Civil Code of the Republic of Azerbaijan

THE CIVIL CODE OF THE REPUBLIC OF AZERBAIJAN
(Approved by the Law of the Republic of Azerbaijan No. 779-IQ of 28 December 1999) GENERAL
Section 1
INTRODUCTION
Chapter 1
Civil Law Legislation
Article 1. Goals and objectives of the Civil Code of the Republic of Azerbaijan
1.1. The purpose of this Code shall be to secure the freedom of civil relationships based
upon the equality of the parties without prejudice to affecting the rights of other persons.
1.2. This Code shall:
regulate property and personal non-property relationships of civil law legislation subjects. protect the rights and lawful interests of civil law legislation subjects. protect the honor, dignity, business reputation, private and family life, personal security of individuals. secure civil relationships. support entrepreneurial activity. establish conditions for the development of a free market economy.
Article 2. Civil legislation of the Republic of Azerbaijan
2.1. The civil legislation of the Republic of Azerbaijan shall base upon the Constitution of
the Republic of Azerbaijan and consist of this Code, other laws and other normative legal acts adopted on the basis of such laws, determining the norms of civil law.
2.2. The civil legislation shall determine the legal status of subjects of civil legal
relationships, the basis for establishment and the manner of exercising rights of ownership and other property rights, and regulate contractual and other obligatory relationships as well as other the property and related personal non-property rights related to them.
2.3. Family, labor relationships, relationships concerning the use of natural resources and
environmental protection, and copyright and related rights shall be regulated by civil law and other legal acts, except as otherwise provided stipulated by family, labor, land, environmental, copyright and other special legislation.
2.4. Relationships concerning the exercise and protection of inalienable human rights and
freedoms and other intangible privileges shall be regulated by civil law and other legal acts, provided that the essence of such relationships does not require otherwise.

2.5. The civil legislation and other legal acts shall not apply to property relationships based
upon administrative or any other power-based subordination of one party to another, as well as tax, financial, competitive and administrative relationships, except as otherwise provided stipulated by law. 2.5-1. Civil relations in the Alat free economic zone shall be regulated in accordance with the requirements of the Law of the Republic of Azerbaijan ‘on the Alat free economic zone.’
2.6. Legal acts adopted in furtherance of laws shall regulate civil relationships only where
to the extent that they comply with the provisions of this Code and are not contradictory to them.
Article 3. Civil legislation and international legal acts
3.1. Interstate treaties to which the Republic of Azerbaijan is a party shall be directly
applicable to civil legal relations regulated by this Code, except in cases where the international treaty requires the adoption of a domestic normative legal act for its implementation
3.2. Where international treaties of the Republic of Azerbaijan establish norms, different
from the norms established by the civil legislation, the provisions of the international treaty shall apply.
Article 4. Objects of civil legal relationships
Material and non-material goods which have a property or non-property value and are not excluded from the scope of civil legal relationships may be objects of civil legal relationships.
Article 5. Subjects of civil legal relationships
5.1. Any individual or legal entity, whether or not involved in entrepreneurial activity, may
be the subject of civil legal relationships.
5.2. Except as otherwise provided by law, the civil legal relationships of public authorities
and bodies of local self-administration with other persons and entities shall be also regulated by the civil legislation.
5.3. The subjects of civil legal relationships shall be obliged to exercise their rights and fulfil
their obligations in good faith.
Article 6. Principles of civil legislation
6.1. The following shall be the principles of civil legislation:
6.1.1. equality of subjects of civil legislation.
6.1.2. free will of subjects of civil legislation.
6.1.3. property independence of participants of civil relationships.
6.1.4. inviolability of property.
6.1.5. freedom of contracts.
6.1.6. inadmissibility of arbitrary interference in personal and family life.
6.1.7. establishment of conditions for unrestricted exercise of civil rights.
6.1.8. securing of the restoration of breached rights.

6.1.9. protection of civil rights by courts.
6.2. Individuals and legal entities shall acquire and exercise their civil rights by their own
will and for their own interest. They shall be free to establish rights and obligations by contract and determine terms and conditions of contracts, provided that such terms and conditions are not contrary to law.
6.3. Civil rights may be restricted by law only where necessary for the protection of state
and public security, civil order, the health and morals of society, rights and freedoms, and the dignity and good name of other persons.
6.4. Goods, services, and money shall freely circulate in the territory of the Republic of
Azerbaijan. The circulation of goods and services may be restricted by the law, where it is necessary to provide security, protect lives and health of people, and protect nature and cultural values.
Article 7. Effect of civil legislation over time
7.1. The provisions of civil legislation, except those provided in Article 149, Chapter VII of
the Constitution of the Republic of Azerbaijan, shall not have retroactive effect and shall only apply to relationships created after the enactment of such law.
7.2. In cases expressly provided for by law, civil legislation may have retroactive effect.
7.3. Civil legislation may not have retroactive effect where it causes harm to subjects of civil
legislation or worsens their position.
Article 8. Territorial application of civil legislation
8.1. Civil legislation shall be effective throughout the territory of the Republic of Azerbaijan
without exception.
8.2. Rights specified by civil legislation shall be freely exercised and obligatorily protected
throughout the Republic of Azerbaijan.
Article 9. Application of civil legislation to persons
9.1. Civil legislation shall apply to all individuals and legal entities, which carry out
activities throughout the Republic of Azerbaijan.
9.2. Except as otherwise provided by law, the rules established by civil legislation shall
apply to relationships with foreign individuals, stateless persons and foreign legal entities.
9.3. Ignorance or misunderstanding of the law shall not be a ground for not applying the
law or for relief from a specified liability.
Article 10. Business practices
10.1. Any rule of behavior not specified by law, which is established and widely applied in
an area of entrepreneurial activity shall be treated as a business practice, whether it is included into any act.
10.2. business practices which are contrary to law or contract shall not be applied.

Article 11. Application of civil legislation by analogy
11.1. Where civil legal relationships are not specifically regulated by civil legislation or by
agreement of the parties and no applicable business practice exists, the norms of civil law regulating similar relationships shall apply, provided, however, that it does not contradict the essence of such relationships (legal analogy).
11.2. In the absence of any norm of civil legislation regulating a similar type of relationship,
rights and obligations of parties shall be regulated under the principles of civil legislation (legal analogy). Where a legal analogy is applied, the requirements of fairness, good faith and morals shall be taken into consideration.
11.3. deleted.
11.4. The provisions of civil legislation, which regulate special relationships (exceptional
norms) may not be applied by analogy.
11.5. The absence or the lack of clarity of a legal norm regulating a civil legal relationship
may not serve as the basis for a court to refuse to consider a civil case.
Article 12. Independence of civil rights from political rights
12.1. The exercise of civil rights shall not depend upon political rights established by the
Constitution or other laws of the Republic of Azerbaijan.
12.2. Subjects of civil legal relationships may take actions, not prohibited by law and
actions not specifically provided for by law.
Article 13. Entrepreneurial activity
Entrepreneurial activity shall be an activity carried out independently by a person, whose main purpose is to generate profit (income in the case of individual entrepreneurs) from the use of property, production and/or sale of goods, performance of works, or supply of services
Chapter 2
Civil rights and obligations and their protection
Article 14. Emergence of civil rights and obligations
14.1. Civil rights and obligations arise from the grounds provided for in civil legislation, as
well as from acts that give rise to civil rights and obligations by individuals and legal entities under the principles of civil law, even if not explicitly provided for by legislation
14.2. The following shall constitute the basis for emergence of civil rights and obligations:
14.2.1. Contracts provided for by legislation (except employment agreements) and other
transactions, as well as contracts and other legal transactions not expressly provided for by legislation but not contrary to it.
14.2.2. Acts of public authorities and local self-administration bodies specified by law as a
basis for the emergence of civil rights and obligations.
14.2.3. Court acts establishing civil rights and obligations.

14.2.4. Acquisition of property under the terms specified by law.
14.2.5. Creation of works of science, literature, culture, art, inventions and other intellectual
property/products of intellectual activity.
14.2.6. Causing harm to another person.
14.2.7. Unjustified enrichment.
14.2.8. Other actions of individuals and legal entities.
14.2.9. An event, which by law causes civil legal consequences.
14.3. Rights of ownership, subject to state registration, unless otherwise stipulated under
legislation on formation of civil rights, shall arise from the moment of registration.
Article 15. Exercise of civil rights
15.1. deleted.
15.2. The failure to exercise civil rights by individuals and legal entities shall not terminate
such rights except as stipulated by law.
Article 16. Restriction on the exercise of civil rights
16.1. Actions of individuals and legal entities committed exclusively for the purpose of
causing harm to another person or to violate any other right shall be prohibited.
16.2. deleted.
Article 17. Protection of civil rights
17.1. All public authorities, local self-administration bodies, political parties, public
associations, trade unions, and individuals and legal entities shall be obligated to respect civil rights and provide assistance in their protection.
17.2. deleted.
17.3. deleted.
Article 18. Ways of protection of civil rights
Civil rights shall be protected under the procedure specified by legislation in a manner, which does not violate the law, public order and morals.
Article 19. Invalidation of an act of a public authority or a local self-administration body
An act of a public authority or a local şelf-administration body of a non-normative nature, incompliant with civil legislation, which violates the rights and interests of individuals and legal entities protected by law, may be declared invalid by a court.
Article 20. Self-protection of civil rights – deleted.
Article 21. Compensation for damages

21.1. A person who has the right to claim compensation for damages may demand full
reimbursement for the damage caused to him/her, provided that the law or the contract does not stipulate that compensation should be paid in a lesser amount.
21.2. Damages shall be defined as the expenses, incurred or to be incurred by the person
whose right has been violated in order to restore the violated right, the loss of or damage to his/her property (actual damage), as well as the income that the person would have obtained under normal civil turnover conditions if his/her right had not been violated (lost profit).
21.3. When determining the amount of a claim for compensation for damages, the extent to
which the behavior of the injured party, its employee, and, in cases provided for by legislation, third parties contributed to the occurrence and increase of the damage should be considered.
Article 22. Compensation for damages by public authorities and local şelf￾administration bodies– deleted.
Article 23. Protection of honor, dignity and business reputation
23.1. An individual may demand in court the retraction of information that tarnishes
his/her honor, dignity, or business reputation, or violates the privacy of his/her personal and family life or personal and family inviolability, provided that the person who disseminated such information does not prove its truthfulness. The same rule shall apply if actual information is published incompletely and, as a result, affects the person’s honor, dignity, or business reputation. At the request of interested parties, protection of an individual’s honor and dignity may also be enforced after his/her death.
23.2. If information harming the honor, dignity or business reputation or disclosing a secret
of private and family life of an individual was disseminated in the media, the information shall be retracted in the same media. If such information is included in an official document, such document shall be changed and interested persons shall be notified of such a change. In other cases, the procedure for retraction shall be determined by the court.
23.3. Where the media published (disseminated) information, which violates an individual’s
rights and interests protected by law, such person shall have the right to publish (disseminate) his/her reply in the same media.
23.4. An individual, whose honor, dignity, or business reputation has been tarnished by
disseminated information, shall have the right not only to demand the retraction of such information but also to claim compensation for the damage caused by its dissemination.
23.5. Where it is impossible to identify the person who disseminated information that
tarnishes an individual’s honor, dignity, or business reputation, the person about whom such information was disseminated shall have the discretion to demand that the information be recognized as false.
23.6. The rules of this article regarding the protection of an individual’s business reputation
shall, accordingly, also apply to the protection of a legal entity’s business reputation.

Section 2
PERSONS
Chapter 3
Individuals
Article 24. Definition of individual
24.1. An individual is a natural person involved in legal relationships on his/her own
behalf.
24.2. All citizens of the Republic of Azerbaijan, citizens of foreign countries and stateless
persons who permanently live or temporarily reside in the territory of the Republic of Azerbaijan shall be individuals in the Republic of Azerbaijan.
Article 25. Civil right capacity of an individual
25.1. The civil right capacity of an individual is the ability of a person to possess civil rights
and be liable for civil obligations. Civil right capacity is recognized equally for all individuals.
25.2. The legal capacity of an individual shall arise at the moment of birth and terminate
upon his/her death. The cessation of brain activity is considered the moment of death.
25.3. The right to inherit shall arise from the moment of conception. however, the exercise
of this right shall be possible only upon individual’s birth.
25.4. An individual may not be deprived of his/her legal capacity.
Article 26. Right to a name
26.1. Every individual shall have the right to a name consisting of first, last and middle
names.
26.2. An individual shall acquire and exercise rights and obligations under his own name.
26.3. An individual may use a pseudonym (fictitious name) where and under the
procedure provided by law.
26.4. An individual shall be entitled to change his/her name under the procedure
established by law. A name change by individual shall not terminate or change his/her rights and obligations acquired under the previous name. An individual shall be obligated to notify his/her debtors and creditors of a change of his/her name and shall bear the risk for the consequences of the failure to provide information about a name change to such parties. Upon a name change, an individual shall be entitled to amend documents legalized in his/her previous name, at his/her own expense.
26.5. The name given to an individual at birth and a name change shall be subject to
registration under the procedure specified for the registry of civil status acts.
26.6. The acquisition of rights and obligations under the name of another individual shall
be prohibited.

26.7. Compensation for damage caused to an individual as a result of the unlawful use of
his/her name shall be paid in accordance with this Code
26.8. If an individual’s name is distorted or used in ways or forms that infringe upon
his/her honor, dignity, or business reputation, the rules provided for in Article 23 of this Code shall apply.
Article 27. Residence of an individual
27.1. The place where an individual usually resides shall be considered his/her place of
residence. A person may have multiple places of residence.
27.2. The residence of an individual under the age of 14 is the residence of his/her parents,
provided that he/she has not been deprived of parental rights, in which case the place of residence of an individual under guardianship is the residence of the guardian.
27.3. If a person leaves his/her place of residence for a certain period for whatever reason,
he/she shall not lose his/her place of residence.
Article 28. Civil right capacity of an individual
28.1. The civil right capacity of an individual is the ability to obtain and exercise civil rights
and to establish and perform civil obligations by his/her own actions.
28.2. The full civil legal capacity of an individual shall begin in its full upon his/her
reaching the adult age, i.e., upon reaching the age of 18.
28.3. Minors under the age of 7 (infants) shall not have legal capacity. Minors between the
ages of 7 and 18 shall have limited legal capacity.
28.4. A minor who has reached the age of sixteen but has not yet attained full legal capacity
may be considered fully capable if he/she is employed under a labor agreement or, at the consent of his/her parents, adoptive parents, or guardian, engage in entrepreneurial activity. Based on the consent of both parents, adoptive parents, or guardian, a decision by the guardianship and trusteeship authority, and if such consent is absent, a court decision, the minor may be recognized as fully legally capable (emancipation).
28.5. Parents, adoptive parents and guardians shall not be liable for the obligations
liabilities of a minor who has been declared as having full legal capacity, including liabilities for having caused damages.
28.6. Where the law permits marriage before the age of 18, an individual under the age of
18 acquires full legal capacity upon marriage. Legal capacity acquired upon entering into marriage continues in full even if divorce occurs before the age of 18.
28.7. Where a marriage is declared invalid, a court may terminate the full legal capacity of a
minor husband (or wife)spouse effective from the moment of the court’s order.
28.8. A court may declare individuals who suffer from mental retardation or mental illness
as lacking legal capacity, and therefore unable to understand the nature of their actions or to manage them. A guardianship shall be established for such persons. Transactions on behalf of an individual declared as lacking legal capacity shall be carried out by their guardian. Transactions made by a person considered incapable may only be deemed valid with the subsequent consent of the guardian.

28.9. Upon recovery or substantial improvement of the health of a person previously
declared as not having legal capacity, a court shall declare such person as having legal capacity. The guardianship established for such person shall be terminated by court order.
Article 29. Legal capacity of minors under the age of 14
29.1. Only parents, adoptive parents or guardians shall be entitled to engage in transactions
on behalf of minors under the age of 14, except for transactions specified by Article 29.2 of this Code. Deal made by such non-adult shall be considered valid if approved by his/her parents, adopted parents or guardians.
29.2. A person between the ages of 7 and 14 shall have the right to independently engage in
the following transactions:
29.2.1. minor household transactions.
29.2.2. transactions aimed at obtaining benefits free of charge, for which neither
notarization nor state registration of the rights arising therefrom is required.
29.2.3. using funds provided by a legal representative or, upon the consent of the latter,
provided by any third party for a particular purpose or free use.
29.3. For transactions entered into by a minor under the age of fourteen, including those
concluded independently, property liability shall be borne by the parents, adoptive parents, or guardian, unless they prove that the breach of obligation did not occur through their fault. In accordance with the law, these persons shall also be liable for the damage caused by the minor.
Article 30. Legal capacity of minors between the age of 14 and 18
30.1. Minors between the ages of 14 and 18, except as provided in Article 30.2 of this Code,
shall conclude transactions with the written consent of their legal representatives — their parents, adoptive parents, or guardians. A transaction entered into by such a minor shall also be considered valid if subsequently approved by the parents, adoptive parents, or guardian.
30.2. Minors between the ages of 14 and 18 shall have the right, independently and without
the consent of their parents, adoptive parents, or guardians, to:
30.2.1. dispose of their earnings, scholarships, and other income.
30.2.2. exercise the rights of an author to a work of science, literature or art, an invention, or
another result of intellectual activity protected by law.
30.2.3. deleted.
30.2.4. conclude minor household transactions and other transactions provided for in
Article 29-2 of this Code. Minors who have reached the age of 16 shall also have the right to
become members of a cooperative.
30.3. Minors between the ages of 14 and 18 shall be independently liable for transactions
concluded in accordance with Articles 30.1 and 30.2 of this Code. Minors between the ages of 14 and 18 shall be liable for damages caused by them in accordance with this Code.
30.4. Where sufficient grounds exist, the court may, upon the petition of the parents,
adoptive parents, guardian, or the guardianship and trusteeship authority, restrict or revoke the right of a minor between the ages of 14 and 18 (if the minor has not acquired full legal capacity) to independently dispose of their earnings, scholarships, or other income.

Article 31. Prohibition of depriving an individual of legal capacity and capacity to act,
and of restricting these capacities
31.1. An individual may not be deprived of his/her legal capacity in any circumstances.
His/her legal capacity and capability may be limited only in the cases and under the procedures provided by law.
31.2. Failure to comply with the conditions and procedures established by law for
restricting an individual's capacity to act, or his/her right to engage in entrepreneurial or other activities, shall invalidate the act of the public authority or other body imposing such restriction.
31.3. Transactions by which an individual wholly or partially renounces his/her legal
capacity or capacity to act, or which are aimed at restricting his/her legal capacity or capacity to act, shall be deemed null and void.
Article 32. Restriction of an individual's capacity to act
32.1. The capacity to act of an individual who, as a result of abuse of alcoholic beverages,
narcotic drugs, or psychotropic substances, or engagement in gambling, places his/her family in a difficult financial situation, may be restricted by a court. Guardianship shall be appointed for such a person. He/she shall have the right to conclude minor household transactions. He/she may enter into other transactions and receive and dispose of their earnings, pension, and other income only with the consent of their guardian. However, such a person shall bear property liability independently for the transactions he/she concludes and for any damage he/she causes. In cases where the consent of the guardian is required, a transaction concluded without such consent may subsequently be validated by the guardian’s written approval.
32.2. When grounds for restricting an individual's capacity to act are removed, the court
shall lift the restriction. Guardianship established over the individual shall be terminated based on a court decision.
Article 33. Guardianship and trusteeship
33.1. Guardianship and trusteeship shall be established to protect the rights and interests of
individuals who lack capacity to act or have limited capacity to act. Guardianship and trusteeship over minors shall also be established for the purpose of their upbringing. The rights and duties of guardians and trustees in this regard shall determined by the Family Code of the Republic of Azerbaijan.
33.2. Guardians and trustees shall protect the rights and interests of those under their
guardianship in all relations, including in court, without the need for special authorization.
33.3. Guardianship and trusteeship shall be established over minors in cases where their
parents are absent, they have not been adopted, their parents have been deprived of parental rights by a court, or such individuals are otherwise deprived of parental care, including situations in which the parents fail to provide upbringing or protect their rights and interests.
33.4. Guardianship shall be established over minors who have not reached the age of 14, as
well as over indivuduals who have been declared by a court to lack capacity to act due to a mental disorder.

33.5. Guardians shall act as legal representatives of those under guardianship and conclude
all necessary transactions on their behalf and in their interests.
33.6. Trusteeship shall be established over minors aged 14 to 18, as well as over individuals
whose capacity to act has been restricted by a court due to abuse of alcoholic beverages, narcotic drugs, or psychotropic substances, or engagement in gambling.
33.7. Trustees shall give consent for transactions that persons under trusteeship are not
authorized to conclude independently. Trustees shall assist those under trusteeship in exercising their rights and performing their duties, and they also protect them from abuse by third parties.
Article 34. Guardianship and trusteeship authorities
34.1. Guardianship and trusteeship authorities shall be established under the law.
34.2. From the date a court decision declaring an individual as lacking capacity to act or
restricting his/her capacity to act enters into legal force, the court shall, within three days, notify the guardianship and trusteeship authority at the person’s place of residence for the purpose of establishing guardianship or trusteeship over that person
34.3. The guardianship and trusteeship authority at the place of residence of persons under
guardianship shall oversee the activities of their guardians and trustees.
Article 35. Guardians and trustees
35.1. The guardianship and trusteeship authority at the place of residence of a person in
need of guardianship or trusteeship shall appoint a guardian or trustee within three months from the moment it becomes aware of the necessity to establish guardianship or trusteeship over the individual. Until a guardian or trustee is appointed for the person in need of guardianship or trusteeship, the duties of the guardian or trustee shall be carried out by the guardianship and trusteeship authority. In cases where children who have lost their parents or have been deprived of parental care are in need of guardianship or trusteeship, the functions of the guardianship and trusteeship authority shall be performed by the relevant executive authority until a guardian or trustee is appointed. Interested parties may file an objection in court regarding the appointment of a guardian or trustee
35.2. Adult individuals who have civil legal capacity may be appointed guardians and
trustees. Individuals who are deprived of their parental rights may not be appointed as guardians or trustees.
35.3. A guardian or trustee shall be appointed upon his/her consent and consideration of
his/her moral and other personal characteristics, ability to carry out responsibilities tasks of a guardian or trustee, the relationship between him/her and the person requiring guardianship or trusteeship and, when applicable, the wishes of the person under guardianship or trusteeship.
35.4. The guardians and trustees of individuals in need of guardianship or trusteeship who
are in, or have been placed in, relevant social service institutions shall be those institutions.
35.5. Duties of guardianship and trusteeship shall be performed without remuneration,
except in cases provided for by law.
35.6. Guardians and trustees of minors shall reside together with those under their
guardianship or trusteeship. Separate residence of a trustee and a ward who has reached the age of 16 shall be permitted with the consent of the guardianship and trusteeship authority,

provided that such separate residence does not adversely affect the upbringing, rights, or interests of him/her. Guardians and trustees shall be obliged to notify the guardianship and trusteeship authorities of any change of residence
35.7. Guardians and trustees shall be obliged to ensure the maintenance, care, and medical
treatment of the children under their guardianship or trusteeship, including children placed in the family of a person intending to adopt them on a trial basis in accordance with Articles 118.12 and 118.13 of the Family Code of the Republic of Azerbaijan. They shall also ensure the education and upbringing of such children, and protect their rights and interests.
35.8. The duties specified in Article 35.7 of this Code shall not be entrusted to the trustees of
adults whose legal capacity has been restricted by a court.
35.9. When the grounds that led to an individual being declared incapable or of limited
legal capacity cease to exist, the guardian or trustee shall be obliged to petition the court for the recognition of the ward’s legal capacity and the termination of guardianship or trusteeship
Article 36. Disposition of the property of the person under guardianship or trusteeship
36.1. Except for income over which a person under guardianship or trusteeship has the
authority to dispose of independently, the income of such person, including income derived from the management of their property, shall be spent by the guardian or trustee solely for the benefit of the ward and only with the prior consent of the guardianship and trusteeship authority. Without the prior consent of the guardianship and trusteeship authority, the guardian or trustee may cover necessary expenses for the maintenance of the ward from amounts of income that the ward would otherwise receive.
36.2. Without the prior consent of the guardianship and trusteeship authority, a guardian
shall not enter into transactions involving the privatization, transfer, or donation of the property of a person under guardianship or trusteeship. nor shall they lease, grant for free use, or pledge such property, renounce rights belonging to the ward, distribute the ward’s property, or allocate shares from it, or engage in any other transactions that may reduce the ward’s property. A trustee, in turn, may not give consent to such transactions. The rules for managing the property of a person under guardianship shall be determined by legislation. 36.2-1. The decisions of the guardianship and trusteeship authorities, in connection with the permit provided for in Articles 36.1 and 36.2 of this Code, shall be entered into the information system of the authority (institution) designated by the relevant executive authority within 1 (one) business day.
36.3. Guardians, trustees, their spouses and close relatives may not enter into transactions
with the person under guardianship or trusteeship, with exception of to granting a gift or gratuitous use of property or to represent the person under guardianship and trusteeship in transactions or court proceedings between the person under guardianship or trusteeship and guardians’ or trustee’s spouse and close relatives.
Article 37. Management of the property of a ward or a person under trusteeship by
power of attorney
37.1. When the permanent management of the movable and valuable immovable property
of a person under guardianship or trusteeship becomes necessary, the guardianship and trusteeship authority shall conclude an agreement with a manager it appoints for the

management of such property by power of attorney. In this case, the guardian or trustee retains their authority over the property of the ward that has not been placed under management by power of attorney. The rules set forth in Articles 36.2 and 36.3 of this Code shall apply to the exercise of powers by the manager in the management of the ward’s property by power of attorney.
37.2. The management of the property of a person under guardianship or trusteeship by
power of attorney shall be terminated on the grounds provided by law for the termination of an agreement on the management of property by power of attorney, as well as in cases where guardianship or trusteeship is terminated.
Article 38. Relieving and dismissing guardians and trustees from execution of their
duties. Termination of guardianship and trusteeship
38.1. The guardianship and trusteeship authority shall relieve a guardian or trustee from
execution of his/her duties upon the return of a minor to his/her parents or upon his/her adoption.
38.2. Upon the placement of a person under guardianship into a social welfare institution or
any other similar institution, the guardianship and trusteeship authority shall release the previously appointed guardian or trustee from execution of his/her duties provided that such action is not contrary to interests of the person under guardianship or trusteeship.
38.3. For valid reasons (illness, changes in property status, lack of mutual understanding
with the ward, etc.), a guardian or trustee may be relieved of his duties at his own request.
38.4. If a guardian or trustee fails to properly perform his/her duties, including using
guardianship or trusteeship for personal gain or leaving the ward without control or necessary assistance, the guardianship and trusteeship authority may remove the guardian or trustee from the performance of his/her duties and take the necessary measures to hold the culpable individual legally accountable.
38.5. Upon the petition of a guardian, trustee or the guardianship and trusteeship
authority, the guardianship or trusteeship shall terminate upon a court decision declaring the person under guardianship or trusteeship as having legal capacity or terminating the restrictions on his/her legal capacity.
38.6. The guardianship of a minor under guardianship shall terminate upon his/her
reaching the age of 14 and the individual who exercised the duties of the guardian shall become a trustee of the minor without any additional decision.
38.7. Guardianship over a minor shall be specifically terminated when the minor reaches
the age of 18, or when the minor enters into marriage or otherwise attains full legal capacity before reaching the age of maturity.
Article 39. Patronage over a person with legal capacity
39.1. At the request of an adult having legal capacity, who, due to health conditions, cannot
independently exercise and protect his/her rights and perform obligations, patronage may be established over such person. The establishment of patronage shall not restrict the rights of an individual.

39.2. A patron (assistant) of an adult having legal capacity shall be appointed by the
guardianship and trusteeship authority upon the consent of such an individual.
39.3. The disposition of property of an adult having legal capacity shall carried out by the
patron (assistant) under an agreement of commission or trust management signed with such adult. The performance of everyday and other transactions directed to maintenance support and satisfaction of living needs shall be carried out by the patron (assistant) with the adult’s consent.
39.4. Patronage of an adult having legal capacity, established according to Article 39.1 of
this Code, shall terminate on the request of the adult under patronage. The patron (assistant) of an individual under patronage shall be released from the fulfillment of his/her duties in cases specified in Article 38 of this Code.
Article 40. Declaration of an individual as missing
40.1. Upon the application of a relevant person, a court may declare an individual as
missing if his whereabouts are unknown or he has not appeared at his place of residence for two years.
40.2. Where it is impossible to establish the date of last information on missing persons, on
which the period for declaring a person as missing commences, the start date for counting of the missing shall be on the first day of the month following the month when the last information on missing person was received, and where it is impossible to determine such month - on the first day of January of the following year.
40.3. After the court decision declaring a person missing enters into legal force, that
person’s legal heirs acquire the right to manage the property of the missing person as entrusted property, including the right to benefit from it. From this property, maintenance expenses for persons dependent on the missing person are provided, and debts are paid
40.4. Where the permanent management of a missing person’s property is necessary and
where such person has no successor, such property shall, by court order, be transferred to a person chosen by the body for guardianship and trusteeship authority who shall act pursuant to a trust management contract signed by such person and the body for guardianship and trusteeship authority. The administrator of the property of the missing person shall, on the account of property of the missing person, pay the debts of such person, manage property in the interest of such person, provide an allowance for the support of persons, who have been dependent on the missing person. Where, within three years from the date of appointment of the administrator, a court decision on declaring a person as missing has not been rescinded and no application is made to the court to state the person’s death, the body for guardianship and trusteeship authority shall apply for a judicial declaration that the person is deceased.
40.5. If the missing person appears or his location is discovered, the court shall cancel the
judicial declaration of such person as missing as well as the decision on management of his property.
Article 41. Declaration of an individual as deceased
41.1. A court may declare an individual as deceased where, for five years, there has been no
information at his residence regarding his whereabouts and where such person disappeared under circumstances which posed danger of death or provided grounds for concluding that he

may have died as a result of an accident and there has been no information about such person for six months.
41.2. A court may declare military serviceman or other person who disappeared in
connection with military operations as deceased not earlier than two years after the date of the end of the military operations. A court, having taken into account the circumstances suggesting that the person died in the military operations, may declare him or her deceased before the expiry of the specified period, but not earlier than six months from the date of the end of the military operations
41.3. The date of entry into force of a judicial declaration of a person as deceased shall be
deemed as the date of death of such a person.
41.4. In cases specified by Articles 41.1 and 41.2 of this Code, a court may deem the date of
his assumed demise as the date of his death.
Article 42. Consequences of the appearance of a person declared as deceased
42.1. If a person declared as deceased appears or his whereabouts are discovered, the court
shall cancel its declaration that the person is deceased.
42.2. Without regard to the time of appearance, a person is entitled to demand the
remaining part of his property which, following the declaration of his death, was gratuitously transferred to another person upon declaration of his death.
42.3. A person who acquired the property of the person declared as deceased from
compensatory transactions, shall be obligated to return the property if it is proven evidenced that he at the time of purchasing of the property he was aware that the person declared as deceased was alive.
42.4. If the property of the person declared as deceased has been transferred to the state
ownership and sold, the proceeds from the sale shall be returned to such person upon rescinding the declaration of such person as deceased.
Chapter 4
Legal entities
§1. Main provisions
Article 43. Definition and types of legal entities
43.1. A legal entity is a specially established organization, which has completed state
registration as provided by law, owns its own property, bears liability for its obligations to the extent of its property, has the right to acquire and exercise property and personal non-property rights on its own behalf, is liable for its obligations, and acts as a plaintiff or defendant in court. A legal entity has its own balance sheet.
43.2. A legal entity may be established by one individual or legal entity, or a group of
individuals and legal entities, may be based upon membership, may or may not depend on the existence of members, and may or may not be engaged in entrepreneurial activity.

43.3. The Republic of Azerbaijan participates in civil relationships in the same manner as
other legal entities. In such cases, the power of the Republic of Azerbaijan is exercised by its bodies authorities which are not legal entities.
43.4. Municipalities shall participate in civil relationships in the same manner as other legal
entities. In such cases, the power of a municipality shall be exercised by its authorities which are not legal entities.
43.5. A legal entity may be an organization which pursues as its main purpose profit
generation (commercial legal entities) or an organization, which does not have the purpose of generating profit and does not distribute the received profits among participants (non￾commercial legal entities), as well as engaged in the activities of the national and (or) social significance (legal entities of public law).
43.6. A non-commercial legal entity may be established in the form of public associations,
funds, unions of legal entities and in other forms stipulated by law. A non-commercial legal entity may engage in entrepreneurial activity only in furtherance of its primary purpose for which it was established and where such activity corresponds to such purpose. A non￾commercial legal entity may establish economic companies or participate in such companies to conduct entrepreneurial activity.
43.7. The activity of legal entities of public law shall be governed by this Code, the laws of the
Republic of Azerbaijan ‘on Legal Entities of Public Law’ and ‘on the Central Bank of the Republic of Azerbaijan.’
Article 44. Legal capacity of a legal entity
44.1. A legal entity shall have civil rights and bear civil liability from the moment of state
registration. The legal capacity of a legal entity shall terminate upon liquidation.
44.2. A commercial legal entity shall have civil rights and bear civil liability required for the
performance of any kind of activities not prohibited by the law. A legal entity may engage in certain activities the list of which is specified by law, only with special permission (license), the list of which is specified by law.
44.3. The rights of a legal entity may be restricted limited only in cases and in accordance
with procedures the manner specified by law. A legal entity may appeal a decision of limitation of restricting its rights to a court.
44.4. The right of a legal entity to engage in a type of activity requiring special permission
(license) shall arise from the moment of obtaining such license or at the time indicated in the license and, unless otherwise provided by law, terminate upon the expiry of the license.
Article 45. Establishment of a legal entity
45.1. A legal entity shall be established through its incorporation and the preparation
development of its charter.
45.2. Where a legal entity is established by several founders, the founders shall conclude an
agreement where they approve the charter of the legal entity, the procedure for joint activities with regard to its establishment and the conditions for the transfer of their property and participation in its operations.

Article 46. Liability of founders of a legal entity
Founders of a legal entity shall be jointly liable for obligations related to its establishment, which arise prior to state registration.
Article 47. Charter of a legal entity
47.1. The charter of a legal entity, approved by its founders, shall be the foundation
document of the legal entity. A legal entity established by one founder shall operate on the basis of a charter approved by the founder, apart from the cases prescribed by the Laws of the Republic of Azerbaijan ‘on Bank’ and ‘on Investment Funds.’
47.2. The charter of a legal entity shall specify the name of the legal entity, its address, the
procedure for the management of its activities, and the procedure for its liquidation. The charter of a non-commercial legal entity shall specify the scope and purposes of its activities. Charters of legal entities (except for legal entities of public law and legal entities that have been granted the functions of state control and inspection by a charter approved by a body (institution) established by the relevant executive authority) shall not reflect the assignment of powers of public authorities (institutions) and local self-government bodies, as well as the functions of state control and inspection.
47.3. Changes to a charter shall become effective for third parties from the moment of their
state registration. However, legal entities and their founders (participants) do not have the right to refer to the lack of registration of such amendments in relationships with the third parties, who have acted reliance on such amendments.
Article 48. State Registration of a legal entity
48.1. A legal entity shall be subject to state registration with the relevant executive
authority. Data on state registration, including the firm trade name for a non-commercial legal entity, shall be entered into the public available state register of legal entities.
48.2. The state registration of the legal entity may be rejected only in cases stipulated by the
Law of the Republic of Azerbaijan on State registration and state register of the legal entities. State registration may not be rejected because the establishment of the legal entity is not deemed necessary. The denial of rejection of state registration, or the failure to perform subtraction of state registration, may be appealed to a court.
48.3. A legal entity shall be subject to re-registration only as provided by law.
Article 49. Bodies of a legal entity
49.1. A legal entity shall acquire civil rights and undertake civil obligations through its
bodies, which act in accordance with law and the charter. The procedure for the election or appointment of a legal entity’s bodies shall be specified respectively by the charter, Laws of the Republic of Azerbaijan on Banks, on Insurance Activity, on Investment Funds, on the Securities Market and on Deposit Insurance.
49.2. A legal entity may acquire civil rights and undertake obligations through its
participants and representatives.

49.3. A person acting on behalf of a legal entity, including any person being represented in
management bodies (supervisory (directors) board, executive body) of a legal entity, shall, when executing his duties for the benefit of the legal entity he represents, be obliged to act faithfully, in a professional manner and logically, be loyal to interests of the legal entity and all of its participants, consider the interests of the legal entity over his own interests, and be careful, and also fair and impartial in the course of decision-making. Such a person shall be responsible for execution of these duties in compliance with the legal entity’s interests. In the event that this person violated his duties, he should, at the request of participant(s) of the legal entity, possessing a stake (shares) in the amount of not less than 5 percent of the authorized capital, compensate the damages caused as a result of such violations
49.4. A person, acting on behalf of a legal entity that does not perform or improperly perform the
duties, established by this Code in the interests of a legal entity, including any person represented in the management bodies (supervisory board, board of directors, executive body) of a legal entity, shall be liable for damage caused to a legal entity or shareholder (shareholder), in the following cases:
49.4.1. payment of bonuses to members of management bodies of a legal entity if the legal entity
operates at loss or if these bonuses are disproportionate to the profits of the legal entity.
49.4.2. alienation or transfer into use of the property of a legal entity on terms and at a price that are
significantly lower than market conditions.
49.4.3. conclusion of agreenebts with related parties of a legal entity that violate the requirements of
the law or pose a threat to the interests of a legal entity.
49.4.4. purchase by a legal entity of goods (works, services) on the basis of concluded agreements at a
price much higher than their real value.
49.4.5. misappropriation or embezzlement of the property of a legal entity with the aim of providing
for themselves, related parties of a legal entity or other persons with tangible and intangible property values and rights to such property.
49.4.6. conclusion of unfair deals with shareholders (stockholders) or transactions causing them loss.
49.5. For damage caused to a legal entity, any person who acts on behalf of a legal entity is
represented in the management bodies (supervisory board, board of directors, executive body) of a legal entity may be removed from the position held by him at the decision of the general meeting of the legal entity. Involvement of a person who acts on behalf of a legal entity, is represented in the management bodies (supervisory board, board of directors, executive body) of a legal entity, to administrative or criminal liability for damage caused to a legal entity shall not relieve its obligation to compensate for the damage.
49.6. In the event of circumstances provided for in Article 49.4 of this Code, or if there are
substantial suspicions regarding the occurrence of such circumstances, the participant(s) holding a stake (shares) in the amount of not less than 10 percent of the authorized capital of a legal entity shall have the right to demand from a person who acts on behalf of the legal entity, including any person who is represented in the management bodies (supervisory board, board of directors, executive body) of the legal entity, all documents or information that are available in the legal entity and are related with these circumstances (without specifying a specific document), in order to view these documents (information). In such a case the person shall be obliged to ensure the demand of this participant within 5 (five) business days. If the participant wishes to receive a copy of this document (information), the person to whom he was referred should present certified copies of this document (information). The participant is obliged to protect the confidentiality of information that became known to him and was received during the reviewing, and, except for the cases established by law, do not transfer this information to third parties.

Article 49-1. The procedure for conclusion of transactions by the legal entity with related
parties
49-1.1. Any transaction, agreement or set of connected transactions, concluded between the legal entity and its related party shall be defined as related party transactions. The following shall be included as related parties to a legal entity:
49-1.1.1. the head and members of the board of directors (supervisory board) and executive body of a legal entity. 49-1.1.2. the head of the structural unit (branch, representative office, office, etc.) of a legal entity. 49-1.1.3. relatives of the persons referred to in articles 49-1.1.1 and 49-1.1.2 of this Code (spouses, parents, including in-laws, grandparents, children, adoptive parents (adopted), siblings). 49-1.1.4. anyone directly or indirectly possessing shares of at least 10% or more in the share capital of a legal entity. 49-1.1.5. legal entities, in which directly or indirectly are participating persons indicated in clauses 49-1.1.1, 49-1.1.2 and 49-1.1.4 of this Code. 49-1.1.6. legal entity holding at least 20% of shares in share capital of the legal entity. 49-1.1.7. anyone owning at least 20% of shares in the legal entities specified in Articles 49-1.1.4 and 49-1.1.6 of this Code. 49-1.1.8. heads of boards of directors (supervisory board) and executive bodies of legal entities specified in Articles 49-1.1.4 and 49-1.1.6 of this Code. 49-1.1.9. other related parties of banks, non-bank credit institutions and investment funds established respectively by Laws of the Republic of Azerbaijan on Banks, on Non-bank Credit Institutions and on investment funds. 49-1.2. If the value of the transaction to be concluded with a related party, is 5 percent or more of assets of a legal entity, this transaction shall be subject to the independent auditor’s opinion, involved by the legal entity, and approved by a simple majority vote at the general meeting of the legal entity’s member. The participant, which is a related party with respect to this transaction, shall have no right to participate in voting on this issue. 49-1.3. If the value of the transaction, to be concluded with a related party, is less than 5 percent of assets of a legal entity, this transaction shall be concluded in accordance with the charter of the legal entity, by the general meeting of its members, by the Board of Directors (Supervisory Board) or the executive body, in respect to banks taking into account the requirements prescribed by the Law of the Republic of Azerbaijan on Banks. In this case, the participant (member), being a related party, shall have no right to participate in the vote at the general meeting of participants, at meetings of the Board of Directors (Supervisory Board) and the collegial executive body. If the head of the sole executive body of the legal entity, as well as persons referred to in Articles 49-1.1.3 and 49-1.1.5 of this Code, act as a related parties, then any transaction between them and the legal entity shall be subject to the decision of the Board of Directors (Supervisory Board), or in its absence - the decision of the general meeting of the legal entity. 49-1.4. Persons found guilty for causing damage to a legal entity as a result of the transaction concluded in violation of the requirements of Articles 49-1.2 and 49-1.3 of this Code, shall
be kept responsible. If the other party of the transaction became to know that the transaction had been concluded in violation of Articles 49-1.2 and 49-1.3 of this Code, a legal entity or its any participant may dispute this transaction in accordance with Articles 337.1 and 339 of this Code. 49-1.5. The head or members of the board of directors (supervisory board) of a legal entity shall present written information to participants of the legal entity that they, as well as persons referred to in

Articles 49-1.1.3 and 49-1.1.5 of this Code, act as a related party in respect of the transaction, and also about the nature of (arising, amount and so on) of their interests in connection with this transaction. 49-1.6. The head or other members of the executive body of the legal entity shall submit to the Board of Directors (Supervisory Board) of the legal entity, and in his absence, to members of the legal entity, written information that they, as well as the persons mentioned in articles and 49-1.1 49-1.1.3. 5 of this Code, act as a related party in respect of the transaction, and also about the nature of (arising, amount and so on) of their interests in connection with this transaction. 49-1.7. Except for the head or members of the board of directors (supervisory board) and executive body of the legal entity, the other persons should submit to the Board of Directors (Supervisory Board) of the legal entity, and in its absence - to the executive body of the legal entity, written information that they, as well as persons referred to in Articles 49-1.1.3 and 49-1.1.5 of this Code, act as a related party in respect of the deal, and the nature of (the appearance, size and so on) of their interests in connection with this transaction.
Article 50. Name of a legal entity
50.1. A legal entity shall have its own name which inlcudes its legal organizational form.
The name of a non-commercial organization shall inlcude an indication of the nature of its activity. 50.1-1. Names of public authorities of the Republic of Azerbaijan, as well as names of famous persons of Azerbaijan (without the consent of their close relatives or heirs) may not be used in the name of non-governmental organizations.
50.2. A legal entity which is a commercial organization shall have a trade name. A legal
entity with a trade name registered in accordance with the procedure specified by law shall have the exclusive right to use such a name. The procedure for the registration and use of a trade name shall be established by law.
50.3. Rights and obligations may not be acquired under the trade name of another legal
entity. A person who illegally uses the registered trade name of another, upon demand from the owner of the right to the trade name, shall cease such use and compensate for any damages caused.
Article 51. Location of a legal entity
The location of a legal entity is the location of its permanent managing body, the headquarters of the political party.
Article 52. Liability of a legal entity
52.1. A legal entity shall be liable for its obligations with all its property.
52.2. Except where provided by this Code, or the corporate charter, a founder (participant)
of a legal entity shall not be kept liable for the obligations of the legal entity and a legal entity shall not be liable for obligations of a founder (participant).
Article 53. Representative offices and branches

53.1. A representative office is a subdivision of a legal entity located somewhere other than
the legal entity’s location, which represents and protects interests of the legal entity.
53.2. A branch is a separate subdivision of the legal entity located somewhere other than
the legal entity’s location, which performs all of its functions or a part thereof, including representation.
53.3. Representative offices and branches are not legal entities and act on the basis of
regulations approved by legal entities. The heads of representative offices and branches are appointed by legal entities and act on the basis of a power of attorney. Deputy heads of branches or representative offices of non-governmental organizations, founded by foreigners or foreign legal entities should be citizens of the Republic of Azerbaijan.
Article 54. Institutions
54.1. An institution is an organization established by a legal entity for the purpose of
performing managerial, socio-cultural and other non-commercial functions.
54.2. An institution is not a legal entity and acts on the basis of regulations approved by the
legal entity.
54.3. With respect to property allocated to it, an institution exercises rights of possession,
use and disposal as provided by law and in accordance with purposes of its activity, the instructions of the legal entity and nature of the property.
54.4. A legal entity which has established an institution shall be liable for obligations of the
institution.
54.5. Specific legal features of the legal status of certain types of state and other institutions
shall be established by law.
Article 55. Reorganization of a legal entity
55.1. The reorganization of a legal entity (consolidation, merger, division, separation,
transformation) may be performed pursuant to a decision of the founders (participants) or a body of the legal entity authorized by the corporate charter.
55.2. Where provided by law, reorganization of a legal entity through division or
separation of one or more legal entities therefrom shall be done pursuant to a court decision.
55.3. A court may appoint and assign an external manager of a legal entity to reorganize
such a legal entity. Effective from the moment of appointment, the manager shall be vested with powers to manage the affairs of the legal entity. The external manager shall act on behalf of the legal entity in court, prepare a statement on division and submit such a statement to the court together with charters of the legal entities emerged as a result of the reorganization. The valid court resolution, complying with legislation requirements, shall constitute the basis for state registration of newly emerged legal entities.
55.4. Except for transformation through merger, a legal entity shall be deemed reorganized
from the moment of the state registration of newly emerged legal entities.
55.5. In the reorganization of a legal entity through the merger with another legal entity,
the former shall be deemed reorganized from the moment of its entry in the state register of legal entities of the notation of the termination of activities of the merged legal entity.
55.6. Banks shall be reorganized in accordance with the law of the Republic of Azerbaijan on Banks.

