turnover and profitability of the company's securities.
- A JSC's shareholders owning simple (ordinary) or other voting shares shall have a preferential right to purchase additional shares issued by the company in the manner prescribed by the charter.
- Shareholders holding ordinary shares in JSCs are also given additional rights:
- to require the members of the executive body and board of directors to be held liable due to their negligence and for damages they cause intentionally;
- to participate in the sale of company shares; and
- to apply to a court or other competent authority for compensation of damages caused to the company or shareholders and payment of the related costs.
Changes to Law On State Registration and State Registry of Legal Entities
On 14 April 2017, the President of the Republic of Azerbaijan signed a decree approving amendments to the Law On State Registration and State Registry of Legal Entities dated 12 December 2003 (the Amendments to the Registration Law), which relates to the registration of public legal entities.
The main purpose of the Amendments to the Registration Law is to set the rules in relation to the state registration and state registry of public legal entities. Thus, according to the Amendments to the Registration Law, public legal entities are registered by the Ministry of Taxes of the Republic of Azerbaijan (the Ministry of Taxes) within two business days on the basis of an authorized person's application upon the entry into force of the act of the relevant executive body or municipality on approval of the charter of public legal entity.
Moreover, the Amendments to the Registration Law regulate the changes to the registration information of public legal entities. Unlike other legal entities or branches and representative offices, the following information on legal entities is obtained and registered by the Ministry of Taxes within five days:
- changes made to the constituent documents and registered facts as per the acts of the relevant executive authority (such information is obtained on the basis of such respective acts, according to which such changes come into force)
- changes to the identity card information of registered persons, which is obtained online from the relevant executive authority
In addition to the above, the Amendments to the Registration Law determine the following necessary information on public legal entities, which must be included into the state registry:
- amount of charter fond (capital)
- amount of property contributed by the founder
- information on board of directors, if established