Shares. Shares in a company are treated as the personal property of shareholder(s). The capital of a joint-stock company (“JSC”) (both open JSC and close JSC) shall be divided into shares with an equal nominal value. The founders of a JSC shall pay the charter capital in full before the joint stock company is registered. Upon the establishment of a JSC, all of its shares shall be distributed among its founders. The share capital of a limited liability company (“LLC”) is divided into different participatory interest and cannot be represented by negotiable instruments.
Minimum Authorized Capital. Minimum capital requirement is 4000 AZN for OJSC, 2000 AZN for CJSC. Except for these requirements, there is no minimum capital requirement for other companies (i.e. LLCs) subject to the specific regulations. Thus, there is specific capital requirement for companies conducting business in specific areas of activity such as banks and other credit organizations, insurance companies, etc.
Transfer of Shares.
The shareholders of a CJSC have a pre-emptive right to acquire shares sold by other shareholders of the company. Where none of the shareholders exercises its pre-emptive right within the term specified in the company’s charter but not later than thirty days after the date of announcement of the share sale, the company may purchase the shares at a price agreed with the selling shareholder within the following thirty days. Where the company refuses to purchase shares or where the parties cannot agree on a price for the shares, the shares may be sold to a third party.
Under the Law on Securities Market of the Republic of Azerbaijan, acquisition of listed (publicly traded) shares of OJSC may only take place at a stock exchange through investment companies.
Existing shareholders of OJSC are entitled to have pre-emptive right with regard to publicly traded shares unless otherwise stipulated in a decision of shareholders approving placement of new shares.
Transfer of non-listed shares can only be carried out through investment companies or upon a share transfer agreement to be certified by a notary public.
Under the Civil Code, a participant in LLC is entitled to sell or otherwise alienate its participatory interest in the charter capital of the company or any portion thereof to one or more participants in such company. Alienation of participatory interest to third parties is permitted. Participants in LLC shall have a pre-emptive right to purchase a participant’s participatory interest proportionally to their own participatory interests. If non-selling participants in the company fail to exercise such right within a month from the date notification thereof or within other term specified by the company’s charter or the shareholders’ agreement, the selling participant will be entitled to alienate its share to a third party.
An agreement for the transfer of participatory interests in LLC must be executed before a notary public. After the agreement is signed, an amendment should be made to the company charter to indicate the buyer as a new shareholder of the company and such amendment must be registered with the state registry of legal entities.
This article was published by the corporate law experts of Baku Attorneys & Consultants, an Azerbaijani law firm, which is strongly specialized in and rendering various services on corporate law to foreign and local business in Azerbaijan. Please, feel free to reach us via www.batco.az in case you have further questions or need advice on establishment, incorporation, merger and acquisition, liquidation or other aspects on Azerbaijani corporate law, as well as, provision of legal services on business, migration, employment, contracts and other related matters.