55.7. To ensure criminal legal measures that can be imposed on a legal entity, its reorganization may
be prohibited in the manner prescribed by the Code of Criminal Procedure of the Republic of Azerbaijan. A court decision banning the reorganization of a legal entity shall be immediately sent to the relevant executive authority.
Article 56. Legal succession upon reorganization of legal entities
56.1. Upon consolidation of legal entities, the rights and obligations of each shall be
transferred to the newly emerged legal entity pursuant to a handover act.
56.2. Upon the acquisition of one legal entity by another one, the rights and obligations of
the former shall be transferred to the latter pursuant to a handover act.
56.3. Upon the division of a legal entity, its rights and obligations shall be transferred to
newly emerged legal entities pursuant to a balance act of division.
56.4. Upon the separation from a legal entity of one or more legal entities, each of them
shall receive the rights and obligations of the reorganized entity pursuant to a balance act of division.
56.5. Upon transformation of legal entity of one type into the legal entity of another type
(change of legal organizational form), the rights and obligations of the reorganized legal entity shall be transferred to the newly emerged legal entity pursuant to an acceptance act.
Article 57. Handover act and statement balance of division
57.1. An acceptance act and a balance statement of division shall contain provisions on
legal succession for all obligations of the reorganized legal entity with respect to all of its creditors and debtors, including obligations which the parties contest.
57.2. An acceptance act and a statement balance of division shall be approved by founders
(participants) of the legal entity or the authority body of the legal entity so authorized by the charter which have adopted a decision on the reorganization of the legal entities, which decision is submitted together with the charters for state registration of the newly emerged legal entities or amendments to the charters of the existing legal entities.
57.3. A failure to submit an acceptance act or a statement balance of division together with
a charter, or the absence therein of the provisions on legal succession to the rights and obligations of the reorganized legal entity shall react form basis for rejection in the denial of state registration of the newly emerged legal entities.
Article 58. Guarantees of the rights of creditors of a legal entity upon reorganization ar
58.1. Founders (participants) of a legal entity making decision on its reorganization, or the
legal entity’s body authorized by the charter, adopting a decision on the legal entity’s reorganization, and, in the cases specified in Article 55.3 of this Code, the external manager should notify the legal entity’s creditors in writing about its reorganization.
58.2. A creditor of a reorganized legal entity shall be entitled to request termination or early
performance of obligations where the reorganized legal entity is a debtor and to recover losses.

58.3. If a statement balance of division does not specify the legal successor of the
reorganized legal entity, newly emerged legal entities shall be jointly liable for obligations of the reorganized legal entity with respect to its creditors.
Article 59. Liquidation of a legal entity
59.1. The liquidation of legal entity is the termination of its existence and activities without
the transfer of its rights and obligations through succession to other persons.
59.2. A legal entity may be liquidated in the following cases:
59.2.1. by the decision of its founders (participants) or a body of the legal entity so
authorized by the charter, including expiry of the effective term of the legal entity’s existence or the achievement of the purpose for which the legal entity was created.
59.2.2. in cases where the registration of a legal entity is declared invalid by a court due to
violations of the law committed during its establishment.
59.2.3. By a court decision, when activities are carried out without the required special
permit (license), or when activities prohibited by law are conducted, or when the law is repeatedly or grossly violated in any other manner, or when a public association or foundation regularly engages in activities contrary to its charter objectives, as well as in other cases provided for in this Code and in the Laws of the Republic of Azerbaijan ‘On Banks,’ ‘On Insurance Activity,’ and ‘On Investment Funds.
59.2.4. when a criminal-law measure in the form of liquidation of a legal entity is applied by a final
court decision.
59.2-1. A participant or the body of the legal entity authorized by the charter proposing the initiative of liquidation of the legal entity on grounds referred to in Article 59.2.1 of the present Code shall require executive authority exercising the management of current activity of the legal entity, adoption of official declaration (on state of assets and liabilities) confirming the payment ability for satisfaction of requirements of all creditors of the legal entity within the period of 12 months. The executive authority of the legal entity shall adopt that declaration or notify on impossibility of adoption of such decision not later than 20 days until the decision on liquidation. If the executive authority notifies on the impossibility of adoption of such decision, general meeting of participants may invite independent auditor with the purpose of confirmation of existence or absence of payment ability for satisfaction of requirements of all creditors of the legal entity within the period of 12 months. If the independent auditor confirms the payment ability of the legal entity by his/her opinion, such opinion shall be equal to the declaration defined by the present Article.
59.3. A request to liquidate a legal entity pursuant to the provisions of Articles 59.2 and 59.3
of this Code may be submitted to a court by a public authority (institution) or body of local self￾administration authorized by law to submit such requests. Pursuant to a court order, the founders (participants) of a legal entity or a body authorized by the legal entity’s charter may be compelled to liquidate the legal entity. By final court decision on the liquidation of a legal entity on the basis specified in Article 59.2.4 of this Code, the liquidation commission (liquidator) is entrusted with the obligation to liquidate the legal entity.
59.4. A legal entity may also be liquidated due to bankruptcy.
59.5. Where the value of property of the liquidated legal entity is not sufficient to satisfy
creditor claims, such legal entity may only be liquidated through bankruptcy.

59.6. Total period of the liquidation process shall not exceed one year from the moment of inclusion
of information on liquidation of the legal entity to the stat register of legal entities. Exceeding of that period shall entail repeated liquidation process.
59.7. The rules established for the liquidation of legal entities by the present Code and the Law of
Republic of Azerbaijan ‘on State registration and state register of legal entities’ shall apply to liquidation of branches or representative offices of foreign legal entities. 59.7-1. Upon receipt of information from the body (institution) determined by the relevant executive authority for the liquidation of branches and representative offices of foreign media entities in the Republic of Azerbaijan, the body (institution) designated by the relevant executive authority shall, within 5 (five) working days, ensure the liquidation of such branches and representative offices of foreign media entities in the Republic of Azerbaijan and their removal from the state register of legal entities, without applying the procedures relating to liquidation of legal entities set forth in Articles 59–61 of this Code.
59.8. The liquidation of local banks, their branches, departments and representative offices, as well as
local branches and representative offices of foreign banks shall be carried out taking into account the requirements of the Law of the Republic of Azerbaijan on banks.
59.9. To ensure criminal legal measures that can be imposed on a legal entity, its liquidation by
decision of the founders (participants) or a body authorized by the charter of a legal entity may be prohibited in the manner prescribed by the Code of Criminal Procedure of the Republic of Azerbaijan. A court decision banning the liquidation of a legal entity shall be immediately sent to the relevant executive authority.
Article 60. Decision on liquidation of the legal entity
60.1. By the decision on the liquidation of a legal entity, a liquidation commission (liquidator) shall
be appointed, the procedure and timeframes for liquidation shall be determined in accordance with this Code, and the liquidation process shall commence.
60.2. Full legal capacity of the legal entity shall be retained within the period of liquidation process.
60.3. From the date of making the decision on liquidation, participants of the legal entity or the body
authorized for this purpose by its charter shall operate solely within the framework of the liquidation process. In court proceedings, the liquidation commission (liquidator) shall act on behalf of the legal entity under liquidation.
60.4. From the moment the liquidation commission (liquidator) is appointed, the authority to
manage the affairs of the legal entity shall be transferred to it. The liquidation commission (liquidator) shall continue its activities with the purpose of selling the property of the legal entity in an economically efficient, cost-effective, and timely manner in order to ensure the payment of debts and the preservation of the remaining income, as well as distributing remaining property among the participants after the settlement of debts. In the event of the liquidation of a non-commercial organization, the legal fate of the remaining property after the payment of debts shall be determined in accordance with Articles 114.3, 116.3, and 117.7 of this Code.
60.5. Members of the liquidation commission (liquidator) shall comply with the requirements of
Article 49.3 of this Code in the course of their activities.
60.6. Members of the liquidation commission (liquidator) may be recalled or replaced by other
persons in the manner in which they were appointed.
Article 61. Procedure for liquidation of the legal entity

61.1. Within 10 days from the date of its appointment, the liquidation commission (liquidator) shall
cause the first notice of the liquidation of the legal entity and the procedure and time limits for the submission of creditors’ claims to be published in the print media in which information on the state registration of legal entities in the Republic of Azerbaijan is published. This notice shall thereafter be published two more times at intervals of 15–20 days in the same manner. The period for the submission of creditors’ claims may not be less than 60 days from the date of publication of the first notice of liquidation.
61.2. Within 15 days from the date of its appointment, the liquidation commission (liquidator) shall
submit to the relevant executive authority responsible for the state registration of legal entities: the decision on liquidation, the official statement confirming the solvency of the legal entity as provided in Articles 59.2-1 and 61.1 of this Code, the document confirming the publication of the first notice, and the seal. The relevant executive authority responsible for the state registration of legal entities shall enter the submitted information into the state register of legal entities in accordance with the Law of the Republic of Azerbaijan ‘On State Registration of Legal Entities and the State Register’ within 5 days of receipt. Thereafter, the legal entity shall use a seal marked ‘under liquidation’ when preparing documents, and in all documents, the words ‘under liquidation’ shall be added after its name.
61.3. The liquidation commission (liquidator) shall take measures to identify creditors and recover
debtor claims, and on the day the notice of liquidation is published in the media, send a notification of the liquidation of the legal entity to all known creditors. The commission shall also apply to the relevant executive authority to determine whether there are any outstanding debts to the state budget in the form of compulsory payments, to extra-budgetary state funds in the form of mandatory state social insurance and unemployment insurance contributions, and to the compulsory health insurance fund in the form of mandatory health insurance contributions. 61.3-1. The liquidation commission shall ensure the transfer of documents generated as a result of its own activities and the activities of the liquidated legal entity, which are classified as archival documents in accordance with the Law of the Republic of Azerbaijan ‘On the National Archival Fund,’ to the relevant state archival service organization at the location of the legal entity.
61.4. If the liquidation commission (liquidator) disagrees with any claim submitted by a creditor,
that creditor shall have the right to file a lawsuit in court. Until a court decision is made regarding the claim, the funds necessary to secure it shall be retained.
61.5. Within 10 days after the expiration of the period for submission of creditors’ claims, the
liquidation commission (liquidator) shall prepare and approve the interim liquidation balance sheet and send it to the participants of the legal entity. The interim liquidation balance sheet shall include at least information on the composition of the property of the liquidated legal entity, claims of its creditors, and the list of accounts receivable. A participant holding at least 10 percent of the charter capital of the legal entity who disagrees with the interim liquidation balance sheet may, within 7 days of receiving it, request the convening of a general meeting. In this case, the interim liquidation balance sheet should be approved by the general meeting of participants.
61.6. If liquidation commission (liquidator) reveals insufficiency of property belonging to the legal
entity for satisfaction of claims of creditors, it shall immediately initiate the process of bankruptcy.
61.7. The liquidation commission (liquidator) shall pay the creditors of the liquidated legal entity in
the order of claims received, in accordance with the interim liquidation balance sheet, starting from the date of its approval.
61.8. After settlements with all known creditors is completed, within 5 days, the liquidation
commission (liquidator) shall prepare a report reflecting the liquidation balance and the plan for the distribution of remaining assets among the participants (or, in the case of a non-profit organization, for

use in accordance with Articles 114.3, 116.3, and 117.7 of this Code). The said balance and report should be approved by participants of the legal entity or by the body authorized to do so under the charter, no later than 45 days from the date of their preparation.
61.9. Creditors may submit their claims until the liquidation balance is approved.
61.10. Within 10 days after the liquidation balance is approved, the liquidation commission
(liquidator) shall ensure that the remaining assets are transferred to the participants of the legal entity in accordance with the approved distribution plan, or, in the case of a non-profit organization, are used in accordance with the approved usage plan and Articles 114.3, 116.3, and 117.7 of this Code. The distribution of assets is carried out proportionally to each participant’s share. If the liquidated legal entity has no participants or heirs of participants, the remaining assets shall be transferred to the state. On behalf of the state, such assets are received by the relevant executive authority.
61.11. Within 10 days after the distribution or use of the remaining assets, the liquidation
commission (liquidator) shall send to the relevant executive authority responsible for the state registration of legal entities: the approved liquidation balance, a report reflecting the plan for the distribution (or use) of the remaining assets, a document confirming the transfer of such assets to the participants (or, in the case of a non-profit organization, their use in accordance with Articles 114.3, 116.3, and 117.7 of this Code), and other documents stipulated in Article 16.2 of the Law of the Republic of Azerbaijan on State Registration of Legal Entities and State Register.
61.12. Liquidation of legal entity shall be deemed completed and the legal entity shall be deemed
ceased to exist from the moment of entry of record thereof into the state register of legal entities.
61.13. If assets are discovered after the completion of the liquidation of a legal entity, the court may,
upon the application of an interested person, reopen the liquidation process and appoint a new liquidation commission (liquidator). The sole duty of this liquidation commission (liquidator) shall be to immediately convert such assets into cash and distribute them among the participants (or, in the case of a non-profit organization, to use them in accordance with Articles 114.3, 116.3, and 117.7 of this Code). The emergence of new obligations after the removal of the legal entity from the state register shall not constitute grounds for reopening the liquidation process
Article 62. Satisfaction of Creditor Claims
62.1. Upon liquidation of a legal entity, claims of its creditors shall be satisfied in the
following order of priority:
62.1.1. 62.1.1. creditor claims with respect to obligations secured by a pledge of property of
the liquidating liquidated legal entity have first priority.
62.1.2. claims of individuals against the liquidating liquidated legal entity for damage to
life or health have second priority by way of capitalization of the relevant periodic payments.
62.1.3. payments of severance payments and compensation to persons working under labor
employment agreements and payments under copyright agreements have third priority.
62.1.4. debts for overdue mandatory payments to the budget and also mandatory state
social insurance contributions to the off-budget state fund have fourth priority.
62.1.5. settlements with other creditors have fifth priority.
62.1.-2. . Order of satisfaction of claims of creditors of the insurer shall be defined by the Law of the Republic of Azerbaijan ‘on Insurance activity.’
62.2. Claims of each priority shall be satisfied only after full satisfaction of all claims of
higher priority.

62.3. If the liquidation commission denies rejects a creditor’s claim or refuses to consider
such claim, the creditor is entitled, prior to the approval of the legal entity’s liquidation balance sheet, to apply to a court for review of claim against the liquidation commission.
62.4. A creditor claims filed after expiry of the deadline set by the liquidation commission
for filing such claims shall be satisfied from the liquidating liquidated legal entity’s assets remaining after satisfaction of timely filed creditor claims.
62.5. The claims of creditors of the liquidating liquidated legal entity, which are not
accepted by the liquidation commission and for which the creditor fails to take action in court, as well as claims rejected by the court decision, shall be deemed as satisfied.
Article 63. Bankruptcy of a legal entity
63.1. Where a legal entity is unable to satisfy creditor claims, such legal entity may be
declared bankrupt by judicial decision.
63.2. The grounds and procedures for a declaration of a legal entity bankrupt are
established respectively by the Civil Procedure Code of the Republic of Azerbaijan, the Laws of the Republic of Azerbaijan ‘on Bankruptcy and Insolvency’ and ‘on Banks.’ §2. Commercial Organizations
Article 64. Commercial partnerships and companies
64.1. Business partnerships and companies are commercial entities whose charter (joint)
capital is divided into shares belonging to their founders (participants). The property formed at the expense of founders’ (participants’) contributions, as well as the property produced or acquired by the partnership or company in the course of its activities, belongs to it under the right of ownership. In cases provided for by this Code, a commercial partnership may be established by a single person.
64.2. Business partnerships may be established as a general or a limited partnership.
64.3. Business companies may be established in the form of a limited liability company, an
additional liability company, or a joint-stock company.
64.4. Only individual entrepreneurs and/or commercial organizations may be participants
in general partnerships and general partners in limited partnerships.
64.5. Participants of business companies and limited partners in limited partnerships may
be natural persons and legal entities.
64.6. Public authorities and local self-government bodies may not act as participants of
business partnerships and companies.
64.7. Business partnerships and companies may, unless otherwise provided for by this
Code, act as founders (participants) of other business partnerships and companies.
64.8. Contributions to property of a business partnership or company may consist of
money, securities, other property, or property rights, and other rights having monetary value.
64.9. Monetary valuation of a participant’s contribution to the property of a business
company shall be carried out on the basis of an agreement among the founders (participants) of the company and should be verified by an independent expert examination (audit).

Article 65. Rights and obligations of participants of a business partnership or company
65.1. Participants in a business partnership or company association shall be entitled to:
65.1.1. participate in the management of the affairs of the partnership or company, except
as specified by this Code.
65.1.2. receive information on activities of the partnership or company association and have
access to its books and other documentation specified by the charter.
65.1.3. participate in the distribution of profits.
65.1.4. in the case of the liquidation of the partnership or company, receive a portion of the
property remaining after settlement with creditors or the value thereof.
65.2. Participants in a business partnership or company association may have other rights
as specified by this Code and the charter of the partnership or company.
65.3. Participants in business partnerships or companies shall be obliged to:
65.3.1. make contributions under the procedure, in the amount, by the means and within
the time periods specified by the charter.
65.3.2. not disclose confidential information on activities of the partnership or company.
65.3.3. carry out other obligations stipulated by the charter thereof.
Article 66. Transformation of business partnerships or companies
66.1. Business partnerships and companies may be transformed into business partnerships
and companies of a different form by a resolution of the general meeting of participants under the procedure specified by this Code.
66.2. When a partnership is transformed into a company, each full partner who was a
participant (shareholder) in the partnership shall bear subsidiary liability with all of his/her assets for the obligations transferred from the partnership to the company for a period of two years. The former partner’s transfer of his/her shares (stocks) to another person shall not release him/her from such liability.
Article 67. Subsidiary
67.1. A business company shall be considered a subsidiary if another (parent) business
partnership or company, due to advantageous positions in terms of participation in the charter capital thereof or in accordance with an agreement by and between them, has the power to control decisions passed by such company.
67.2. A subsidiary shall not be liable for debts of its parent partnership or company.
67.3. A parent partnership or company which has the right to issue binding instructions to
a subsidiary shall bear joint and several liability with the subsidiary for transactions concluded by the subsidiary in the performance of such instructions. The parent partnership or company shall have the right to issue binding instructions to the subsidiary only if such right is provided by an agreement with the subsidiary.
67.4. Participants (shareholders) in a subsidiary shall be entitled to recover the
compensation by the parent partnership or company of losses incurred due to the fault of the parent partnership or company. Losses are considered as caused due to the fault of the parent

partnership or company only when such losses occurred as a result of performance by the subsidiary of binding instructions issued by the parent partnership or company.
67.5. In case of bankruptcy of a subsidiary which has occurred due to the fault of the parent
partnership or company, the latter shall bear secondary liability for the debts of the former. Bankruptcy shall be deemed as having occurred due to the fault of the parent partnership or company only where such bankruptcy occurred as a result of performance by the subsidiary of binding instructions of the parent partnership or company.
67.6. A subsidiary shall not be entitled to redeem shares (stakes) of the parent company.
Article 68. Dependent business company
68.1. A business company shall be dependent where more than twenty percent of the
charter capital of a limited liability company or more than twenty percent of voting shares of a joint stock company belong to another (dominant, participating) partnership or company.
68.2. A business partnership or company which acquired more than twenty percent of the
charter capital of a limited liability company or more than twenty percent of the voting shares of a joint stock company shall immediately publish information about such acquisition.
68.3. A dependent company shall not be entitled to redeem shares (stakes) of the parent company.
Article 69. Full partnership
69.1. A partnership shall be deemed a full partnership if its participants (full partners)
conduct entrepreneurial activities on behalf of the partnership in accordance with the charter and bear liability with their own property for the partnership’s obligations.
69.2. A person can be a participant in only one full partnership.
69.3. The name of a full partnership should include names of all its participants and the
words ‘full partnership,’ or it may include the name of one or more participants with the addition of the words ‘and partners’ and ‘full partnership.’
Article 70. Charter of full partnership
In addition to the information specified in Article 47.2 of this Code, the charter of a full partnership should specify: the amount and composition of the partnership’s joint capital. the amount of each participant’s share in the joint capital and the procedure for its modification. the composition of their contributions and the procedure for making contributions. and the terms regarding the liability of participants for failure to fulfill their obligations to make contributions.
Article 71. Management in full partnership
71.1. Activities of sull partnership shall be managed by the mutual consent of all
participants therein. A charter of the general partnership may stipulate cases when resolutions are adopted by a majority vote of the participants.
71.2. If the charter does not establish another rule for determining the number of votes of
full partnership participants, each participant in the full partnership shall have one vote.

71.3. Each participant of the partnership may review all documents related to the conduct
of partnership’s affairs, regardless of whether they have been authorized to manage those affairs. Any waiver or restriction of this right, including a waiver or restriction based on an agreement among the partnership participants, shall be invalid.
Article 72. Administration of affairs of full partnership
72.1. Each participant in a full partnership shall be entitled to act on behalf of the
partnership unless the charter of the partnership stipulates that the affairs thereof are administered jointly by all the participants or that administration of the affairs is to be commissioned to certain participants.
72.2. Where affairs of the partnership are administered jointly by its participants, the
consent of all the participants in the partnership shall be required to conclude each transaction.
72.3. Where participants of a partnership commission the administration of affairs of the
partnership to one or more of its participants, other participants shall, in order to conclude transactions on behalf of the partnership, have a power of attorney issued by the participant(s) commissioned to administer the affairs of the partnership.
72.4. In relations with third parties, the partnership may not refer to provisions of the
charter restricting the authority of its participants, except for cases when the partnership proves that, at the moment of concluding the transaction, such third party knew or should have known that the participant in the partnership had no right to act on behalf of the partnership.
72.5. The authority to administer affairs of the partnership conferred upon one or several
participants may be terminated by a court upon the request of one or several of other participants of the partnership if there are sufficient grounds including gross violation by the authorized official(s) of his/her responsibilities or an acquired incapacity to reasonably administer its affairs. On the basis of a court order, relevant changes shall be made to the partnership’s charter.
Article 73. Obligations of a participant in a full partnership
73.1. A participant in full partnership shall be obligated to participate in the activities of the
partnership in accordance with the provisions of the charter.
73.2. A participant in full partnership shall be obligated to make his contribution to the
statutory charter capital prior to the registration of the partnership.
73.3. A participant in a full partnership may not, without prior consent of other
participants, conclude transactions on his own behalf and in his own interests or in the interests of third parties, if such transactions are similar in nature to those constituting the subject matter at the partnership’s activity.
73.4. In case of the violation of this rule, the partnership shall be entitled, at its own
discretion, to claim from such participant compensation for damages incurred to the partnership or transfer of all revenues acquired from such transactions.
Article 74. Distribution of profits and losses of a full partnership

74.1. Profits and losses of a full partnership shall be distributed among its participants pro
rata with their shares in the statutory charter capital, except otherwise stipulated by the charter or other agreement between participants. An agreement on the dismissal of a participant in the partnership from the distribution of profits or losses is void.
74.2. Where, as a result of losses incurred by the partnership, the value of its net assets
becomes less than the amount of its statutory charter capital, profits obtained by the partnership shall not be distributed among participants until such time as the value of net assets exceeds the amount of the statutory charter capital.
Article 75. Liability of participants in a full partnership for its obligations
75.1. Participants of a full partnership shall bear joint and several subsidiary liability with
their own property for the obligations of the partnership.
75.2. A participant in a full partnership who is not a founder thereof shall be liable together
with other participants for obligations of the partnership, which arose prior to his joining the partnership.
75.3. A participant withdrawing from a partnership shall be liable for obligations of the
partnership which arose prior to his withdrawal together with remaining participants for a period of two years from the date of approval of annual statement of activities of the partnership for the year during which such participant withdrew from the partnership.
75.4. An agreement among the participants to limit or waive the liability specified by this
Article is void.
Article 76. Change of the composition of participants in a full partnership
76.1. Where so provided by the charter of the partnership or an agreement among
remaining participants, a partnership may continue its activities after withdrawal or death of any participant of the partnership, a declaration of one of the participants as missing, incapacitated or bankrupt, the opening of reorganization procedures with respect to one of the participants on the basis of a court order, the liquidation of a legal entity participating in the partnership, or execution levied by a participant’s creditor on the latter’s property corresponding to the share of such participant in the statutory charter capital.
76.2. Participants in a full partnership shall be entitled, by court order to exclude a
participant from the partnership by a unanimous decision of remaining participants, provided that there are sufficient grounds for doing so, in particular, as a result of a gross major violation by such participant of his obligations or discovering his inability to reasonably conduct business.
Article 77. Withdrawal of a participant from a full partnership
77.1. A participant in a full partnership shall be entitled to withdraw from a partnership by
declaring his withdrawal from participation in the partnership.
77.2. Withdrawal from participation in a partnership should be declared by the participant
no later less than six months prior to actual withdrawal therefrom.
77.3. An agreement among participants of a partnership to waive the right to withdraw
from the partnership is void.

Article 78. Consequences of withdrawal of a participant from a full partnership
78.1. A participant withdrawing from a full partnership shall be paid the value of that part
of property of the partnership corresponding to share of the participant in the statutory charter capital, unless otherwise provided by the charter. Upon an agreement among the withdrawing participant and remaining participants, the withdrawing partner may be given property in kind in lieu of its value. The portion or the value of the partnership property due to the withdrawing participant shall be determined on the basis of the balance sheet as of the date of his withdrawal, except for cases specified stipulated under Article 80 of this Code.
78.2. In case of the death of a participant in a full partnership, his heirs may join the full
partnership only upon consent of other participants, except as otherwise provided by the partnership’s charter. A legal entity successor to a legal entity, which participated in a full partnership may enter into the partnership upon consent of other participants, except as otherwise provided by the charter of the partnership. Settlements with an heir (legal successor), who does not join the partnership shall be carried out in accordance with Article 78.1 of this Code. The heir (legal successor) to a participant in a full partnership shall be liable for obligations of the partnership with respect to third parties, for which the withdrawing participant would have been liable pursuant to Articles 75.2 and 75.3 of this Code to the extent of succeeded property of the withdrawing participant.
78.3. Where one of the participants withdraws from the partnership, remaining
participants’ shares in the statutory charter capital of the partnership shall increase proportionately, except as otherwise provided by the charter or any other agreement between participants.
Article 79. Transfer of a participant’s share in the charter capital of a full partnership
79.1. A participant in a full partnership shall have the right to transfer, with the consent of
other participants, his share in the statutory charter capital or any portion thereof to another participant in the partnership or a third party.
79.2. In case of the transfer of a share (or a portion thereof) to another party, such party
shall receive all or the respective part of the rights of the transferor of the share (or portion thereof). The transferee shall be liable for obligations of the partnership in accordance with the procedure set forth in Article 75.2 of this Code.
79.3. A participant’s transfer of its full share to another party shall terminate the
participant’s participation in the partnership and have the consequences specified in Articles
75.2 and 75.3 of this Code.
Article 80. Forfeiture of share of participant in the compiled charter capital of a full
partnership
80.1. Forfeiture of share of participant in the property of a full partnership to [re]pay his
debts, which are not connected to his participation in the partnership (personal debts), shall be permitted only where his other property is not sufficient for payment of the debts. Creditors of such participant may demand that the full partnership allocate a part of its property corresponding to the share of such participant in the compiled charter capital of the full

partnership for the purpose of forfeiture. The part of the property of the partnership subject to allocation, or the value thereof, shall be determined as per balance sheets compiled as of the date of the creditors’ demand with regard to allocation of such property.
80.2. Forfeiture of property corresponding to the share of the participant in the compiled
charter capital of a full partnership shall terminate his participation in the partnership and have the consequences specified by Article 75.3 of this Code.
Article 81. Liquidation of a full partnership
81.1. A full partnership shall be liquidated on the basis specified in Article 59 of this Code,
as well as in case where only one participant remains in the partnership. Such participant shall be entitled to transform such partnership into a business company under the procedure specified by this Code within six months from date when he became the sole remaining participant in the partnership.
81.2. A full partnership shall also be liquidated in cases specified by Article 76.1 of this
Code, unless the charter of the partnership or agreement between remaining participants provides for continuation of the partnership activities of partnership.
Article 82. Limited partnership
82.1. A limited partnership shall means a partnership which consists, along with
participants conducting business activities on behalf of the partnership and being responsible for obligations of the partnership with their property (full partners), of one or more participants

• limited partners (commanditaires), who bear risk of losses related to activities of the
  partnership to the extent of the amount of their contributions and do not take part in the business activities of the partnership.
  82.2. Legal status of full partners participating in a limited partnership and their liability for
  obligations of such partnership shall be governed by the rules of this Code related to participants of a full partnership.
  82.3. A person may be a general partner in one limited partnership only. A participant in a
  full partnership may not be a full partner in a limited partnership. A full partner in a limited partnership may not be a participant in a full partnership.
  82.4. The company name of a limited partnership shall contain either names of all general
  partners and the words ‘limited partnership’, or name of at least one general partner followed by the words ‘and partners’ and ‘limited partnership’.
  82.5. Where the name of a limited partner is included into a company name of the limited
  partnership, such limited partner shall become a full partner.
  82.6. The rules of this Code applicable to a full partnership shall apply to a limited
  partnership only if such rules do not contradict to the rules of this Code applicable to a limited partnership.
  Article 83. Charter of a limited partnership
  A charter of a limited partnership shall contain, in addition to the information specified in
  Article 47.2 of this Code, terms and conditions with regard to the amount and composition of

the compiled charter capital of the partnership. an amount of and a procedure for changing each full partners’ share in the compiled charter capital. a composition of and a procedure for making thereof and their liability for breach of obligations on making contributions. and a cumulative amount of contributions made by companions
Article 84. Management and conduct of limited partnership affairs
84.1. Management of a limited partnership shall be carried out by full partners. The
procedure for the management and conduct of affairs of such partnership by full partners shall be established thereby in accordance with the rules of this Code regarding for full partnership.
84.2. Limited partners shall not have a right to participate in the management and conduct
of affairs of a limited partnership, or act on behalf of it without a power of attorney. They shall not be entitled to contest actions of full partners on management and conduct of affairs of the partnership
Article 85. Rights and obligations of a limited partner in a limited partnership
85.1. A limited partner in a limited partnership shall be obliged to make his contribution to
the compiled charter capital. Making of contribution shall be certified by a certificate of participation issued to a limited partner by the partnership.
85.2. A limited partner in a limited partnership shall have the right to:
85.2.1. receive a portion of the partnership’s profit corresponding to his share in the
compiled charter capital in accordance with the procedure specified by the charter.
85.2.2. have access to annual statements and balance sheets of the partnership.
85.2.3. at the end of the fiscal year, withdraw from the partnership and receive his share in
accordance with the procedure specified by the charter.
85.2.4. transfer his share in the compiled charter capital or a portion thereof to another
partner or a third party.
85.3. Limited partners shall have a pre-emptive right, under the conditions and procedures
set forth in Article 93.3 of this Code, to acquire a share (or part thereof) offered for sale to third parties. The transfer of a limited partner’s entire share to another person results in the termination of that partner’s participation in the partnership.
85.4. The charter of a limited partnership may also provide for other rights for limited
partners.
Article 86. Liquidation of a limited partnership
86.1. A limited partnership shall be liquidated in case of withdrawal therefrom of all
limited partners. However, full partners shall be entitled, instead of liquidation, to reorganize the limited partnership into a full partnership. A limited partnership shall also be liquidated on the basis specified for liquidation of a full partnership. However, a limited partnership shall continue to exist, provided that it has at least one full partner and one limited partner left therein.
86.2. Upon liquidation of a limited partnership, including liquidation as a result of
bankruptcy, limited partners shall have, in relation to full partners, a pre-emptive right to

receive their shares from assets of the partnership remaining after satisfaction of creditor claims. Assets of the partnership, remaining after this, shall be distributed among full partners in proportion of their shares in the compiled charter capital of the partnership, unless otherwise provided by the charter or an agreement between the general partners.
Article 87. Limited Liability Company
87.1. A limited liability company (LLC) shall mean company established by one or more
persons (individuals and (or) legal entity), the charter capital of which is divided into shares, the sizes of which are specified by the charter. Participants in an LLC shall not be liable for its obligations and shall bear the risk of losses associated with the activity of the company to the extent of the value of their contributions. The company shall not bear responsibility for liabilities of its participants before third parties.
87.2. Company can be established via foundation of new entity in accordance with the
Code hereof and re-organization (merger, consolidation, dissolutionç separation and conversion) with consideration of the rules and limitations established under the Code
87.3. The formation of a company shall involve convening a founding meeting and entering
into a foundation agreement (in the cases provided under Article 45.2 of this Code), or adopting a resolution on the establishment of the company (if established by a sole founder), payment of the charter capital (unless the company’s charter stipulates a specific period for its payment), and the preparation of the company’s charter.
87.4. Upon the establishment of a company, the founding meeting shall be convened after
the charter capital has been fully formed by founders (unless the company’s charter provides for payment of the charter capital within a specified period). The founding meeting shall be deemed competent (quorate) if all founders or their representatives are present. In the absence of a quorum, the meeting shall be reconvened. If a quorum is still not present at the reconvened founding meeting, the establishment of the company shall be deemed not to have occurred by the founders or their representatives in attendance, and this decision shall be communicated to all founders within seven days.
87.5. The founding meeting held during the establishment of the company shall:
87.5.1. approve the value of non-monetary contributions to the charter capital of company.
87.5.2. make decision on the establishment of company and approves its charter.
87.5.3. establish management bodies of the company stipulated under the Code hereof and
company charter.
87.5.4. resolve other issues on establishment of company and start of company operations
in compliance with the Code hereof, other legislative acts and contract made by and between the founders.
87.6. In the foundation meeting of the Company, decisions on foundation of the company,
approval of the Charter, approval of value of the non-monetary assets paid into the Charter Capital when establishing the company, organisation of management authorities shall be taken by founders unanimously, and decisions on other issues - with the majority of votes.
87.7. Founders of the Company shall bear joint responsibility for liabilities associated with
the establishment and up to state registration of the Company.
87.8. company name of a limited liability company shall contain the name of the company
and the words ‘limited liability company’.

87.9. The legal status of a limited liability company, as well as the rights and obligations of
the participants therein shall be determined by this Code.
87.10. A transaction amounting to more than fifty percent of the value of net assets of a limited
liability company shall be deemed a material transaction. The decision to conclude a material transaction shall be made at the general meeting of company's participants.
Article 88. Participants in a limited liability company
88.1. The number of participants in a limited liability company shall not exceed the
threshold specified by the legislation. Otherwise, such enterprise shall be reorganized into a joint stock company within one year and, upon expiry of such term, it shall be liquidated by the court, unless the number of participants therein is not reduced to the limit specified by the law.
88.2. A limited liability company may not have as its sole participant another business
entity that itself consists of a single person
Article 89. Charter of limited liability company
The charter of limited liability company shall specify, in addition to the information specified by Article 47.2 of this Code, information with respect to the amount of the charter capital of the company. the size of a share of each participant therein. the composition of and the procedure for making contributions by the participants. the liability of the participants for breaches violation of obligations with respect to making contributions. the composition and competence of management authorities of the company and the procedure for passing resolutions [decision-making] by such authorities, including resolutions with respect to issues, which require unanimous or qualified majority vote.
Article 90. Charter capital of limited liability company
90.1. A charter capital of an LLC shall be composed of the value of contributions of its
participants. The charter capital shall indicate the minimum amount of assets of the company securing interests of its creditors. The amount of the charter capital of the company may not be less than the amount, which secures interests of its creditors. The minimum amount of authorized capital in respect of entities supervised in financial markets and the procedure for their formation shall be determined taking into account the requirements of sectoral laws.
90.2. If the Charter of a limited liability company does not provide for payment of the share
capital within a certain period, founders should pay the share capital in full prior the state registration of the company. If the Charter of a limited liability company stipulates payment of the share capital within a fixed period, this period may not exceed three months.
90.3. It shall not be permitted to relieve any participant of a LLC from an obligation to
make a contribution into the charter capital of the company, inncluding by offsetting his claims to the company. 90.3-1. When increasing the charter capital of an LLC, on the basis of a unanimous decision of shareholders of the company, persons having a monetary claim against the company may be released from the obligation to make a contribution to the charter capital by offsetting monetary claims and becoming a

participant of the LLC. Such initiative may be taken by persons having a monetary claim against the company and (or) the company itself. Offsetting monetary claims held by persons against entities supervised in financial markets into shares in the charter capital of those entities shall be carried out taking into account the requirements regarding the acquisition of a qualifying holding as stipulated in the laws regulating financial markets.
90.4. If the value of net assets of an LLC becomes less than the amount of charter capital at
the end of the second or any subsequent fiscal year, the company shall declare a decrease in its charter capital and register such reduction in accordance with statutory procedure. If the value of the said assets of the company becomes less than the minimum amount of the charter capital, the company should be liquidated.
90.4. The charter capital of an LLC may be increased only after its full payment in
accordance with the procedure provided by the present Code and charter of a company by means of increase at the expense of property of a company in proportional form to the value of contributions of shareholders and (or) by means of making additional contributions by shareholders and (or) by means of offsetting monetary claims of persons having monetary claims against a company, with shares in the charter capital of this company and (or) at the expense of contributions of new shareholders admitted to a company. Except for availability of provisions in the laws regulating financial markets regarding offsetting monetary claims with shares in the charter capital of a company, if the outstanding loss of a company arisen as a result of economic activity exceeds its charter capital, offsetting of monetary claims against a company shall be allowed after elimination at the expense of making an additional contribution of the difference between this excess amount and the amount of debt provided for offsetting of shares. When determining the outstanding loss of the company arising as a result of business activities, expenses arising from depreciation charges on fixed assets shall not be taken into account.
90.5. Increase in the Charter capital of an LLC at the expense of Company’s property shall
be realized by decision of the General Meeting of the Company as specified in the Charter of the company. Such a decision may be taken only on the basis of the financial statements' data for previous year. Amount of the Charter capital increased through the Company property shall not exceed the difference between the net assets, amount of the Charter capital and reserves (funds) of the company. In case of increase in the Charter capital of the Company as specified in this
Article, asset value of all participants’ shares shall proportionally increase, without changing the
amount of participants’ shares.
90.6. Increase in the Charter capital of an LLC by means of additional contributions of
participants shall be realized by the General Meeting of the Company, as specified in the Charter of the company. By such a decision, total value of additional shares, as well as the ratio between the value of the participant’s additional share and the increased amount of his share’s nominal value shall be defined. This ratio shall be defined taking into account whether the nominal value of the participant’s share is increased equally to or less than his additional share. Each participant shall have the right to invest additional shares not exceeding the total value of additional shares and proportionally to the amount of such participant’s share in the Charter capital. Additional shares by participants shall be invested after the appropriate decision of the General Meeting and within the deadline determined by either the Charter or the decision of the General Meeting. Exceeding the deadline for investing additional share shall cause failure of increase in the Charter capital by the abovementioned means.

90.7. A decision of the General Meeting of the Company related to increase of the Charter
capital of the Company as provided for in Article 90.6 hereof shall be taken based on the participant’s(s’) written request on investment of additional share and/or, if not prohibited by the Charter, based on an application of a third party (parties) on accepting him to the Company and investing funds. The application shall include amount and composition of funds, rules and term of investment, and amounts of shares in the Charter capital that the participant or a third party wishes to have. The application may also include terms on investment of funds and other terms related to entering the Company. The General Meeting of the Company shall, based on the participants’ application, make a decision on increase of the Charter capital and on making amendments to the Charter in connection with the increase of Charter capital’s amount and nominal value of the funds received from the participants that have presented an application. The General Meeting shall, based on the third party’s application, make a decision on increase of the Charter Capital and also make decision on making amendments to the Charter related to acceptance of a third party to the Company, determining nominal value of his share and change of value of the participants’ shares. Nominal value of shares of a third party accepted to the Company shall be equal to or less than the amount of his share’s value. In case if the increase of the Charter Capital has failed, the Company shall within a reasonable time limit return additional funds of participants and funds of the third parties accordingly.
90.8. Reduction of the Charter capital of an LLC shall be realized by reducing the nominal
value of all participants’ shares. Reduction of the Charter capital by reducing the nominal value of all participants’ shares shall be realized with retention of the proportion of all participants’ shares. Reduction of the Charter capital of the Company shall be realized under the decision of the General Meeting. After the decision of the General Meeting on reduction of the Charter capital, the Company shall inform all of its creditors of such a decision within the deadline specified in the Charter or by the decision of the General Meeting. Within one month after the date of receiving the notice, the creditors of the Company shall have the right to request the Company to fulfil its appropriate liabilities before the appointed time or close down or compensate for losses incurred by themselves.
Article 90-1. Distribution of profits of a limited liability company
90-1.1. Distribution of the net profit received as a result of the activity of a limited liability company between its participants shall be realized on the basis of the decision accepted by the General Meting of the Company and in the order stipulated by the Charter of the Company. By the same decision may be determined full or partial distribution of the profit. 90-1.2. Each participant of an LLC shall have the right to receive a profit pro rata his share in the Charter Capital. Net profit shall be paid within one month after the decision of the General Meeting 90-1.3. A limited liability company may not make a decision on distribution of profits if:
90-1.3.1. at the time the decision provided for in Article 90-1.1 of this Code is made, the company meets the signs of insolvency or bankruptcy established by law, or such signs would arise as a result of that decision. 90-1.3.2. at the time the decision provided for in Article 90-1.1 of this Code is made, the value of the company’s net assets is less than its charter capital, or, as a result of that decision, it will become less than that amount.

Article 91. Management in a limited liability company
91.1. The general meeting of participants shall be the supreme superior body of an LLC. In
a company, where there is one participant only, authorities of the General Meeting shall be executed by the participant. In cases specified in the Charter of the Company, as well as in socially significant structures, board of directors (or supervisory board) and (or) auditing board (auditor) of the Company shall be established. In an LLC an executive body (collegial or individual) shall be established, which shall deal with current management of activities of the LLC and be accountable to the general meeting of the participants. The head and members of the collegial executive body of the company or the head of the sole executive body of the company may also be elected from persons other than participants of the company. 91.1-1. The General Meeting of participants of an LLC may be ordinary and extraordinary. Each participant shall have the right to participate in the General Meeting of the Company, elect (appoint) authorities of the Company, to be elected (appointed) to them and take part in an election (except in the cases provided for in Articles 49-1.2 and 49-1.3 of this Code), participate personally or be represented through his representative appointed as specified in this Code, require amendments to the agenda of the general meeting and addition of the agenda with new topics for discussion. Any agreement or act limiting the same rights of the participants shall be deemed void. At the General Meeting of participants of the Company, each participant shall have votes pro rata his/her share in the Charter capital of the Company. The head of a collective executive body or its members, not a participant of the Company, or the head of a sole executive body of the Company may participate in the General Meeting with advisory voting right. In addition to the matters assigned by this Code to the exclusive authority of the general meeting of the company’s participants, other matters may also be included within the competence of the general meeting of participants in accordance with the company’s charter. Whether such matters are specified in the charter or not, the general meeting may discuss any issue related to the company’s activities. 91.1-2. Ordinary General Meeting of participants of the Company shall be convened by the executive body within the period defined by the Charter, but not less than once every year. The General Meeting devoted to the results of the Company’s annual activity shall be convened not later than within four month after completion of a fiscal year. 91.1-3. An extraordinary general meeting of participants of the Company shall be convened in cases and in the order specified in law or the Charter. The extraordinary general meeting shall be convened by the initiative of the executive body as well as upon request of the board of directors (supervisory board), auditing board (auditor) or the participants holding at least ten (10) percent of all votes, as well as by other persons, designated by the law. Extraordinary General Meeting
of the Company under liquidation shall be convened by the liquidation committee. 91.1-4. The general meeting of the company’s participants shall be competent if participants holding more than fifty percent of the company’s shares are present. 91.1-5. If there is no quorum at the general meeting of the company's participants, the general meeting shall be convened by the executive body of the company under the procedure established by the company's charter, without changing the agenda of the general meeting. The re-convened general meeting is competent if there are participants who have fifty percent of the company. 91.1-6. In the absence of a quorum at a re-convened meeting, the general meeting shall be convened by the executive body of the company in the manner prescribed by the company's charter, without

changing the agenda of the general meeting. A reconvened general meeting shall be competent if attended by participants who have 25 percent of the company's shares. 91.1-7. Decisions on matters referred to the competence of the general meeting of the company, consisting of one participant, shall be taken by this participant individually and documented in writing.
91.2. The competence of management bodies of the company, as well as the procedure for
passing resolutions and acting on behalf of the company shall be determined in accordance with this Code and the charter of the company.
91.3. The exclusive competence of the general meeting of participants in the company shall
be to:
91.3.1. change the charter and the charter capital of the company.
91.3.2. establish and prematurely terminate executive bodies of the company.
91.3.3. approve company’s annual reports and financial statements, and distribute its profits
and losses.
91.3.4. decide on the reorganization or liquidation of the company.
91.3.5. elect and prematurely terminate the board of directors of the Company (or supervisory
board) and (or) audit committee (auditor) of the company.
91.3.6. decide on conclusion of transactions provided for in Articles 49-1.2 and 87.10 of this Code.
91.4. To verify the accuracy of annual financial statements of the LLC (except for micro and
small businesses), such company shall annually engage an independent auditor (external audit). An audit of annual financial statements of the company may also be conducted upon request of any of the participants. In this case, the audit shall be conducted at the expense of the participant requesting such an audit. The procedure for conduct of audits of the LLC shall be determined by the legislation and the charter of the company.
91.5. Companies shall not be required to publish information on results of conduct of its
affairs (public statement), except for the cases specified by the legislation. Note: ‘Socially significant structures’ specified in Articles 91.1, 91-4.1, 107.3 and 107-12.1 of this Code mean business entities specified in Article 2.1.9 of the Law of the Republic of Azerbaijan ‘on Accounting.’
Article 91-1. Board of directors (supervisory board) of a limited liability company
91-1.1. The board of directors (supervisory board) established in cases specified in Article
91.1. of this Code shall oversee activities of the company’s executive body during the period
between general meetings. If the charter does not provide for the election of an auditing board (appointment of an auditor), authorities of the auditing board (auditor) may be delegated to the board of directors (supervisory board) in accordance with this Code. 91-1.2. The charter shall determine the establishment of board of directors (supervisory board) of the company and its activity as well as the order of cancellation of its authorities. 91-1.3. A sole head of the company, head (member) of the collective executive body, external manager may not be a member of the board of directors (supervisory board). 91-1.4. The chairperson of the board of directors (supervisory board) of the company shall convene its meetings at least once every three months and preside at the meetings. The meeting of the board of directors (supervisory board) at the request of the audit committee (auditor), the executive body, members of the company's board and other persons that may be established by the charter, shall be convened by the chairperson of the board. The meeting of the board of directors (supervisory board) of the company shall be

convened in respect of entities supervised in financial markets and subject to the requirements of the Law of the Republic of Azerbaijan ‘on the Central Bank of the Republic of Azerbaijan.’ The rules for holding a meeting of the board shall be established by the charter of the company. 91-1.5. Decisions at a meeting of the board of directors (supervisory board) of a company shall be taken by a simple majority of votes, based on one vote for each member. With equal distribution of votes, the vote of the chairperson of the board shall be deemed decisive. 91-1.6. At meetings of the board of directors (supervisory board) of the company, meeting minutes shall be drawn up stating the place, time, participants, agenda, review of speeches, voting results and decisions. These minutes shall be signed by the chairperson and members of the board.
Article 91-2. Executive body of a limited liability company
91-2.1. Activities of an executive body of the Company and the order of making decisions by this authority shall be determined by the Charter of the Company and its internal documents. 91-2.2. A collective executive body of the Company shall consist only of individuals. 91-2.3. An agreement between the Company and the independent director of the Company shall be signed by a person presiding the general meeting of the Company’s participants where this person was elected or by a person who was authorized by the decision of the general meeting. Authorities of the independent director shall be executed by individual, with the exception of the case specified in Article 91-2.4 hereof 91-2.4. If specified in the Charter of the Company, authorities of the executive body of the Company may, on a contractual basis, be transferred to other individuals or legal entities (external manager). A contract signed by the external manager and the person approved at the general meeting and presiding the general meeting on behalf of the Company or one of the participants authorized by the general meeting shall be concluded . 91-2.5. The external manager shall, under the legislation, bear responsibility for unsatisfactory management with regard to the Company as an executive body and for damages to third parties.
Article 91-3. Auditing committee (auditor) of a limited liability company
91-3.1. In cases provided for by Article 91 hereof an auditing committee (auditor) shall be elected (appointed) by the general meeting of Company’s participants. 91-3.2. A procedure on the establishment of an auditing committee (auditor), its members and activity shall be determined by the Charter of the Company. 91-3.3. Individuals shall be elected as (appointed to) members (as auditors) of the auditing committee of the Company. Election to members of the auditing committee (appointment of an auditor) of persons not being participants of the Company shall be allowed. Head (member) of the board of directors (supervisory board)or head (member) of the collective executive body, an independent director or external manager may not be elected a member (appointed an auditor) of the auditing committee. 91-3.4. The auditing committee (the auditor) of the Company shall have the right to audit financial and economic activity of the Company and receive all documents relating to the activity of the Company. Upon the request of the auditing committee (the auditor), head of the board of directors (supervisory board) and head (members) of the collective executive body,

independent director, external manager shall be liable to present necessary information either verbally or in writing. 91-3.5. If the Company has an auditing committee (auditor), without the opinion of this body the general meeting of the Company’s participant shall neither approve annual reports and financial statements of the Company, nor make decision on distribution of profits and losses.
Article 91-4. Audit Committee of a limited liability company
91-4.1. In companies with more than fifty participants, as well as in socially significant structures, the board of directors (supervisory board) shall establish an audit committee for the preparation, implementation of the internal audit policy and strategy and the organization of audit control. If specified in the company's charter, the audit committee shall be established in companies with less than fifty participants. 91-4.2. The procedure for the formation of the audit committee of the company, its composition, procedure of activities shall be established by law and the charter of the company. 91-4.3. Members of the executive body of the company and (or) members of the company may not be a member of the audit committee. Members of the board of directors (supervisory board) of the company may be a member of the audit committee 91-4.4. Internal audit of company's activities shall be carried out at an initiative of the audit committee by the decision of the general meeting or the board of directors (supervisory board) or the request of participants owning more than ten percent of company's shares and the executive body of the company. 91-4.5. At the request of the company's audit committee, all bodies and officials of the company should provide documentation related to financial and economic activities of the company. 91-4.6. The audit committee shall subordinate to the board of directors (supervisory board).
Article 92. Reorganization and liquidation of a limited liability company
92.1. A limited liability company may be reorganized or liquidated voluntarily upon the
unanimous decision of its participants. Other grounds for reorganization and liquidation of the company, as well as the procedure for the reorganization and liquidation thereof shall be determined by this Code.
92.2. A limited liability company may be converted into a joint stock company.
Article 93. Transfer of a share in the charter capital of a limited liability company
93.1. A member (participant) of an LLC may sell or otherwise transfer all or part of his
share in the company’s charter capital to one or more participants of that company.
93.2. Alienation by the participant in the company of his share (or a portion thereof) to
third parties shall be permitted unless otherwise provided by the charter of the company.
93.3. Participants in the LLC shall have a right of first refusal to purchase a participant’s
share (or portion thereof) proportionally to their own shares, unless different procedure for exercising of such right is stipulated in the company’s charter or an agreement between participants provides for a different procedure for exercising of such right. If a participant of the company wishes to alienate his share (part thereof), he should offer a buy-out of this share (part thereof)

primarily to other members of the company. If the participants of the company do not exercise their preemptive right within one month from the date they are notified, or within another period specified in the company’s charter or in an agreement between its participants, the participant’s share may be alienated to a third party.
93.4. Where, pursuant to the charter of an LLC, alienation of a participant’s share (or
portion thereof) to third parties is impossible, and other participants in the company refuse to purchase this share, the company shall be obliged to acquire the participant’s share.
93.5. In case of acquisition of a participant’s share (or portion thereof) by an LLC itself, the
company shall be obliged to sell such a share to other participants or third parties within a term and under the procedure specified by the company’s charter, or reduce charter capital pursuant to Articles 90.4 and 90.5 of this Code.
93.6. Shares in the charter capital of the LLC shall be transferred to heirs of individuals and
successors of legal entities, which have been participants of the company, unless the company’s charter provides that such transfer is subject to the consent of the other participants in the company. Refusal to approve such transfer of share shall entail obligation of the company to pay to heirs (legal successors) of the participant the real value of his share or give them property in kind, the value of which equals to the value of such share under such procedure and such terms and conditions as specified [stipulated] by the company’s charter.
93.7. A person willing to acquire fifty percent or more of a company’s shares officially submits a
respective offer to all participants.
Article 94. Forfeiture of participant’s share in the property of a limited liability company
94.1. Forfeiture of a participant’s share in the property of an LLC to [re]pay his personal
debts shall be permitted only where the participant’s other property is not sufficient for payment of debts. Creditors of such participant may request that the LLC pays a part of its property, corresponding to the share of the debtor in the charter capital, or allocate such a part of the property for the purpose of forfeiture. The part of the property of the company subject to allocation, or its value thereof, shall be determined as per balance sheets compiled as of the date of submission of the creditors demand.
94.2. Forfeiture of the entire share of a participant in the LLC shall terminate his
participation in the company.
Article 95. Withdrawal of a participant from a limited liability company
A participant of an LLC may withdraw from the company at any time, regardless of the consent of other participants.
Article 96. Settlements upon withdrawal of participant from a limited liability company
96.1. A participant withdrawing from an LLC shall receive the value of property
corresponding to the share of such participant in the charter capital of the company, except otherwise provided by the charter of the company. Pursuant to an agreement between the withdrawing participant and the company, payment for the value of the property may be substituted by giving the property in-kind. A part of the property or the value thereof due to

withdrawing participant shall be determined based on the balance sheets compiled as of the date of the withdrawal.
96.2. Where the right for property use was contributed into the charter capital of the LLC,
the relevant property shall be returned to a withdrawing participant. Reduction of the value of such property as a result of ordinary regular wear and tear shall not be compensated.
96.3. While a heir of the participant in the company or a legal successor of the legal entity
participating therein do not enter the company, settlements therewith shall be conducted pursuant to the provisions of this Article.
Article 97. Additional liability company
97.1. An additional liability company shall mean a company established by one or more
persons, the charter capital of which is divided into shares of a size established by the charter. Participants of such company jointly bear a joint subsidiary liability for obligations of the company by their property in the amount equal for all of them and commensurate with the value of their contributions, and determined by the company’s charter. Upon bankruptcy of one of the participants, his liability for obligations of the company shall be divided among remaining participants in proportion to their contributions, provided that the company’s charter does not stipulate another procedure of distribution of liability.
97.2. A company name of the liability company shall contain the name of the Company and
the words ‘additional liability company’.
97.3. The rules of this Code applicable to LLCs shall apply to additional liability companies
unless otherwise provided by this Article.
Article 98. Joint-stock company
98.1. A joint stock company shall mean a company the charter capital of which is divided
into a certain number of shares.
98.2. Only joint stock companies shall have the right to issue shares. Property of the
Company shall be formed as a result of investment of its shares, its financial and economic activity as well as by other resources not prohibited by the Law.
98.3. Under this Code, a joint stock company shall be established through the creation of a
new company or as a result of reorganization (merger, dissolution, separation, conversion) of a legal entity, acting subject to the rules and restrictions provided for by this Code, Laws of the Republic of Azerbaijan on Banks, on Insurance Activity, on Investment Funds and on Credit Unions.
98.4. Participants in a joint stock company (shareholders) shall be liable for its obligations
and bear risk of loss associated with the company’s activity to the extent of the value of their shares.
98.5. A joint-stock company may be established by one person (individual or legal entity)
or consist of one person (individual or legal entity), where one shareholder have purchased all of the shares of the company. Information on this shall be included into the charter of the company, be registered and published for being available to the public. A legal entity consisting of one person may not be a sole founder of a joint stock company.
98.6. A company name of a joint-stock company shall contain its name as well as the words
‘open joint stock company’ or ‘closed joint stock company’.

98.7. The legal status of a joint-stock company and the rights and obligations of
shareholders shall be determined respectively by this Code, Laws of the Republic of Azerbaijan on Banks, on Insurance Activity and on Investment Funds.
98.8. Particular aspects of establishment of joint-stock companies upon privatization of
state-owned enterprises shall be determined by legislation on privatization of such companies.
98.9. Establishment of joint-stock company shall cover holding of a foundation meeting and
making agreement (in case if it is specified in Article 45.2 hereof) or making decision on establishment of joint-stock company (in case if the joint-stock company is established by one person), distribution of shares between founders and preparation (acceptance) of the Charter.
98.10. When establishing a joint-stock company, the foundation meeting shall be held
within the timframee stipulated by the agreement between founders, and after distribution of all shares of the Company among the founders. The foundation meeting shall be deemed to be legal if all founders or their representatives participate in the meeting (i.e. quorum is secured). In cases when the quorum is not secured, second meeting shall be held. If at the second meeting the quorum was not secured, establishment of the joint-stock company shall be deemed not happened according to the decision of founders or their representatives participating at the meeting and this decision shall be communicated to all founders within seven days.
98.11. The foundation meeting held for the establishment of a joint-stock company shall:
98.11.1. approve value of the non-monetary property directed to the payment of shares
invested when establishing the joint-stock company.
98.11.2. make decision on establishment of the join-stock company and approves it Charter.
98.11.3. organize management, control and executive bodies of the Company as specified
respectively in this Code, Laws of the Republic of Azerbaijan on Banks, on Insurance Activity and on Investment Funds and in the Charter of the joint-stock company.
98.11.4. make decisions on other issues, associated with establishment of the Company and
commencement of its activity, not conflicting with this Code, other legislative acts and the agreement between the founders.
98.12. At the foundation meeting of the Company, decisions on establishment of the
company, approval of the Charter, approval of value of the non-monetary property directed to the payment of shares invested when establishing the joint-stock company, establishment of management, control and executive authorities shall be made unanimously and decisions on other issues- by simple majority.
98.13. When founding a joint-stock company, issuance and state registration of shares shall
be performed respectively according to this Code, Laws of the Republic of Azerbaijan on Banks, on InvestmentFunds and on Securities Market.
98.14. Founders of a joint-stock company shall bear joint liability for the obligations arising
in connection with the establishment and prior to the state registration of the company.
98.15. For banks, insurers and licensed persons in the securities market in connection with the
issues mentioned in Articles 98.4, 98.5 and 98.11.1 of this Code, the provisions of the Laws of the Republic of Azerbaijan on Banks, on Insurance Activity and on Securities Market, and in relation to joint-stock investment funds in connection with issues mentioned in Articles 98.5 and 98.11.1 of this Code, the provisions of the Law of the Republic of Azerbaijan on Investment Funds shall apply.
Article 99. Open joint-stock company

99.1. A joint-stock company, whose participants may dispose of their shares without the
consent of other shareholders shall be deemed an open joint-stock company. Such a company shall have the right to hold open subscription to shares it is issuing and their free unlimited sale.
99.2. A public joint-stock company shall be obliged to publish its annual report and financial
statements (except for micro and small businesses), and the following information, each year for public access:
99.2.1. financial indicators for the reporting period.
99.2.2. material transactions concluded with related parties.
99.2.3. funds attracted.
99.2.4. management bodies and officials, their main and additional places of employment.
99.2.5. management structure.
99.2.6. development policy.
99.2.7. return on equity and the dividend policy.
99.2.8. payments made to each member of management bodies.
99.2.9. the volume and sources of investment.
99.2.10. turnover and profitability of the company's securities.
99.2.11. public projects.
99.3. Transactions amounting to more than 25% of the value of net assets of an open type
joint-stock company shall be deemed as material. A decision on concluding a material transaction shall be made at the general meeting of shareholders and related information shall be disclosed. The procedure for disclosing this information shall be stipulated by the Charter of the joint-stock company. Banks and local branches of foreign banks shall not be subject to the requirements of this Article.
99.4. Any transaction, agreement or collection of associated transactions between any
person related to an open type joint stock company and this company shall be deemed to be a related party transaction. With the exception of cases provided for by the legislation, list of related persons, rules of concluding transactions between them and the company and disclosure of information about such transactions shall be determined by the relevant executive authority.
Article 100. Closed joint-stock company
100.1. A joint stock company, whose shares are distributed only among its founders or
other predetermined persons, shall be deemed a closed joint-stock company. Such a company may not hold public subscription to shares it is issuing or otherwise offer them for acquisition by unlimited range of persons.
100.2. The number of participants in a closed joint-stock company shall not exceed the
threshold established by the relevant executive authority. Otherwise, such a company shall within one year be converted into an open joint-stock company and upon expiry of such a term it shall be liquidated by the manner of court ruling, provided that the number of shareholders has not been reduced to the limit established by the relevant executive authority.
100.3. A closed joint-stock company shall be obliged to publish the documents listed in
article 99 of this Code for public access.
Article 101. Transfer of shares in a closed joint-stock company to third party

101.1. Shareholders of a closed joint-stock company shall have a preemptive right to
acquire shares sold by other shareholders of the company. Where none of the shareholders exercises his preemptive right within the term specified in the company’s charter but within thirty days after the date of announcement of sales, the company may purchase the shares at a price agreed with the selling shareholder during 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. In this case the sale price of the share shall not be less than the price offered to shareholders or to the joint-stock company. Otherwise, the joint-stock company may demand invalidation of this transaction and sale of this share at the same price to the Company through the court.
101.2. Where shares have been pledged and the pledgee has enforced such a pledge, the
provisions of Article 101.1 of this Code apply.
101.3. The shares of a closed joint stock company pass to the heirs of an individual or to the
legal successors of legal entities, who are shareholders in the joint stock company, unless otherwise provided for in the company’s charter. The provisions of Article 101.1 of this Code apply where the company refuses to consent to the transfer of shares to the heirs of an individual, or legal successors of a legal entity, who were shareholders in the company.
Article 102. Charter of a joint-stock company
102.1. The charter of a joint stock company shall include, in addition to the information
specified in Article 47.2 of this Code, the information on the categories of shares to be issued, their nominal value and quantity, the amount of the company’s charter capital, the rights of shareholders, the membership and powers of management bodies and their decision-making procedure, including decisions requiring a unanimous or a qualified majority vote.
102.2. The Charter of a joint-stock company may also provide for other information not
conflicting with the legislation.
102.3. Observance of requirements of the Company Charter shall be mandatory for all
bodies of the Company, its officials and shareholders.
102.4. A joint-stock company shall provide opportunity to its shareholders to make
themselves familiar with the Charter, additions and changes to it. Upon their request, a copy of the Charter shall be given to him.
102.5. Except in cases provided for by the Law of the Republic of Azerbaijan on Banks, a decision to
make amendments or additions to the company’s charter shall be made at the general meeting of shareholders by a two-thirds majority of the votes of shareholders entitled to vote.
Article 103. Charter capital of a joint-stock company
103.1. The charter capital of a joint stock company shall consist of the nominal value of
shares acquired by shareholders of the company. Forms of investments to the charter capital of the joint-stock company shall be determined respectively, by this Code, sectoral laws and an agreement made between the founders. Investments to the charter capital of the company may be in the form of monetary funds, fully paid securities, other property, including property rights and other rights having cash value. When establishing a joint-stock company the value of non-

cash property shall be determined by the decision of the foundation meeting, and after establishment of the company - by the decision of the general meeting of company shareholders.
103.2. The charter capital of a joint stock company shall define the minimum amount of
property of the company, which secures the rights of creditors. The amount of the charter capital may not fall below the amount specified by the relevant executive authority and the Central Bank of the Republic of Azerbaijan in cases stipulated by the laws regulating financial markets.
103.3. Founders of a joint stock company shall pay the charter capital in full before the joint
stock company is registered. Upon the establishment of a joint-stock company, all of its shares shall be distributed among its founders
103.4. Shareholders may not be relieved of the duty to pay for their shares in the company,
including by setting-off claims against the company or otherwise.
103.4-1. By two-thirds majority of votes of shareholders of a joint stock company having the right to vote, persons having a monetary claim against the company may be released from the obligation to pay for company's shares by offsetting monetary claims and becoming a shareholder of the company (acquiring additionally issued shares). Such an initiative may be proposed by persons having a monetary claim against the company and (or) the company itself. Acquisition of additionally issued shares by offsetting monetary claims against the company shall be allowed by a private placement method. Offsetting monetary claims of persons having a monetary claim against entities supervised in financial markets with shares in the charter capital of these entities shall be carried out subject to the requirements for acquisition of a qualifying holding established by the laws regulating financial markets.
103.5. Where at the end of the second or any subsequent fiscal year the net value of joint￾stock company’s assets falls below the amount of its charter capital, the company shall reduce its
charter capital and register such reduction in accordance with statutory procedure. A company shall be subject to liquidation where the value of its assets falls below the minimum amount of charter capital specified by the relevant executive authority, except as provided for by sectoral laws.
103.6. A joint stock company’s charter may restrict the number of shares, the total nominal
value of shares or the maximum number of votes, one shareholder may have.
Article 104. Increase of the charter capital of a joint-stock company
104.1. Pursuant to a resolution of the general meeting of shareholders, a joint stock
company may increase the amount of its charter capital by increasing the nominal value of its shares or by issuing additional shares. If persons having a monetary claim against the company take the initiative to acquire shares by offsetting the monetary claim, the decision to issue additional shares should specify the persons who will acquire these shares. The procedure for increasing the nominal value of shares of a joint-stock company and issuing additional shares shall be determined by the Central Bank of the Republic of Azerbaijan. 104.1-1. Except for the cases when the laws regulating financial markets include provisions related to the offsetting monetary claims with additionally issued shares, if the outstanding loss of the company arising as a result of business activities exceeds its charter capital, the offsetting monetary claims against the company shall be allowed after the difference between this excess amount and the amount of debt eligible for offsetting with additionally issued shares is eliminated through the additional issue of shares. When determining the outstanding loss of the company arising as a result of business activities, expenses arising from depreciation charges on fixed assets shall not be taken into account.

104.2. Shareholders, holding ordinary (common) or other voting shares shall have the pre-emptive
right to purchase shares additionally issued by the company in the manner prescribed by the company's charter. A person willing to buy fifty or more percent of the shares of the company shall submit the respective proposal to all shareholders in an official manner.
Article 105. Reduction of the charter capital of a joint-stock company
105.1. Pursuant to a resolution of a general meeting of shareholders, a joint-stock company
may reduce amount of its charter capital by means of reduction of the nominal value of shares or redemption of a portion of the shares for the purpose of reducing the total number of shares.
105.2. Within fifteen calendar days after making decision at the general meeting of
shareholders on reduction of charter capital of the joint-stock company, the company shall inform its creditors in writing of this decision. The creditors of the company, within thirty calendar days after receiving such information, may request the pre-mature execution or cancellation of liabilities and payment of losses incurred.
105.3. Reduction of a joint stock company’s charter capital by means of redeeming and
canceling a portion of the shares shall be permitted where the company’s charter provides for such a procedure.
105.4. Except for the cases stipulated by sectoral laws, a reduction of the charter capital of a
joint-stock company below the minimum amount established by the relevant executive authority shall entail liquidation of the company.
Article 105-1. Withdrawal of shares invested by a joint-stock company
105-1.1. Withdrawal of shares invested by joint-stock company shall be executed upon the request of shareholders in cases specified in this Code or in the charter of the company. 105-1.2. To reduce the amount of the charter capital and the number of shares, the Company may, based on the decision of the general meeting, withdraw part of the previously invested shares. In such a case total nominal value of shares remained in turnover shall not be less than the minimum limit determined by the legislation for the charter capital. 105-1.3. keçirilir Withdrawal of shares, with the exception of cases when withdrawal of shares is done through the stock exchange, shall be carried out by the consent of the shareholders, and at the price determined for the share at the general meeting. 105-1.4. A decision on withdrawal of shares of the company shall not be made if:
105-1.4.1. charter capital of the company is not formed in full.
105-1.4.2. a decision on the liquidation of the company has been made.
105-1.4.3. withdrawal of their shares is not completed based on the shareholders request. 105-1.5. Withdrawn shares shall not be considered during voting and no dividends shall be paid on them. These shares should be either alienated or withdrawn from circulation within one year from the date of withdrawal by resolution of the general meeting.
Article 106. Issuance of joint-stock company securities

106.1. Issuance, investment, circulation and withdrawal from circulation of shares, bonds and
other securities shall be executed by this Code, other legislative acts accepted in compliance with this Code and according to the charter of the company.
106.2. A joint-stock company shall have the right to issue simple and privileged shares. The
portion of privileged shares in the total volume of the charter capital of the company shall not be more than twenty five percent. A privileged share shall provide its owners with a privilege over other shareholders in buying the property portion remained after liquidation of the Company and other rights related to terms of issue of such shares. Except as otherwise provided for in this Code and in the charter of the company, privileged shares shall not entitle their owners to participate in the management of the company activities.
106.3. Consolidation, split and conversion of securities of a joint-stock company shall be
executed according to Article 1078-26 of the Code.
Article 106-1. Shareholders of the joint-stock company
106-1.1. A shareholder of a joint-stock company shall be an individual and (or) legal entity holding one or more shares of the company in the order defined by this Code. 106-1.2. If more than one person holds one share, they shall be considered as one person in relation to the joint-stock company and may execute their rights through a representative. 106-1.3. The owner of a joint-stock company’s ordinary share shall:
106-1.3.1. participate in the management of the company as specified by this Code, other legislation and the charter of the company, elect and be elected to its management and executive bodies. 106-1.3.2. in the order determined by the legislation, receive information about the activity of the company, once every year become familiar with its annual report and financial statements. 106-1.3.3. request convening a general meeting of the company shareholders. 106-1.3.4. request making changes to the agenda of the general meeting of shareholders and addition of new issues for discussion to the agenda. 106-1.3.5. participate in the general meeting of shareholders with voting right (except in the cases provided for in Articles 49-1.2 and 49-1.3 of this Code) and request a copy of meeting minutes. 106-1.3.6. request the review of activities of the company by the auditing committee or the auditor. 106-1.3.7. receive dividends from the net profit of the company. 106-1.3.8. in case of the termination of the company, after satisfying claims of the creditors, payment of calculated but not yet paid dividends as well as liquidation value of privileged shares, receive certain part of the remaining property of the company. 106-1.3.8-1. demand that the members of the executive body and the board of directors (supervisory board) be held liable for negligence and for intentionally causing damage to the joint-stock company. 106-1.3.8-2. participate in the sale of shares of the company. 106-1.3.8-3. apply to the court or other competent authority for the compensation of damage caused to the company or shareholders as a result of a concluded transaction and for the reimbursement of related expenses. 106-1.3.8-4. review the annexes to the transactions to be concluded (transactions with related parties and material transactions). 106-1.3.9. enjoy other rights provided for by this Code and the charter of the company.

106-1.4. The rights of owners of privileged shares of the company shall be determined under this Code and the charter of the company. 106-1.5 According to the charter of the joint-stock company, owners of preferred shares shall acquire voting rights in decisions concerning the following issues:
106-1.5.1. re-organization of the joint-stock company.
106-1.5.2. liquidation of the joint-stock company.
106-1.5.3. making additions and changes to the charter related to limitation of rights on privileged type of shares owned by the shareholder. 106-1.6. The shareholder of the joint-stock company shall:
106-1.6.1. not disclose to third parties any information considered a trade secret or confidential under the law and/or the charter. 106-1.6.2. present within ten calendar days a written notice to the central depository on changes made to the information related to him/her in the register. 106-1.6.3. fulfil other duties provided for by the legislation. 106-1.7. Protection of the rights of shareholders of the joint-stock company shall be ensured by this Code, other laws and legislative acts.
Article 106-2. Register of the shareholders of a joint-stock company
106-2.1. A joint-stock company shall ensure registration of shareholders no later than within thirty days after the state registration of the company. 106-2.2. The register of shareholders of the joint-stock company shall be maintained by the central depository. 106-2.3. A shareholder may once a year request the executive body of the company to present him/her the register of shareholders. In such a case, the executive body of the joint-stock company shall within five days present the Register of shareholders to the said shareholder.
Article 106-3. Profits and dividends of a joint-stock company
106-3.1. Net profits of a joint-stock company shall be formed after the payment of taxes and other mandatory assignments, and may be directed to objectives determined by the legislation and the charter of the company. Distribution of net profit of the joint-stock company on fiscal year shall be decided by the general meeting of shareholders. 106-3.2. A joint-stock company may, whether determined by the Charter of the company or not, pay interim (quarterly, half year) dividends on shares being in turnover. Obligations for payment of dividends of the joint-stock company arise from the date of a decision on their payment and are executed within 30 (thirty) days. The change in the composition of shareholders shall not affect the execution of the decision to pay dividends in the manner and within the timeframe established by this Code 106-3.3. A dividend on an ordinary share is a portion of net profit of the company distributed to shareholders as payments calculated per ordinary share. 106-3.4. A dividend on preferred shares is an amount paid to owners of preferred shares, typically as a fixed percentage of the nominal value of the share, regardless of results of the joint-stock company’s economic activities. To ensure the payment of this amount, the joint-stock company may create special funds from its own resources.

106-3.5. The decision on dividends and the procedure for their payment (if not specified in the charter) shall be made by the general meeting of shareholders upon the proposal of the company’s board of directors (supervisory board), or, if such bodies have not been formed, by the company’s executive body. 106-3.6. A joint-stock company shall carry out calculation (distribution) of dividends on ordinary shares after calculation (distribution) of dividends on all types of privileged shares. 106-3.7. Dividends on preferred shares that grant a priority right in dividend calculation (distribution) shall be distributed before dividends on other preferred shares. 106-3.8. When calculating dividends, the amount allocated per share should be the same for each type and nominal value of shares. 106-3.9. If the value of a joint-stock company’s net assets is less than its charter capital, or would become less as a result of paying dividends, the company may not declare or pay dividends.
Article 107. Management of a joint-stock company
107.1. The supreme governing body of a joint-stock company shall be its general meeting of
shareholders. Exclusive powers of the general meeting of shareholders shall include:
107.1.1. change the charter of a company or the amount of the charter capital.
107.1.2. elect and dismiss members of the board of directors or supervisory board and the
audit committee or the auditor.
107.1.3. establish and dismiss company’s executive bodies provided that this matter is not
within the competence of the board of directors (supervisory board).
107.1.4. approve annual reports, financial statements and distribute profits and losses of the
company.
107.1.5. decide to reorganize or liquidate the company.
107.1.6. decide to conclude transactions specified in Articles 49-1.2 and 99.3 of this Code.
107.2. Decisions which, pursuant to this Code, fall within the exclusive competence of the
general meeting of shareholders may not be delegated to executive bodies of the company.
107.3. A board of directors or supervisory board shall be established in a company with
more than 50 shareholders, as well as in socially significant structures. Where a board of directors or supervisory board is established, the charter shall define its exclusive powers. Matters allocated by the company’s charter to the exclusive competence of the board of directors or supervisory board may not be delegated to company’s executive bodies for resolution.
107.4. The company’s executive body may be either collegiate (management board,
directorate) or sole (director, general director). He/she shall manage day-to-day activities of the company and report to the board of directors or supervisory board and the general meeting of shareholders. All matters which, pursuant to this Code or the charter, do not fall within the exclusive competence of other management bodies of the company shall be within the competence of the company’s executive body. Except for the cases specified in the Laws of the Republic of Azerbaijan on Banks and on Insurance Activity, upon a resolution decision of the general meeting of shareholders, the duties of the company’s executive body may be delegated to any other commercial organization or private entrepreneur (manager) on a contractual basis.
107.5. The competence of management bodies of a joint-stock company and the procedure
for decision-making and acting on behalf of the company shall be determined in accordance

with this Code, the Laws of the Republic of Azerbaijan on Banks, on Insurance Activity, on Investment Funds and the company’s charter.
107.6. During the publication of the documents specified in Article 99 of this Code, the
joint-stock company shall be obliged to engage an independent auditor to review its annual financial statements. At the request of shareholders whose total share in the charter capital is ten percent or more, an audit of the joint-stock company’s activities should be conducted at any time. The procedure for conducting an audit of joint-stock company’s activities shall be determined by legislation and the company’s charter.
Article 107-1. Convening general meetings of shareholders
107-1.1. General meetings of shareholders may be as ordinary and extraordinary. 107-1.2. Ordinary general meeting of shareholders shall be convened no less than once a year (annual general meeting). 107-1.3. Apart from the cases prescribed by the Law of the Republic of Azerbaijan on Banks, the board of directors (supervisory board) shall convene annual general meeting of shareholders no later than six months after financial year is ended and shareholders shall be informed about this. If there is no board of directors of the company (supervisory board), convening of general meeting of shareholders shall be carried out by the executive body of the company. 107-1.4. Forty-five days before the convening of the general meeting of shareholders, information about the meeting should be communicated to the media (except in cases of convening the general meeting of shareholders of a closed joint-stock company), and a written notice should also be sent to shareholders or nominal holders. The nominal holder should ensure that this notice is delivered to the shareholder. 107-1.5. Notifications about convening the general meeting of shareholders should specify:
107-1.5.1. the name and location of the company.
107-1.5.2. the date, time and venue of shareholders’ general meeting.
107-1.5.3. the agenda of shareholders’ general meeting.
107-1.5.4. the rule of getting acquainted with materials on agenda of shareholders’ general meeting. 107-1.6. Except for the cases specified in law, an extraordinary general meeting of shareholders shall be convened by the company’s executive body at the initiative of the board of directors (supervisory board) or at the written request of the audit commission (auditor) or shareholders holding ten percent of voting shares. If the company does not have a board of directors (supervisory board), the extraordinary general meeting of shareholders shall be convened at the initiative of the executive body. 107-1.7. The request to convene an extraordinary general meeting of shareholders should specify the matters proposed for the agenda. These matters should be included in the agenda of the meeting. 107-1.8. From the date the request (initiative) to convene an extraordinary general meeting of shareholders is received, the executive body should:
107-1.8.1. within three working days, set the date and venue of the shareholders’ general meeting and, except in cases of convening the general meeting of shareholders of a closed joint￾stock company, announce this in the media.

107-1.8.2. within five working days send notices about the convening of the shareholders’ general meeting to shareholders. 107-1.8.3. ensure that the shareholders’ general meeting is held not earlier than thirty days and not later than forty-five days.
Article 107-2. Quorum at general meetings of shareholders
107-2.1. The general meeting of shareholders shall be deemed competent when at least owners of sixty percent of voting shares participate in the general meeting of shareholders. 107-2.2. If there is no quorum at the shareholders’ general meeting, the meeting should be reconvened in accordance with Article 107-1.8 of this Code, except in cases provided by the Law of the Republic of Azerbaijan on Banks. In this case, the agenda of the general meeting should not be changed. The reconvened general meeting shall be authorized if share owners holding 40 percent of voting shares are present. 107-2.3. If there is no quorum at the reconvened meeting, the general meeting should be convened again under Article 107-1.8 of this Code, without changing the agenda, except in cases provided by the Law of the Republic of Azerbaijan on Banks. The general meeting called for the second time shall be authorized if share owners holding 25 percent of voting shares are present 107-2.4. According to Article 107-2.3, if a quorum is not achieved for the reconvened general meeting, the company may be liquidated by a decision of the general meeting regardless of the quorum, or by a court decision based on a claim by the Central Bank of the Republic of Azerbaijan, after notifying the Central Bank of the Republic of Azerbaijan. Shareholders shall have the right to appeal to the court against the decision of the general meeting regarding the liquidation of the company.
Article 107-3. Procedure for shareholder participation in general meetings
107-3.1. A shareholder shall exercise the right to participate in the general meeting either personally or through a representative. In this case, the shareholder’s representative should have a power of attorney drawn up in accordance with the procedure established by law. 107-3.2. If provided for in the company’s charter, a shareholder may participate in the voting at the general meeting in absentia by expressing a clear and unconditional position on the matters on the agenda (in favor, against, or abstaining) and by having his/her signature certified in the manner prescribed by law (notarized or otherwise) through a written document. 107-3.3. The company’s charter shall determine the procedure for voting in absentia. 107-3.4. If a share is owned jointly by several persons, the right to vote at the general meeting shall be entrusted to one of the owners or to their common representative in accordance with the procedure established by law. 107-3.5. Voting at the shareholders’ general meeting shall be conducted on the principle of ‘one voting share — one vote’.
Article 107-4. Counting committee
107-4.1. In general meetings of companies with more than one hundred shareholders, a counting committee of at least three members shall be established to determine results of the

voting. Members of the board of directors (supervisory board), the audit committee (auditor), executive bodies (sole executive body), and candidates for these positions shall not be included in the counting committee. 107-4.2. The procedure for the establishment of the counting committee shall be determined with the charter of company. 107-4.3. Counting committee minutes shall be added to general meeting minutes.
Article 107-5. Decision of shareholders’ general meeting
107-5.1. Unless otherwise provided by this Code or the company’s charter, decisions of the shareholders’ general meeting shall be made by a simple majority of shareholders present at the meeting, taking into account the provisions of Article 107-3.5 of this Code. Decisions on the reorganization or liquidation of the company, as well as on amendments and additions to the charter, shall be made by a two-thirds majority of shareholders entitled to vote at the general meeting, except as otherwise provided by the Law of the Republic of Azerbaijan on Banks. 107-5.2. The shareholders’ general meeting may not make decisions on matters that are not included in the agenda. 107-5.3. Decisions made by the shareholders’ general meeting should be announced to shareholders no later than fifteen calendar days. 107-5.4. Shareholders may appeal decisions of the general meeting of shareholders in court.
Article 107-6. Minutes of shareholders’ general meeting
107-6.1. Minutes of the shareholders’ general meeting shall be worked out in two copies not later than 3 working days after the meeting is ended and be signed and sealed by the chairperson and the secretary of the meeting. 107-6.2. Minutes of the general meeting of shareholders should specify the following:
107-6.2.1. the date and venue of the general meeting.
107-6.2.2 the agenda of the general meeting.
107-6.2.3. number of voting shares held by participants of the general meeting. 107-6.2.4. number of participating shareholders entitled to vote. 107-6.2.5. summary of speeches. 107-6.2.6. voting results for each matter submitted to a vote. 107-6.2.7. precisely and clearly worded text of the decision made by the general meeting. 107-6.3. A copy of minutes should be provided to the shareholder upon his/her request.
Article 107-7. Board of directors of joint-stock company (supervisory board)
107-7.1. A board of directors of the company (supervisory board) shall be established subject to Article 107.3. of this Code. The board of directors of the company (supervisory board) shall oversee overall management and activity of the company within its authority. 107-7.2. The number of members of the board of directors of the company (supervisory board) and requirements for them shall be determined by the charter of the company. The number of members of the board of directors (supervisory board) of the company and the requirements for them may also be established by law.

107-7.3. If the composition of the board of directors of the company (supervisory board) reduced to the half of the number specified in the charter, new members shall be elected to the board of directors (supervisory board) convening an extraordinary general meeting of the company within 30 calendar days. 107-7.4. Members of the board of directors of the company (supervisory board) shall be elected for the period not more than 3 years as per this Code and the charter of the company. 107-7.5. A Member of the board of directors of the company (supervisory board) should be an individual. If unless otherwise stipulated in the charter, non-shareholder of the company can be admitted to the membership of the board of directors. Members of executive bodies of the company may not be admitted to membership of the board of directors. 107-7.6. Premature termination to authorization of the board of directors or its member shall be decided by the general meeting.
Article 107-8. Chairperson of the board of directors (supervisory board) of the joint-stock
company
A chairperson of the board of directors (supervisory board) of the joint-stock company shall be elected from among the members of the board of directors (supervisory board) by the general meeting of shareholders. The chairperson of the board of directors (supervisory board) shall lead the board.
Article 107-9. Meeting of the board of directors (supervisory board) of the joint-stock
company
107-9.1. A chairperson of the board of directors (supervisory board) of the joint-stock company shall convene its meetings at least once every three months and preside over them. The chairperson of the board of directors (supervisory board) shall also convene meetings at the request of the audit committee (auditor), the executive body, members of the board, as well as other persons as may be determined by law and the charter. The procedure for holding meetings of the board shall be determined by the company’s charter. 107-9.2. At the meeting of the board of directors (supervisory board) of the joint-stock company, each member shall have one vote, and decisions shall be made by a simple majority of votes. In the event of a tie, the vote of the chairperson of the board shall be decisive in making or rejecting a decision. 107-9.3. When the meeting of the board of directors (supervisory board) of the joint-stock company is convened, minutes will be worked out reflecting the venue and date of the meeting, participants, agenda, summary of speeches, results of voting and decisions. The minutes shall be signed by the chairperson of the board.
Article 107-10. Executive body of the joint-stock company
107-10.1. Members of the board of directors (supervisory board) may not elected to the executive body of the company. 107-10.2. Powers of the executive body of the company shall include all matters that are not within the exclusive competence of management bodies of the company as defined by this Code,

and the Laws of the Republic of Azerbaijan on Banks, on Insurance Activity, and on Investment Funds, as well as by the company’s charter. 107-10.3. The number and composition of the members of the company’s collegial executive body, as well as the rules governing its activities, shall be determined by the company’s charter and, as applicable, by the Laws of the Republic of Azerbaijan on Banks and on Insurance Activity. 107-10.4. Members of the company’s executive body may hold positions in another organization with the consent of the general meeting or the board of directors (supervisory board) of the company, provided that this does not contradict the law. 107-10.5. In cases where a conflict may arise between personal interests of members of the company’s executive body and the interests of the company, as well as in the situations provided for in
Article 49-1.6 of this Code, the head or other members of the company’s executive body should submit the
relevant information in writing to the board of directors (supervisory board) of the company, or, if there is no such board, to the general meeting of shareholders. The conclusion of transactions that contradict the interests of the company may be carried out based on a decision of the relevant management body, unless otherwise provided by this Code or the Laws of the Republic of Azerbaijan on Banks and on Insurance Activity. 107-10.6. A member of the company’s executive body or board of directors (supervisory board) should disclose information to the media before entering into any transaction involving securities owned by them. 107-10.7. If a shareholder owns twenty percent of shares of the company, he/she may not be elected as the member of the executive body of the company.
Article 107-11. Inspection committee (inspector) of the joint-sctock company
107-11.1. In companies with more than fifty shareholders, an inspeciton committee (inspector) shall be elected (appointed) at the general meeting to monitor company’s financial and economic activities. If provided for in the company’s charter, an inspection committee (inspector) may also be elected (appointed) in companies with fifty or fewer shareholders. 107-11.2. The procedure for the formation of the company’s inspection committee (inspector), its composition, and the rules governing its activities shall be determined by the company’s charter. 107-11.3. Only individuals may be elected as members (as the inspector) of the company’s inspection committee. The member of the inspection committee (inspector) may not be a shareholder of the company, a member of the board of directors (supervisory board), or a member of the company’s executive bodies. 107-11.4. The term of office of the members of the company’s inspection committee (insepctor) shall be determined by the charter for a period not exceeding three years. 107-11.5. An inspection of the company’s financial and economic activities shall be carried out at the initiative of the company’s inspection committee (inspector), by decision of the general meeting or the board of directors (supervisory board), or at the request of shareholders holding more than ten percent of the company’s voting shares, or at the request of the company’s executive body. 107-11.6. At the request of the company’s inspection committee (inspector), all company bodies and officials should provide documents related to the company’s financial and economic activities.

107-11.7. The provisions of this Article shall not apply to insurers, banks, and local branches of foreign banks.
Article 107-12. Audit Committee of the joint-stock company
107-12.1. In companies with more than fifty shareholders, as well as in socially significant structures, the board of directors (supervisory board) establishes an audit committee for the preparation, implementation of the internal audit policy and strategy and the organization of audit control. In the case provided by the company's charter, an audit committee is established in companies with less than fifty shareholders. 107-12.2. The rules for the formation of the audit committee of the company, its composition, procedure of activities shall be established by law and the charter of the company. 107-12.3. Members of the executive body of the company and (or) participants of the company may not be a member of the audit committee. Members of the board of directors (supervisory board) of the company may be a member of the audit committee. 107-12.4. Internal audit of company's activities shall be carried out at the initiative of the audit committee by the decision of the general meeting or the board of directors (supervisory board) or the request of shareholders owning more than ten percent of company's shares and the executive body of the company. 107-12.5. At the request of the company's audit committee, all bodies and officials of the company should provide documentation related to the financial and economic activities of the company. 107-12.6. The audit committee shall subordinate to the board of directors (supervisory board).
Article 108. Reorganization and liquidation of a joint-stock company
108.1. A joint stock company may be voluntarily reorganized or liquidated by a resolution
of the general meeting of shareholders. Other grounds and the procedure for reorganization and liquidation of a joint-stock company shall be determined by this Code, Laws of the Republic of Azerbaijan on Banks, on Insurance Activity and on Investment Funds.
108.2. Except as provided for by the Laws of the Republic of Azerbaijan on Banks, on Insurance
Activity, on the Securities Market, on Non-Bank Credit Institutions, on Investment Funds and on Credit Bureaus, a joint-stock company may be converted into a limited liability company.
Article 109. Main provisions with regard to cooperatives
109.1. A cooperative is a voluntary union of individuals and legal entities on the basis of
membership with the purpose of satisfying the material and other needs of participants through consolidation of the participants’ material contribution.
109.2. A member of cooperative is an individual and (or) legal entity, who meet the
requirements of this Code, who made the membership, mandatory and additional share payment in accordance with procedures and at volumes stipulated under charter of cooperative and accepted in the cooperative, participating in its activities and having voting rights (except in the cases provided for in Articles 49-1.2 and 49-1.3 of this Code).
109.3. An associate (associative) member of a cooperative is an individual and/or legal
entity who meets the requirements of this Code, has paid the membership fee and only the

mandatory share contribution in the manner and amount determined by the cooperative’s charter, has been admitted to the cooperative, participates in its activities, and—except in cases provided for by this Code—does not have the right to vote.
109.4. A cooperative member’s property share contribution is the share consisting of
movable and/or immovable property, as well as property rights valued in monetary terms, paid by members in the manner and amount determined by the charter. The property share contribution may be mandatory or additional.
109.5. The mandatory property share contribution is the property share that should be paid
by the member and grants the right to participate in the cooperative’s activities, to vote, and to receive main cooperative payments.
109.6. The additional property share contribution is the share paid voluntarily by a
member, in addition to the share contribution specified in Article 109.5 of this Code, which grants the right to receive, apart from the main cooperative payments, dividends (additional cooperative payments).
109.7. The membership fee is the amount of money paid by a participant upon joining the
cooperative to cover related expenses. A cooperative member has the right to receive cooperative payments (main) and dividends (additional cooperative payments).
109.8. Cooperative payments (main cooperative payments)- part of cooperative profit paid
to members proportional to their mandatory share payment, personal work efforts in the cooperative and other activities.
109.9. Dividend (additional cooperative payments)- portion of cooperative profit, paid only
to members who hold the voting right, proportional to the additional share payment and mandatory share payments of assessable (associated) members of the cooperative.
109.10. The charter of a cooperative shall contain, in addition to information specified by
Article 47.2 of this Code, information on the amount of contributions of its members, the
procedure for making contributions and members’ liability for breach of their obligations to make contributions, the composition and competence of the management bodies and the procedure for decision-making, including decisions requiring a unanimous or qualified majority vote, and the procedure for the member’s compensating for losses the cooperative incurs, rules for document preparation (documentation for acceptance to cooperative, list of members and acceptance of share payments, development of protocols of the general meeting of cooperative members and other management authorities etc.).
109.11. Cooperative may be engaged in entrepreneur activities in accordance with
legislation in any sector not prohibited by the law. By the type of activity, cooperatives may be of production, consumer, integrated (production and consumer oriented) and of other types.
109.12. Cooperative may enter with its members into agreements on sales of their produced
products, works and services to the cooperative.
109.13. Public authorities, municipalities, other individuals and legal entities shall build
their relations with cooperative on contractual basis. Public authorities and municipalities shall not interfere to economic, financial, organizational (formation of management authorities) and other activities of cooperatives, with exceptions stipulated under the legislation of the Republic of Azerbaijan.
109.14. Operations and accounting reporting of financial and economic activities, statistical
reporting in the cooperative shall be implemented in accordance with procedures stipulated under the legislation of the Republic of Azerbaijan.

109.15. For execution of its activities the cooperative shall have the right to contract
employees. Employment relations of cooperative with such employees are regulated by the labor legislation of the Republic of Azerbaijan.
109.16. Labor relations between the cooperative and its members, participating via
application of the personal labor in the cooperative activities, are regulated by the labor legislation of the Republic of Azerbaijan, this Code and charter of cooperative.
109.17. The name of cooperative shall contain the main purpose of its activity and the word
‘cooperative’.
109.18. The organization and activities of agricultural cooperatives shall be regulated by this Code
and the Law of the Republic of Azerbaijan on Agricultural Cooperation.
Article 109-1. Establishment of cooperatives
109-1.1. Cooperatives are organized by not less than five individuals and (or) legal entities. 109-1.2. For establishment of the cooperative individuals and (or) legal entities shall establish an initiative group. The scope of the initiative group is:
109-1.2.1. identification of the scope of activities of the cooperative with indication of the volume of share payment funds and their sources. 109-1.2.2. preparation of the draft charter of cooperative. 109-1.2.3. acceptance from individuals and (or) legal entities of applications membership in cooperative. 109-1.2.4. preparation and implementation of the founding meeting of the cooperative. 109-1.3. The foundation meeting of the cooperative shall make a decision on foundation of cooperative and its membership. approve a charter of cooperative. form management authorities of the cooperative with consideration of provisions of Article 11 of this Code. 109-1.4. Members of the cooperative shall enter into the foundation agreement in accordance with Article 45.2 of this Code. 109-1.5. The decision of the foundation meeting shall be documented by protocol.
Article 109-2. Cooperative members
109-2.1. Members of cooperative can be individuals and (or) legal entities, who reached the age of 16, accepted the cooperative’s charter and contributing in accordance with charter the membership fee and property share payment. 109-2.2. Legal entities, members of cooperative, shall be represented in cooperative via their representatives, whom they have authorized in accordance with established procedures. 109-2.3. Dependent from the type of activities of the cooperative its members may participate on not to take part in the cooperative’s activities by applying their own labor. 109-2.4. Unless otherwise is stipulated by the charter of cooperative, the member of cooperative can be the member of the other cooperative. 109-2.5. No dividends shall be paid to the members of cooperative [with exception of associate (associated) members] for their mandatory property share contributions. 109-2.6. In the event of retirement of the member of cooperative due to poor health condition, transfer to another elected position outside of cooperative, call up for military services and other events stipulated under the charter of cooperative, he shall by the decision of

the general meeting of the cooperative be transferred to business (associated) membership in the cooperative. 109-2.7. The value of mandatory property share contribution payment of the assessable (associated) member of cooperative and provisions of payment for share payment of dividends are established by the charter of cooperative on the basis of agreement, made between share (associated) member and cooperative. If the value of mandatory property share payment of the share (associated) member of cooperative is established in the charter of cooperative, it can be established at the amount, exceeding the value of the mandatory share payment of other members of cooperative. 109-2.8. The share (associated) member of cooperative does not have the voting right, with exception of introduction of changes to the charter, related to his membership in cooperative.
Article 109-3. Acceptance for membership in cooperative
Acceptance for membership in cooperative shall be performed in under the procedures established under the charter based on an official application of the person willing to become a member. The membership book is issued to the member of cooperative. The content of records made to the book is established under the cooperative charter.
Article 109-4. Rights and responsibilities of members of cooperative
109-4.1. Members of the cooperative shall:
109-4.1.1. enter and voluntarily withdraw from the cooperative.
109-4.1.2. participate in the management of cooperative and its operations, elect and be elected to the cooperative authorities. 109-4.1.3. receive information on cooperative’s activities, review its financial and other documents. 109-4.1.4. make proposals for improvement of cooperative’s performance, correction of deficiencies of its authorities and officials. 109-4.1.5. participate in distribution of profits and receive other payments. 109-4.1.6. receive his share of property or the value of such a share upon all settlements with creditors when the cooperative is liquidated.
109.4.1.7. use privileges and benefits stipulated for members of cooperative.
109.4.1.8. exercise other rights, stipulated in this Code and the charter of cooperative.
109-4.2. The rights stipulated in Articles 109-4.1.2 and 109-4.1.7 of this Code shall not apply to associate (associated) members of cooperative. 109-4.3. Members of cooperative participating personally in the activities of the cooperative, shall, additionally, receive payment for its work in cash or in kind. 109-4.4. Members of cooperative shall:
109-4.4.1. pay the membership fee, mandatory property share payments and implement other obligations accepted in relation with the activities of cooperative in accordance with volumes and procedures stipulated under the charter. 109-4.4.2. comply with the charter and execute decisions of cooperative authorities. 104-4.4.3. participate in compensation of losses occurred in cooperative in the cases and in accordance with the procedures stipulated in Article 110.4 of this Code.

109-4.4.4. implement other obligations stipulated under legislation and charter.
Article 110. Property of the cooperative
110.1. The property owned by the cooperative is divided into the shares of its members in
accordance with the charter of the cooperative. The property (assets) of the cooperative consists of its fixed assets, current assets, and other material values shown on its balance sheet. The sources for the formation of the cooperative’s property may include its own funds and borrowed funds. The cooperative’s own funds are formed from property share contributions provided for in its charter, income derived from entrepreneurial activity, income from placing its funds in banks and other credit institutions or in securities, loans, donations from individuals and legal entities, and other sources not prohibited by law. The volume of funds attracted by the cooperative in accordance with legislation should not exceed 50 percent of the cooperative’s total funds (property). The property of the cooperative is its private ownership. A member of the cooperative may, on a contractual basis, transfer property owned by them to the cooperative for use. A cooperative union may, on a contractual basis, transfer property owned by it to a member cooperative for use, as well as use such property for other purposes specified in the charter of the union.
110.2. Provided that the charter of the cooperative does not specify otherwise, each member
of the cooperative shall pay its share contribution in full before the cooperative is registered.
110.3. The charter of a cooperative may specify that a certain portion of its property be
composed of indivisible funds to be used for purposes specified by the charter. A decision to establish indivisible funds may be taken by a unanimous vote of the cooperative’s members, unless otherwise provided by the cooperative’s charter.
110.4. Members of a cooperative shall, through additional contributions, pay for losses
incurred by the cooperative within two months of the date when the annual balance sheet is approved. A cooperative may be liquidated by court order at a creditor’s request for failure to do so. A cooperative’s members bear joint secondary liability for its obligations to the extent of the unpaid portion of their additional contributions.
110.5. Property remaining after the liquidation of the cooperative shall be distributed
among its members in accordance with the cooperative’s charter.
Article 110-1. Share payments of members of cooperative and share fund of cooperative
110-1.1. Property share payments made to cooperative by its members shall comprise the share fund of cooperative. The share fund of cooperative shall define the minimum amount of the property of cooperative, guaranteeing interests of its creditors. Membership payment made when entrance into cooperative shall not be included into the share fund and shall not be reimbursed in the event of withdrawal of the member from the cooperative. 110-1.2. Collection of personal debts via share payments of cooperative members can be made in cases and in accordance with the procedures, stipulated in Article 112.5 of this Code. 110-1.3. The volume of the share fund of the cooperative and mandatory share payment, procedures for payment of mandatory and additional payments, procedures for evaluation of shares, paid by property (property rights) shall be determined by the charter. Persons engaged in this sector under the procedure specified in the legislation may be involved in evaluations.

110-1.4. If, at the end of the second and subsequent years, the value of cooperative’s net assets is less than the value of the share fund, the general meeting of cooperative members shall be obliged to declare reduction of the share fund and register it in the manner prescribed by law. 110-1.5. The share fund may be increased or decreased by a decision of the general meeting of cooperative members. The amount of the share fund should not exceed the amount of the cooperative’s net assets. If the amount of the cooperative’s share fund exceeds the amount of its net assets, the share fund should be reduced by the amount of the difference through a proportional reduction of mandatory share contributions. 110-1.6. An increase in the cooperative’s share fund shall be permitted through an increase in the amount of mandatory share contributions.
Article 110-2. Profit of cooperative and its distribution
110-2.1. The profit of the cooperative, after making the mandatory payments established by the legislation of the Republic of Azerbaijan, shall be directed—under the cases and procedures provided in the cooperative’s charter—to cooperative’s funds, settlements with creditors, other purposes defined by the charter of the cooperative, and/or to the payment of cooperative contributions and dividends. 110-2.2. The profit of the cooperative shall be distributed among its members in proportion to the amount of their share (mandatory and additional) contributions, according to their personal labor participation and/or other forms of participation in activities of the cooperative. 110-2.3. The general meeting of cooperative members may determine a limitation on the amount of cooperative payments and dividends to be paid, based on a certain portion of the cooperative’s profit.
Article 110-3. Property liability of cooperative and its members
110-3.1. A cooperative shall be liable on its obligations to the extend of its property. 110-3.2. A cooperative shall not be liable for obligations undertaken by its members in relations with the activities of the cooperative and their other liabilities (debts) with exceptions stipulated under Article 112.5. of this Code. 110-3.3. After the cooperative is established, a person who becomes a member of the cooperative shall be liable for the obligations undertaken by the cooperative before he became a member, unless otherwise provided by the charter. A person willing to become a member of the cooperative should be provided with all necessary information regarding this matter. 110-3.4. Members of the cooperative shall bear subsidiary liability for the obligations of the cooperative. The subsidiary liability of cooperative members for the obligations of the cooperative shall arise when cooperative’s own funds are insufficient to cover its obligations and shall be determined in accordance with Article 110.4 of this Code.
Article 111. Management in a cooperative
111.1. The supreme governing body of the cooperative is the general meeting of its
members. In a cooperative with more than fifty members, a supervisory board may be

established to oversee activities of its executive bodies. Members of the supervisory board shall not have the authority to act on behalf of the cooperative. Executive bodies of the cooperative are the management board and/or its chairperson. They carry out the current management of cooperative’s activities and report to the supervisory board and the general meeting of cooperative members. Members of the cooperative’s supervisory and management boards, as well as the chairperson of the cooperative, can only be chosen from among cooperative’s members. A member of the supervisory board or executive body may not be a member of a similar cooperative. A cooperative member may not simultaneously serve as a member of the supervisory board and as a member of the management board or as the chairperson of the cooperative.
111.2. The competence of a cooperative’s management bodies and the procedure for
decision-making shall be determined by the cooperative charter.
111.3. The exclusive authority of the general meeting of cooperative members shall be to:
111.3.1. change to the cooperative’s charter.
111.3.2. establish a supervisory board and dismiss its members, establish and dismiss the
cooperative’s executive bodies, provided that the charter does not allocate this right to the competence of the supervisory board.
111.3.3. accept and dismiss members of the cooperative.
111.3.4. approve cooperative’s annual reports and financial statements and distribute its
losses.
111.3.5. decide to reorganize or liquidate the cooperative.
111.3.5-1. make a decision on conclusion of transactions specified in Article 49-1.2 of this Code.
111.3.6. A cooperative’s charter may also allocate other matters to the exclusive competence
of the general meeting.
111.4. Matters allocated to exclusive competence of a cooperative’s general meeting or
supervisory board may not be delegated to cooperative’s executive bodies for their resolution.
111.5. A cooperative member shall have one vote when voting on resolutions at a general
meeting.
111.6. In cooperatives with more than 200 members, general meetings of members of
cooperative can be held under the charter of cooperative as a meeting of authorized representatives. The number of authorized representatives shall be established with consideration of members of cooperative. Authorized representatives shall be elected via show or secret voting in accordance with the charter including requirements for number of elected authorized representatives, term of authority of representatives, rules for their election. Authorized representatives are not entitled to transfer their authorities to other persons including members of cooperative. At the meeting of authorized representatives are distributed provisions of this Code and charter of cooperative on general meeting of cooperative members.
111.7. The general meeting of cooperative members shall be authorized, if more than half of
members (or their representatives) participate. The meeting of authorized representative shall be deemed competent if half of elected authorized representative participates.
111.8. The general meeting of cooperative members shall be called by the board
(chairperson) not less than once a year within terms and procedures established under the charter, but not later than within 3 months of the end of fiscal year. An extraordinary general meeting of cooperative members shall be initiated by the management board (chairperson), supervisory board and inspection committee (inspector) itself or at the request of at least one

fourth of the number of members having the right to vote (in the case of the entities supervised in financial markets, taking into account the requirements of the Law of the Republic of Azerbaijan on the Central Bank of the Republic of Azerbaijan). In this case, an extraordinary general meeting of members of the cooperative shall be convened by the board (chairperson) within fifteen days in accordance with the procedure established in the charter of the co-operative.
111.9. When the supervisory board is established, the number of its members and term of
their authority shall be established by the general meeting of cooperative members. The meeting of supervisory board shall be called on when required, but not less than once in half year. A procedure for holding meetings of the supervisory board shall be established by the charter of cooperative. In the cases, stipulated in the charter, the general meeting of the members of cooperative can prematurely re-call the supervisory board and dismiss some of its members.
111.10. Between general meetings of members of cooperative the management board of the
cooperative and (or) its chairperson shall manage current affairs of cooperative, perform its activities and represent the cooperative. When the number of cooperative members exceeds fifty persons, the general meeting of cooperative members shall elect the board of cooperative from among its members. The management board shall be led by the chairperson, elected (appointed) by the general meeting of cooperative members. The charter of cooperative shall determine the procedure for election (appointment) of the management of cooperative and (or) its chairperson, their responsibilities and term of authority, rights of the chairperson of the board to manage the property of cooperative, terms of its payment, responsibilities of the chairpersn, as well as procedures and basis for premature dismissal.
111.11. If the board is established, the charter shall separately include authorities of the
chairperson and the board (authorities performed independently or on a collegial basis).
111.12. To control cooperative’s financial and economic activities, the general meeting of
cooperative members shall elect an inspection committee (consisting of at least three members) if the number of cooperative members exceeds fifty, and an inspector if the number of cooperative members is less than fifty.
111.13. The cooperative’s inspection committee (inspector) shall:
111.13.1. review the cooperative’s financial stranding by results of fiscal and economic year.
111.13.2. provide an extraordinary inspection at the request of the general meeting of
cooperative members, the supervisory board, or members representing more than ten percent of the total membership, as well as at its own initiative.
111.14. Based on results of the inspection, the cooperative’s inspection committee
(inspector) submits an opinion to cooperative’s management bodies. The supervisory board or the management board (chairperson) reviews the inspection results in accordance with the procedure established by the charter and makes an appropriate decision. If the inspection committee (inspector) disagrees with the decision, it may appeal to the general meeting of cooperative members.
111.15. In cases specified in the charter, the general meeting of cooperative members may
prematurely recall the inspection committee, any of its individual members, or the inspector.
Article 112. Cancellation of membership in a cooperative and transfer of shares
112.1. A cooperative member shall be entitled to withdraw from the cooperative. In this
event, he shall be paid the value of his share or receive property corresponding to the share, as

well as receive all other payments specified by the cooperative’s charter. Payment of the value of shares or transfer of other property to the withdrawing member of the cooperative shall be made at the end of the financial year and after approval of cooperative’s financial statements, unless otherwise specified in the cooperative’s charter.
112.2. A cooperative member may be dismissed from the cooperative upon a decision of
the general meeting of members in case of non-performance or improper performance of obligations conferred upon it by the cooperative’s charter and in other cases as set out in the charter. A dismissed member of a cooperative shall be entitled to receive its share and other payments specified by Article 112.1 of this Code.
112.3. A member of a cooperative may transfer its share or a portion thereof to any other
member of the cooperative provided that the cooperative’s charter does not specify otherwise. The transfer of a share (or a portion thereof) to an individual who is not a member of the cooperative shall be permitted only with the consent of the cooperative. In such case, members of the cooperative shall have a preemptive right to acquire this share (or portion thereof). Where members of the cooperative do not exercise their preemptive right within the term specified by the cooperative’s charter, the share may be alienated to a third party.
112.4. In event of the death of a member of a cooperative, his heirs may be accepted into
membership of the cooperative, unless otherwise provided by the cooperative’s charter. Otherwise, the cooperative shall pay to the heirs the value of the deceased member’s share.
112.5. Enforcement against a cooperative member’s share for settling member’s personal
debts shall be permitted only in the manner prescribed by the cooperative’s charter and only if the member’s other property is insufficient to cover such debts. Enforcement for a cooperative member’s debts may not be directed against the cooperative’s indivisible funds.
Article 113. Reorganization and liquidation of a cooperative
113.1. A cooperative may be voluntarily reorganized or liquidated pursuant to a resolution
of a general meeting of its members.
113.2. Other grounds for reorganization or liquidation of a cooperative shall be specified in
this Code.
§3. Non-commercial organizations
Article 114. Public associations
114.1. Property contributed to a public association by its founders (participants) is the
property of the association. Such public association shall use such property for the purposes specified in its charter.
114.2. A participant shall not retain ownership over property contributed to a public
association, including membership fees. A participant shall not be liable for obligations of a public association and a public association shall not be liable for obligations of its participants.
114.3. On liquidation of a public association, its property, remaining after payment of arrears,
shall be used for the purposes specified in such association’s charter, and where this is not possible, transferred to the state budget.
114.4. Specific features and the legal status of particular types of public associations are set
out in this Code and by law.

Article 115. Funds
115.1. A fund is an organization established by individuals and/or legal entities, without
membership, based on property contributions, pursuing social, charitable, cultural, educational, or other publicly beneficial objectives. 115.1-1. Share capital of the established fund shall not be less than ten thousand manats.
115.2. Property contributed to a fund by its founders (founder) is the property of the fund.
The fund shall use this property for the purposes specified by the fund’s charter.
115.3. A fund shall be obligated to publish annual reports on the use of its property.
115.4. Founders shall not be liable for obligations of the fund and the fund shall not be
liable for obligations of its founders.
115.5. The management of a fund and the procedure for forming its management bodies
shall be determined by the fund’s charter approved by its founders.
115.6. The fund’s charter shall include, in addition to the information specified in Article
47.2 of this Code, the name of the fund which shall include the word ‘fund’, the information on
its objectives and details of its management bodies, including information on the board of trustees who controls its activities, the procedure for appointment and dismissal of fund’s officials, and the procedure for disposing of the fund’s property in the event of liquidation.
115.7. Specific features and legal status of particular types of funds, including charitable
organizations, shall be set out in this Code and by law.
Article 116. Amendments to a charter and liquidation of a fund
116.1. The charter of a fund may be amended by its governing bodies only if the charter
provides for the possibility of such amendments. If maintaining the charter unchanged leads to consequences that could not have been foreseen at the time the foundation was established, and the charter does not provide for the possibility of amendment, and the authorized persons do not make necessary changes, the right to amend the charter shall belong to the court upon the application of the fund’s governing bodies or the body authorized by the charter to control the fund’s activities.
116.2. A decision to liquidate a fund may only be made by a court upon an application by
interested persons. A fund may be liquidated when:
116.2.1. the property of the fund is insufficient to achieve its objectives and no reasonable
possibility exists to obtain such property.
116.2.2. the objectives of the fund cannot be achieved and it is impossible to appropriately
change the objectives of the fund.
116.2.3. it deviates from the objectives of its activity as established in the charter.
116.2.4. in other cases specified by law.
116.3. When a fund is liquidiated, its remaining property, after the settlement of its debts, shall
be directed toward the purposes specified in the fund’s charter. if that is not possible, it shall be transferred to the state budget.
Article 117. Unions of legal entities

117.1. Commercial organizations may establish unions for the purpose of coordinating their
business activity and representing and protecting (including in state and international entities) of common (including property) material interests. Where, pursuant to a decision of its members, a union is granted the right to engage in entrepreneurial activity, such a union shall be converted into a business partnership or company under the procedure specified by this Code. Alternatively, for the purpose of engaging in entrepreneurial activity, such union may establish a business company or participate in such company.
117.2. Non-commercial organizations may establish unions to coordinate their activities
and represent and protect common interests.
117.3. Participants in unions maintain their independence and rights as a legal entity.
117.4. Property contributed to a union by its founders (participants) becomes the property
of the association. A union shall use its property for the objectives specified by its charter.
117.5. A union shall not be liable for obligations of its participants. Participants in a union
are subsidiarily liable for obligations of the union to the extent and in the manner specified by the union’s charter.
117.6. The name of a union shall include an indication of the main area of its participants’
activity, and the word ‘union’.
117.7. When a union is liquidated, its remaining property, after the settlement of its debts,
shall be directed toward the purposes specified in the union’s charter. if that is not possible, it shall be transferred to the state budget.
117.8. The specific features and legal status of various types of unions shall be determined
by this Code and by legislation.
Article 118. Charter of a union
A union’s charter shall include, in addition to the information specified by Article 47.2 of this Code, information on the amount of contributions made by its participants, the composition and procedure for making contributions, the liability of participants for failure to make contributions, the composition and competence of the union’s management bodies and the procedure for decision-making, including on decisions requiring a unanimous or qualified majority vote, and the procedure for disposing of the union’s property in the event of its liquidation.
Article 119. Rights and obligations of participants in a union
119.1. The participants of a union shall have the right to use its services free of charge,
provided that its charter does not specify otherwise.
119.2. A member of a union shall have the right to withdraw therefrom at the end of a
financial year. At that, it shall be subsidarily liable for union’s obligations to the extent of its contribution for one year from the date of its withdrawal, provided that the union’s charter does not establish any other term. A participant in a union may be dismissed from membership by a decision of other participants in the union in cases and under the procedure specified by the union’s charter. The rules governing the liability of a withdrawing participant shall also apply to a dismissed participant.

119.3. A new participant may be accepted into a union upon the consent of its participants.
Admission to a union of a new participant may be conditional upon its subsidaary liability for the union’s obligations which arose prior to such new participant’s admission. §4. Inventory, annual balance sheet and audit of legal entities – deleted. § 5. Inventory of assets of legal entities – deleted.
Section three
RIGHT FOR PROPERTY AND THINGS
Chapter 5
General provisions
§ 1. Main definitions of the right of things
Article 135. Objects of the right of things
135.1. According to this Codeç only physical objects shall be deemed things. Money and
physical securities are also things.
135.2. Property is the aggregate of any things and intangible property assets.
135.3. Plants and animals shall not constitute things. Their legal status shall be regulated by
special laws. The legal status of things shall also apply to plants and animals provided that the law does not specify otherwise.
135.4. Things may be movable or immovable. Land plots, surface plots, separate water
bodies, forests, perennial plantations, buildings, structures, and other objects firmly attached to the land (which cannot be separated from it), that is, objects whose location cannot be changed without causing disproportionate damage to their purpose, shall be deemed immovable things. An item firmly attached to a land plot and land (inseparable from it) is a single thing and is a single object of the property.
135.5. All objects that cannot be classified as immovable things shall be deemed movable
property. Claims and rights intended to be transferred to others, or provide the owner with material benefits or the right to demand something from other persons, shall be deemed intangible assets. Relations concerning intangible assets (claims and rights) shall be regulated under the provisions of the specific legislation applicable to each of them.
135.6. Things may be divisible or indivisible. Objects that cannot be divided without
changing their purpose, or cannot be divided into separate pieces in virtue of statutory provisions, shall be deemed indivisible things.
135.7. Things distinguished by their unique characteristics from other objects shall be
deemed irreplaceable things. Movable objects differentiated only by type, usually measured by quantity, size, or weight in circulation, shall be deemed replaceable objects.
135.8. Movable things intended for consumption or alienation by others shall be deemed
consumable things.

135.9. If objects of different types form a single unit intended for common use according to
their purpose, they are deemed one property (complex property). The validity of an agreement concerning complex property, unless otherwise specified in the contract, extends to all its component parts.
135.10. Anything that is part of an object in the ordinary sense and cannot be separated
from it without destruction, damage, or alteration shall be deemed a component part of the object. Except in cases of unauthorized construction, the owner of an object shall also be the owner of all its component parts.
135.11. Accessories of an object are movable objects intended for the permanent operation
of an enterprise, use, or maintenance of the main object, and adapted to it, based on the general meaning or the clear intention of the owner of the main thing. If an accessory is temporarily separated from the main object, it retains its status as an accessory. In the absence of a separate agreement, ownership of the main object shall extend to its accessories.
135.12. Increase, and/or benefits derived from an object shall be deemed the productivity of
the object. Until separated, productivity shall be a part of the object. Whoever owns the object shall also own its productivity.
Article 136. Civil circulation of things
136.1. If things have not been withdrawn from circulation or if their circulation is not
restricted, they can be freely alienated or transferred from one person to another, either through universal succession (inheritance, reorganization of a legal entity) or by other means.
136.2. Things that are not permitted to circulate in civil circulation (withdrawn from civil
circulation) should be explicitly specified by law.
136.3. Objects that can only belong to certain participants in circulation or whose
circulation is permitted only under special authorization (objects with restricted civil circulation) shall be designated in accordance with the procedure established by law.
Article 137. Intangible property assets – deleted.
Article 138. Encumbrance of things and rights
138.1. An encumbrance of a things shall mean any form of restriction on property rights to
such property on the basis of law or agreement.
138.2. An encumbrance of the right shall mean any form of restriction of civil rights or
claims on the basis of the law or agreement.
§ 2. State registration of property rights
Article 139. State registration of rights to movable and immovable property
139.1. Property rights and other rights in immovable property, as well as the limitation,
acquisition, transfer to others, and termination of these rights, should be state registered. Ownership rights, usage rights, mortgages, servitudes, and other rights in immovable property should be recorded in the cases provided for in this Code and other legislation.

139.2. Rights in movable property should be state registered only in cases provided for by
law.
139.3. State registration of rights in immovable property shall be carried out by the relevant
executive authority as per the legislation, through the state register of immovable property, which is maintained and managed by that authority.
139.4. An address registry shall be maintained to provide a database that identifies the
location of immovable property objects and ensures their individualization without using special equipment. Each immovable property object shall be assigned an address that allows it to be localized without special tools. The maintenance of the address registry and the assignment of addresses to immovable property objects shall be carried out by the relevant executive authority in accordance with the established procedure.
Article 139-1. Grounds for state registration of the right in immovable property
139-1.1. The grounds of state registration of arising, transfer, restrictions (encumbrance) and termination of rights to immovable property are the following:
139-1.1.1. acts of the executive authorities and municipal authorities about the alienation, lease, transfer for use, mortgage of immovable property belonging respectively to the state or municipalities, adopted in accordance with the law. 139-1.1.2. protocol on results of an auction conducted under the procedure established by law. 139-1.1.3. notarized real estate agreements, certificates regarding inheritance rights, certificates concerning ownership rights to a spouse’s share in joint marital property,certificates issued under Article 63 of the Law of the Republic of Azerbaijan on Notariat in connection with the compulsory enforcement of executive documents concerning immovable property, immovable property certificates. 139-1.1.4. court judgments entered into force. 139-1.1.5. acts, certificates and registration certificates, confirming the right to immovable property, including land, buildings, residential and non-residential apartments, private homes and villas, subsoil, water reservoirs, forest and perennial crops, enterprises as property complex issued by relevant executive authorities until 6 July 2006. 139-1.1.6. decision of the general meeting of members of housing co-operative on provision of residential (non-residential) premises in the building of housing co-operative (with the full payment of the share specified in the legislation). 139-1.1.7. lease agreements, orders and warrants issued as regards the suburban areas allocated to citizens by the offices of suburban economy under the respective executive authorities until 22 May 2007, the membership book, issued in accordance with the list of members of the collective summer house community or an extract from the minutes of the meeting of the members. 139-1.1.8. documents determined by the relevant executive authority that confirm the acquisition of rights over immovable property objects obtained or created before the Law of the Republic of Azerbaijan on the State Register of Real Estate came into force. 139-1.1.9. with regard to buildings constructed before the entry into force of the Urban Planning and Construction Code of the Republic of Azerbaijan (up to 1 January 2013):
139-1.1.9.1. in respect of residential buildings up to 12 meters - a document certifying the right of ownership, lease or use of land, the project agreed with the relevant executive authority, or the act of acceptance of an apartment house into operation.

139-1.1.9.2. in respect of apartment buildings, non-residential buildings and residential buildings higher than 12 meters - a document certifying the right of ownership, lease or use of land, the project agreed with the relevant executive authority, the decision of the relevant executive authority on the construction of buildings, the act of acceptance into operation. 139-1.1.10. with regard to buildings constructed after the entry into force of the Urban Planning and Construction Code of the Republic of Azerbaijan (since 1 January 2013):
139-1.1.10.1. for construction objects, the construction of which require a permit - a document certifying the right of ownership, lease or use of land, the decision to grant construction license, architectural and planning section of the construction project, the permit for the operation of the facility. 139-1.1.10.2. for construction projects to which applies the notification process, - a document certifying the right of ownership, lease or information about construction provided by the customer to the authority (institution) after completion of construction. 139-1.1.11. until the entry into force of the Housing Code of the Republic of Azerbaijan (until October 1, 2009) the order, warrant, or residential lease agreement issued by the relevant executive authority regarding the allocation of residential premises from the state or public housing fund. 139-1.1.12. real estate certificates issued by the relevant executive authority between 6 July 2006, and 24 June 2009. 139-1.1.13. in relation to residential houses and apartments in multi-apartment residential buildings constructed at the expense of state funds as replacements for residential premises destroyed or rendered unusable as a result of natural disasters, technogenic accidents, or military operations (excluding territories liberated from occupation) – the list of persons to whom such houses and apartments were allocated (with precise indication of the residential house and/or apartment handed over to each person), the architectural-planning section of the construction project of the residential houses, the architectural-planning section of the construction project of the multi-apartment residential building, and the occupancy permit.
Article 140. Presumption of accuracy and completeness of the contents of state registry of
immovable property
Until the inaccuracy of the content of the register is proven, the presumption of the authenticity and completeness of that content shall remain in force. Except in cases where an objection to the entry has been recorded in the register or where the acquirer knew that the entry was inaccurate, an entry in the register in favor of a person who has acquired any right based on a transaction and in whose name that right has been registered shall be deemed valid.
Article 141 . Introduction of changes to state registry of immovable property
141.1. If the content of the state register of real estate does not correspond to the actual legal
situation regarding a right over a land plot or the restriction of such a right, a person whose right has not been registered or has been incorrectly registered, or whose right has been violated due to the inclusion of a record on a non-existent encumbrance, may demand that the person whose right would be affected by such correction give consent for the correction of the entry in the state register of real estate.
141.2. In the cases provided for in Article 141.1 of this Code, an objection may be raised
against the validity of the state register of real estate.

141.3. The inclusion of a note on objection in the state register of real estate shall be carried
out on the basis of a court decision or with the consent of the person whose right would be affected by the correction of the register.
Article 142. Fee for registration of immovable property – Deleted.
Article 143. Control over keeping state register of immovable property – Deleted.
Article 144. Notarization of agreements on disposition of objects entered in the state
register of immovable property
144.1. Agreements concerning the disposal of real estate objects included in the state
register of real estate should be notarized. During notarization, the notary or, in cases provided by law, other authorized officials entitled to perform such notarial acts shall verify the disposal right of the party disposing of the property and the legality of the contract. They shall be held liable for any inaccuracy in the contract they certify.
144.2. The right of disposal shall be confirmed by the fact that, according to the state
register of real estate, the disposing party possesses this right, or by the authorization granted to that party by a duly authorized person. Such authorization should also be notarized. The legality of the agreement shall be established through notarization. Agreements concerning the disposal of real estate objects registered in the state register of real estate shall be certified by a notary or, in cases provided by law, by other officials authorized to perform such notarial acts, in accordance with the technical specifications of the relevant property as recorded in the state register of real estate. 144.2-1. Verification of the disposing party’s right of disposal and obligations, as well as of any existing encumbrances on the property, shall be ensured in accordance with Article 148.3 of this Code through the state register of real estate.
144.3. Based on the electronic copy of a notarized agreement on the disposal of real estate,
transmitted in real time through the Electronic Government Information System via information systems, the corresponding rights shall be registered in the state register of real estate. Such an agreement shall be deemed an application for the registration in the state register of real estate of the ownership and other property rights arising therefrom.
144.4. Notarization shall not be required where a purchaser refers to a valid court decision
or document equal thereto, including certified by notary.
144.5. The ownership of immovable property can be divided on the basis of a partition plan that does
not provide for the physical division of property, but establishes the percentage of shares in the common equity property that has arisen. After certifying the partition plan prepared by the owner in accordance with the procedure established by the relevant executive authority, the ownership of each share of the owner resulting from the division shall be registered in the state register of immovable property.
Article 144-1. Characteristics of disposal of componental parts of unfinished buildings
144-1.1. In accordance with the Urban Planning and Construction Code of the Republic of Azerbaijan, unfinished buildings are buildings that have been authorized to build, however, the operation of which is not permitted in accordance with the Code.

144-1.2. The owner, who has received a permit to build a building consisting of parts, on the land plot that is in his possession, can divide this plot into portions in proportion to the number and area of the parts of the building to be built on the basis of the partition plan in the manner provided for in Article
144.5 of this Code, and request registration of ownership of each portion resulting from the division.
144-1.3. A person who has received a permit for the construction of a building consisting of parts on the land plot in his possession may dispose of portions arising under the partition plan and associated parts of the unfinished building associated with these portions after registration of the ownership of each of the portions that arose in result of the division, in the state register of real estate. 144-1.4. Agreements on the disposal of shares that have arisen on the land plot that is in the ownership according to the partition plan and the parts of the unfinished building connected with these portions should be notarized and a securitization entry should be made in favor of the persons who purchased the component parts in accordance with article 147 of this Code. 144-1.5. Along with other provisions, the terms of the purchase and sale of portions with which the relevant component parts are connected on the land plot on which the unfinished building is located, should be clearly reflected in the contract provided for in Article 144-1.4 of this Code. the obligations of the owner of the land plot and the person wishing to acquire the right to a land plot provided by Article
178.8 of this Code and their consent, stipulated in Article 147.2 of this Code, with regard to making a
security entry. as well as the consent of the owner of the land plot with regard to the transfer of ownership rights to the corresponding portion on the land plot and the component part after fulfillment of the obligations provided for by Article 178.8 of this Code to the person in which favor the security entry was made. 144-1.6. The person in whose favour the securitization entry is made, shall have the right to transfer to a third party the rights and obligations with respect to the portion with which the relevant component
part is connected on the land plot on which the unfinished building is located, from the written
notification of the owner of the land plot by mail and on the basis of the notarized agreement. Along with other provisions, the agreement should clearly reflect the scope of rights and obligations at the time of transfer and their transfer in this scope, the consent of both parties to make appropriate changes to the securitization entry made in favor of a third party to whom rights and obligations are transferred. Such rights and obligations should be transferred to the extent and under the conditions that were in effect at the time of their transfer to a third party. After certifying this agreement, the notary should immediately forward it to the state register of real estate: in electronic form by means of information systems and in certified written form by registered mail, and also to the owner of the land plot: in certified written form by registered mail. Such a contract shall be recognized as an application for making appropriate changes to the securitization record entered in the state register of real estate, and on the basis of this agreement, appropriate registration actions shall be carried out.
Article 145. Application for registration in the state register of immovable property –
Deleted.
Article 146. Acquisition of a right to immovable property
146.1. The right of ownership and the right of use of immovable property shall arise from
the moment a transaction concerning such property is notarized, except for rights arising from a court decision or other decision having the force of law and not subject to appeal.

146.2. The right to dispose of immovable property shall arise from the date of registration
of that property in the state register of real estate according to territorial jurisdiction.
146.3. Notarization of agreements on immovable property that has not been registered in
the state register of real estate shall not be permitted, and the agreements concluded in respect of such property shall be deemed invalid. The provisions of Article 146.2 of this Code and the first paragraph of this Article shall not apply to cases involving the notarization of a combined purchase and sale agreement and mortgage of a residential property acquired through a mortgage loan, until such property is registered in the state register of real estate
146.4. Upon notarization of the agreement, the notary shall issue two copies of the
agreement to the applicant or at his option provide the relevant authority of executive power with notarized application of the person, applied for registration of the right in the state register for immovable property, within 2 days . To the application shall be attached one copy of the agreement, documents, reflecting any statutory stipulated grounds for state registration of the rights, plan and area of the land site, technical passport, plan-layout of the building, construction or any immovable property (its compounds), located at the land site and document on payment of the state duty. Copy of this application shall be submitted to the person, who applied for notary verification of the agreement.
146.5. If a person acquiring immovable property or rights thereto relies on a court decision
or another decision having the force of law and not subject to appeal, the application shall be accompanied by a notarized copy of that decision and documents reflecting the technical specifications of the immovable property.
146.6. If documents required for registration of immovable property or rights on such
property by the state registry on immovable property are not collected, the state registry may perform the preliminary registration based on consent of owner or based on court decision.
146.7. The registration of immovable property or rights thereto in the state register of real
estate shall be carried out as of the date of submission of the application.
146.8. Notaries certifying agreements on immovable property for registration in the state
register of real estate, other officials authorized by law to perform such notarial acts, and the relevant executive authority officials shall bear judicial liability. The state shall act as the registrant in claims regarding the failure to register agreements on immovable property in the state register, incorrect registration, or incomplete registration.
Article 147. Security entry about a land plot
147.1. A security note regarding a land plot (including buildings constructed on it or under
construction) may be entered in the state register of real estate to secure claims aimed at acquiring any right over the land plot. The specifics of entering a security note concerning shares related to components located on a land plot with an unfinished building shall be determined in accordance with the requirements of this Article and Article 144‑1 of this Code.
147.2. For the entry of a security note, a notarized agreement between the owner of the land plot and
the person seeking to acquire rights over the land plot shall be required. The agreement shall clearly express, alongside other provisions, the landowner’s consent to the entry of the security note concerning their land and the consent of the person seeking to acquire rights to have a security note entered in their

favor. It shall also specify that, upon fulfillment of the relevant requirements, the rights arising from the contract shall pass to the person in whose favor the security note has been entered.
147.3. A security note shall arise from the moment it is registered in the state register of real estate.
147.4. While a security note regarding a land plot remains in effect, no subsequent security note
may be entered for that land plot.
147.5. The actions of the authority maintaining the state register of real estate and of notaries
concerning the entry of security notes regarding land plots shall be regulated by this Code, the Law ‘on Notariat,’ and the Law ‘on the State Register of Real Estate’ of the Republic of Azerbaijan.
147.6. After determining the legality of the agreement intended for the entry of a security note, the
notary shall notarize the agreement and submit it to the state register of real estate, and the security note shall be entered in the register within three days.
147.7. While a security note concerning a land plot remains in effect, agreements or other forms of
disposal relating to the land plot or rights thereto shall be invalid to the extent that they affect or obstruct the enforcement of the claim underlying the security note. This rule shall also apply in cases of compulsory execution, attachment, or during bankruptcy proceedings conducted by the property administrator.
147.8. A security note concerning a land plot entered in the state register of real estate shall cease to
have legal effect when:
147.8.1. the rights of the person in whose favor the security note was entered, arising from the
agreement referred to in Article 147.2 of this Code, are registered in the state register of real estate under this Code.
147.8.2. the agreement referred to in Article 147.2 of this Code is terminated in accordance with
Articles 421‑424 of this Code.
147.8.3. the entry of the security note is modified in favor of a third party to whom rights and
obligations have been transferred under the contract referred to in Article 144‑1.6 of this Code.
147.9. If the person in whose favor a security note has been entered under an agreement concluded in
accordance with Article 147.2 of this Code is allowed to use a mortgage loan for the acquisition of the land plot (including buildings constructed or under construction), they may conclude a mortgage contract to finance the acquisition. Such a mortgage may only secure the credit used to finance the acquisition of the land plot (including buildings constructed or under construction) that serves as the mortgaged property. That mortgage can only serve as security for a loan used to finance the acquisition of the mortgaged land plot (including any constructed or under-construction buildings on it).
Article 148. Openness of the state register of real estate
148.1. An extract from the state register containing information on the description of real
estate, the rights registered to it, and their restrictions (encumbrances) shall be issued, in accordance with the procedure established by law, to the owner of the right, a person authorized by the owner, persons who have inheritance rights to the owner’s property by law or by will, as well as to relevant public authorities and municipalities in connection with the exercise of powers provided for by law.
148.2. Any person who has acquired property or any other rights relying upon entry in the
state register of immovable property shall be protected against violations of such rights. 148.2-1. In case of real estate disposal on the basis of an extract from the state register of real estate placed on the portal ‘Electronic Government’, at the request of the rightholder, a notary or other officials,

authorized to perform such a notarial action in cases specified by law, in accordance with the Law of the Republic of Azerbaijan ‘On Notarial System’ receive an extract from the state register of real estate in real time through electronic information systems.
148.3. To ensure the obtaining of extracts from the state register of real estate, including information
on the description of the property, the registered rights over it, and any restrictions (encumbrances) on such rights, by notaries or, in cases prescribed by law, by other officials authorized to perform notarial acts in connection with the performance of notarial actions concerning real estate, as well as ensure the immediate electronic transmission to the state register of real estate of the document prepared and/or certified as a result of such notarial actions—which serves as the basis for registration of the relevant real estate—the possibility of real-time exchange of information and documents through electronic information systems between the state register of real estate and notaries, or other authorized officials in cases provided by law, shall be ensured, along with their direct access to the state register of real estate through such systems.
148.4. To obtain information related to mortgaged real estate, a connection shall be established
between the state register of real estate and the information systems of the Central Bank of the Republic of Azerbaijan, the financial markets supervisory authority, mortgage funds, mortgage-holding banks, and other credit institutions.
Article 149. Unreasonable registration of rights to immovable property
149.1. Deleted.
149.2. Where registration of rights to immovable property is declared unreasonable, or a
valid registration is cancelled or changed, any person whose rights in respect of such property are breached shall be entitled to seek a court order for cancellation or amendment of the corresponding entry. Claims for recovery of damages cannot be excluded. In such case the rights of a third party who acted in good faith shall remain intact.
Article 150. Cancellation of registration of destroyed immovable property
150.1. If a piece of real estate is completely destroyed and, as a result, its registration loses
all legal significance, the interested party may demand the cancellation of the registration through the court. The destruction of the real estate should be certified by an official of the relevant executive authority responsible for maintaining the state register of real estate.
150.2. Any interested person may appeal cancellation of registration in court within ten
days of the date when they became aware of such cancellation.
Article 151. Amendments in the State Register of Immovable Property
151.1. In the event of complete destruction of immovable property resulting in loss of legal
sense of its registration, the relevant person shall be entitled to claim the cancellation of registration under court order. Relevant executive authority shall be entitled to make amendments in the state register of immovable property without having the written consent of interested parties only upon the basis of a court order.
151.2. Amendment of misprints and technical errors shall be carried out under ordinary
office procedure.

Chapter 6
General provisions of the right of ownership
Article 152. Concept and scope of ownership rights
152.1. The right of ownership is the right of a person, recognized and protected by the state,
to possess, use, and dispose of property (a thing) belonging to him at his own discretion.
152.2. The right of possession is the legally secured ability to exercise actual control over
property (a thing).
152.3. The right of use is the legally secured ability to derive beneficial natural properties of
property (a thing) and obtain benefits from it. Benefits from use may take the form of income, growth, yield, offspring, or other forms.
152.4. The right of disposal is the legally secured ability to determine the legal fate of
property (a thing).
152.5. The owner, within the limits established by law or agreement, may freely possess, use,
and dispose of property (a thing). may prevent others from possessing that property. and may, at his own discretion, perform any actions in relation to the property, provided that such actions do not infringe upon the rights of neighbors or third parties, and do not constitute an abuse of rights.
152.6. Abuse of rights is the use of property in a manner that causes harm to others. in such
cases, the owner’s interest is not clearly expressed, and the necessity of his actions is not justified.
152.7. The right of use also includes the possibility for a person not to use his property. If
the failure to use or maintain the property threatens public interests, a duty to use, maintain, or preserve it may be established. In such cases, the owner may be obliged either to perform these duties personally or allow others to use the property for an appropriate remuneration.
152.8. The owner may place his property under the management of another person through
a power of attorney (authorized manager). Placing the property under authorized management does not transfer the ownership right to the manager. the manager should manage the property for the benefit of the owner or a third party designated by the owner. 152.8-1. Measures related to the management of seized property may be taken in cases and in the manner prescribed by law.
152.9. Ownership rights to an item of property shall also apply to components of such item.
152.10. The risk of destruction of property or sudden damage shall be borne by the owner,
provided that this Code, or an agreement, shall not specify otherwise.
152.11. An owner shall be liable for maintenance of his property, provided that this Code,
or an agreement, does not specify otherwise.
Article 153. Subjects of ownership rights
153.1. Legal entities, individuals, municipalities, and the state of the Republic of Azerbaijan
shall have rights of ownership to movable and immovable property.
153.2. Legislation shall establish types of property which may only be owned by the state or
municipalities.

153.3. Special features of acquisition or termination of ownership rights to property,
possession, use, and disposal depending upon the fact whether the property is under the ownership of legal entity or individual, under the ownership of the Republic of Azerbaijan or communities may be established only by the law.
153.4. Rights of all owners shall be equally protected.
Article 154. Ownership rights of individuals and legal entities
154.1. Individuals and legal entities may be owners of any property, except for certain
types which under the law may not be in the ownership of individuals or legal entities.
154.2. Quantity and value of property in the ownership of individuals or legal entities shall
not be restricted, except for cases when such restrictions are imposed in furtherance of purposes specified in Article 6.3.
154.3. Commercial and non-commercial legal entities shall be owners of property
transferred to such entities as contribution by founders (participants, members) or acquired by such legal entities upon other grounds.
Article 155. Right to state property
155.1. State property shall mean all property belonging under ownership rights to the
Republic of Azerbaijan.
155.2. Land and other natural resources which are not in the ownership of individuals,
legal entities or societies shall be in the ownership of the state.
155.3. Funds from the state budget shall be the property of the Republic of Azerbaijan.
155.4. The State may transfer its own property to ownership of individuals and legal
entities under the procedure specified by the laws on privatization of state property.
Article 156. Ownership rights of municipalities
156.1. Property belonging under ownership rights to municipalities shall be their property.
156.2. Funds from local budgets shall be property of municipalities.
Article 157. Protection of ownership
157.1. An owner shall be entitled to request acknowledgement of ownership rights.
157.2. Owner shall be entitled to claim his property from another one’s illegal possession.
157.3. Deleted.
157.4. Where violation of ownership or other restrictions occurs without confiscation or
deprivation of property, the owner is entitled to request the offender to stop such actions. Where such actions continue, the owner is entitled to seek termination of such actions by court order.
157.5. Upon claiming property from another one’s illegal possession, the owner shall also
be entitled to claim from a person who knew or should have known that his ownership is illegal (mala fide purchaser), return or reimbursement of all income which such person received or could have received during their enjoyment of the property starting from the moment when they came to know or should have come to know or receive the service as per the owner’s claim for return of property or illegal possession of property. Besides, the dishonest owner shall

compensate to property owner all damage incurred as a result of holding his property. Legal owner during compensation shall not be obliged to compensate for lost or damaged property, including losses associated with incomes obtained from the property.
157.6. Both a bona fide purchaser and a mala fide purchaser shall be entitled to claim from
the owner reimbursement of necessary expenditure on the property starting from the moment when income becomes due to the owner.
157.7. A bona fide possessor may retain improvements he has made that can be separated
from the property without causing damage to it. If it is not possible to separate improvements in this way, the bona fide possessor may demand compensation for the expenses incurred in improving the property, provided that the amount does not exceed the value of the property.
157.8. Rights of owner shall also belong to a person who while not being the owner
possesses the property upon grounds specified by this Code or under an agreement.
157.9. When required by state needs, property may be acquired by the state only in the
cases provided for by the Law of the Republic of Azerbaijan on Acquisition of Land for State Needs. Such acquisition shall be carried out for the purposes of constructing and installing state￾significant roads and other communication lines, ensuring reliable protection of the state border within the border zone, constructing facilities of defense and security significance, and constructing state-significant mining industry facilities.
Article 158. Property rights of persons who are not owners
158.1. The following shall be treated as property rights along with the ownership rights:
158.1.1. right of pledge.
158.1.2. right of use of property.
158.1.3. easements.
158.2. Property rights may belong to persons who are not the owners of such property.
158.3. Transfer of ownership rights in respect of property to another person shall not
constitute grounds for termination of other property right in respect of such property provided that the beneficiary is the bona fide holder of charged property.
158.4. Property rights of a person who is not the owner of the property shall be protected
from violation by any person, including that of the owner.
Chapter 7
Right of possession
Article 159. Possession of a thing
Possession shall be achieved via actual possession of a thing.
Article 160. Direct and indirect possession
If the owner of a thing has given it to another person for the exercise of a limited real right or a personal right of possession, both persons shall be considered possessors. The first one shall be an indirect possessor, and the second one shall be a direct possessor.
Article 161. Possessor of another one’s thing and possessor of own thing

Whoever possesses a thing under ownership rights shall be the possessor of his own thing, whereas any other possessor shall be the possessor of another one’s property.
Article 162. Temporary interruption of possession
Temporary inability or lack of possibility of actual possession of a thing shall not vitiate possession of such a thing.
Article 163. Transfer of possession
163.1. Possession shall be transferred by delivering the thing itself. The transfer shall occur
when the acquirer, with the will of the previous possessor, becomes able to exercise actual control over the thing.
163.2. If a third person or the transferor himself continues to possess the thing on the basis
of a special legal relationship, possession of the thing may be acquired without the physical delivery of the thing. Such a transfer of possession is valid for the third person only when the transferor notifies him about it. A third person who has the right to refuse to deliver the thing to the transferor may also refuse to deliver it to the acquirer on the same grounds.
163.3. In the case of goods delivered to a carrier or to a warehouse, the delivery of an order
document representing those goods shall be considered as the delivery of the goods themselves. If both the holder of the order document and the person who has acquired the goods are in good faith, priority shall be given to the latter (the one who has acquired the goods).
Article 164. Protection of possession
164.1. Deprivation of possession or interference with possession without the will of the
possessor shall be considered unlawful self-help. Every possessor shall have the right to use reasonable force to protect against such unlawful self-help. In doing so, he should refrain from excessive or unjustified use of force, taking into account the circumstances.
164.2. A person who has been deprived of possession may demand the return of possession
from the unlawful possessor. However, such a claim shall be excluded if the deprivation resulted from a mistaken act against the factual possessor or his legal successor, and if the possession was acquired within one year prior to the deprivation.
Article 165. Violation of possession
165.1. Where possession is violated through unlawful acts, the possessor is entitled to
request that the offender desist from such acts. Where there are doubts that the violation will cease, the possessor is entitled to file a claim for termination of such acts. Such claims are excluded where in respect of the offender or their predecessor in law the possessor is considered unlawful and possession was acquired during the year preceding the year of deprivation.
165.2. A claim against unlawful acts is permitted only where the possessor claims return of
property or eliminating breaches immediately on the date when they become aware of the fact of violation and the identity of the offender. A claim shall be filed within one year of the date of

deprivation or violation, even in cases when the possessor becomes aware of the violation and offender later.
Article 166. Assumption of ownership upon possession
166.1. It shall be assumed that the possessor of property possesses such property under
ownership rights. It shall be assumed that each previous possessor was the owner of such property during their possession thereof.
166.2. A person in possession of movable property, who does not wish to become the
owner of such property, may assume that such property is in the ownership of the person from whom such property was received. The possessor shall be treated as acting in bad faith where they knew or should have known that they have no right to possess the property. It is assumed that the possessor of movable property who claims restricted property or personal rights indeed has such rights. However, they may not assume the existence of such right in the person from whom they receive the property.
166.3. It shall be assumed that only the person whose right of possession arises out of
registration of a land plot in the state register of immovable property has the ownership rights and right to claim possession. However, the actual possessor of a land plot may file a claim on deliberate deprivation or violation of possession.
Article 167. Obligation of mala fide possessor to return property – Deleted.
Article 168. Absence of bona fide possessor’s liability to owner – Deleted.
Chapter 8
Restriction on right of ownership
Article 169. General provisions on restriction on ownership rights
169.1. Ownership rights may be restricted in cases specified by this Code.
169.2. Any owner of immovable property shall permit drilling of wells, laying of water,
gas, and other pipes, and laying of surface and underground power cables in return for full compensation of damage caused by such actions, provided that such actions cannot be accomplished without the use of the corresponding land plot, or where it may be so accomplished, it would require significant expenditure.
169.3. The owner of an encumbered land plot is entitled to proper consideration of their
interests. Where it is justified by extraordinary circumstances, in the case of surface utilities, they may claim separation of the relevant land plot for full consideration.
169.4. Where circumstances change, an owner may claim laying of utilities in accordance
with his/its own interests. The cost shall be borne by the primary recipient. However, a reasonable portion of the costs, justified by circumstances, may be borne by the owner.
Article 170. Rights of neighbors

170.1. Any land plot or other immovable property subject to bilateral influence shall be
regarded as a land plot or immovable property of a neighbor.
170.2. Owners of neighboring land plots or other immovable property shall, in addition to
rights and duties specified by law, respect each other. In exercising rights of ownership, each person shall refrain from excessive actions in respect of property of the neighbor. In particular, all harmful and depending upon the situation and features of the land plots, illegal actions relating to use of gas, waste, smells, noises and vibrations are prohibited.
170.3. Nobody shall be permitted to change the natural course of water such that it entails
harm to a neighbor. Water required for each of a lower and higher land plot may be directed to the higher land plot only in the amount necessary therefore. In using water the owner of the lower land plot shall receive all water which comes to their plot through its natural course free of charge. Where such owner sustains damage from discharge of water, they shall be entitled to demand that the owner of the higher land plot, at their expense, dig a ditch through the lower land plot.
170.4. It shall not be permitted to change the course of underground waters which traverse
several land plots, or so to manipulation the water that it could lead to reduction in volume of water or a deterioration in its quality at other land plots.
Article 171. Duty to suffer nuisance from a neighbor
171.1. The owner of a land plot or other immovable property may not prohibit the effect on
his property of gas, vapor, odor, soot, smoke, noise, heat, vibration, or other similar influences coming from a neighboring property, if such influence does not interfere with the use of his property or only slightly affects his rights.
171.2. The same rule shall apply when the influence is significant, but arises from the
ordinary use of the neighboring land or other immovable property and cannot be prevented by measures normally associated with the proper management of such property.
171.3. If the owner is obliged to tolerate such an influence, he may demand monetary
compensation from the owner of the land plot or other immovable property causing the influence, if the influence exceeds the limits of ordinary use established for that area or the economically permissible standards.
Article 172. Damage caused to owner by excavation and construction works
172.1. During excavation and construction works, the owner shall not be allowed to harm
neighboring land plots by dumping soil, exposing them to danger, or damaging structures located on those plots.
172.2. The owner of a land plot may demand the prohibition of construction or operation of
structures on a neighboring plot if such structures illegally interfere with his right to use his land.
172.3. If the owner unintentionally encroaches on a neighboring plot during construction,
the neighboring owner should tolerate the encroachment, except in cases where it is discovered beforehand or protested immediately after discovery. The encroaching neighbor should pay monetary compensation for the encroachment and continue to pay it annually thereafter.

172.4. The rules on protruding buildings apply to constructions that violate neighborhood
rights.
Article 173. Protruding buildings
173.1. Buildings and other structures that extend onto another immovable property shall
remain part of the property on which they are located, provided that the owner of that property has a property right over them. The neighbor may either object to the superstructure or accept it and demand reasonable compensation.
173.2. The right to the superstructure may be registered as a servitude in the state real
estate registry.
173.3. If the superstructure is unauthorized, and the affected person knows about it but
does not timely object, the person who erected the superstructure may, in circumstances that justify it, be granted a property right over the superstructure or the land, with reasonable compensation.
173.4. If there is a risk that the building may collapse from the neighboring plot onto the
land, the owner may demand that the neighbor take necessary measures to prevent this danger.
Article 174. Protruding plants
174.1. If overhanging branches or extending roots cause damage to a neighbor’s property
and are not removed within a reasonable period after the neighbor’s complaint, the neighbor may cut them off and keep them.
174.2. If fruits of a tree or bush fall onto neighbor’s land, they belong to the owner of that
land.
174.3. If the owner of a land plot with buildings or structures allows overhanging branches,
fruits growing on those branches belong to him. These rules shall not apply to forest land plots.
Article 175. Right of way through another person’s possession
175.1. If a land plot does not have access from its owner’s property to a public road or to
electricity, oil, gas, or water supply lines, the owner may require neighbors to provide a necessary passage, with full compensation. The claim shall be first directed to the neighbor from whom it is most reasonable to demand access due to ownership and access relationships. if that is not sufficient, the claim shall be directed to neighbors where the passage causes less harm. When determining the necessary passage, mutual interests should be considered.
175.2. Neighbors whose land will be crossed by a necessary road or connecting line should
be appropriately compensated. By agreement between the parties, compensation may be provided as a one-time payment.
175.3. If connection lines to land plot already existed but are removed due to owner’s
unauthorized actions, there shall be no obligation to tolerate a necessary road or connecting line.
Article 176. Fencing and separation of land plots

176.1. The cost of fencing shall be borne by the owner of the land plot where such fencing is
located. Where two land plots are separated by a fence or any other structure, it shall be assumed that the owners of such adjacent land plots have equal rights of use of such structure and shall incur expenditure in respect of such structures in proportion to their interests. Where both neighbors are equally entitled to use the structure designated to be the border, each neighbor shall use the structure in such manner that no impediment is caused to the other neighbor.
176.2. The owner of a land plot shall be entitled to claim from an owner of neighboring
land plot to take part in the construction of a new fencing or repair of the fencing which previously existed but has become demolished or damaged. The costs shall be borne equally by the neighbors unless they determine otherwise. For as long as at least one of the neighbors is interested in maintaining a fence or border structure, such fence or structure shall not be demolished or altered without such neighbor’s consent.
176.3. Where it is impossible to establish a precise boundary, the neighbor’s actual
possessions shall play the deciding role in determining where the fencing will be traced. Where it is impossible to establish borders of the neighbor’s actual possessions, the disputed area shall be divided into equal sections. Should such division create unjust results, then the border shall be established by court upon application by one of the parties.
Article 177. Animals and things lost
If, as a result of a natural disaster or accidental events, things fall onto another person’s land, or animals (except wild animals) enter another person’s property, the owner of that land should allow a reasonable person to retrieve them. In this case, the owner may demand compensation for any damage caused and shall have the right to retain the items in connection with that claim.
Chapter 9
Acquisition and loss of ownership rights
§ 1. Daşınmaz əşyalara mülkiyyət hüququnun əldə edilməsi
Article 178. uisition of ownership rights to immovable property
178.1. Ownership rights to immovable property shall pass to the purchaser from the
moment of registration of act of transfer in the state register of immovable property on the grounds established by law. If in accordance with law the rights on property can be transferred to another person without registration in the state registry, the person shall inform the state registry on this.
178.2. Ownership rights to newly created immovable property shall arise from the moment
of registration of such property in the state register of immovable property.
178.3. Where, as the result of flood, landslide, or subsidence, change of direction or level of
a river or by any other means a new land plot appears, it shall be adjoined to adjacent land plot.
178.4. Movement of soil from one plot to another shall not cause a change of boundaries.

178.5. Where an owner has unknowingly been registered without justification in the state
register of immovable property as the owner of a land plot continuously for ten years without any objection being made, such person shall be considered the owner of land plot.
178.6. Where a person has possessed property not registered in the state register of
immovable property and such possession was continuous for thirty years without any objection being made, such person may demand registration as the owner. On the same principle such right shall belong to the possessor of property whose owner is not recorded in the state register or who died 30 years previously or was declared missing without trace at the time of acquisition of property. However, in the absence of claims during the official notice period or on refusal to register, registration may subsequently be made only as the consequence of a court order.
178.7. Immovable property which has no owner, common waterways, and land unsuitable
for cultivation, for example, rocks, highlands and spring waters arising therefrom, and subsoil resources shall belong to the state.
178.8. Between the person willing to purchase a part of the unfinished building and the owner
(seller) of the land plot on which the building is located, contractual relations stipulated in Chapter 39 of this Code shall arise and in such relations the owner (seller) of the land plot shall be recognized as the contractor, and the person willing to acquire a part of the unfinished building - as the customer. At that, along with other obligations, the seller (contractor) shall undertake to complete the construction of the building and obtain a permit for its operation within the period established in the agreement provided for in Article 144-1.4 of this Code, and the person (customer) wishing to purchase a component part undertakes timely to pay the seller an agreed amount in installments. The change of the owner (seller, contractor) of the land plot on which the unfinished building is located and (or) the person willing to purchase a part of this building should not exclude the application of the contractual relations provided for by Chapter 39 of this Code to the relations that have arisen between them.
Article 179. Acquisition through length of use
179.1. Deleted.
179.2. A party relying on length of use of a property may include in such period all the time
when such property was in the possession of an entity which is its legal predecessor.
179.3. Until acquisition of ownership rights to immovable property through length of use,
the party possessing such property as their own shall have the right to protect their possession against breaches by third parties who are not owners of the property and who do not have the right to possess such property in virtue of this Code or under a contract.
179.4. Ownership rights to an immovable property shall arise in respect of a party
acquiring such right through length of use from the moment of registration of such property in the state register of immovable property.
Article 180. Unauthorized construction and consequences thereof
180.1. A residential house, other building, structure, or other immovable property
constructed on a land plot not designated for construction, or without obtaining necessary permits, or in gross violation of urban planning and construction norms and rules, shall be considered unauthorized construction.

180.2. A person who carries out unauthorized construction shall not acquire ownership
rights over it. Such a person shall have no right to dispose of the construction — including selling, gifting, leasing, or entering into other transactions.
180.3. Ownership rights over unauthorized construction may be granted by a court only if
the land plot on which the construction was made belongs to that person. If maintaining the construction violates the rights or legally protected interests of others, or poses a threat to human life or health, the person may not be granted ownership rights over the unauthorized construction.
180.4. Buildings and structures constructed on land not designated for construction, or
without necessary permits, or in gross violation of urban planning and construction norms, may be demolished based on a court decision issued at the request of the relevant executive authority or an interested party. § 2. Acquisition of ownership rights to movable property
Article 181. Basis for acquisition of ownership rights to movable property
181.1. Owner shall, on real legal basis, give the ownership rights to property to the person
who acquires right of property to movable property.
181.2 Assignment of property means: assignment of property to direct ownership of person
who acquires the property, assignment of roundabout ownership to property based on agreement, in this case previous owner may remain as a direct owner. assignment of right of the owner to require the ownership from third party to person who gained ownership rights.
181.3. Right of property to a new item manufactured or created for himself by the person
following the requirements of legislation shall acquire the person himself. The benefit derived as a result of usage of property, property right to the production and the income shall be gained based upon requirements specified in Article 135.12.
181.4. Property right to item which has an owner may be acquired by another person on the
basis of a purchase and sale agreement, substitution, deed of gift or upon other transaction relating to disposal of property. If person has owned continuously for five years any item as his own, he shall be entitled to obtain the rights of ownership of such property (statute of limitation). If it dishonestly owns the obtained item and later it is established that this item does not belong to him, obtaining of such movable item shall not be allowed.
181.5. Deleted.
181.6. Where a legal entity is reorganized the ownership rights to the property formerly
belonging to such legal entity shall pass to the legal entity or entities which is the legal successor of the reorganized legal entity.
181.7. In those cases and under a procedure stipulated by this Code, a person may acquire
ownership rights to property which has no owner, or to property the owner of which is unknown, or to property renounced by its owner, or to property to which the owner has lost his/its property rights on other grounds specified by law.
181.8. Deleted.
Article 182. Acquisition of property in good faith

182.1. A person who acquires an item from someone who is not its owner, but does so in
good faith, shall become the owner of the item. If the acquirer knew or should have known that the transferor was not the owner, they cannot be considered in good faith. The fact of good faith should exist at the time the item is transferred.
182.2. If the owner of a movable item has lost it, if it was stolen or otherwise taken against
their will, or if the acquirer obtained it without compensation, the acquirer cannot be considered in good faith. These restrictions shall not apply to money, documented securities, or items acquired at auction.
Article 183. Transfer of ownership through securities
If the transfer of ownership requires, instead of delivering the item itself, the delivery of a security, the ownership of the item is considered to have passed to the acquirer from the moment ownership of the security is acquired.
Article 184. Acquisition of ownership of ownerless movable property
184.1. If the appropriation of an ownerless movable item is not prohibited by this Code, or
does not violate the rights of another person who has the legal right to appropriate it, the person who takes possession of the item shall acquire ownership rights over it.
184.2. A movable item shall be deemed ownerless if it has no known owner, its owner is
unknown, or its former owner has renounced ownership and abandoned possession of the item.
Article 185. Movable property abandoned by owner
185.1. Movable property that has been abandoned by its owner—whether by being thrown
away or otherwise relinquished—may be appropriated by another person for his ownership.
185.2. A person who owns, possesses, or uses a land plot, water body, or other object may,
if there is abandoned property or abandoned metal scrap, defective products, spoil heaps arising from the extraction of useful minerals, production waste, or other debris with an obvious value below fifty-five manats, begin using that property or perform other acts indicating their intent to acquire ownership, thereby directing it to their ownership.
185.3. Other abandoned property enters into the ownership of the person who has taken
possession only when a court declares it ownerless at the person’s request.
Article 186. Lost and found property
186.1. A person who finds a lost item should immediately notify the person who lost it, its
owner, an authorized official, or, if the owner is unknown, the police, and deliver it to them.
186.2. Except in cases where the owner is known or the owner’s right to the item has
already been reported to the police, the finder acquires ownership of the item one year after notifying about the find. Upon acquisition of ownership, all other rights over the item shall be terminated.
186.3. If an authorized official accepts the found item, the finder may claim a reward of up
to five percent of the item’s value. In addition, the finder may demand reimbursement from the

authorized official for expenses incurred in preserving the item. If the finder fails to report the item or attempts to conceal it, they are not entitled to a reward.
186.4. If the finder renounces ownership, the authorized body may, after one year, sell the
item at auction and benefit from the proceeds, or, if the item is of low value, may appropriately dispose of it or destroy it.
186.5. If the found item is an animal, perishable, or costly to maintain, the one-year period
shall not apply, and any proceeds obtained from appropriation of such items should be returned to the owner.
Article 187. Treasure
187.1. A treasure, that is, money or other items buried in the ground or otherwise hidden,
the owner of which cannot be identified, enters the ownership of the owner of the property where it was hidden (land plot, building, etc.) and the person who discovered the treasure, in equal shares, unless a different arrangement is agreed upon between them.
187.2. If a treasure is discovered by a person digging or searching for valuables without the
consent of the owner of the land or other property, it should be given to the owner of that land or property.
187.3. If the discovered treasure relates to historical or cultural monuments, or is of
scientific value, it belongs to the state. In this case, the owner of the property where the treasure was hidden and the person who discovered it are entitled to a reward equal to fifty percent of the treasure’s value. If no other arrangement is agreed upon, the reward is divided equally between them.
187.4. If such a treasure is discovered by a person digging or searching without the consent
of the owner, the entire reward is given to the property owner.
187.5. The rules of this Article do not apply to persons conducting excavations or searches
as part of their labor or service duties.
Article 188. Processing
188.1. Unless otherwise provided by an agreement, the ownership of a new movable item
created by processing materials belongs to the owner of materials, if materials do not belong to the person who performed the processing. If the value of the processing is significantly higher than the value of the materials, the ownership of the new item shall belong to the person who acted in good faith and performed the processing.
188.2. Unless otherwise provided by agreement, the owner of the new item made from
their own materials should pay the processor the value of the processing.
188.3. If the owner of the materials loses them due to the bad faith actions of the processor,
the owner may demand that the new item be transferred to their ownership and claim compensation for the damage incurred.
Article 189. Acquisition of ownership of property accessible to everyone
When, in accordance with legislation, general permit granted by the owner, or local custom, collection of berries, fishing, hunting, or gathering of other property accessible to

everyone is allowed in forests, water bodies, or other areas, the person who collects or hunts the property shall acquire ownership rights over it.
Article 190. Acquisition of right of property to a component part of a land plot
Where, due to its related character to a land plot where it is located, an immovable property has become a component part of the land plot, then in accordance with Article 135.10 of this Code the owner of such land plot shall also be the owner of such property.
Article 191. Co-ownership of a thing created by accession or merger
191.1. When movable items are connected or combined in such a way that they become
parts of a new unified item, or when movable items merge, the former owners of the items shall become the owners of the new item. Their shares shall be determined in proportion to the value of their items prior to the combination.
191.2. If one of the items is, according to custom or established practice, considered the
principal item, its owner shall also acquire ownership of its accessories.
Article 191-1 . Claim for compensation against the new owner
191-1.1. In accordance with Articles 188, 190, and 191 of this Code, a person who has lost ownership or whose rights have otherwise been violated may claim compensation from the current owner. A claim for restoration of the previous situation shall not be permitted. 191-1.2. If the new owner acquired the item from a third party under an agreement for consideration, the claim referred to in Article 191-1.1 of this Code shall not arise.
Article 192. Stray animals
192.1. Any person who finds stray or exhausted cattle on pasture, or other neglected
animals, should return them to their owner. where such animal’s owner or their whereabouts is unknown, the finder shall notify the police about such animal within three days of their being found. the police shall then institute a search for the owners.
192.2. While looking for the owner the person who found the animals may keep them, look
after them and use them or transfer them to other persons who have appropriate facilities for so doing. At the request of the finder, the police may find a person with the appropriate facilities for looking after the animals, and transport them to such person.
192.3. The finder of the animals and the person in whose charge they are given shall
maintain the animals in appropriate conditions. Where such persons are responsible for the animals' death or disease, they will bear liability within the limit of the animals’ value.
192.4. Where the owner of the animals is not identified within 6 months of the notice
concerning their finding or does not wish to accept them, the person who is maintaining and using the animals will acquire ownership rights to them. Where such person refuses to accept the animals they will become state property.

192.5. Where after the animals have been transferred into another person’s ownership the
previous owner is able to demonstrate an attachment on the part of the animals they may require that the animals be returned to them on the basis of an agreements with the new owner. Where no such agreement is possible, the matter shall be resolved by the courts.
192.6. On returning stray animals to the owner, the person who maintained them is entitled
to require reimbursement of costs incurred for their maintenance, with a deduction of any profit received from their use. The person who caught the stray animal is entitled to a reward pursuant to Article 186.3. § 3. Acquisition of ownership rights to rights and claims
Article 193. Concept of acquisition of ownership rights to rights and claims
193.1. The owner of rights or claims which may be assigned or pledged may assign them
into ownership of another person. Such rights and claims are assigned to the new owner with the same status as they had with the predecessor in title.
193.2. The predecessor shall assign to the new owner all documents at his disposal relating
to the rights and claims, and also all information necessary for exercising such rights and claims.
193.3. On request the predecessor shall provide to the new owner a duly certified
document confirming assignment of the rights and claims. The new owner shall pay all costs in respect of obtaining such document.
Article 194. Waiver of the claim
194.1. The holder of a claim (creditor) may assign (waive) the claim to a third party without
the debtor’s consent, provided that such assignment does not contradict the nature of the obligation, the agreement between the debtor and the creditor, or the law. An agreement with the debtor regarding inadmissibility of assignment is possible only if it serves legitimate interests of the debtor.
194.2. The assignment (waiver) of a claim shall be effected through an agreement between
the claim holder and the third party, in which case the third party assumes the position of the original holder. In such cases, no amendment to the agreement concluded between the creditor and the debtor shall be required, in accordance with the Law of the Republic of Azerbaijan on Banks
194.3. Claims that are inextricably linked to the creditor’s personality, including claims for
alimony and claims for compensation for damage to life or health, may not be assigned (waived).
194.4. The assignment (waiver) of a claim based on an agreement executed in simple
written or notarial form should be carried out in the corresponding written form.
194.5. The assignment (waiver) of a claim related to a registered negotiable instrument or a
mortgage note establishing a mortgage on immovable property shall be effected by endorsement of the respective instrument or note.
Article 195. Debtor's responsibilities on assignment of claim

Until the debtor is informed about the assignment of the claim, he may fulfill his obligations to the original creditor.
Article 196 . Scope of the creditor’s claims assigned to another person
Unless otherwise provided by this Code or by the agreement, the claim of the original creditor shall pass to the new creditor in the amount and on the terms existing at the moment the right is transferred. In particular, the rights securing the performance of the obligation, as well as other rights related to the claim — including the right to unpaid interest — pass to the new creditor. When a claim is assigned, the new creditor acquires the rights arising from pledge and mortgage, as well as the rights under any guarantees granted. The new creditor may exercise the preferential right associated with the claim in cases of enforcement or insolvency.
Article 197. Order of priority of claim holders
If the claim holder agrees with several persons on the assignment of the same claim, unless otherwise provided by the Law of the Republic of Azerbaijan on Encumbrance of Movable Property, the claim shall pass to the person with whom the claim holder established relations earlier. If this cannot be determined, the claim shall pass to the person who was notified to the debtor earlier. The same rule shall apply to claims that will arise in the future.
Article 198 . Proof of the new creditor’s claims
198.1. The debtor may refrain from performing the obligation in favor of the new creditor
until evidence is presented to them that the claim has been transferred to that person.
198.2. A creditor who has assigned the claim to another person shall be obliged to provide
that person with the documents confirming the claim right and to communicate the information that is significant for the enforcement of the claim.
Article 199 . Objections of debtor against claims of new creditor
199.1. At the time of obtaining a notification on cession to new creditor the debtor shall be
entitled to raise objections against the claim of new creditor, which he previously had against original creditor.
199.2. If the debtor has issued a document confirming the debt obligation, upon the
assignment of the claim for the delivery of that obligation, the debtor may not invoke against the new creditor that the obligation relationship and its confirmation were created merely for appearance’s sake, or that the assignment was excluded by an agreement with the original creditor — except in cases where, at the time of the assignment, the new creditor knew or ought to have known the particulars of the matter.
Article 200. Responsibilities of new debtor – deleted.
Article 201. Termination of security facilities at debt transfer – deleted.

Article 202. Assignment of the claim based on the law, or the decision of the court or
another competent public authority
The rules for acquisition of the ownership to rights and claims are also applied in the relevant manner to assignments of claims based on the law, or on the decision of the court another competent state authority. § 4. Loss of the property ownership right
Article 203. Types of loss of the property ownership right
203.1. Upon liquidation of registration records for the immovable property in the state
register of immovable property, and also upon at utter annihilation of the immovable property, the ownership right to immovable property shall be lost.
203.2. At rejection of the ownership right, annihilation of the property or acquisition of the
ownership right by another person, notwithstanding whether the possession right is lost or not, the owner of the movable property shall lose the ownership right to the movable property.
203.3. Except for below-mentioned measures, realized on the bases stipulated by law, the
forced withdrawal of property from the owner shall be prohibited:
203.3.1. forfeiture of property for liabilities.
203.3.2. the alienation of property which may not belong to the given person under the law.
203.3.3. the alienation of immovable property in connection with purchase of a land plot.
203.3.4. purchase of non-economically maintained cultural valuables.
203.3.5. requisition.
203.3.6. confiscation.
203.4. In the manner established by the legislation on privatization, the state-owned
property may be alienated into the ownership of legal and individuals.
203.5. The alienation of property owned by natural and legal entities for state and public
needs shall be realized according to Part 4 of Article 29 of the Constitution of the Republic of Azerbaijan.
Article 204. Abandonment of ownership
204.1. For renunciation of the ownership right or other rights to immovable property, an
application of the authorized person and registration of such application in the public register of immovable property shall be required. The application on rejection of the ownership right or other rights to immovable property shall become effective after registration thereof in the public register of immovable property.
204.2. For the renunciation of the right of ownership or any other right to movable
property, the owner should issue a written declaration to that effect or perform other actions that clearly demonstrate the owner’s intention to refrain from possessing, using, or disposing of the property without any intent to retain any right to it.
Article 205. Forfeiture of the property for the owner’s liabilities

205.1. The withdrawal of property by forfeiture of the property for the owner’s liabilities
may be performed based on the Law of the Republic of Azerbaijan on Encumbrance of Movable Property or the court decision, unless the agreement stipulates another procedure for forfeiture.
205.2. Ownership rights of the forfeited property owner shall terminate from the moment
the person to whom the forfeited property was transferred acquires the ownership right thereto.
Article 206. Revocation of person’s ownership rights over property he is not entitled to
own
206.1. If, under grounds allowed by law, a person acquired ownership to property that may
not be owned by such person by law, he should alienate this property within one year from the date he acquired the ownership right thereto, unless the law provides for another deadline.
206.2. Where the owner failed to alienate the property within the periods stipulated by
Article 206.1 of this Code, then, pursuant to court order based on the application of a public
authority, such property should be sold in the mandatory manner or transferred to the state budget and proceeds from the sale thereof or the value thereof shall be given to the former owner. In such case, expenses incurred for the alienation of the property shall be deducted from the amount given to the former owner.
206.3. Where, under grounds allowed by law, a natural or legal entity acquired ownership
to property that may be owned by such person only pursuant to a special permit and where the owner was declined in issuance of such special permit, such property should be alienated in the manner established for the property that may not belong to such owner by law.
Article 207. Expropriation of immovable property located on a land plot in connection
with the acquisition of the land plot
207.1. Where it is impossible to expropriate a land plot for the public needs without
termination of the ownership rights to buildings, structures or other immovable property located on such land plot, the state may purchase such property.
207.2. Deleted.
Article 208. Purchase of non-economically maintained cultural valuables
208.1. If the owner non-economically maintains the cultural valuables that, according to
law, constitute specially valued cultural valuables protected by the state, and such maintenance creates a risk of such cultural valuables losing their importance, such valuables may be purchased from their owner by the state pursuant to a court order.
208.2. Upon the purchase of the cultural valuables, their value is determined in the amount
agreed by the parties or, in the event of a dispute, determined by the court.
Article 209. Requisition
209.1. In the event of natural disasters, technological accidents, epidemics or emergency
events, the property may be taken for the public interest from the owner by the relevant state

authorities in the manner and on the terms established by law, and on the condition of compensating the owner for the value thereof (requisition).
209.2. Upon termination of effect of the above-mentioned circumstances serving as the
basis for requisition, the person whose property was requisitioned may demand the return of the remains of this property through the court.
Article 210. Consequences of the ownership right termination by law
When a law of the Republic of Azerbaijan terminating ownership rights is adopted, the state shall compensate the owner for any damage resulting from the adoption of this law, including the value of the property. Disputes regarding the payment of compensation shall be resolved by the court.
Article 211. Valuation of property upon termination of ownership rights
When ownership rights are terminated, the property shall be valued based on its market price.
Article 212. Confiscation
Confiscation is the compulsory and gratuitous seizure of property in favor of the state by a court decision in cases provided for by the Criminal Code of the Republic of Azerbaijan and the Code of Administrative Offenses of the Republic of Azerbaijan.
Chapter 10
Special types of the ownership right
§ 1. Common ownership
Article 213. Definition of common ownership and grounds for its emergence
213.1. Property in ownership of two or several persons shall belong to them on the basis
common ownership right.
213.2 Property may be in common ownership with establishment of shares of each of
owners (shared ownership) or without establishment of such shares (joint ownership).
213.3 Common ownership of property shall be shared ownership, except for cases where
the legislation stipulates establishment of joint ownership to this property.
213.4 Common ownership shall arise at the time of transfer to ownership of two or several
persons of property being indivisible without change of its destination (indivisible property) or property not destined for division by this Code. Common ownership to divisible property shall emerge in circumstances stipulated in this Code or in an agreement.
213.5 There may be established, with agreement of participants of joint ownership or by
court decision in the event of absence of such an agreement, a shared ownership of such persons to common property.

213.6 Any owner of common ownership may put forward claims against third persons in
respect of property in common ownership. Any owner of common ownership may claim property only for the benefit of all owners.
213.7 Property in common ownership may be pledged or otherwise encumbered to the
benefit of one of the owners on the basis of agreement with other owners.
213.8 Service and maintenance expenses in respect of property in common ownership shall
be equally apportioned among owners, unless provided otherwise in this Code or agreement.
Article 214. Determination of shares in right of shared common ownership
214.1. Shares shall be deemed to be equal if shares of owners of shared ownership cannot
be established on the basis of this Code and are not established by agreement of all owners.
214.2 There may be established, by agreement of all owners in shared ownership and
depending on contribution of each of the owner to the establishment and increase of common ownership, a procedure for determination and change of their shares.
214.3 Owner in shared ownership shall, in the event he has made at his own expense
improving additions to the property with observance of procedures established for use of common ownership and where such additions are inseparable from the property, have the right to relevant increase of his share in right of common ownership.
214.4 Additions improving common ownership which are separable from the property
shall comprise property of owner making such additions, unless stipulated otherwise by agreement of owners of shared ownership.
Article 215. Possession, use and disposition of property in shared ownership
215.1. Possession and use of property in shared ownership shall be carried out on the basis
of agreement of all its owners, and in the event such agreement has not been secured - in order determined by court.
215.2 Owner of shared ownership shall have the right to have possession and use of
portion of common property corresponding to his share, and in the event of impossibility of such - he may claim payment of relevant compensation from other owners having possession and use of portion of property corresponding to his share.
215.3 Owners of shared common ownership may come to agreement on procedure of
possession and use of property in common ownership. However, they may not terminate or restrict the following powers belonging to each of the owners:
215.3.1 power to demand carrying out of actions relating to use of property for the
purposes of maintaining value of property or its fitness for use, and where such actions are not being carried out - demand court to issue decision or carrying out of such actions.
215.3.2 power to independently carry out at expense of all owners actions for the purposes
of prevention of potential or probable damage to property.
215.4 Any owner shall have the right to have possession, use and disposition of property to
extent conforming to the rights of the other owners. Consent of all owners shall be required for the purposes of alienation or encumbrance of property, as well as for the purposes of change of its designation, with condition that they have not unanimously agreed otherwise. Participants

shall not, in the event there is hypothecation over shares of common ownership or encumbrance over land plots, be able to encumber the property itself with such rights.
215.5 Disposition of property in shared ownership shall be carried out through agreement
of all owners of property.
215.6 Owner of shared ownership may sell, gift, bequeath, pledge his share or dispose it in
any other way. rules specified in this Code shall be observed in the event of alienation of property for compensation.
Article 216. Fruits, products, and benefits from use of property in shared ownership
Fruits, products, and benefit from the use of property in shared ownership shall be added to common ownership and be divided between owners of shared ownership in proportion to their shares, unless provided otherwise by agreement between owners.
Article 217. Maintenance expenses in respect of property in shared ownership
217.1. Each owner of shared ownership shall bear responsibility, in proportion to his share,
for payment of taxes, fees and other payments in respect of common ownership, as well as for expenses relating to safekeeping and maintenance of the property.
217.2 Expenses incurred by any one of owners without necessity and without obtaining
consent of the rest of owners shall not be reimbursed by remaining owners. Disputes arising in this regard shall be resolved in court order.
217.3 There may be carried out, with consent of majority of owners, maintenance, repair
(restoration) and refreshing works for to protect property’s value and fitness for use.
217.4 Consent of majority of owners representing majority of shares in property shall be
necessary for the purposes of carrying out refreshing and restoration work aimed at increase of property’s value and increase of its efficiency and fitness for use. Changes complicating to a significant degree and for a permanent duration use of property for its initial designation by one of the owners or making such use inefficient shall not be carried out without consent of such owner. In the event change requires from one of the owners expenses not affordable by him, including expenses not affordable due to their non-proportionate nature to his share in property, such change may be carried out without his consent only where all remaining participants undertake to cover expenses falling on his share where such expenses exceed amount he can afford.
217.5 Carrying out of construction works and other works directed only at improvement of
outside appearance of property or increase of efficiency of its use shall be permitted only upon consent of all owners. In the event there is an order on carrying out of such activities with consent of owners representing majority of shares in property, such works may be carried out without wish of dissenting participant, provided that his right of use and disposition shall not be permanently restricted by such works, and the remaining participants shall pay compensation to him only for temporary restriction and shall undertake to cover expenses falling on his share.
Article 218. Preemptive right of purchase

218.1. In the event of sale to third person of share in common shared ownership right, the
remaining owners of shared ownership shall, except for cases of sale through public auction, have pre-emptive right of purchase of share on sale at sale price and other equal conditions. In the event all owners of shared ownership do not consent to public auction for the purposes of sale of share in common shared ownership, such auction may be carried out only in circumstance stipulated in Article 224.2 of this Code.
218.2 Seller of share shall give written notice on his intent to sell his share to third person
by indicating price and other conditions of share to the remaining owners of shared ownership. Seller may sell his share to any person in the event the remaining owners of shared ownership refuse from purchase of share of immovable property sold in right of ownership, or fail to acquire it within 45 days of notification date, and in the event of movable property - fail to acquire share to movable property in right of ownership within 15 days.
218.3. In the event of sale of share with violation of preemptive right in purchase, any
owner of shared ownership shall have, within three months, the right to demand in court order a transfer to him of buyer’s rights and obligations.
218.4. Assignment of preemptive right in purchase of share shall not permitted.
218.5. Rules of this Article shall also apply in the event of alienation in accordance with
share exchange contract.
Article 219. The moment when a share in shared ownership is transferred to the acquirer
under the agreement
219.1. A share in shared ownership, unless the parties have agreed on a different time, shall
pass to the acquirer under the agreement from the moment the agreement is concluded.
219.2. The moment of transfer of a share in shared ownership under a contract that gives
rise to rights requiring state registration shall be determined from the time these rights are entered into the state register.
Article 220. Division of a thing in shared ownership or separation of share from it
220.1. A thing in shared ownership may be divided between its owners based on an
agreement between them.
220.2 Owner of shared property may demand separation of his share.
220.3 If the owners of joint property cannot agree on the method and conditions for
dividing the common item or separating a share from it, an owner of joint property may demand in court that their share be separated in kind. If separation in kind is not possible, or if it cannot be done without disproportionately harming the property held in common, the separating owner has the right to have the value of their share paid to them by the other owners of the joint property.
220.4 Under this article, any disproportion between the property separated in kind and the
owner's share in ownership is remedied by payment of the corresponding monetary amount or other compensation. Payment of compensation by the remaining owners instead of separating the share in kind is permitted only with the owner’s consent. If the owner’s share is small, cannot be physically separated, and their interests in using the common property are

insignificant, the court may, even without the owner’s consent, impose on the remaining participants of the joint ownership the obligation to pay compensation.
220.5 From the moment the owner receives compensation under this article, they lose their
right to the share in the common property.
220.6. If, based on the rules established in Articles 220.3–220.5 of this Code, the division of
the common property or separation of a share is clearly impractical, the court may decide to sell the property at a public auction and distribute the proceeds among the owners of the joint property in proportion to their shares.
Article 221. Termination of common shared ownership right
Shared ownership rights in common property may be terminated by physical division, voluntary sale, sale at auction with the proceeds divided, or by registering the entire property in the name of one or more participants and compensating the remaining participants. If participants cannot agree on the method of termination, the property is physically divided by court decision. if such division is not possible without significantly reducing the property’s value, it shall be sold at a public auction or an auction limited to participants. Physical division may be combined with monetary compensation for unequal shares.
Article 222. Possession, use, and disposition of items in joint ownership
222.1. Participants of commonality serving as a ground for formation of joint ownership
shall be owners of joint ownership. Owners of joint ownership shall jointly own and use common property, unless provided otherwise by agreement of owners of joint ownership.
222.2. Disposition of an item in joint ownership shall be carried out with consent of all
owners, and this consent shall be assumed regardless of signing of agreement on disposition of property by any one of owners.
222.3. Any owner of joint ownership may enter into agreement on disposition of common
property, unless provided otherwise by agreement of all owners. Agreement on disposition of common property entered into by one of the owners of joint ownership may be considered invalid upon demand of the remaining owners based on allegations of absence of necessary authority of such owner only in the event its has been proved that the other party to the agreement knew or should have known about the lack of authority.
222.4. Debtor may not substitute claim to separate joint owner without consent of other
owners of joint ownership.
Article 223. Termination of joint ownership right, division of items in joint ownership or
separation of share from it
223.1. Joint ownership right shall be terminated in the event of alienation of property or
putting an end to existence of communality serving as a ground for formation of joint ownership.
223.2. Division of common item by owners of joint ownership or separation of share of one
of them shall be carried out after preliminary determination of each owner’s shares.

223.3. Shares of owners at the time of division of common item or separation of share from
it shall be considered to be equal, unless provided otherwise by their agreement.
223.4. Grounds and procedure for division of common item or separation of share from it
shall be determined in accordance with provisions of Article 220 of this Code.
Article 224. Foreclosure of share in common ownership
224.1. In the event of insufficiency of other property of shared and joint ownership’s owner,
his creditor may demand separation of his share for the purposes of foreclosure of debtor’s share in common item.
224.2. In the event of impossibility of separation of share in kind or where the remaining
participants of shared or joint ownership object to it, creditor shall have the right to demand the debtor to sell his share to the remaining participants of common ownership at a market price and direct proceeds received from the sale to the debt repayment. In the event of refusal of the remaining owners of common ownership to purchase the debtor’s share, the creditor shall have the right to demand in court order an foreclosure of debtor’s share in common ownership right through public auction of his share. If the share of the debtor in the right of common ownership is the subject of a mortgage, then foreclosure of this share is carried out in the manner prescribed by the Laws of the Republic of Azerbaijan on Mortgage and on Execution.
Article 225. Common ownership of husband and wife
225.1. Property earned by spouses during their marriage shall be their common ownership,
unless provided otherwise in prenuptial agreement or agreement between them.
225.2. Property belonging to each of spouses prior to their entry into marriage, as well as
property received by any one of them during their marriage as a gift or through inheritance shall be in his or her ownership.
225.3. Property in individual use (clothes, shoes, etc.), except for jewelry and other
valuables items, shall be deemed property of husband (wife) using it even thought it was obtained during their marriage at spouses’ common funds.
225.4. Property of each of spouses may be deemed their common ownership only where it
has been established that the funds at the expense of common ownership of spouses during their marriage or personal property of husband (wife) have been invested into the property significantly increasing its value (considerable repairs, reconstruction, supply of new equipment, etc.). This rule shall not apply where provided otherwise in prenuptial agreement or agreement between the spouses.
225.5. Foreclosure in respect of obligations of husband (wife) may be imposed on property
in his ownership as well as on his share in spouses’ common property only if prenuptial agreement does not provide otherwise.
225.6. Without consent of spouse, holding the joint ownership rights on immovable
property, an agreemetnt made on property rights registered in the state registry of immovable property, shall be deemed invalid. It shall also apply to cases when the beneficiary is a bona fide purchaser towards the ownership of such rights only to the party of agreement. If under the agreement any party knew or should have known about invalidity of the agreement, the purchaser shall require this party to compensate the loss incurred as a result of such invalidity.

§ 2. Right of ownership to integral part of residential building
Article 226. Definition of ownership right to integral part of residential building
226.1. Ownership right to integral part of residential building shall mean right to common
shared immovable ownership, meaning acquisition by owner of special right for the purposes of having an exclusive use of certain parts of building and carrying out decoration-renovation works inside such property. Owner of integral part of residential building shall be free to manage, use and carry out decoration-renovation works in his own rooms, provided that he shall not hamper exercise of similar rights by other such owners and shall not damage general construction elements and installations or shall not worsen their functions or outside appearance. He shall keep his rooms in a manner required for the purposes of maintenance of entire building in perfect condition or protection of its good outside appearance.
226.2. Owner of integral part of residential building shall possess, use and dispose of
residential room belonging to him in accordance with the room’s designation.
226.3. Owner of integral part of residential building may lease it on a contractual basis.
226.4. Placement of industrial production in residential buildings shall be prohibited.
Article 227. Common ownership of owners of integral part of residential building
227.1. Common rooms, supporting constructions, mechanical, electric, sanitary-technical
and other equipment, serving more than one apartment, and located outside or inside of residential building, as well as located land site shall belong to owners of integral part of residential building on the basis of common shared ownership right.
227.2. Owners of integral part of residential building shall not have the right to alienate his
share in ownership right to common property of residential building, as well as to perform other actions serving as a cause for grant of such share separately from ownership right to integral
part of building.
Article 228. Right of use of integral part of residential building
228.1. Family members of owner of integral part of residential building and other persons
shall have the right of use of building, provided that such right has been registered in the state register of immovable property.
228.2. Emergence, enforcement conditions and termination of right of use of integral part of
residential building shall be established by notarized written agreement concluded with owner. In the event of absence of agreement on termination of right of use of integral part of residential building, this right may be terminated on the basis of claim of owner in court order by payment of compensation equal to market price.
228.3. Right of use of integral part of residential building may not be an independent
subject of sale and purchase, pledge and lease. Person having right of use of integral part of residential building shall have the right to demand any person, including its owner, to rectify violation of right to the residential building.
228.4. Transfer of ownership right to residential house or apartment shall not be a ground
for termination of right of use of integral part of residential building, except where person

having right of use of residential room gives, prior to transfer of such right, notarized obligation relating to refusal from the ownership right.
228.5. Family members of the owner of integral part of residential building (husband, wife,
parents, children), residing together with him/her, shall have the right of use of living space equally with him. Family members of the owner of integral part of residential building are entitled to move their minor children in this building. Moving of other family members (husband, wife) in shall be permitted only with the owner's consent. The right of use of integral
part of residential building shall be reserved in case of divorce. The right of use of integral part
of residential building shall arise since the day of coming into force of this Code.
Article 229. Meeting of owners of integral parts of residential building
229.1. Gathering of individual owners of integral parts of residential building shall
constitute meeting of owners of integral parts of residential building not being a legal entity.
229.2. Demand of termination of meeting of owners of integral parts of residential building
shall be prohibited.
Article 230. Units of integral parts of residential building
Various integral parts of residential building or their partitions may be objects of special rights. these parts and partitions shall be closed and have own entrance like apartments or room units designated for business or other purposes, however they may have various auxiliary rooms. Such units shall be referred below as ‘units of integral parts of residential building’.
Article 231. Rights of owners of integral parts of residential building in common shared
ownership
231.1. In the event no special right in favor of certain owner of integral part of residential
building has been registered in the state register of immovable property, the following items and rights shall be in common shared ownership of owners of integral parts of residential building:
231.1.1 inheritance right to construction serving as a ground for land and construction of
building.
231.1.2 construction elements bearing importance for design, constructive structure and
firmness of rooms of other owners of residential building and its integral parts and defining building’s outside beauty and appearance.
231.1.3 other equipment designed to serve the use by such owners of their rooms.
231.2 Other construction designs of building may, upon subsequent agreement of owners
of integral parts of residential building, be announced as joint constructions in justification act. In the absence of such, it shall be assumed that they relate to special rights.
Article 232. Restriction of preemptive right of acquisition of integral part of residential
building
Owner of integral part of residential building shall not have preemptive right in respect of third person that had acquired from other owner of integral part of residential building his share or has assigned by subsequent agreement such preemptive right to other person and in whose

favor a security entry in the state register of immovable property is made. Equally, it may be established that alienation of integral part of residential building, encumbrance of it with right of use or right of residence, as well as its leasing shall have legal force only where the remaining owners of integral part of residential building do not object, by issuing relevant decision, to this within 14 days of presentation to them of information. Objection shall be invalid in the event it was given without presence of significant grounds. In the course of hearing such objection, court shall, upon request of objection’s opponent, issue order on satisfaction of his claim.
Article 233. Registration of ownership right to integral part of residential building
233.1. Ownership right to integral part of residential building shall be secured through
registration in the state register of immovable property. Registration may be required on the basis of followings:
233.1.1. agreement relating to formalization of shares in owners’ ownership right to integral
part of residential building.
233.1.2. application relating to establishment by owner of immovable property or possessor
of independent and continuing construction right of share of such property and formalization of their ownership right to integral part of residential building.
233.2 For an agreement to be deemed valid it should be notarized or, in the event of
existence of a will or an agreement on division of inheritance - relevant form of agreement should be followed.
233.3 Justification act relating to ownership right to integral part of residential building
shall contain, in addition to area partitioning, each share of integral part of residential building depicted in one-hundreds or one-thousands scale of immovable property or construction right. Consent and permission of meeting of owners of integral parts of residential building shall be required for the purposes of alteration of shares’ value. however, each owner has the right of correction in the event an owner’s share has been defined incorrectly or became incorrect as a result of constructional alterations of building or its surrounding.
Article 234. Termination of ownership right to integral part of residential building
Ownership right to integral part of residential building shall be terminated by immovable property’s or construction right’s destruction and recording in the state register of immovable property. In the event a building has been destroyed to an extent reducing its value by more than half and an owner cannot afford to restore the building without incurring unbearable encumbrances upon himself, any owner of integral part of residential building may be requested to terminate his ownership right, however, in the event owners of integral parts of residential building have intent to continue possession of common ownership, they may prevent termination of right by payment of relevant compensation to the other owners.
Article 235. Joint management expenses
235.1. Owners of integral parts of residential building shall participate in payment of
encumbrances of joint ownership and in joint management expenses in proportion to value of their shares. Payable by owners encumbrances and expenses shall also include the followings:

235.1.1 expenses incurred for the purposes of maintenance, current repairs and renovation
of joint portions of, joint constructions and installations on land plot and residential building.
235.1.2 expenses incurred for management activities, including payment of fee to a
manager.
235.1.3 payments and taxes withheld from all owners of integral parts of residential
building.
235.2 Facts that certain jointly used construction designs, installations do not serve various
integral parts of ownership or serve to an insignificant degree shall be taken into account in allocation of expenses.
235.3 In the event any owner of integral part of residential building fails to make payments
for covering expenses for period of three years, a meeting of owners of integral parts of residential building shall:
235.3.1. have the right to register hypothecation in respect of his share in the ownership of
integral parts of residential building. Registration of hypothecation may be demanded by manager or in the event he has not been appointed - any owner of integral parts of residential building authorized by decision of majority of owners or by court, or by creditor of pledged unpaid funds.
235.3.2 have the right to pledge movable property located in rooms of owner of integral
part of residential building and designed for equipment supply and use of such rooms.
Article 236. Competence of meeting of owners of integral parts of residential building
236.1. Meeting of owners of integral parts of residential building shall acquire in its own
name property formed out of its management activity, including its demand for payment of fees, and cash proceeds formed out of fees, for example, renovation fund. Meeting of owners of integral parts of residential building may initiate claim and demand execution on its own name, and may be respondent in place of location of property.
236.2 Meeting of owners of integral parts of residential building shall, in addition to
authorities enumerated in this Code:
236.2.1 resolve all matters not delegated by a meeting of owners of integral parts of
residential building to a manager’s competence.
236.2.2 appoint a manager and supervise his activities.
236.2.3 elect committee or representative that could be instructed to resolve management
matters, including rendition of advice to manager, review of his management activity, rendering reports about it to the meeting and submission of applications.
236.2.4 give permission to annual expenses budget, calculation and distribution of expenses
among owners.
236.2.5 issue decision on setting up of renovation fund for the purposes of preservation of
tidiness and conduct of renovation works.
236.2.6 insure building against fire and other dangers and execute a liability insurance.
236.3 In the event a manager has been appointed and there is issued no decision, manager
shall call and head a meeting of owners of integral parts of residential building. In the event a manager has not been appointed or has refused from such appointment, any owner (or any other majority of owners) representing at least 10 percent of total value of building may call a meeting. Meeting’s chairman shall be elected by simply majority of votes. There shall be drafted

protocols in respect of decisions. Protocols shall be kept by manager or owner of integral parts of residential building chairing the meeting.
236.4 In the event an integral part of residential building belongs to several persons jointly,
they shall have only one vote. They shall render such vote through their representative. Owner of unit of integral parts of residential building and usufruct holder shall also come to an agreement on carrying out of voting right. otherwise, usufruct holder shall be considered as a person having voting right in respect of all management matters, except for only useful constructions activities designed for creation of decorative and convenient environment.
236.5 Meeting of owners of integral parts of residential building shall have the right to
issue decisions only where half of the owners having ownership of half of shares, but at least two owners, participate or be represented at the meeting. In the event of absence of quorum, meeting shall be called for a second time with an interval of at least ten days. Second meeting shall have the right to issue decisions only where one-third of all owners of integral parts of residential building, but al least two owners, participate or be represented at the meeting.
236.6 In the event a meeting of owners of integral parts of residential building fails to
appoint a manager, any owner of integral part of residential building may demand appointment of manager by court. Person having significant interest in it, for example pledgee and assured, shall also have such right.
236.7 Manager may be recalled by a meeting’s decision from his position at any time by
retention of claims on his compensation that can be brought forward. In the event a meeting of owners refuses dismissal of manager by ignoring important reasons, any owner of integral part of residential building may demand his dismissal in court order within one month. Court appointed manager may not be dismissed prior to expiry of his appointed without court’s consent.
Article 237. Manager of joint ownership to integral parts of residential building
237.1. Manager shall, pursuant to the requirements of law and decisions of meeting of
owners, carry out all actions relating to management of joint ownership, and take necessary steps for prevention or elimination of potential damage. He shall distribute joint expenses and encumbrances of various owners of integral parts of residential building, submit reports to them, receive fees, manage cash proceeds and use them for designated purposes. He shall supervise over enforcement of special rights, compliance with the requirements of legislation and in-house residence rules in the course of use of joint portions of land plots and residential building, as well as joint installations.
237.2 Manager shall, in the area of management of joint ownership, represent on-side as all
owners so and each individual owner of integral parts of residential building in all activities within his legal work duties. He shall need, aside from instruction on satisfaction of claim, prior issued authorization of a meeting of owners for the purposes of conduct of court procedure initiated by him or opposite party. Applications, claims, court decisions and instructions addressed to all owners of integral parts of residential building may be delivered to manager at place of his residence or at place of location of property and shall enter in force from that moment.

§ 3. Peculiarities of right of ownership to land
Article 238. Land as object of right of ownership
238.1. Land is an object of ownership right as an immovable property. Territorial
boundaries of a land plot shall be established on the basis of documents given to an owner by the state register of immovable property’s authorized person.
238.2 Ownership right to land plot shall apply to surface (soil) layer, close water reservoirs,
forests and plants located within boundaries of a plot, unless provided otherwise by law.
238.3 Owner of land plot may use anything on or beneath it, unless provided otherwise by
law or violates rights of other persons. Subsoil and natural resources shall be ownership of the Republic of Azerbaijan, unless provided otherwise by law.
238.4 Land plots of agricultural and other designation use of which for other purposes is
prohibited or restricted shall be established by law.
Article 239. Access to land plot
239.1. Individuals shall have the right to be, without obtaining any prior permit, on land
plots in state and municipal ownership open for public, and use located on such plots objects of nature within limits stipulated by legislation or allowed by owner of relevant land plot.
239.2 Entry to a land plot in ownership of physical or legal entity without its owner’s
permission shall be prohibited, except for circumstances stipulated by law.
Article 240. Construction on land plot
240.1. Owner of land plot may, with observance of city-planning and construction norms
and rules, and requirements relating to land designation, erect buildings and installations on his plot, re-build and carry them down [destroy], permit others to conduct construction on his plot.
240.2. Owner of land plot shall acquire ownership right to building, installations and other
immovable property constructed or created on plot belonging to him.
240.3. Consequences of carrying out of arbitrary construction by owner on his land plot
shall be determined by Article 181 of this Code.
Article 241. Grounds for acquisition of right of use over land plot
241.1. Owner of land plot may grant it to other persons for use, including grant of lease.
241.2 Right of use of land plot in state and municipal ownership shall be granted to
physical and legal entities on the basis of decisions of state body or local self-regulating body authorized to grant such use of land plots in order determined by law.
241.3 Owner of building, installation and other immovable property can also acquire right
of use of land plot in circumstances stipulated in Article 243 of this Code.
241.4 In the event of reorganization of legal entity, right of use of land plot belonging to it
shall transfer to its legal successor.
Article 242. Possession and use of land plot

242.1. Deleted.
242.2. Person receiving land plot for use may lease it or give it into uncompensated use
only upon its owner’s consent.
Article 243. Right of use of land plot by owner of immovable property
243.1. Owner of immovable property located on land plot belonging to another person
shall have a right of use of portion of land plot where such property is located.
243.2 In the event of transfer to another person of ownership right to immovable property
located on other land plot, he shall acquire right of use of relevant portion of land plot on conditions and in capacity equal to those of a previous owner of immovable property. Transfer of ownership right over land plot to another person shall not be a ground for termination or alteration of right of use of plot by owner of immovable property located on the same land plot.
243.3. Owner of immovable property located on other land plot shall have a right of
possession, use and disposition of the property, and also to carry down [destroy] relevant building and installation.
Article 244. Consequences of termination of right of use of land plot
In the event of termination of right of use of land plot, ownership right to buildings, installations and other immovable property constructed by land user on this land plot shall transfer to the owner of land plot, unless agreement between owner of land plot and land user provides otherwise.
Article 245. Transfers of right to land plot in the event of alienation of buildings or
installations located on land plot
In the event of transfer of ownership right to building or installation belonging to owner of land plot and located on this plot, rights to land plot identified by agreement of parties shall pass to person acquiring the building (installation). Ownership right to portion of land plot on which a building (installation) is located, which is important for its use shall transfer to an acquirer.
Article 246. Land appropriation for public needs
246.1. The decision to confiscate land for public needs in accordance with Article 157.9 of
this Code shall be taken by appropriate executive authority in accordance with the Law of the Republic of Azerbaijan on the Land Appropriation for Public Needs.
246.2. Decision of the relevant executive authority on land appropriation for public needs
shall be registered in the public register of real estate.
246.3. The relevant executive authority that made the decision to confiscate the land,
should give written notice to that land owner.

246.4. After the conclusion of the sales agreement in accordance with Article 35.3 of the Law
of the Republic of Azerbaijan on the Land Appropriation for Public Needs, the appropriating authority within 90 (ninety) calendar days shall:
246.4.1. fully pay the cost of the land to the owner.
246.4.2. at its own expense take necessary steps to transfer rights over land to the state.
246.4.3. If the land sold is the place of residence of the owner or the owner’s family, then
after the full payment of the land’s value to the owner, assist the owner in vacating the land and relocating to a new place of residence, in accordance with Chapter V of the Law of the Republic of Azerbaijan on the Land Appropriation for Public Needs.
246.5. The provisions of Articles 246-249 of this Code, along with the land appropriated for
public needs, shall also apply to items located or not located on this land, firmly connected (inseparable) with the land acquired, for the same purposes.
246.6. In case of refusal from the appropriation of the land, re-appropriation of land that is
subject to such refusal shall not be possible within 3 (three) years.
246.7. Rules of land appropriation for public needs, calculation and payment of the
compensation in connection with this and other relations arising between the parties in this area are governed by the Law of the Republic of Azerbaijan on the Land Appropriation for Public Needs.
Article 247. Compensation granted to individuals affected by the acquisition of land or
the acquisition of rights pertaining to land
247.1. The amount of compensation for the land, appropriated under the Law of the Republic
of Azerbaijan on the Land Appropriation for Public Needs shall be calculated as follows:
247.1.1. determination of the market value of the land.
247.1.2. determination of the replacement value, if in the territory of location of
appropriated land there is no land market to determine the fair value of the land based on the market value or if the existing land market is not sufficient to determine the fair market value, or instead appropriated land plot is provided another land plot.
247.2. When determining the amount of compensation in respect of any land, appropriated
for public needs under the Law of the Republic of Azerbaijan on the Land Appropriation for Public Needs, the following factors shall be taken into consideration:
247.2.1. compensation paid to claimants should be based on the principle of recovery
within a reasonable time after the damage and disturbance of property, funds for food, income and standards of living of all persons in connection with the need to vacate land and resettlement and the resulting damage or anxiety, with view to prevent the conditions that are less favorable than the conditions they had before resettlement.
247.2.2. current inflation when assessing payable compensation.
247.2.3. market value of the land (building), determined in accordance with the Law of the
Republic of Azerbaijan on the Land Appropriation for Public Needs.
247.2.4. in the case of appropriation of certain parts of the land of the person subjected to
the procedure of appropriation - the damage that can be caused to a person as a result of dissociation of appropriated land part from the reserved (not appropriated) land part for this person.

247.2.5. damage, caused or may be caused to other real or personal property, or real income
of the person subjected to the procedure of appropriation, as a result of the acquisition of land ownership of such person.
247.2.6. if as a result of appropriation the person is obliged to change a place of residence,
business or work, all costs and damages resulting from such a move.
247.3. When determining the amount of compensation payable for the land, which is
subject to appropriation for public needs under the Law of the Republic of Azerbaijan on the Land Appropriation for Public Needs, the following factors are not taken into consideration:
247.3.1. the degree of urgency, which is a cause of appropriation.
247.3.2. evasion of the person which became the subject of appropriation, from the land
vacation.
247.3.3. reduction in the price, which may follow from the use of the land in the future.
247.3.4. price increase, which may follow from the use of the land in the future.
247.3.5. expenses in connection with the reconstruction and other annexes that spent on
land, appropriated from the date of the inventory in accordance with the Law of the Republic of Azerbaijan «On the land appropriation for public needs» except for cases of capital investment in the reconstruction and long growing products on the land for agricultural purposes, which are necessary for the maintenance of a building on the appropriated land in good order.
247.4. Compensation for land, appropriated for public needs shall be paid in the following
forms:
247.4.1. land plot, comparable to the forfeited land in quality, size, production capacity.
247.4.2. living area or structure, comparable to the forfeited living are or structure for
quality, size and scope of use.
247.4.3. in case of forfeiture of agricultural land, other than land, provided in the Law of the
Republic of Azerbaijan on the Land Appropriation for Public Needs - plants and seeds for use on agricultural land.
247.4.4. guarantees, envisaged by the Law of the Republic of Azerbaijan on the Land
Appropriation for Public Needs in connection with the property that is in common use.
247.4.5. lump-sum cash payment for the forfeiture of land and other capital in the amount
established pursuant to the provisions of this chapter.
247.4.6. payments for a fixed period for the provision or recovery of income, reduced or lost
as a result of the movement.
247.4.7. continuous provision of food for a certain period in exchange of food produced on
the forfeited land or lost revenues used previously for the receiving of such food.
247.4.8. providing training related to the acquisition by persons subjected to the procedure
of appropriation, new skills to get a job to replace work-related opportunities lost due to movement or work-related use of opportunities arising from the project of the land appropriation.
247.4.9. other forms of compensation, established or agreed upon by the persons subjected
to the procedure of appropriation and buying agency.
247.5. The person subjected to the procedure of appropriation can select one or more types
of compensation to be paid.
Article 248. Court approval

248.1. Obtaining ownership for land, purchased from a person subjected to the procedure
of appropriation can be made only after the court makes a decision.
248.2. Appeal to the Court of the territorial unit where the land subject to appropriation is
located, shall be submitted by purchasing authority for approval of:
248.2.1. compliance of land appropriation to the requirements of the Law of the Republic of
Azerbaijan on the Land Appropriation for Public Needs.
248.2.2. acquisition of ownership for appropriating land in accordance with the
requirements of the Law of the Republic of Azerbaijan on the Land Appropriation for Public Needs.
248.2.3. type and amount of compensation to be paid to persons subjected to the procedure
of appropriation.
248.3. The person subjected to the process of appropriation and opposed the appropriation
of land, the acquisition of ownership of land or proposed compensation, may apply to the court for one or more of the following grounds:
248.3.1. conflict of the land appropriation with the Law of the Republic of Azerbaijan on the
Land Appropriation for Public Needs.
248.3.2. no need for land to fulfill the project, for which it is appropriated.
248.3.3. unfairness of the proposed compensation.
248.3.4. lack of appropriate powers of the purchasing body.
248.3.5. non-compliance or incorrect and unfair application of the procedures established
by the Law of the Republic of Azerbaijan on the Land Appropriation for Public Needs.
248.4. No expenses, payments, or other financial obligations shall be imposed on, or
collected from, any person affected by the acquisition in relation to any actions required to complete the procedures for the acquisition of rights over land.
Article 249. Legal validity of the decision to purchase land
249.1. From the date of the decision to purchase the land:
249.1.1. this land is recognized as appropriated land.
249.1.2. persons residing on the appropriated land or using it, included in the list according
to the Law of the Republic of Azerbaijan on the Land Appropriation for Public Needs shall be deemed as persons which are subject to the procedure of appropriation.
249.1.3. purchasing authority shall take necessary measures related to the purchase of
appropriating land.
249.1.4. where a resettlement plan and/or guideline is required, the acquiring authority
shall be responsible for ensuring their preparation within a reasonable timeframe, in consultation with the persons affected by the acquisition.
249.1.5. the acquiring authority shall be responsible for assisting the valuation commission
in the assessment of the acquired land and any structures located thereon (including unfinished constructions), as well as the produce, crops, all other natural objects, and constructed property, for the purpose of determining the compensation payable to persons affected by the acquisition and to other persons or entities that may incur losses as a result of the acquisition of the land.
249.1.6. the acquiring authority shall be responsible for paying compensation to persons
affected by the acquisition and to other individuals and organizations that will incur losses as a result of the acquisition of the land.

249.1.7. the acquiring authority shall be obliged to prepare the necessary documents for
obtaining funds from the relevant state authorities for the purpose of paying compensation.
249.2. From the date on which the decision on the acquisition of land is adopted, all rights
related to that land, except for the ownership and use rights of the persons whose land is being acquired as of that date, shall be converted into the right to receive compensation. Unless otherwise provided for in cases where the State refuses to acquire certain lands or where such refusal is deemed to have occurred under the Law of the Republic of Azerbaijan on the Land Appropriation for Public Needs, this right may be transferred to other persons in accordance with the procedure established by law.
249.3. Following the decision on the acquisition of land, the relevant executive authority
may, in accordance with the procedure established by legislation, take necessary measures to suspend construction (building works) initiated on the acquired land and/or to demolish any structures.
249.4. The acquiring authority shall be responsible for bringing to the attention of the
persons affected by the acquisition a copy of the decision on the acquisition of land and the certificate concerning the legal validity of that decision.
Chapter 11
Rights for the use of things
§ 1. Inheritance right to construction
Article 250. Definition of inheritance right to construction
250.1. Land plot may be encumbered to such an extent that ownership right to building
located on or beneath it - alienated right and right passing through inheritance may belong to person in whose favor encumbrance is carried out. Inheritance right to construction shall be registered in the state register of immovable property.
250.2. The right of inheritance to a building may extend to that portion of the land plot
which, while not essential for construction, shall facilitate the more effective use of the building.
250.3. The duration of the right of inheritance to a building shall be established by mutual agreement
of the parties. however, it may not exceed ninety-nine (99) years in respect of land plots held in private ownership, and forty-nine (49) years in respect of land plots held in state or municipal ownership.
Article 251. Agreement on inheritance right to construction
251.1. Agreement on inheritance right to construction shall be valid upon notarization.
251.2. Terms of agreement relating to content and volume of right to construction, for
example, relating to building’s positioning, form, extension and designation, as well as terms of agreement relating to use of plots not used for construction and used for enforcement of such right shall be obligatory for each person acquiring inheritance right to construction. Similar rule shall be valid in respect of obligation of subject of inheritance right to construction to pass this right to owner of immovable property upon creation of certain conditions.

Article 252. Termination of agreement on inheritance right to construction
252.1. In the event the effect of agreement on inheritance right to construction has been
terminated, existing buildings shall pass (return to owner) to owner of land plot and shall become integral part of his land plot.
252.2 Inheritance right to construction shall be terminated upon expiration of its term or
upon mutual agreement of parties.
252.3 In the event person acquiring inheritance right to construction has grossly violated
his property right or has breached his contractual obligations, owner of land plot may, by demanding a transfer to him of all rights and obligations arising out of inheritance right to construction together with all arising out of it rights and encumbrances, achieve an early termination of that right.
252.4 Owner of land plot shall pay a reasonable compensation to person having inheritance
right to construction for buildings passing to him after termination of contract. In the event of early return of a right, compensation shall be calculated with taking into account a faulty attitude of subject of inheritance right leaving to reduction of compensation. Inheritance right to construction shall transfer to owner of land plot or shall be terminated only where compensation has been paid or has been pledged. This compensation shall be considered a guarantee for creditors granted with pledge of inheritance right to construction, and compensation to previous owner of inheritance right to construction shall not be paid without their consent.
252.5 In the event a compensation has not been paid or pledge granted, a previous subject
of inheritance right to construction or a creditor holding the inheritance right to construction in a pledge may demand in exchange for termination of inheritance right to construction a registration of hypothecation for the purposes of guaranteeing claim in respect of compensation. Registration shall be carried out not later than within three months of termination of inheritance right to construction.
252.6. Agreements, in required form and necessary for justification of inheritance right to
construction, relating to amount and specified procedure of compensation, as well as to termination of obligation to pay compensation and restoration of land plot to its original condition may be accepted and a security entry in the state register of immovable property may be made.
252.7. Destruction of building shall not result in termination of inheritance right to
construction, and persons having inheritance right to it may relinquish it, and as a result it shall be terminated.
Article 253. Payment for inheritance right to construction
253.1. Owner of immovable property shall have the right to receive payment for
inheritance right to consecution.
253.2 Owner may unilaterally terminate inheritance right to construction only in
connection with non-payment of dues for a period of two years.
253.3 For the purposes of guaranteeing payment for inheritance right to construction,
owner of land plot shall have the right in respect of the same subject of inheritance right to construction to register the right of pledge in respect of inheritance right to construction registered in the state register of immovable property in amount not exceeding three years

payment. In the event mutual obligation has not been specified in form of equal annual payments, there may be required legal right for pledge of amount falling for three years in the course of equal division.
253.4 Right of pledge may be registered at any time during existence of inheritance right to
construction, and its termination through public sale at auction shall be prohibited.
Article 254. Pre-emptive right of person having inheritance right to construction to
purchase a land plot
Person having inheritance right to construction shall have pre-emptive right in purchase of a land plot. Owner of land plot shall have pre-emptive right in purchase of inheritance right to construction. § 2. Right of limited use of other person’s immovable property
I. Servitude
Article 255. Definition of servitude
255.1. Servitude shall mean such encumbrance of immovable property in favor of owner of
other immovable property that at that time he (owner of other immovable property) shall be permitted in certain cases to use the property, or an owner of immovable property shall be permitted to carry out certain actions or enforce other rights arising out of ownership right.
255.2 Encumbrance of immovable property with servitude shall not deprive owner of that
property of rights of possession, use and disposition.
255.3 Servitude may not be an independent subject of sale and purchase, pledge and lease.
255.4 Servitude may be established for the purposes of pedestrian and automobile passage
through land plot, construction and operation of electric and communication lines and main pipelines, for water supply and melioration, as well for security of other needs of owner of immovable property that cannot be provided without existence of servitude.
255.5 Owner shall have the right to grant servitude to his immovable property at the
expense of belonging to him other immovable property.
255.6 Servitude shall be effective only where it creates privileges and opportunities
necessary for use by person receiving servitude of his immovable property.
255.7 Servitude shall remain in force in the event of transfer of rights to immovable
property encumbered with servitude.
255.8 Immovable property may be encumbered with servitude in favor of certain
individual. Such encumbrance shall be referred to as a personal servitude, and shall mean the right of that person, together with the owner, to use building or part of it as an apartment for himself or his family. Personal servitude shall not be assigned to others.
Article 256. Registration of servitude

256.1. Registration of servitude in the state register of immovable property shall be
necessary for grant of servitude. Provisions on ownership right to land shall remain in force for the purposes of acquisition and registration of servitude.
256.2 Agreement on grant of servitude shall become valid upon its notarization.
Article 257. Obligations of parties to servitude
257.1. Person obtaining servitude (authorized person) shall have the right to do everything
required for preservation and realization of the servitude, but he should use his rights, to extent possible, in a manner not conflicting with interests of owner of burdened property and not causing him unnecessary inconvenience.
257.2 Owner burdened with servitude shall not take actions preventing or complicating
realization of servitude.
Article 258. Content of servitude
258.1. Servitude shall contain [information on] period of its validity and terms [of
servitude]. Plan of immovable property burdened with servitude shall be included in agreement with indication of place of servitude.
258.2. Content of servitude shall be recorded in the recordation note of the state register of
immovable property.
258.3 Plan of immovable property burdened with servitude shall be indicated in the
recordation note together with place of servitude.
Article 259. Protection of authorized person’s and burdened owner’s rights
259.1. In the event an authorized person faces, in the course of realization of servitude,
obstacles in carrying out his rights, he shall have equal rights with bona fide owner for the purposes of elimination of such obstacles.
259.2 Additional encumbering of burdened owner shall not be permitted in the event needs
of an authorized person or his immovable property have changed in the course of realization of servitude.
259.3 In the event of existence of an installation for the purposes of realization of servitude,
authorized person shall bear costs of its maintenance. In the event an installation is also designed for serving a burdened owner’s interests, each of them shall bear expenses for maintenance of installations in proportion to their interests.
259.4 Burdened owner may demand, with taking into account authorized person’s needs, a
transfer of servitude from one place to another, only in the event he can prove existence of his interests in change of location and where he assumes expenses relating to change of location.
Article 260. Consequences of division of authorized person’s immovable property
260.1. In the event of division of authorized person’s immovable property having servitude
right, there shall be determined a servitude in respect of each divided part. However, this procedure may be permitted only with condition of not worsening burdened owner’s position.

260.2 In the event servitude has, as a result of division of burdened immovable property,
been applied only to one part of it, then after division servitude shall not affect part to which servitude is not applicable.
260.3 All amendments made in servitude shall be registered in state register of immovable
property.
260.4 Employees of the state register of immovable property shall be obligated to give to
authorized person information on request to terminate the servitude and to carry out termination where he does not object within one month.
Article 261. Payment for servitude
261.1. There may be demanded from authorized persons having right of servitude a
payment for use of plot in favor of owner of immovable property burdened with servitude, unless provided otherwise in agreement.
261.2 Amount of payment shall be established by agreement of parties, and in the event of
impossibility of reaching an agreement - by court decision.
Article 262. Termination of servitude
262.1. Any kind of servitude shall be terminated in the event of complete destruction of
burdened immovable property or immovable property given into disposition.
262.2 Servitude may be terminated, by demand of burdened owner, upon disappearance of
grounds for its grant.
262.3 Owner may demand termination of servitude in court order in the event immovable
property belonging to physical or legal entity cannot be used according to its designation as a result of encumbrance with servitude.
262.4 Termination of servitude shall be recorded in the state register of immovable
property.
262.5 In the event owner of immovable property given into disposition becomes an owner
burdened immovable property, he may terminate servitude.
262.6 Owner of burdened immovable property may demand termination of servitude in
the event of loss of any interest to servitude of immovable property given into disposition. In the event there still is an interest of owner of immovable property given into disposition, but this interest is insignificant in comparison with encumbrance, then servitude may be completely or partially terminated in exchange for compensation.
II. Usufruct
Article 263. Definition of usufruct
263.1. Usufruct shall mean such encumbrance of property or rights that gives person in
whose favor encumbrance is imposed (usufructuary) the right to use it and take benefit from it, but that shall not give him, unlike to owner, the right to pledge, alienate or pass that property through will. Usufruct may be limited by excepting separate benefits.
263.2 Usufruct may be for a fee or free of charge.

263.3 Usufruct may be temporary or for a usufructuary’s lifetime.
Article 264. Conditions for establishment of usufruct
For establishment of usufruct, it shall be necessary to transfer property and rights to usufructuary in cases relating to movable property and rights, and to register them in the state register of immovable property in cases relating to immovable property. Provisions on ownership right shall be in force at time of establishment of usufruct. Establishment of usufruct shall imply that its integral parts are definable.
Article 265. Rights and obligations of usufructuary
265.1. Prior to [establishment] of usufruct, owner and usufructuary may describe condition
of objects granted under usufruct.
265.2 Usufructuary may not change purpose of use [of usufruct] without owner’s consent.
265.3 Usufructuary shall have the right to appropriate fruits and benefit not resulting from
property’s usual economic use. In such an event, he shall be obligated to compensate owner for damage caused as a result of such use.
265.4 In the event usufructuary has incurred expenses which he was not obligated to incur
or has applied novelties, he may demand, at time of returning property, compensation for them as an uninstructed manager. In the event owner has no intention to compensate him for his installations, he may take such fixtures back, but shall nevertheless be obligated to reinstate property to its original condition.
265.5 Usufructuary shall have the right to possess, use and take benefit from property. He
shall ensure management of property. He shall act in line with conscientious economy procedures in the course of realization of his rights. Usufructuary shall not be responsible for property’s normal wear. He shall be responsible for payment of current expenses, repair of property, as well as rendering to it of normal economic service.
265.6 Owner’s claims relating to compensation resulting out of alteration of property or
reduction of it value, as well as usufructuary’s claims relating to reimbursement of compensation for expenses or taking back of fixtures shall expire within one year of return of property due to passage of period [of limitation].
265.7 Fruits received within confines of economy’s due administration during
usufructuary’s period of disposal shall belong to usufructuary.
265.8 Payment for and other periodical services over objects of usufruct shall, from the date
of commencement till the moment of expiry of usufructuary’s right, be upon usufructuary, even in the event period of their execution comes after termination of right of use.
265.9 In the event usufruct has not been given only to certain person, usufructuary may
give it to another person for its realization. Owner shall directly exercise his rights in respect of this person.
265.10 Usufructuary shall be obligated to insure property for the entire of existence of
usufruct. Usufructuary shall be obligated to pay insurance premium for already insured property during period of effectiveness of usufruct.
265.11 In the event property or a part of it has been destroyed, damaged or require
unforeseen expenses for its maintenance, usufructuary shall immediately inform owner about it.

He shall tolerate measures and actions carried out by owner for the purposes of elimination of negative results. Owner shall not be obligated to undertake appropriate measures. In the event usufructuary himself carries out such measures, he shall have the right, at the end of usufruct, to separate items added by him to property as a result of such measures and actions or may demand from owner appropriate compensation for it.
265.12 In the event usufructuary has alienated separate items in the course of normal
economic activity, items acquired by him should replace alienated items.
265.13 Usufructuary shall, in the event he does not prove that damage occurred not due to
his fault, bear responsibility for destruction of property or reduction of its value. He shall be obligated to compensate for items not entered into use or used items. He shall be obligated to compensate for reduction of value of items due to their proper use.
265.14 Usufructuary of immovable property shall ensure that immovable property is not
used excessively. Fruits acquired from such excessive use shall belong to owner.
265.15 Usufructuary shall be prohibited from making any alterations in land plot’s
economical designation that can cause significant damage to owner. He shall not have the right to alter land plot to a significant degree.
265.16 Usufructuary shall, unless provided otherwise, acquire ownership right to used
items, but shall be obligated to compensate their value existing prior to entry into force of right of use.
Article 266. Right and obligations of owner of property encumbered with usufruct
266.1. Owner may object to any illegal use of property or use of property outside its
designation. In the event usufructuary ignores the objection, owner may demand reimbursement for inflicted damage or termination of usufruct in court order.
266.2 Owner may demand pledge from usufructuary in the event he can prove that his
property or rights are in danger. In the event subject of usufruct consists of consumption goods or securities, he [owner] may demand guarantee without bringing proof and prior to grant of property. In case of securities, their depositing shall be satisfactory guarantee. For the purposes of securing a guarantee, a claim against person gifting property to an owner with retention of right of use may not be commenced.
266.3 In the event usufructuary has not, within reasonable time set for him, given pledge or
has not stopped illegal use of property despite owner’s objection, court shall deprive him of possession of property until issuance of decision.
266.4 Owner and usufructuary may at any time demand evaluation of property at their
own expense.
266.5 Usufructuary shall maintain property in good condition and independently carry out
improvements and renovations relating to usual maintenance of property in good condition. In the event a carrying out of more complex works and measures are required for the purposes of safekeeping of property, usufructuary shall inform owner about it and upon necessity shall permit carrying out of them by owner. In the event owner does not carry out such works, usufructuary may carry out the works and measures himself at owner’s expense.
266.6 Usufructuary shall, during time a property is in his disposition, pay usual
maintenance expenses and expenses relating to usual economical use, interests on relevant loans in this regard, as well as taxes and duties. In the event taxes and deductions are withheld from

owner, usufructuary shall be obligated to compensate them to same extent. Any other expenses shall be borne by owner.
Article 267. Peculiarities of usufruct to apartment
267.1. Usufruct to apartment shall be a right to possess an apartment in building or one
part of it. It shall not be transferable to third persons and shall not pass through inheritance.
Provisions on right of use shall apply to it.
267.2 Usufruct to apartment shall usually be determined by usufructuary’s personal needs.
However, he may, unless owner put direct condition, take to his apartment his family members or persons jointly dwelling with him in a building. In the event apartment right is limited to one
part of building, usufructuary may use object devised for joint use.
267.3 In the event usufructuary has exclusively apartment right, he shall bear expenses
relating to usual maintenance of apartment. In the event he has right of joint use, owner shall bear expenses relating to maintenance of apartment.
Article 268. Termination of usufruct
268.1. Usufruct shall terminate upon complete destruction of property, expiration of
usufruct’s term, refusal of usufructuary from usufruct, as well as in connection with death of usufructuary, and for legal entities - upon their liquidation.
268.2 Usufructuary shall be obligated to return property to owner upon end of usufruct.
268.3 Usufruct shall terminate in the event usufruct together with ownership ends up in
hands of one person.
268.4 Owner shall not be obligated to restore destroyed property. In the event he restores a
property, usufruct to property shall also be restored. In the event destroyed property is replaced with another one, usufruct shall pass to replaced property.
Chapter 12
Right of guarantee to property. Pledge and mortgage right § 1. General provisions
Article 269. Definition of pledge and mortgage right
269.1. Pledge and hypothecation right shall mean property right of pledgee in respect of
pledgor’s property, and shall, at the same time, mean method of guarantee to pledgee of debtor’s monetary or other obligations.
269.2. Pledge and mortgage right shall consist of restriction of property rights.
269.3. Pledge shall mean restriction of property rights to movable property (except for
movable item subject to mortgage). Pledge of right shall also be possible in cases stipulated under this Code.
269.4. Mortgage shall mean restriction of property rights to immovable property as well as
to movable property subject to registration in official register.

269.5. A pledge and a mortgage shall constitute accessory proprietary rights granted by the
debtor (pledgor) to the creditor (pledgee) for the purpose of securing the fulfillment of the principal obligation.
269.6. Pledge and mortgage right to property shall apply to everything relating to
ownership right to property.
269.7. In respect of an obligation secured by a pledge or mortgage, the creditor (pledgee or
mortgagee) is entitled, in the event of the debtor’s default, to satisfy his claim from the value of the pledged or mortgaged property with priority over other creditors of the owner of that property (the pledgor or mortgagor).
269.8. According to the principle established in Article 266.6 of this Code, the pledgee (or
mortgagee) shall have the right to obtain satisfaction from the Insurance indemnity for the loss or damage of the pledged or mortgaged property, regardless of for whose benefit the property was insured, provided that the loss or damage did not occur due to reasons for which the pledgee (or mortgagee) is liable.
269.9. Pledge and mortgage rights may be established over all transferable property and
rights.
269.10. If the pledged or mortgaged property is destroyed or damaged, or if the pledged
right held by the pledgee (or mortgagee) is terminated or violated, the right to claim compensation shall arise.
269.11. A pledge or mortgage may be granted to secure both existing and future claims.The
claim may be registered in the name of a specific person, to order, or to bearer. It may be a claim against the pledgor (or mortgagor) or the owner himself, or against another person. The claim secured by the pledge or mortgage should be sufficiently determined
Article 270. Formation of pledge and mortgage rights
270.1. Pledge and mortgage shall emerge on the basis of agreement.
270.2. Provisions of this Code relating to emergence of pledge and mortgage on a
contractual basis shall apply in relevant order to pledge and mortgage emerging based on other grounds.
Article 271. Pledgor (mortgagee)
271.1. Pledgor (mortgagee) of property may only be its owner. Legal consequences of
obtaining of right of mortgage (collateral) from the person who is not an owner, shall be determined in accordance with provisions of Articles 140 and 182 of this Code.
271.2. Pledgor (mortgagee) may be both debtor and third person.
271.3. Pledgor of right may only be person possessing that right.
Article 272. Pledgee (mortgagor)
Pledgee (mortgagor) shall mean person having, upon grounds indicated in agreement relating to pledgor’s property, pledge, or mortgage right for the purposes of guaranteeing to him debtor’s execution of monetary or other obligation.

Article 273. Inadmissibility of appropriation of pledged property or property
encumbered with mortgage
Any kind of agreement granting pledgee or mortgagor with the right of appropriation of pledged property or property encumbered with mortgage shall be invalid.
Article 274. Consequences of change of owner of pledged property or property
encumbered with mortgage
274.1. Change of owner of the property encumbered with mortgage shall not change the mortgage
right.
274.2. Change of the owner of the pledged property shall not change the right of pledge, except for
the cases provided for by the Law of the Azerbaijan Republic on Encumbrance of Movable Property.
Article 275. Termination of pledge or mortgage right – deleted.
§ 2. Pledge
Article 276. Subject of pledge
276.1. Items, object of mortgage, as well as items taken out of civil circulation and claims
inseparably connected with creditor’s personality, including alimonies, except for claims relating to compensation of damage caused to life and health and other rights assignment of which to person is prohibited by law, any property and claims may be subject of pledge.
276.2. Indivisible property may not be pledged partially.
276.3. Pledge of lease right without property owner’s consent shall be prohibited.
276.4. State-owned assets of the Republic of Azerbaijan, its international reserves and
deferred assets could not be pledged in order to ensure fulfillment of obligations on public debt or debt guaranteed by the state.
Article 277. Pledge of items in common ownership
277.1. Items in common joint ownership may be pledged only upon availability of written
consent of all owners.
277.2. Any owner of common shared ownership may pledge his share in common property
right without consent of other owners. In the event of imposition, upon pledgee’s demand, of foreclosure upon that share and its sale, provisions of this Code on preemptive right of purchase shall apply.
Article 278. The item to which pledge right is applicable
The right of pledge of a pledgee to a property that is the subject of a pledge shall also apply to its appurtenances, as well as to other property provided for by the Law of the Republic of Azerbaijan on Encumbrance of Movable Property, unless otherwise is provided by the agreement.

Article 279. Claim guaranteed by pledge
Unless the agreement provides otherwise, the pledge shall secure the pledgee’s claim to the extent existing at the time of the realization of the security. Such claim shall include interest, default penalties, compensation for losses resulting from delayed performance, and necessary expenses and costs incurred by the pledgee for the custody and preservation of the pledged property, as well as enforcement costs.
Article 280. Collateral agreement
280.1. A collateral agreement shall be signed in writing.
280.2. The collateral agreement should include the name(s) and place of residence (location)
of the parties, the subject of the pledge, the essence, the amount (upper limit) and the period of performance of the obligation, quaranteed by the pledge. The description of the subject of pledge may indicate that it consists of all the existing or future movable property of the pledger. Such a description may also include a certain type (category) of movable property, receivables or their specific
part.
280.3. Collateral agreements shall, in circumstance provided in this Code, be notarized,
whereas pledge right shall be state registered.
280.4. Non-observance of provisions of this Article shall result in invalidity of collateral
agreement. Such agreement shall be deemed void.
Article 281. Emergence of collateral right
281.1. Pledge right shall emerge from the moment of execution of collateral agreement, and
in the event of necessity of state registration of pledge right - from the moment of its registration.
281.2. In the event pledgee should, according to agreement, have a subject of pledge,
pledge right shall emerge at the moment of transfer of subject of pledge to him, and in the event of transfer of subject of pledge prior to execution of agreement -at the moment of its execution.
Article 282. Subsequent pledge
282.1. Pledged property may be subject of another pledge (subsequent pledge).
282.2. Subsequent pledge shall be permitted if not prohibited by prior pledge agreements.
282.3. ‘Taking into account the cases stipulated by the Law of the Republic of Azerbaijan on
Encumbrance of Movable Property, upon subsequent pledge, claims of subsequent pledgee shall be satisfied from value of subject of pledge after satisfaction of claims of prior pledgee.
Article 283. Maintenance and safety of pledged property
283.1. Regardless of in whose possession a pledged property is, and unless provided
otherwise in agreement, pledgor and pledgee shall:

283.1.1 insure pledged property against risks of loss and damage in its full value, and
where property’s full value exceeds obligation guaranteed by pledge - in amount not lower than value of obligation.
283.1.2 carry out actions in respect of ensuring safety of pledged property, including
protection against encroachments and claims of third persons.
283.1.3 immediately inform the other party in the event of emergence of danger of loss or
damage to pledged property.
283.2. Pledgor and pledgee may check the availability, quantity, condition, and
maintenance condition of pledged property held by the other party.
283.3. Pledgor may demand early termination of pledge where pledgee creates, by gross
violation of his obligations, possibility of loss of or damage to pledged property.
Article 284. Use and disposition of subject of pledge
284.1. Pledgor may use subject of pledge in accordance with its designation, including
taking of fruits and benefit from it, unless provided otherwise in agreement.
284.2 Pledgor may alienate subject of pledge, grant it to other person into lease or
uncompensated use, or dispose it in any other way only upon pledgee’s consent, unless provided otherwise in agreement. Agreement on restricting pledgor’s right to bequeath a pledged property shall be void.
284.3 Pledgee may use granted to him subject of pledge only in circumstances provided in
agreement. He shall submit report on use upon pledgor’s demand. There may be imposed, according to agreement, an obligation on pledgee to take fruits and benefit from pledged property for the purposes of payment of main obligation or for interests of pledgor.
Article 285. Consequences of destruction, loss of or damage to pledged property
285.1. Risk of accidental destruction, loss of or accidental damage to pledged property shall
rest with pledgor, unless provided otherwise in pledge agreement.
285.2. Pledgee shall, where he cannot prove possibility of exemption from liability bear
responsibility for full or partial destruction, loss of or damage to pledged property granted to him.
285.3. Pledgee shall, regardless of pledged property’s evaluated amount at the time of its
grant to him, bear responsibility in amount of pledged property’s actual value in the event of its loss, and in reduced value - in the event of its damage.
285.4 In the event subject of pledge has changed, as a result of damage, to an extent its use
for direct designated purposes is no longer possible, pledgor may refuse from it and demand compensation for its loss. Agreement may provide for compensation by pledgee to pledgor of other damage resulting from loss of or damage to pledged property. Pledgor being a debtor in respect of obligation guaranteed by pledge may relate claim against pledgor relating to compensation for damage caused due to loss of or damage to pledged property to payment of obligation guaranteed by pledge.
Article 286. Change of subject of pledge

Change of subject of pledge shall be permitted only upon pledgee’s consent, unless provided otherwise in agreement.
Article 287. Restoration and replacement of subject of pledge
In the event of destruction of or damage to subject of pledge or upon termination of ownership right to it, pledgor shall restore subject of pledge or replace it with another property of equal value within reasonable time, unless provided otherwise in agreement.
Article 288. Protection by pledgee of his rights to subject of pledge
288.1. Pledgee keeping or being obligated to keep pledged property may demand it from
illegal possession of another person, including pledgor’s possession.
288.2 In the event pledgee has been granted in agreement’s provisions with right of use of
pledged property given to him, he may demand from other persons, including from pledgor, elimination of any violations of his rights, even where these violations have not related to deprivation of possession.
Article 289. Retention of pledge in case of transfer of ownership right to pledged
property
289.1. Taking into account Article 274.2 of this Code, pledge right shall remain in force in
course of transfer of ownership right to pledged property from pledgor to another person as a result of compensated or uncompensated alienation of that property or in order of universal legal succession. Pledgor’s legal successor shall take pledgor’s place and bear pledgor’s all obligations, unless provided otherwise in agreement with pledgee.
289.2. In the event of transfer of pledgor’s property being subject of pledge to several
persons in order of universal succession, each of legal successors (property acquiring persons) shall bear, in proportion to transferred to him share of that property, responsibility for arising￾out-of-pledge consequences of non-performance of guaranteed by pledge obligations. However, in the event of indivisibility of subject of pledge or where it remains in legal successors’ common ownership due to other grounds, they shall become joint pledgors.
Article 290. Consequences of forced taking of pledged property
290.1. In the event of termination of ownership right to pledgor’s property being subject of
pledge as a result of its purchase for state needs, requisition or nationalization on grounds established in law, and where pledgor has been granted with another property and (or) relevant substitute, pledge right shall apply to property given as substitute, or pledgee shall, in relevant order, acquire right of priority of compensation from amount of substitute due to pledgor.
290.2. In the event of taking from pledgor of property being subject of pledge in form of its
foreclosure or in form of its impounding in order provided by law as a sanction for commitment of crime, pledgee shall acquire right of priority compensation of his claim from that property.

290.3 In the event of taking from pledgor of property being subject of pledge on ground
that in reality an owner of that property is a different person, pledge in regard of that property shall be terminated.
290.4 Pledgee may require earlier performance of obligation guaranteed by pledge in
circumstances provided in this Article.
Article 291. Assignment of rights arising out of collateral agreement
291.1. Pledgee may assign his rights arising out of pledge agreement to another person
with observance of rules on transfer of creditor’s rights through assignment of claim.
291.2. Deleted.
Article 292. Transfer of debt in respect of obligation secured by pledge
If the debt secured by a pledge is transferred to another person, the pledge ceases to exist unless the pledgor has consented to be liable to the creditor in substitution for the new debtor.
Article 293. Acceleration and realization of the pledged property
293.1. Pledgee may demand early performance of guaranteed by pledge obligation if:
293.1.1. the pledged property is removed from the possession of the pledgor, contrary to
the conditions of the collateral agreement.
293.1.2. pledgor has violated procedures on replacement of subject of pledge.
293.1.3. pledged property has been lost due to circumstances for which the pledgee bears
no responsibility if the pledgor has not exercised the right set under Article 287 of this Code.
293.2. The pledgee shall have the right to require premature performance of the obligation
secured by the pledge and, should this demand remain unfulfilled, proceed with foreclosure on the pledged property if:
293.2.1. pledgor violates procedure on subsequent pledge.
293.2.2. the pledgor fails to fulfill obligations provided in Articles 283.1 and 283.2 of this
Code.
293.2.3. the pledgee violates procedures on use and disposition of pledged items.
Article 294. Termination of pledge
294.1. Pledge shall be terminated in the following circumstances:
294.1.1. when the obligation secured by a pledge is terminated.
294.1.2. at the request of the pledgor, in cases provided for in Article 283.3 of this Code.
294.1.3. if the pledgor has not exercised the right provided for in Article 288.2 of this Code,
when the pledged property is destroyed or the pledged right is terminated.
294.1.4. when the property pledged in connection with enforcement is sold at a public auction.
294.2. When the obligation secured by a pledge is fulfilled or the pledge is terminated at the
request of the pledgor, the pledgee holding the pledged property is obliged to return it to the pledgor immediately.

Article 295. Grounds for imposition of foreclosure on pledged property
For the satisfaction of the pledgee’s (creditor’s) claims, foreclosure may be directed at the pledged property if the debtor fails to perform, or performs inadequately, the obligation secured by the pledge for reasons for which he is responsible
Article 296. Procedure for imposition of foreclosure on pledged property
296.1. Repayment of pledgee’s claim on account of pledged property without application to
court shall be permitted on the basis of notarized agreement between pledgor and pledgee. Court may consider such agreement invalid upon claim of person whose rights have been violated by such agreement. In the absence of such agreement, repayment of pledgee’s (creditor) claim from value of pledged property shall be carried out through court decision. The foreclosure of subject of encumbrance, to which the Law of the Republic of Azerbaijan on Encumbrance of Movable Property applies, shall be carried out as per this Law.
296.2. The subject of pledge may be foreclosed only by a court decision if:
296.2.1. another person’s approval or consent is required for collateral agreement.
296.2.2. subject of pledge is property of significant historical, artistic, or cultural value to
society.
Article 297. Realization (sale) of pledged property
The pledged property can be sold at auction (public auction) or by any method in cases established by the Law of the Republic of Azerbaijan on Encumbrance of Movable Property.
Article 298. Distribution of amount received from sale of pledged property
298.1. The amount received from the sale of pledged property is distributed in the following order:
298.1.1. repay expenses on the maintenance, safety, improvement and sale of the pledged property.
298.1.2. repay claims that have a preemptive right in cases and in the manner established by the
Law of the Republic of Azerbaijan on Encumbrance of Movable Property.
298.1.3. repay the claims of the pledgee.
298.1.4. repay claims that have a lower right in cases and in the manner prescribed by the Law of the
Republic of Azerbaijan on Encumbrance of Movable Property.
298.2. After making payments provided for in Article 298.1 of this Code, the remainder of the funds
from the sale of the pledged property shall be returned to the pledgor within 10 (ten) working days from the moment the pledged property is sold.
298.3. If the amount from the sale of the pledged property is not sufficient for repayment of pledgee's
claim, then the pledgee is entitled to receive the missing amount from other property of the debtor, unless otherwise provided by the agreement. In this case, the pledgee has no preemptive right based on the pledge.
Article 299. Termination of foreclosure of and sale of pledged property
299.1. Until the pledged asset subject to attachment is sold (until a purchase-sale agreement is
concluded, or until a protocol is signed based on the results of an auction conducted with the consent of

the parties, or until a protocol is drawn up on the results of an electronic auction, or until a certificate is issued pursuant to Article 63 of the Law of the Republic of Azerbaijan on Notaries), or until the pledged asset becomes the property of the pledgee in accordance with the Law of the Republic of Azerbaijan on Encumbrance of Movable Property, the pledgor and/or the debtor may terminate the foreclosure of the pledge by fulfilling the obligation secured by the pledge or the overdue portion of that obligation. Agreement restricting that right shall be void.
299.2. Person demanding termination of foreclosure and sale of pledged property shall be
obligated to compensate pledgee for expenses incurred in respect of foreclosure and sale of that property.
Article 300. Types of collateral
300.0. Collateral may be of the following kinds:
300.0.1. safekeeping.
300.0.2. pledge of items in pawnshops.
300.0.3. pledge of rights.
300.0.4. pledge of funds.
300.0.5. fixed pledge.
300.0.6. pledge of goods in circulation.
Article 301. Safekeeping
Safekeeping shall be such a pledge whose subject is given to pledgee’s possession.
Article 302. Pledge of items in pawnshops
302.1. Movable items intended for personal consumption may be taken as collateral from
individuals for securing short-term loans only by specialized organizations (pawnshops) that have a special permit (license) to carry out such activity as part of entrepreneurial activity.
302.2. An agreement for pledging an item at a pawnshop shall be formalized by the
pawnshop issuing a pawn ticket.
302.3. Items pledged as collateral shall be handed over to the pawnshop.
302.4. The pawnshop should insure the pledged item in favor of the pledgor for the full
amount of its value, which is determined at the time of acceptance as collateral based on the market price of a similar item of the same type and quality.
302.5. The pawnshop shall not have the right to use or dispose of the pledged item.
302.6. The pawnshop shall be responsible for the loss or damage of the pledged item.
302.7. If the loan amount secured by an item pledged at a pawnshop is not repaid within
the specified period, the pawnshop may realize (sell) the item through an open auction. After such sale, the pawnshop’s claims against the pledgor (debtor) shall be terminated, even if the proceeds from the sale of the pledged item are insufficient to fully satisfy the debt.
302.8. Procedures for lending to individuals in exchange for the pledge of their property by
pawnshops shall be determined by legislation.

302.8-1. Pawnshops should take measures prescribed by the relevant legislation to prevent the legalization of criminally obtained funds or other property, and the financing of terrorism, including the imposition of targeted financial sanctions.
302.9. Any terms in an agreement for pledging an item at a pawnshop that restrict the
pledgor’s rights compared to the rights granted to him under this Code shall be deemed invalid
Article 303. Pledge of rights
303.1. A right may be pledged if it can be alienated, including the right to lease a land plot,
building, facility, or residential house (apartment), the right to a share in property, or a claim for debt.
303.2. A term-limited right can only be pledged until the expiration of its validity period.
303.3. The debtor of a pledged right should be notified immediately about the pledge.
303.4. The pledge of a right that requires state registration becomes valid from the moment
it is registered with the state body responsible for such registration.
303.5. A right certified by a documented security should, when pledged, unless otherwise
specified in the agreement, be delivered to the pledgee, or placed in the deposit of a bank or notary
Article 304. Pledge of funds
Money that is the subject of a pledge shall be kept in the deposit account of a bank or notary. Unless otherwise provided in the agreement, any interest accrued on this amount belongs to the pledgor.
Article 305. Fixed pledge
A fixed pledge is a pledge whose subject is kept by the pledgor under the lock of the pledgee or marked with signs indicating the pledge.
Article 306. Pledge of goods in circulation
306.1. When circulating goods are pledged, the pledged goods shall be kept by the pledgor,
and the pledgor shall be granted the right to alter the composition and natural form of the pledged property (including inventory, raw materials, materials, semi-finished products, finished goods, etc.) , provided that the total value of the goods does not fall below the value specified in the pledge agreement. Unless otherwise stipulated in the contract, any decrease in the value of the pledged circulating goods is allowed proportionally to the portion of the obligation secured by the pledge that has been fulfilled.
306.2. Circulating goods that the pledgor has alienated shall cease to be the subject of the
pledge from the moment they pass into the ownership of the acquirer. Conversely, goods acquired by the pledgor, specified in the pledge agreement, shall become the subject of the pledge from the moment the pledgor acquires ownership rights over them.
306.3. When circulating goods are pledged, the parties may stipulate that their total value should
not fall below the value specified in the collateral agreement. In this case:

306.3.1. unless otherwise provided in the agreement, any decrease in the value of pledged circulating
goods is allowed proportionally to the portion of the obligation secured by the pledge that has been fulfilled.
306.3.2. the pledgor shall be obliged to maintain a register of pledged goods. This register should
include, as of the last day of operations, entries regarding the terms of the pledge and all transactions that lead to changes in the composition or natural form of the pledged goods, including their processing.
306.4. If the pledgor violates the terms of the pledge of circulating goods, the pledgee may
suspend transactions related to the pledged goods by marking them with their signs until the violation is remedied. § 3. Mortgage
Article 307. Mortgage agreement
307.1 The mortgage agreement should include the name and place of residence (location) of the
parties, the subject of the mortgage, its name, location and other description sufficient for identification, the essence, amount (sum) of the main obligation, the basis for the occurrence and the period of performance, the parties to the agreement, on which this obligation is based, the place, the date of its conclusion, as well as the conditions for applying the mortgagee’s claims to the mortgaged property subject to the imperative norms established by law, the method of selling the subject mortgage, the initial selling price of the mortgaged property or the appraisers who will determine this price, and in case the appraisal agreement is concluded with an appraisal organization, also information about such organization, the person required to make a sale in the sale of the mortgaged property on the public market, and the order and sequence of the distribution of income from the sale of the mortgaged property, e-mail address of the mortgagor.
307.2. Subject of mortgage shall be determined in agreement by provision of its name, place
of location, and description sufficient for identification.
307.3. Mortgage agreement shall indicate upon which right a property being subject of
mortgage belongs to mortgagee and a state body registering that right of mortgagee.
307.4. Mortgage agreement shall show guaranteed by mortgage obligation, its amount,
grounds for its emergence and period of performance. In circumstances where that obligation is based on some agreement, parties to that agreement, date and place of execution shall be indicated. In the event an amount of guaranteed by mortgage obligation is to be determined in future, mortgage agreement shall indicate order of its determination and other necessary terms.
307.5. If the obligation secured by the mortgage is to be performed in installments, the
mortgage agreement should specify the terms or periodicity of the respective payments, their amounts, or the conditions that allow these amounts to be determined.
307.6. The mortgage agreement should be concluded writting by drawing up a document
signed by the mortgagor and the mortgagee, and if the mortgagor is not the debtor, it should also be signed by the debtor.
307.7. The mortgage agreement should be notarized
Article 308. Types of mortgage

308.1. A general mortgage is a mortgage whose subject consists of several items, and each
of these items is used to satisfy the overall claim. The creditor’s claim may, at his discretion, be satisfied from any of the items.
308.2. An owner’s mortgage means that when the claim secured by the mortgage does not
arise, is terminated, or when that claim passes to the owner of the property, the mortgage also passes to that owner. In this case, the order of priority of other rights shall not change.
Article 309. State registration of mortgage
309.1. The mortgage agreement for immovable property should be registered in the State
Register of Immovable Property, while the mortgage agreement for movable property should be recorded in the official register of movable property subject to state registration.
309.2. Mortgage shall be state registered under the procedure established by law.
309.3. The mortgage and the claim shall be transferred to the new creditor in the same
manner as they existed with the former creditor. The registration of information in the State Register of Immovable Property that reflects the creditor’s interests is deemed to be correct. In this case, the debtor may not refer to the non-existence of the claim. However, this rule shall not apply if the new creditor knew that the entries in the register were incorrect.
Article 310. Encumbrance of items by multiple mortgages
The same property may be encumbered by several mortgages. The order of priority of the encumbrances shall be determined by the moment of the mortgage’s state registration.
Article 311. Owner’s right to satisfy a creditor
311.1. Property owner may satisfy a creditor where time of performance of claim becomes
due. This may also be done by personal debtor.
311.2. In the event owner is not a personal debtor, claim shall be transferred to him at the
time of satisfaction of creditor by owner.
311.3. In course of satisfying a creditor, owner may demand documents necessary for
making relevant records in the state register of immovable property or other official register of movable property, and termination of mortgage.
Article 312. Obligation to preserve items encumbered by mortgage
312.1. The mortgagor shall be obliged to preserve the actual value of the item. If, due to a
deterioration of circumstances, a risk arises for the mortgage, the mortgagee may set an appropriate period for the mortgagor to eliminate this risk.
312.2. If the property is insured, after the deterioration of circumstances, the insurance
organization may pay the insurance amount to the insured only from the moment the fact of damage has been reported to the mortgagee. If the mortgagee has reason to believe that the amount will not be used for the restoration of the item, he may prevent the payment of the amount.

312.3. If it becomes evident that the mortgagor is unable to fulfill his obligations, the
mortgagee may demand the property be transferred to him. The court shall decide on this demand.
312.4. Any agreement under which the mortgagor undertakes an obligation before the
mortgagee not to alienate, use, or otherwise encumber the property shall be invalid. The validity of such transactions with respect to third parties cannot depend on the consent of the mortgagee.
Article 313. Transfer of the mortgage and the underlying claim to a third party
The mortgage and the underlying claim may be transferred to another person only simultaneously and together. When the claim is transferred to the new mortgagee, the mortgage shall also pass to that person. The transfer of the claim shall be deemed valid only if the notarially certified document on the establishment of the mortgage is delivered to the new mortgagee and the transfer is registered in the State Register of Immovable Property or the official register of movable property.
Article 314. Presumption of accuracy of the entry in the State Register of Immovable
Property or the Official Register of Movable Property upon transfer of the mortgage and the claim to a new mortgagee The mortgage and the claim shall be transferred to the new mortgagee in the same manner as they existed for the previous mortgagee. The information recorded in the State Register of Immovable Property or in the official register of movable property shall be deemed correct, based on the interests of the mortgagee. In this case, the mortgagor may not refer to the non￾existence of the claim. However, this rule shall not apply if the new mortgagee was aware of incorrect entries in the register.
Article 315. Rights of third parties
315.1. Any third party whose position has worsened as a result of the realization of the
mortgage shall have the right to enforce the claim and, in this way, acquire the mortgage for him/herselves. When the mortgagee is satisfied, he/she may demand notarized documents and their registration as a mortgagee.
315.2. If an individual debtor satisfies the mortgagee, the mortgage passes to him/her. In
this case, he/she may demand compensation from the owner.
Article 316. Refusal of mortgagor from claim or mortgage
In the event mortgagor refuses from claim or mortgage, the mortgage shall be terminated. Refusal shall have legal force provided that the termination of the mortgage is registered in the state register of immovable property or in the official register of movable property.
Article 317. Claim to sell property encumbered by a mortgage

317.1. If the debtor fails to perform or improperly performs the principal obligation secured
by the mortgage, the mortgagee may demand the sale of the immovable property.
317.2. The sale shall be carried out in accordance with the Law of the Republic of Azerbaijan on
Mortgage.
Article 318. Costs of granting a mortgage
318.1. Unless otherwise stipulated in the agreement, the costs of granting the mortgage
shall be borne by the debtor.
318.2. If the item is encumbered by a mortgage, and the owner has made changes or
additions to the mortgage after it was granted, and is not obliged to provide these changes or additions as security for the claim, the owner may withdraw such changes and additions and restore the item to its previous condition. The owner shall bears responsibility for any reduction in the value of the immovable property.
Article 319. Consequences of the debtor’s delay in fulfilling obligations
319.1. If the debtor delays the fulfillment of obligations for which the property was pledged
as security, the mortgagee shall have the right to sell the mortgaged property at a public auction. Any agreement under which ownership of the immovable property directly passes to the creditor in cases where the debtor fails to perform or delays performance of the obligations secured by the mortgage shall be invalid.
319.2. If the claim secured by the mortgage is not performed, the mortgagee and the debtor
may agree on forms of sale other than a public auction at the time the mortgage claim is enforced. The agreement may also stipulate that the mortgaged property is sold at market value, subject to full settlement of the debtor’s obligations, and/or that the person acquiring the mortgaged apartment (or residential premises) is granted the right to be a tenant of that apartment (or residential premises) in relation to the debtor and their family members in the future.
319.3. The purchaser of mortgaged property shall be obliged to pay the purchase price.
Cost of directing the mortgaged property to enforcement shall be deducted from the purchase price.
319.4. The initial sale price of a mortgaged property offered at a public auction is determined in
accordance with the Law of the Republic of Azerbaijan on Mortgage.
319.5. Based on a notarized agreement of the parties, when a mortgaged property is sold without
recourse to the court, the method of sale, the person responsible for carrying out the sale, the procedure for holding the auction, subsequent procedures if the auction fails, the rights and obligations of the parties, and the sale price of the property shall be determined by the agreement concluded after the parties acquire the right to direct the mortgaged property to enforcement.
319.6. If the amount obtained from the sale of the mortgaged property is insufficient to satisfy the
mortgagee’s claim, they have the right, unless otherwise provided in the mortgage agreement, to recover the shortfall from other property of the debtor. In this case, the mortgagee has no preferential right based on the mortgage. If the amount obtained from the sale exceeds the mortgagee’s claims, the excess should be returned to the mortgagor.

Article 320. Priority of repayment of mortgagor’s claims
If there are several mortgagors, the their claims shall be satisfied from the net proceeds of the sale of the mortgaged property in accordance with the order of their registered rights. If the amount attributable to each person in the order or to each of the voluntary parties is disputed, payment shall not be made until the order or the amount due to each mortgagor is determined. The remaining amount shall be paid to the owner of the sold item.
Article 321. Mortgage debt
321.1. A land plot can be encumbered in such a way that a certain amount of money
(mortgage debt) should be paid to the person for whose benefit the encumbrance is established. The encumbrance can also be established in such a way that interest on the monetary amount should be paid, as well as other additional obligations related to the immovable property. Instructions regarding the mortgage shall apply correspondingly to the mortgage debt, provided that no claims arise from them beyond the mortgage debt.
321.2. By agreement of the parties, a mortgage can be transferred to the mortgage debt, and
the mortgage debt can be transferred to the mortgage.
Article 322. Rent debt
Mortgage debt may be paid in a way requiring payment of certain monetary amount (rent debt) in respect of immovable property in systematic repetitive periods. Upon payment of rent debt, amount making possible its purchase shall also be specified. Purchase amount shall be indicated in the state register of immovable property.
Article 323. Item encumbrance
Immovable property can be encumbered in such a way that the person for whose benefit the encumbrance is established will have to be provided with periodic obligations related to the land plot
Article 323-1 . Owner objections against mortgage
Even if the owner of immovable property is not personally liable for the obligation secured by the mortgage, he may assert a counterclaim against the mortgagee only to the extent of the claims belonging to the personal debtor. specifically, these are reciprocal claims related to the offsetting of monetary obligations and the filing of a complaint regarding the claim. This shall also apply when the owner is personally liable as the mortgagee’s debtor.

Section 4
DEALS
Chapter 13
General provisions about deals
Article 324. Definition a deal and its types
324.1. A deal shall mean unilateral, bilateral or multilateral expression of will directed at
emergence, modification and termination of civil legal relationship.
324.2. Deals may be unilateral or in contractual form (bilateral or multilateral).
324.3. A deal for which the expression of will by one party is necessary and sufficient for its
conclusion, under this Code or by agreement of the parties, shall be a unilateral deal.
324.4. For the conclusion of a contract, the mutual expression of will of two parties (a
bilateral deal) or the mutual expression of will of three or more parties (a multilateral deal) shall be required.
324.5. In the course of interpretation of expression of will, its true content shall be
established not only in accordance with its literal meaning, but also on the basis of reasonable judgement.
324.6. A deal shall not exist in the event the content of will cannot be strictly determined
either according to external expression or other circumstances.
Article 325. Validity of unilateral expression of will
325.1. An expression of will that requires acceptance by the other party shall become
effective from the moment it reaches that party.
325.2. Deleted.
325.3. If the person who concluded the transaction dies or loses legal capacity after
expressing his/her will, this may not affect the validity of the expression of will.
Article 326. Obligations under unilateral deal
A unilateral deal shall create obligations for the person who concluded it. It may create obligations for other persons only in cases provided for by this Code or by an agreement with those persons.
Article 327. Legal regulation of unilateral deals
General provisions on obligations or contracts shall apply to unilateral deals correspondingly, provided that such application does not contradict this Code, or the unilateral nature and substance of the deal.
Article 328. Deals concluded under conditions

328.1. A deal shall be deemed concluded under a condition if the parties have made the
arising of rights and obligations dependent on circumstances whose occurrence is uncertain.
328.2. A condition that contradicts the requirements established by this Code, or that is
impossible to fulfill, is invalid. A deal dependent on such a condition shall be entirely invalid.
328.3. A condition dependent on the will of the parties, i.e., one whose occurrence or non￾occurrence depends solely on the will of the parties to the transaction, shall be invalid. A deal
concluded under such a condition shall be invalid.
328.4. A positive condition shall mean that the deal is concluded on the condition that a
certain event will occur within a specified period. If that period expires and the event does not occur, the condition shall be deemed null and void. If no period has been determined, the condition may be fulfilled at any time. When it becomes evident that the event cannot occur, the condition may be deemed void.
328.5. A negative condition shall mean that the transaction is concluded on the condition
that a certain event will not occur within a specified period. If that period expires without the event occurring, or if it becomes evident before the expiration of the period that the event cannot occur, the condition shall be deemed fulfilled. If no period has been determined, the condition shall be deemed fulfilled only when it becomes evident that the event will not occur.
328.6. If the arising of the rights and obligations stipulated in the deal depends on a future
or uncertain event, or on an event that has already occurred but is still unknown to the parties, the transaction shall be deemed concluded under a suspensive condition.
328.7. A deal shall be deemed concluded under a resolutive condition if the occurrence of
that condition terminates the transaction and restores the situation that existed before its conclusion.
328.8. A person who has concluded a transaction under a certain condition has no right to
perform any act that may hinder the fulfillment of the condition before it occurs. If the condition occurs within the specified period and that person has committed such an act, he should compensate the other party for any damage caused by it.
328.9. If the party for whom the occurrence of the condition is disadvantageous unfairly
prevents its occurrence, the condition shall be deemed fulfilled.
328.10. If the party for whom the occurrence of the condition is advantageous unfairly
facilitates its occurrence, the condition shall be deemed not fulfilled
Article 329. Forms of deals
329.1. Unless otherwise provided by law, a deal concluded without observing the form
requirements established by law or by mutual agreement of the parties shall be invalid.
329.2. Deals may be concluded verbally or in writing (in simple written or notarial form).
329.3. A deal that may be concluded verbally shall be deemed concluded if the person’s
intention to enter into the deal is evident from his conduct.
329.4. Silence shall be regarded as an expression of intent to conclude a deal in cases
provided for by this Code or by agreement of the parties
Article 330. Verbal deal – deleted.

Article 331. Writtem deals
331.1. A written deal shall be concluded by drawing up a document that expresses its
content and is signed by the person or persons concluding the deal, or by their duly authorized representatives. Compliance with the written form shall also be deemed observed if the deal is concluded by means of electronic or other technical devices that make it possible to record its content on a material carrier in an unalterable form. In such a case, if any method that reliably identifies the person expressing his will has been used, the requirement of a signature shall be considered fulfilled. The law, other legal acts, or agreement of the parties may establish specific method(s) of identification that ensure precise determination of the person.
331.2. The law, other legal acts, or agreement of the parties may establish additional
requirements for the form of the deal (drawing it up on a specific form, confirming it with a seal, etc.) and may also determine the consequences of non-compliance with such requirements.
331.3. The use of a facsimile reproduction of a signature, an electronic signature, or another
analogue of a handwritten signature by mechanical or other copying means shall be permitted in cases and in the manner provided by law, other legal acts, or by agreement of the parties. The rules for the use of electronic signatures shall be determined by legislation.
331.4. If an individual, due to a physical disability, illness, or illiteracy, is unable to sign the
deal personally, it may be signed at his/her request by another individual. The signature of another individual should be certified by a notary or by another authorized official entitled to perform such notarial acts, indicating the reasons why the person concluding the deal could not sign it personally.
331.5. Issues related to the conclusion of deals in electronic commerce and their confirmation by
electronic signature shall be regulated by the legislation of the Republic of Azerbaijan on electronic commerce and electronic document circulation
Article 332. Deals concluded in simple written form – deleted.
Article 333. Consequences of non-compliance with simple written form of deal – deleted.
Article 334. Notarial certification of a deal
334.1. Notarial certification of a deal shall be carried out by making a certifying note in a
document that complies with the requirements of Article 331 of this Code, signed by a notary or by another official authorized to perform such notarial acts.
334.2. The procedure for notarial certification of a deal shall be determined in accordance
with the Law of the Republic of Azerbaijan on Notaries.
334.3. Deleted.
Article 335. Consequences of non-compliance with notary form of deals– deleted.
Article 336. Consequences of non-compliance with requirement of registration of rights
arising out of deals

336.1. If one of the parties evades the state registration of the rights occurring from the deal,
the registration shall base upon court decision made under the application of counterpart.
336.2. Other rights associated with compensation of losses, shall be unchanged.
Chapter 14
Invalidity of deals
Article 337. Definition of invalidity of deals and its consequences. Disputed and void
agreements
337.1. A deal concluded in violation of the conditions established by this Code shall be
invalid. Invalid deals may be either disputable or insignificant deals.
337.2. If a deal is disputed, it is deemed invalid from the moment of its conclusion. A deal
shall be disputed by notifying the other party of the expression of will regarding its invalidity. A unilateral deal carried out with respect to the other party shall be disputed against that person.
337.3. An insignificant deal shall be a deal that is invalid in itself, whether it is declared
invalid by a court or not.
337.4. An invalid deal shall not produce legal effects, except for the consequences related to
its invalidity. Such a deal shall be invalid from the moment it is concluded.
337.5. If a deal is invalid, unless this Code provides separate consequences for its invalidity,
each of the parties should return everything received under the transaction to the other party. If returning the received items in kind is not possible (including, when the items were used, incorporated into property, or expressed in performed work or services), the party should compensate the value in money.
Article 338. Invalidity of deals violating rules and prohibitions specified by this Code–
deleted.
Article 339. Invalidity of agreement concluded as a result of abuse of power, fraud,
coercion, threat, bad faith agreement of representative of one party with the other party or duress
339.1. A deal concluded as a result of abuse of power, bad faith agreement of representative
of one party with the other one, or entailing circumstances established by Article 49.4 of this Code, extremely non-beneficial to a person agreement concluded as a result of duress and other party’s utilization of this (deal under hard conditions) can be subject to dispute by suffering party.
339.2. In the event a person has been defrauded with the purpose of conclusion of a deaL,
he may dispute the deal. Such dispute shall be implemented where impossibility of conclusion of a deal without fraud has become evident. In the event one of the parties has known and kept silent about circumstances making conclusion of deal by the other party impossible, defrauded party may dispute the deal. The obligation to inform of silenced circumstances may arise only where the other party expects it in good faith.
339.3. For a deal to be disputed on the grounds of deception, it is irrelevant whether the
party providing false information did so to gain an advantage or to cause harm to the other

party. If the deception is carried out by a third party, the transaction may still be disputed if the person benefiting from the transaction knew or should have known about the deception. If both parties acted through deception, neither of them shall have the right to dispute the deal on the grounds of being deceived or demand compensation for any resulting damage.
339.4. A person compelled to conclude a deal (through violence or threats) shall have the
right to dispute the deal, even if the coercion was carried out by a third party. Coercion that is capable of affecting a person and can make him believe that he or his property face a real danger leads to the invalidity of the deal. When assessing the nature of coercion, the person’s age, gender, and living conditions shall be taken into account. Coercion directed at the spouse, other family members, or close relatives of one of the parties shall also constitute grounds for disputing the transaction. Except in cases where the purpose and means of coercion are incompatible, acts that are not carried out for an illegal purpose and do not involve illegal means shall not be deemed coercion.
339.5. If a deal is declared invalid on the grounds specified in Articles 339.1, 339.2, or 339.4,
the rules of Article 337.5 of this Code shall apply. In addition, the other party should compensate the actual damage caused to the injured party as a result of abuse of authority.
339.6. A transaction may be declared invalid by a court at the claim of the injured party based on the
grounds specified in Articles 339.1–339.4 of this Code.
Article 340. Invalidity of fictitious and sham deals
340.1. A fictitious deal is a deal concluded for appearance only, without the intention to
produce the corresponding legal effects. A fictitious deal is insignificant.
340.2. A sham deal is a deal concluded to conceal another one. A sham deal is insignificant.
For a sham deal, the rules applicable to the deal that the parties actually intended at the time of conclusion shall apply, taking into account its substance.
Article 341. Invalidity of a non-serious deal
341.1. An expression of will made non-seriously (as a joke), with the expectation that the
lack of seriousness will be noticed, is invalid.
341.2. If a non-serious deal causes damage to the other party, and the other party was not
aware of the non-serious nature of the deal and could not have been aware, the damage should be compensated
Article 342. Invalidity of a deal concluded by a person lacking legal capacity
342.1. A deal concluded by a person deemed incapable of acting due to a mental disorder is
invalid. Each party to such a deal should return everything received under the deal to the other party. If returning the received items in kind is not possible, their value should be compensated in money. In addition, if the party with legal capacity knew or should have known that the other party lacked capacity, he/she should also compensate the actual damage caused.
342.2. A deal concluded by an individual deemed incapable due to a mental disorder may
be considered valid for his benefit with the consent of his guardian.

Article 343. Invalidity of a deal concluded by a person with limited legal capacity
343.1. A deal concerning disposal of property concluded by an individual whose legal
capacity has been restricted by a court due to abuse of alcohol, narcotic or psychotropic substances, or involvement in gambling, without the consent of his guardian, may be declared invalid by a court at the claim of the guardian.
343.2. The rules of this Article shall not apply to minor household deals that a person with
limited legal capacity shall be entitled to conclude independently
Article 344. Invalidity of a deal concluded by a minor under fourteen years of age
344.1. Except in the cases provided for in Article 29 of this Code, a deal concluded by a
minor who has not reached the age of fourteen shall be invalid.
344.2. Deleted.
344.3. Deleted.
Article 345. Invalidity of deals concluded by a minor aged fourteen to eighteen
345.1. A deal concluded by a minor aged fourteen to eighteen is invalid if, according to the
requirements of this Code, the minor was required to obtain consent from his parents, adoptive parents, or guardian and failed to obtain such consent.
345.2. The rules of this Article shall not apply to deals of minors who have attained full
legal capacity in accordance with the provisions of this Code
Article 346. Invalidity of deals concluded by an individual who does not understand or
cannot control his actions
346.1. Even if a person is legally capable, a deal concluded by him may be declared invalid
by a court at the claim of the person himself or of another person whose rights or legally protected interests were violated as a result of the deal, if at the time of concluding the deal the person did not understand the meaning of or could not control his actions.
346.2. A deal concluded by a person later recognized as legally capable may be declared
invalid by a court at the claim of his guardian if it is proven that at the time of concluding the deal the person did not understand the meaning of or could not control his actions.
346.3. A declaration of will made during loss of consciousness or temporary mental
disorder may be deemed invalid.
346.4. A declaration of will of a mentally ill person is invalid if it does not correspond to a
correct perception of reality and the person has been recognized by a court as legally incapable.
Article 347. Invalidity of a deal concluded under impact of material misunderstanding
347.1. A deal concluded under impact of material misunderstanding may be contested by
the person who acted under such a mistake.
347.2. A mistake of essential significance occurs in the following cases:

347.2.1. the person intended to conclude a different deal than the one he consented to.
347.2.2. the person was mistaken about the content of the deal he intended to conclude.
347.2.3. circumstances considered by the parties as the basis of the deal, in accordance with
the principle of good faith, do not exist.
347.3. Misunderstanding in respect of motives of deal shall not be of material importance
except for circumstances where they are subject of deal.
347.4. Misunderstanding in respect of personality of counteragent shall be deemed material
only where counteragent’s personality or his personal qualities have been primary basis for conclusion of the deal.
347.5. Misunderstanding in respect of main features of subject shall be deemed material
where it bears importance for determination of subject’s value.
347.6. Minor errors made in the conclusion of written deals shall entitle correction but do
not justify contesting the deal.
347.7. If the party contesting the deal under a material misunderstanding proves that the
mistake arose due to the fault of the other party, he may demand compensation for the actual damage suffered from that party. If this cannot be proven, the party contesting the deal under a material misunderstanding shall be obliged, at the request of the other party, to compensate for the actual damage caused to the other party, even if the misunderstanding arose due to reasons beyond the control of the mistaken party.
Article 348. Invalidity of deals concluded with violation of mandatory form – deleted.
Article 349. Invalidity of a deal concluded by legal entity beyond its legal capacity
The deal concluded by legal entity in contradiction to purposes of its activity set forth in its charter, may, in the event its has been proven that the other party participating in the deal knew or should have known of its illegality, can be appealed by entity or its founder.
Article 350. Consequences of limitation of powers to conclude deals
If a person’s authority to conclude a deal is limited by contract, or if the powers of a legal entity’s body are limited by its charter, by a power of attorney, by this Code, or by circumstances that could be reasonably apparent at the time of concluding the deal, and that person or body exceeds such limitations when concluding the deal, the deal may be contested by the person whose interests those limitations were intended to protect only if it is proven that the other party to the deal knew or should have known of such limitations.
Article 351. Significance of confirmation in the event of invalidity of deals
351.1. Void agreement shall be invalid from the moment of its conclusion.
351.2. If a person who has concluded a voidable deal confirms it, his actions shall be
regarded as the re-conclusion of the deal.
351.3. If the person entitled to contest the deal confirms it, he shall thereby lose the right to
contest it.

351.4. If both parties confirm a voidable bilateral deal, then, in case of doubt, they shall be
obliged to give each other everything that would have been due to them had the deal been valid from the outset.
351.5. Confirmation shall be valid only if the contract or deal does not contradict moral
principles and does not infringe upon the interests of third parties
Article 352. Consequences of invalidity of one part of the deal
The invalidity of any part of a deal shall not affect the validity of its remaining provisions, provided that the deal could have been concluded without the invalid part.
Article 353. Conversion of the deal
If, after becoming aware of the invalidity of a deal, the parties express the intention for it to remain valid, the provisions governing another deal shall apply, provided that the invalid deal satisfies the requirements prescribed for such other transaction
Article 354. Periods applicable to invalid transactions
354.1. A claim seeking the application of the consequences of a void deal’s invalidity may
be filed within one year from the date on which performance of the deal commenced.
354.2. Except as provided in Article 347.1 of this Code, an interested party may contest a
deal within one year from the date the coercion or threat influencing its conclusion ceased, or from the date the party became aware or ought reasonably to have become aware of the circumstances giving rise to its invalidity. A deal concluded under a material misunderstanding may be contested within one month from the date the mistake became known.
Chapter 15
Consent in deals
Article 355. Definition of consent in deals
355.1. Where the validity of a deal is subject to the consent of a third party, such consent or
refusal may be communicated to either party to the transaction.
355.2. The form established for the transaction need not be observed in giving consent.
Article 356. Authorization (prior consent)
Authorization (prior consent) granted for the conclusion of a deal may be revoked before the deal is concluded, unless the parties have agreed otherwise. Notice of the revocation of such authorization (prior consent) shall be given to both parties
Article 357. Approval (subsequent consent)

Ratification of a transaction (subsequent consent), unless otherwise provided by this Code or by agreement between the parties, shall have retroactive effect from the time the transaction was concluded
Article 358. Disposition of item or right by an unauthorized person
358.1. Disposition of item or right by an unauthorized person shall be valid in the event it is
carried out with an authorized person’s authorization (prior consent).
358.2. Disposition of item or right shall be valid where approved by an authorized person.
Chapter 16
Representation in deals
Article 359. Definition of representation in deals
359.1. A deal may be concluded through a representative. A deal entered into by a person
(the representative) on behalf of another person (the principal), based on a power of attorney, a provision of law, or an act of a state or municipal body empowered for this purpose, shall directly create, modify, or terminate the civil rights and obligations of the principal. The representative’s authority may also be inferred from the circumstances in which the acts (e.g., a seller or cashier in retail trade, etc.).
359.2. Persons who act in their own name but for the benefit of another (commercial agents,
bankruptcy administrators, executors of wills, etc.), as well as persons authorized to initiate negotiations regarding prospective deals, shall not be deemed representatives.
359.3. A representative may not enter into transactions on behalf of the principal in which
the representative is personally a party. Except in cases of commercial representation or investment company activities in the securities market, a representative may not simultaneously enter into such transactions concerning the same principal.
359.4. Deals that, by their nature, should be concluded personally, as well as other deals
specified in this Code, may not be concluded through a representative.
Article 360. Conclusion of a deal by an unauthorized person
360.1. Where a person (the representative) acts on behalf of another (the principal) without
authority, or exceeds his authority, the other party to the deal shall have the right to require the representative to perform the deal or compensate for any damage resulting from it, provided that the principal does not subsequently approve the transaction.
360.2. Approval of the deal by the principal shall create, modify, and terminate civil rights
and obligations for the principal as if the deal had been originally concluded on his behalf.
Article 361. Commercial representation
361.1. A person representing entrepreneurs on a permanent and independent basis at the
time of conclusion of deals in entrepreneurship shall be deemed a commercial representative.

361.2. Simultaneous commercial representation of different parties in a deal shall be
permitted upon consent of these parties or in other circumstances specified in this Code. Commercial representative may demand payment of agreed upon remuneration and expenses incurred in the course of performance from parties to contract in equal shares, provided that agreement between parties does not provide otherwise.
361.3. Commercial representation shall be carried out on the basis of a contract concluded
in written form and specifying representative’s powers, and in the event of unavailability of such specifications - on the basis of a power of attorney. Commercial representative shall be obliged to keep confidential information in respect of commercial agreements he became aware of even after performance of given to him assignment.
Article 362. Power of attorney
362.1. A power of attorney granted by a person to another for representation before third
parties is considered a power of attorney. The principal may submit the written power of attorney authorizing the representative to conclude a deal directly to the relevant third party .
362.2. Powers of attorney for deals requiring notarization should be certified in accordance
with notarial procedure.
362.3. The following are equivalent to powers of attorney certified in notarial form:
362.3.1. powers of attorney of military personnel and other persons receiving treatment in
hospitals, sanatoriums, and other military medical institutions, certified by the head of the institution, their deputy in charge of medical affairs, or the chief/on-duty physician.
362.3.2. powers of attorney of military personnel, and in locations where notarial offices or
other authorities performing notarial acts are absent, powers of attorney of workers and employees, their family members, and family members of military personnel, certified by the commander (head) of the unit, formation, administration, or military training school.
362.3.3. powers of attorney of persons in places of deprivation of liberty, certified by the
head of the respective institution.
362.3.4. powers of attorney of adult legally capable persons in social service institutions,
certified by the administration of the institution or the head (or deputy) of the relevant social protection authority.
362.4. powers of attorney for receiving wages, other labor-related entitlements, authors’
and inventors’ rights, pensions, allowances, and benefits, as well as deposits and postal items (including money and parcels) in banks, may also be certified by the principal’s employer or educational institution, the relevant local executive authority of their place of residence, or the administration of the inpatient medical facility where they are treated. in the case of persons placed in social service institutions, by the administration of the respective institution.
362.5. a power of attorney on behalf of a legal entity is issued with the signature of its head
or another person authorized by its charter, and the seal of the organization is affixed.
362.6. powers of attorney sent by telegraph or other means of communication dispatched
by a postal or communication officer are certified by the communication authorities.
362.7. Third parties may recognize as valid a power of attorney sent by the principal to the
agent via facsimile or other communication means, without the involvement of official postal authorities.

Article 363. Validity period of a power of attorney
363.1. Except as provided in Article 363.3 of this Code, a power of attorney may be granted
for any period. Where no period is specified, it shall remain in force for one year from the date of execution. A power of attorney that does not indicate the date of execution shall be deemed void.
363.2. A power of attorney intended for acts abroad, and for which no period of validity is
specified, shall remain in force until revoked by the principal, provided it has been notarized.
363.3. A power of attorney conferring the right to dispose of a vehicle shall not be granted
for a period exceeding one year.
Article 364. Delegated power of attorney
364.1. A person granted a power of attorney shall personally perform the acts for which he
is authorized. Such acts may be delegated to another person only if the power of attorney so authorizes or if circumstances make it necessary to protect the interests of the principal.
364.2. A person who delegates authority to another shall inform the principal and provide
necessary information regarding the delegate. Failure to do so shall render the delegating person liable to the principal for the acts of the delegate as if the delegating person had performed them personally.
364.3. Deleted.
364.4. The period of validity of a power of attorney granted under a delegation procedure
shall not exceed the period of validity of the original power of attorney it is based on.
Article 365. Termination of a power of attorney
365.1. A power of attorney shall terminate upon the occurrence of the following:
365.1.1. expiration of its term.
365.1.2. performance of the acts for which it was granted.
365.1.3. revocation by the principal.
365.1.4. renunciation by the attorney-in-fact.
365.1.5. liquidation of legal entity on behalf of which a power of attorney has been issued.
365.1.6. liquidation of legal entity in name of which a power of attorney has been issued.
365.1.7. death, legal incapacity, limited legal capacity, or being declared missing of the
principal.
365.1.8. death, legal incapacity, limited legal capacity, or being declared missing of the
attorney-in-fact.
365.2. The principal may revoke a power of attorney or delegation at any time, and the
attorney-in-fact may renounce it at any time. Any agreement waiving these rights shall be void.
Article 366. Consequences of termination of a power of attorney
366.1. A principal who has granted and subsequently revoked a power of attorney shall
notify the attorney-in-fact, as well as any third parties known to the principal to whom the power of attorney was presented for representation. Where a power of attorney is terminated on

the grounds set forth in Articles 365.1.5 and 365.1.7, the principal’s legal heirs shall bear the same obligation.
366.2. Rights and obligations arising from acts performed by the attorney-in-fact prior to
the time he knew or should have known of the termination shall remain valid with respect to third parties vis-à-vis the principal and their legal heirs. This rule shall not apply if the third party knew or should have known of the termination.
366.3. Upon termination of a power of attorney, the attorney-in-fact or their legal heirs shall
promptly return the power of attorney.
366.4. Termination of a power of attorney shall render any delegated power of attorney
granted by the attorney-in-fact null and void.
Section 5
PERIODS
Chapter 17
Calculation of periods
Article 367. Definition of period
367.1. Period shall mean a time connected to creation, change and termination of civil rights
and obligations.
367.2. Period established by a deal or set by court shall be specified by expiry of time
calculated in calendar date or months, weeks, days or hours.
367.3. The period may also be determined by indicating an event that should necessarily
occur.
Article 368. Time indicating to commencement of period
The flow of a period defined by a time frame shall start on the day after the specified calendar date or the occurrence of the event that marks the beginning of that period
Article 369. Time indicating the expiration of a period
369.1. A period calculated in years expires on the corresponding month and day of the final
year of the period. Rules for periods calculated in months apply to periods determined by half a year. A half-year is considered equal to six months and is counted from the early year.
369.2. Rules for periods calculated in months also apply to periods calculated in quarters. A
quarter is considered equal to three months and is counted from the beginning of the year.
369.3. A period calculated in months expires on the corresponding day of the final month
of the period. If the expiration falls on a month that does not have the corresponding day, the period ends on the last day of that month.

369.4. A period determined by half a month is treated as a period calculated in days and is
considered equal to fifteen days.
369.5. A period calculated in weeks is equal to seven days and expires on the
corresponding day of the final week of the period.
369.6. A period calculated in days expires at the end of its final day.
369.7. If a period consists of one or several full months and a half month, the fifteen days
shall be counted at the end.
369.8. When a period is extended, the new period is calculated from the end of the expired
period.
369.9. If a period is determined in months or years, and it is not necessary for them to end
simultaneously, then a month shall be considered as thirty days, and a year as three hundred and sixty-five days.
369.10. The first day of the month is considered the beginning of the month, the fifteenth
day the middle of the month, and the last day the end of the month
Article 370. Calculation of periods on non-working days
370.1. If an action should be performed on a specific day and that day is a non-working
day, the action shall be performed on the next working day.
370.2. If the last day of a period falls on a non-working day, the next working day shall be
considered the day on which the period expires.
Article 371. Procedure for performing actions on the last day of a period
371.1. If a period is established for the performance of a certain action, that action may be
performed until twenty-four hundred hours (midnight) of the last day of the period. However, if the action should be performed within an organization, the period shall expire at the hour when, according to established rules, operations in that organization are terminated.
371.2. Written applications and notifications submitted to a communications organization
by twenty-four hundred hours (midnight) on the last day of the period shall be deemed to have been submitted on time.
Chapter 18
Limitation period
Article 372. Definition of limitation period
372.1. The limitation period shall apply to the right to demand that another person perform
or refrain from performing a certain act.
372.2. The period established for the protection of a right upon the claim of a person whose
right has been violated shall be deemed the limitation period.
Article 373. Limitation periods

373.1. The general limitation period is ten years.
373.2. The limitation period for contractual claims is three years, while for contractual
claims related to immovable property the limitation period is six years.
373.3. The limitation period for claims arising from obligations to be performed
periodically is three years.
373.4. For certain types of claims, special limitation periods—shorter or longer than the
general period—may be established by this Code.
373.5. Unless otherwise provided by law, the rules set forth in this Chapter shall also apply
to special limitation periods
Article 374. Determination of limitation periods
374.1. Unless otherwise specified in the agreement, limitation periods and procedures for
their calculation shall be determined by this Code.
374.2. Grounds for suspension and interruption of limitation periods shall be determined
by this Code.
Article 375. Application of the limitation period
375.1. A claim for the protection of a right shall be accepted by the court for consideration
regardless of whether the limitation period has expired.
375.2. The limitation period shall be applied by the court only upon a petition submitted by
a party to the dispute before the court renders its decision. If the party files such a petition, the expiration of the limitation period constitutes grounds for the court to issue a decision rejecting the claim.
Article 376. Application of the limitation period to accessory claims
If the limitation period for the principal claim expires, the limitation period shall also be considered expired for accessory claims (pledge, penalty, retention, warranty, or earnest money)
Article 377. Commencement of the limitation period
377.1. The limitation period begins to run from the day on which a person becomes aware
or should have become aware of the violation of his right. Exceptions to this rule are established by this Code.
377.2. For obligations with a fixed performance period, the limitation period begins upon
the expiration of that performance period.
377.3. For obligations without a fixed performance period, or those determined by the
moment a claim can be made, the limitation period begins from the moment the creditor acquires the right to demand performance of the obligation. If the debtor is granted a grace period to fulfill the obligation, the limitation period begins to run after the expiration of that period.
377.4. For recourse obligations, the limitation period begins from the performance of the
principal obligation.

Article 378. Period of limitation in the event of change of persons in obligation
Change of persons in obligation shall not result in change of a period of limitation or of procedure of its calculation.
Article 379. Suspension of the limitation period
379.1. The running of the limitation period shall be suspended when:
379.1.1. an extraordinary circumstance beyond control (force majeure) prevents the filing of
a claim.
379.1.2. the claimant or defendant is serving in the armed forces under martial law.
379.1.3. the relevant executive authority establishes a deferment (moratorium) for the
performance of obligations.
379.1.4. a person without legal capacity does not have a legal representative.
379.1.5. the law or other normative legal act regulating the relevant relationship is
suspended.
379.1.6. a mediation process is applied in a dispute between the parties.
379.2. For claims related to compensation for harm to the life or health of individuals, the
limitation period shall also be suspended from the moment the person applies to the relevant authority for the assignment of a pension or benefit, until the pension or benefit is granted or the request is refused.
379.3. The running of the limitation period shall be suspended only if the circumstances
specified in this Article arise or continue to exist during the last six months of the limitation period, or, if the limitation period is six months or less, at any time during the limitation period.
379.4. The running of the period resumes from the day the circumstance causing the
suspension ends. The remaining part of the period is extended up to six months. if the limitation period is six months or less, it is extended to the full limitation period. 379.4-1. The limitation period suspended due to the application of the mediation process shall resume from the date established by the Law of the Republic of Azerbaijan on Mediation.
379.5. The running of the limitation period is suspended for claims between spouses during
the existence of the marriage. The same rule applies to claims between children and parents until the children reach the age of majority, as well as to claims between guardians (custodians) and wards during the entire guardianship (custodianship) period.
379.6. If a claim is filed by a person with limited legal capacity or by a person without legal
capacity who does not have a legal representative, the limitation period shall be considered suspended until the person attains full legal capacity or a representative is appointed for them.
Article 380. Interruption of the limitation period
380.1. The running of the limitation period is interrupted when a claim is filed in the
prescribed manner, or when the debtor performs actions indicating acknowledgment of the debt.
380.2. After the interruption, the limitation period begins anew. The time elapsed before the
interruption is not included in the new period.

Article 381. Running of the limitation period when a claim is left unreviewed
381.1. If a claim is left unreviewed by the court, the running of the limitation period that
began before the claim was filed continues in the usual manner.
381.2. If a claim filed in a criminal case is left unexamined by the court, the running of the
limitation period that began before the claim was filed shall be suspended until the court decision leaving the claim unexamined enters into legal force. The time during which the period is suspended is not included in the limitation period. If the remaining portion of the period is less than six months, it shall be extended to six months.
Article 382. Restoration of the limitation period
If, due to circumstances related to the claimant’s personal situation (serious illness, helpless condition, illiteracy, etc.), the reason for the expiration of the limitation period is considered by the court as excusable in exceptional cases, the right of an individual whose right has been violated shall be protected. The reasons for the expiration of the limitation period may be deemed excusable if they occur during the last six months of the limitation period, or, if the limitation period is six months or less, at any time during the limitation period.
Article 383. Performance of an obligation after the limitation period
If a debtor or other obligated person performs his duty after the expiration of the limitation period, he cannot demand restitution of what was performed, even if he was unaware that the limitation period had expired at the time of performance.
Article 384. Claims to which the limitation period does not apply
384.0. The limitation period shall not apply to the claims:
384.0.1. for the protection of personal non-property rights and other intangible benefits.
384.0.2. of depositors to the bank for the return of deposits.
384.0.3. for compensation for harm caused to the life or health of an individual. However,
claims filed after three years from the moment the right to compensation arises shall be compensated at most for the three years preceding the filing of the claim.
384.0.4. of an owner or other holder to eliminate any violations of his rights, even if such
violations are not combined with deprivation of possession.
384.0.5. of an owner against an act of a state or municipal body, or their officials, that
violates owner’s rights of ownership, use, or disposal of property, requesting its invalidation.
384.0.6. Other claims specified by this Code in certain cases.

Section 6
GENERAL PART OF THE LAW OF OBLIGATION
Chapter 19
General provisions on obligations
Article 385. Definition of an obligation
385.1. According to an obligation, a person (the debtor) should perform a certain action for
the benefit of another person (the creditor), for example, pay money, transfer property, perform work, provide services, etc., or refrain from a certain action, while the creditor has the right to demand that the debtor fulfills his duty.
385.2. Depending on its content and nature, an obligation may impose on each party, either
during or after contractual relations, the duty to exercise special care regarding the rights and property of the other party.
Article 386. Grounds for the formation of obligations
386.1. Except in cases where an obligation arises as a result of causing harm, unjust
enrichment, or other grounds provided for in this Code, the formation of an obligation requires an agreement between its participants.
386.2. Obligations referred to in Article 385 of this Code may also arise on the basis of the
preparation of an agreement.
386.3. A participant in negotiations may demand compensation from the other participant
for expenses incurred in attempting to conclude an agreement that was not concluded due to the fault of the other participant.
386.4. Matters concerning the content and performance of obligations arising from
agreements concluded electronically, except as provided by the legislation of the Republic of Azerbaijan on electronic commerce, are regulated by this Code.
Article 387. Parties to an obligation
387.1. In an obligation, each of its parties may participate as a creditor or a debtor, or there
may be several persons simultaneously. The invalidity of the creditor’s claims against one of the persons participating as a debtor, as well as the expiration of the limitation period for such a claim, does not, by itself, affect the creditor’s claims against the remaining persons.
387.2. If, under an agreement, each of the parties owes a duty for the benefit of the other
party, that party is deemed the creditor with respect to the other party’s debtor concerning the duties to be performed for the benefit of that party and, simultaneously, with respect to those entitled to claim from them.
387.3. An obligation does not create duties for persons who do not participate in it (third
parties). In cases provided for in the parties’ agreement, an obligation may create rights for third parties against one or both parties to the obligation.

387.4. In deals where one of the parties is a public institution employing a civil servant, that
civil servant may not be considered a party to the deal.
Article 388. Obligation to provide information
A right to obtain certain information from an obligation may arise. The provision of information should be ensured if it is important for determining the content of the obligation and if the counterparty can provide such information without infringing on his own rights. The person receiving the information should reimburse the obligated person for the costs of providing it. 20-ci Chapter Contract law §1. Definition and terms of a contract
Article 389. Definition of a contract
389.1. A contract shall be considered an agreement between two or more persons regarding
the establishment, modification, or termination of civil rights and obligations.
389.2. The rules on bilateral and multilateral acts shall apply to contracts.
389.3. Unless otherwise provided in the rules of this Chapter or in the provisions of this
Code concerning specific types of contracts, the general provisions on obligations shall apply to the obligations arising from a contract.
389.4. General provisions on contracts shall apply to contracts concluded by more than two
parties, provided that such application does not contradict multilateral nature of those contracts.
Article 390. Freedom of contract
390.1. Individuals and legal persons shall be free to conclude and determine the content of
contracts. They may also conclude contracts not expressly provided for in this Code, provided they do not contradict it.
390.2. A contract should comply with the law and other legal acts in force at the time of its
conclusion and with mandatory rules (imperative norms) applicable to the parties. If, after the contract is concluded, a law is adopted establishing mandatory rules for the parties that differ from those in force at the time of conclusion, the terms of the concluded contract shall remain in force, except in cases where the law expressly provides for its retroactive application to relations arising from previously concluded contracts.
390.3. Except in cases where the duty to conclude a contract is provided for in this Code or
in voluntarily assumed obligations, no one may be compelled to conclude a contract.
390.4. The parties may conclude a contract containing elements of various types of
contracts provided for in this Code (a mixed contract). Unless otherwise follows from the parties’ agreement or the nature of the mixed contract, rules governing contracts corresponding to elements included in the mixed contract shall apply to parties’ relations in relevant parts.

390.5. Terms of a contract shall be determined by the parties’ will, except in cases where the
content of a corresponding term is expressly provided in this Code.
390.6. If a contract term is provided for by the parties’ agreement in the absence of a
separate rule or, where no agreement is reached, by a dispositive norm, parties may, by agreement, exclude the application of that norm or establish a term differing from that provided by it. In the absence of such agreement, the term shall be determined by the dispositive norm.
390.7. If a contract term is not determined by the parties or by a dispositive norm, the
relevant term shall be determined by commercial usage applicable to the parties’ relations.
Article 391. Invalidity of a contract concerning future property
A contract under which one party undertakes to transfer all or part of their future property to the other party, or encumber it with a usufruct, shall be invalid, except in cases where the contract concerns individual items of future property, as well as cases provided for by the Law of the Republic of Azerbaijan on Encumbrance of Movable Property.
Article 392. Invalidity of a contract concerning inherited property
392.1. A contract concerning the inherited property of a living person concluded by other
persons shall be invalid. The same rule shall apply to contracts concerning compulsory shares of a living person’s inheritance and/or the fulfillment of his/her testamentary instructions.
392.2. The rule in Article 392.1 shall not apply to contracts concluded regarding the share of
future heirs or compulsory shares during intestate succession in accordance with the law.
Article 393. Contract for transfer of property
A contract under which one party undertakes to transfer all or part of his/her existing property to the other party, or encumber it with a usufruct, should be notarized, except in cases where the contract concerns individual items of existing property.
Article 394. Procedure for concluding a contract on alienation of immovable property
A contract under which one party undertakes to transfer ownership or other item rights in an immovable object to another party, or to acquire them, should be notarized.
Article 395. Scope of a contract for encumbrance of property
If a person undertakes an obligation to alienate or encumber his property, this obligation, unless otherwise provided by the Law of the Republic of Azerbaijan on Encumbrance of Movable Property or by the contract, shall also extend to the accessories of the property.
Article 396. Application of rules on contractucal obligations to non-contractual
obligations
Unless otherwise follows from the nature of the obligation, the rules on contractual obligations shall apply to other non-contractual obligations.

Article 397. Remunerated and gratuitous contracts
397.1. A contract is considered remunerated if, under it, a party is entitled to a fee or other
reciprocal consideration in exchange for performing his obligations.
397.2. A contract is considered gratuitous if one party undertakes to provide something to
the other party without receiving a fee or other reciprocal consideration.
397.3. Unless otherwise follows from this Code, the content, or the nature of the contract, a
contract shall be presumed to be remunerated.
Article 398. Price
398.1. Performance of a contract shall be paid at the price agreed upon by the parties. In
cases provided by law, prices determined or regulated by the relevant executive authority (tariffs, norms, rates, etc.) shall apply.
398.2. After a contract is concluded, the price may be changed in the cases and manner
provided by the contract or by this Code.
398.3. If the price is not specified in a remunerated contract and cannot be determined
based on the contract terms, performance of the contract shall be paid at the customary price for similar goods, works, or services in comparable circumstances.
Article 399. Effect of contract
399.1. A contract shall enter into force from the moment it is concluded and is binding on
the parties.
399.2. Parties may stipulate that the terms of the concluded contract shall also apply to
relations that arose before the contract was concluded.
399.3. A contract may provide that the expiration of its term terminates the parties’
obligations under the contract. In the absence of such a provision, the contract shall remain in force until the moment specified therein for the performance of the obligation.
399.4. The expiration of the contract’s term shall not release the parties from liability for
violations committed under the contract before its expiration.
Article 400. General contract
400.1. If one of the parties holds a dominant position in the market, it should not
unreasonably refuse to conclude a contract in this area of activity, nor offer unequal terms to the counterparty.
400.2. A party acting within the scope of its entrepreneurial activity may not unreasonably
refuse to conclude a contract with a person who acquires or uses property or services without a commercial purpose or for meeting their essential needs.
Article 401. Joining contract – deleted.
Article 402. Preliminary contract

402.1. Under a preliminary contract, the parties shall undertake to conclude in the future a
contract (main contract) for the transfer of property, performance of work, or provision of services on the terms specified in the preliminary contract.
402.2. The preliminary contract shall be concluded in the form prescribed for the main
contract. Non-compliance with the form requirements of the preliminary contract shall render it invalid.
402.3. The preliminary contract should specify the subject matter of the main contract, as
well as other essential terms, in a manner that allows them to be determined.
402.4. The preliminary contract should indicate the period within which the parties
undertake to conclude the main contract. If no such period is specified, the main contract should be concluded within one year from the conclusion of the preliminary contract.
402.5. If the main contract is not concluded by the time the parties were required to
conclude it, or if one party does not make an offer to conclude it, the obligations under the preliminary contract shall be terminated.
402.6. If an intention agreement (protocol of intent, etc.) does not expressly state the parties’
intention to give it the force of a preliminary contract, it shall not give rise to civil law consequences.
Article 403. Contract for the benefit of a third party
403.1. A contract for the benefit of a third party shall be a contract under which the parties
determine that the debtor should perform the obligation for the benefit of a third party who has the right to demand its performance, whether specified in the contract or not.
403.2. Unless otherwise provided in this Code or the contract, or unless otherwise follows
from the nature of the obligation, both the creditor and the third party may demand performance of a contract concluded for the benefit of a third party.
403.3. Unless a special provision is made, the following should be determined based on the
circumstances of the case, including its purpose:
403.3.1. whether the third party acquires the right or not.
403.3.2. whether the right arises immediately or upon fulfillment of certain preliminary
conditions.
403.3.3. whether the parties may, without the third party’s consent, terminate or modify the
third party’s right.
403.4. The party that included a provision for the benefit of a third party may, without the
counterparty’s consent, change the third party specified in the contract.
403.5. Unless otherwise provided in this Code or the contract, from the moment the third
party notifies the debtor of his intention to exercise the right, the parties may not cancel or modify the contract without the third party’s consent.
403.6. The debtor may raise against the third party’s claim any defenses that could be
raised against the creditor.
403.7. If the third party waives the right granted to them under the contract, the creditor
may exercise that right, unless prohibited by this Code or the contract.
Article 403-1. Derivative financial instruments

403-1.1. Derivative financial instrument is a contract that evidences a right of purchase, sale or exchange of any of the underlying asset. As the underlying asset may act securities (except investment fund share), currency, interest rates, yields, derivatives, commodity, financial index, credit risk, etc. 403-1.2. The order of placement and circulation of derivative financial instruments through the stock exchange in a standardized form shall be established by the Central Bank of the Republic of Azerbaijan. When conducting operations with derivative financial instruments in another trading system in cases stipulated by the Law of the Republic of Azerbaijan ‘on Securities Market’, placement and circulation of derivative financial instruments shall be carried out in accordance with the rules of this trading system. 403-1.3. Derivative financial instruments shall include futures contracts, options and swaps. 403-1.4. Futures contract is a derivative financial instrument of purchase and sale of the underlying asset in the prescribed form and quantity within a predetermined timeframe and price. 403-1.5. Option is a derivative financial instrument, authorizing the holder to unilaterally buy, sell the underlying asset or to make the swap. 403-1.6. Swap is a derivative financial instrument for the exchange of the underlying assets of the same kind between the two sides.
Article 404. Contract Interpretation
404.1. In the course of the contract terms interpretation, the court shall consider not only
the actual meaning of the words and phrases thereof, but the essence of the parties’ will, and shall compare the actual meaning of the contract with its other terms and conditions.
404.2. At that, all relevant circumstances, including preceding negotiations, the practice of
relationship established between the parties, business traditions and the consequent behavior of the parties, shall be taken into account.
404.3. In the event certain phrases of the contract can be interpreted differently, then the
priority shall be given to the meaning normally accepted in the parties’ location. In the event the parties’ location are different, then the location of the acceptor shall be decisive.
404.4. In the event of the presence of mutually exclusive or multi-meaning phrases in the
contract, the priority shall be given to those more relevant to the content of the contract.
404.5. In the course of the mixed contracts interpretation the norms with respect to the
contracts most close and relevant to the essence of their performance shall apply.
Article 404-1. Public procurement contract
Public procurement related relations shall be regulated by the legislation of the Republic of Azerbaijan on public procurements. § 2. Conclusion of a contract
Article 405. Agreement regarding essential conditions of a contract
405.1. A contract shall be considered concluded when the parties reach agreement, in the
required form, on all essential contractual terms. Conditions relating to the subject matter of the

contract, the terms designated by this Code as essential or necessary for contracts of the given type, as well as all conditions to be agreed upon at the request of one of the parties, shall be deemed essential.
405.2. A contract shall be concluded through one party making an offer (a proposal to
conclude a contract) and the other party accepting it (acceptance of the offer).
Article 406. Form of the contract
406.1. A contract may be concluded in any form prescribed for the making of transactions,
provided that this Code does not establish a specific form for that particular type of contract.
406.2. If the parties have agreed that the contract shall be concluded in a specific form, the
contract shall be deemed concluded only after it has been executed in the agreed form, even if such form is not required for that type of contract under this Code.
406.3. A written contract may be concluded by drawing up a document signed by the
parties, as well as by exchanging letters, telegrams, electronic documents, or other data in accordance with Article 331.1 of this Code.
Article 407. Moment of conclusion of the contract
407.1. A contract shall be deemed concluded at the moment when the person who made the
offer receives its acceptance.
407.2. A simple written contract shall be deemed concluded from the moment it is duly
signed, and a contract requiring notarization shall be deemed concluded from the moment it is duly notarized.
407.3. Deleted.
Article 408. Offer
408.1. A proposal to conclude a contract (offer) shall be deemed made when it is addressed
to one or more specific persons and contains an expression by the person making the proposal (the offeror) of his intention to be bound by the proposal in case of its acceptance. The offer should contain essential contractual terms.
408.2. A proposal addressed to an indefinite number of persons (including advertisements)
shall be regarded as an invitation to make an offer, unless otherwise directly provided therein.
408.3. An offer shall become binding on the offeror from the moment it is received by the
addressee. If a notice of withdrawal of the offer is received before or simultaneously with the offer itself, the offer shall be deemed not to have been made.
408.4. Deleted.
408.5. Deleted.
408.6. An offer received by the addressee cannot be revoked during the period established
for its acceptance, unless otherwise stipulated in the offer itself, or unless it follows otherwise from the nature of the proposal or the circumstances under which it was made.

408.7. If a proposal containing all essential contractual terms clearly expresses the offeror’s
intention to enter into a contract on the terms stated therein with any person who accepts it, such a proposal shall be deemed a public offer.
Article 409. Acceptance
409.1. The response of the person to whom an offer is addressed, indicating acceptance of
the offer, shall constitute acceptance. Acceptance should be complete and unconditional.
409.2. If the offeror has set a period for acceptance, the acceptance may be made only
within that period.
409.3. Unless otherwise provided by this Code, established business practice, or previous
dealings between the parties, silence shall not be deemed acceptance.
409.4. Unless otherwise provided in this Code or specified in the offer, performance by the
offeree, within the period established for acceptance, of the terms stated in the offer (dispatching goods, providing services, performing work, paying the corresponding amount, etc.) shall constitute acceptance.
409.5. If the acceptance reaches the offeror late, but it is evident from the circumstances that
it was sent on time, the acceptance shall be considered delayed only if the offeror immediately notifies the other party thereof. If the offeror immediately informs the other party that the delayed acceptance will be accepted, the contract shall be deemed concluded.
409.6. If a notice of withdrawal of the acceptance reaches the offeror before or
simultaneously with the acceptance itself, acceptance shall be deemed not to have been received.
409.7. If a period for acceptance is specified in the offer, the contract shall be deemed
concluded when the offeror receives the acceptance within that period.
409.8. If a written offer does not specify a period for acceptance, the contract shall be
deemed concluded if the offeror receives the acceptance before the expiration of the period established by this Code, or, if no such period is established, within a reasonable time.
409.9. If a verbal offer is made without specifying a period for acceptance, the contract shall
be deemed concluded if the other party immediately declares its acceptance.
409.10. Except in the cases provided for in Article 409.8 of this Code, an offer made to a
person who is present should be accepted or rejected immediately.
409.11. Except in the cases provided for in Article 409.8 of this Code, an offer made to a
person who is absent may be accepted only within the time during which the offeror could normally expect a reply.
Article 410. New offer
410.1. A late acceptance of an offer shall be deemed a new offer.
410.2. If the response expresses consent to conclude the contract on terms different from
those contained in the offer, such response shall be regarded as a rejection of the offer and, at the same time, as a new offer.
Article 411. Place of conclusion of the contract

411.1. If the place of conclusion of the contract is not specified in the contract, the contract
shall be deemed concluded at the place of residence of the individual or the place of business of the legal entity that made the offer.
411.2. A contract concluded between a consumer and a person engaged in trade within or
near his business premises, on the street, in front of a house, or in similar locations, shall be valid only if the consumer does not withdraw from the contract in writing within one week. However, this rule shall not apply to contracts that are performed at the moment of their conclusion.
Article 412. A party’s refusal to enter into a contract – deleted.
Article 413. Acknowledgment of debt – deleted.
Article 414. Conclusion of a contract auction
414.1. Unless otherwise provided by the nature of the contract, it may be concluded
through the holding of an auction. The contract shall be concluded with the person who wins the auction.
414.2. The organizer of the auction may be the owner of the property, the holder of the
property right, or a specialized organization. A specialized organization shall act on the basis of a contract concluded with the owner of the property or the holder of the property right, and may act either on their behalf or in its own name.
414.3. In the cases specified by this Code, contracts for the sale of property or property
rights may be concluded only through the holding of an auction.
414.4. The auction shall be held in the form of a public auction or a tender. The person who
offers the highest price shall be deemed the winner of a public auction. the person who offers the best terms, according to the opinion of the tender committee established in advance by the auction organizer, shall be deemed the winner of the tender.
414.5. Unless otherwise provided by law, the form of the auction shall be determined by
the owner of the property or the holder of the property right being sold.
Article 415. Organization and procedure of the auction
415.1. Auctions and tenders may be open or closed. In an open auction or open tender, any
person may participate. In a closed auction or closed tender, only persons specifically invited for this purpose may participate.
415.2. Unless otherwise provided by law, the organizer shall announce the holding of the
auction not later than thirty days prior to its commencement. The notice shall specify the time, place, and form of the auction, its subject matter, and the procedure for its conduct, including the formalization of participation, the determination of the winning bidder, the starting price, and other information prescribed by law. If the subject of the auction is the right to conclude a contract, the notice shall also indicate the period granted for that purpose.
415.3. Unless otherwise provided in this Code or in the auction notice, the organizer of an
open auction may withdraw from holding the auction at any time, but not later than three days prior to the scheduled date of the auction, and may withdraw from holding a tender not later than thirty days prior to its scheduled date. If the organizer of an open auction withdraws from holding it in violation of these time limits, the organizer shall compensate the participants for

the actual damages incurred. The organizer of a closed auction or closed tender shall compensate the invited participants for the actual damages incurred, regardless of the time of withdrawal after the notice has been sent.
415.4. Participants in the auction shall pay a deposit (security payment) in the amount,
time, and manner specified in the auction notice. If the auction is not held, the deposit shall be refunded. Deposits paid by participants who took part in the auction but did not win shall also be refunded. When a contract is concluded with the winning bidder, the amount of the deposit paid by that bidder shall be counted toward the performance of obligations under the concluded contract.
415.5. The winning bidder and the auction organizer shall sign a protocol on the results of
the auction or tender on the same day the auction or tender is held. this protocol has the force of a contract. If the winning bidder refuses to sign the protocol, he shall forfeit the deposit. If the organizer refuses to sign the protocol, he should return the deposit in double amount to the winning bidder and compensate for any damages caused by participation in the auction.
415.6. If the subject of the auction was only the right to conclude a contract, the parties shall
sign such contract no later than twenty days after the conclusion of the auction and the formalization of the protocol, unless a different period is specified in the notice.
415.7. If one of the parties refuses to conclude the contract, the other party may apply to the
court with a claim to compel the conclusion of the contract and recover damages caused by the refusal to conclude it.
415.8. The procedure for holding an electronic auction on the basis of a writ of execution shall be
determined by the Law of the Republic of Azerbaijan ‘on Execution’.
415.9. The provisions of this Article shall also apply to auctions conducted pursuant to a notarially
certified agreement between the parties in accordance with Article 41.4 of the Law of the Republic of Azerbaijan ‘on Mortgage,’ unless a different procedure is stipulated in such agreement, taking into account the requirements established in Article 415.5 of this Code.
Article 416. Consequences of violation of the auction procedure
416.1. An auction held in violation of the procedure established by this Code may be
declared invalid by the court upon the claim of an interested person.
416.2. The declaration of an auction as invalid shall entail the invalidity of the contract
concluded with the person who won the auction.
§ 3. Standard contract terms
Article 417. Concept of standard terms of a contract
417.1. Standard terms of a contract are provisions that are pre-formulated and intended for
repeated use, which are presented by one party (the offeror) to the other one. Through such terms, rules that deviate from or supplement previously established norms are determined.
417.2. If the parties have determined the contractual terms in detail by mutual agreement,
such terms shall not be considered standard terms.
417.3. The terms directly agreed upon by the parties shall prevail over the standard terms.

Article 418. Incorporation of standard terms into a contract
418.1. Standard terms of a contract shall become part of the contract concluded between the
party proposing them and the other party only if the proposing party makes a clear written reference to such terms at the place where the contract is concluded, and the other party has the opportunity to become acquainted with these terms and, if it agrees, to accept them.
418.2. If the other party to the contract is an entrepreneur, standard terms shall become part
of the contract provided that, by exercising the necessary diligence customary in business relations, that party ought to have taken them into account.
Article 419. Unusual provisions of standard terms of contracts
419.1. Provisions of standard terms that are unusual in form, and therefore could not
reasonably be expected by the other party, shall not become part of the contract.
419.2. In interpreting standard terms of a contract, any ambiguities encountered shall be
construed against the party who proposed the inclusion of such terms in the contract.
Article 420. Invalidity of standard terms of a contract
420.1. The following standard terms of a contract applied by the proposing party to
individuals not engaged in entrepreneurial activity shall be deemed invalid:
420.1.1. provisions establishing unreasonably long or manifestly short periods for accepting
or rejecting the offer, or for performing any act under the contract (periods for acceptance or performance).
420.1.2. provisions establishing unreasonably long or insufficiently clear periods for the
performance of obligations that deviate from previously established norms (periods in case of non-performance).
420.1.3. provisions granting the proposing party the right to refuse performance of its
obligations without justification or grounds stated in the contract (right to withdraw from the contract).
420.1.4. provisions granting the proposing party the right to alter the promised
performance or withdraw from it, provided that such alteration or withdrawal is unreasonable for the other party (condition for amendment).
420.1.5. provisions granting the proposing party the right to demand disproportionately
high compensation for costs incurred by the other party (excessive compensation for incurred costs).
420.2. A standard term shall be invalid if, even though incorporated into the contract, it is
prejudicial to the other party in a manner contrary to the principles of trust and good faith. In such cases, the circumstances of incorporation, mutual interests of the parties, and other relevant factors shall be taken into account.
420.3. Standard terms of a contract applied by the proposing party to individuals not
engaged in entrepreneurial activity shall also be deemed invalid if they contain provisions on:
420.3.1. providing for unjustified short-term increases in prices.
420.3.2. limiting or excluding the right of the contract party to refuse to perform obligations
granted by this Code, or the right of the other party to refuse performance until the first party performs its obligations (right to refuse performance).

420.3.3. depriving a party of the right to set off claims established by law or determined by
a court (prohibition of set-off of mutual claims).
420.3.4. exempting the proposing party from the legal duty to notify the other party or
provide a period for performance of the obligation (notification. period setting).
420.3.5. providing for a claim for an amount exceeding the actual damage (excessive
compensation).
420.3.6. excluding or limiting the liability of the proposing party or its representative for
damage caused by gross negligence (liability for negligence).
420.3.7. limiting or excluding the right of the other party to terminate the contract or claim
compensation for damages resulting from non-performance, contrary to Article 420.3.6, in case the proposing party breaches a primary obligation (violation of the requirement to perform the primary obligation).
420.3.8. when the proposing party performs its obligations in parts, limiting the right of the
other party to claim full compensation for non-performance or, if the other party is not interested in partial performance, terminate the contract (loss of interest in partial performance).
420.3.9. limiting the liability of the proposing party for defects in goods or services during
delivery or performance, contrary to provisions governing new goods or services § 4. Modification and termination of a contract
Article 421. Grounds for modification and termination of a contract
421.1. The modification or termination of a contract, unless otherwise provided in this Code
or in the contract, shall be possible by agreement of the parties.
421.2. At the request of one party, a contract may be modified or terminated only if the
other party has significantly breached the contract, or in other cases provided for in this Code or in the contract. A breach by one party shall be deemed significant if, as a result of the damage caused to the other party, that party is deprived to a considerable extent of what they were entitled to reasonably expect when entering into the contract.
421.3. When there is a unilateral refusal to perform the contract in whole or in part, and
such refusal is allowed by this Code or by agreement of the parties, the contract shall be deemed correspondingly terminated or modified.
Article 422. Modification and termination of a contract due to a significant change of
circumstances
422.1. A significant change circumstances that the parties relied upon when concluding the
contract, unless otherwise provided in the contract or arising from its nature, shall constitute grounds for its modification or termination. A change of circumstances shall be deemed significant if, had the parties reasonably foreseen it, they would have concluded the contract under substantially different terms or would not have concluded it at all. The incorrectness of parties’ assumptions underlying the contract is equated with a change of circumstances.
422.2. If the parties fail to reach an agreement on adapting the contract to the significantly
changed circumstances or on its termination, the contract may, at the request of the interested

party, be terminated by a court under the following conditions, or modified in cases specified in
Article 422.4:
422.2.1. at the time of concluding the contract, the parties assumed that the circumstances
would not change to such an extent.
422.2.2. the change of circumstances is caused by factors that, after their occurrence, the
interested party cannot overcome with the care and diligence required of them according to the nature of the contract and the conditions of commerce.
422.2.3. performing the contract without modifying its terms would disturb the balance of
the parties’ contractual property interests to such an extent and cause such damage to the interested party that they would be deprived to a considerable degree of what they were entitled to reasonably expect when entering into the contract.
422.2.4. the risk of a change of circumstances is not assumed by the interested party under
business practices or the nature of the contract.
422.3. When a contract is terminated due to significantly changed circumstances, the court,
at the request of any party, shall determine the consequences of termination, taking into account the need to fairly distribute the expenses incurred in connection with the performance of the contract between the parties.
422.4. Modification of the contract due to a significant change of circumstances shall be
allowed by court decision only in exceptional cases where termination of the contract would be contrary to public interest or would cause the parties damage far exceeding the necessary costs of performing the contract under the modified terms.
Article 423. Procedure for modification and termination of a contract
423.1. An agreement on the modification or termination of a contract, unless otherwise
provided by this Code, the contract, or business practices, shall be concluded in the same form as the contract itself.
423.2. A party may submit a claim to the court for modification or termination of a contract
only after receiving the other party’s refusal of the proposal to modify or terminate the contract, or if no response is received within the period specified in the proposal, or, if no period is specified, within thirty days.
Article 424. Consequences of modification and termination of a contract
424.1. When a contract is modified, parties’ obligations shall be maintained in their
modified form.
424.2. When a contract is terminated, the parties’ obligations shall be discharged.
424.3. When a contract is modified or terminated, unless otherwise provided by the parties’
agreement or the nature of the modification, the parties’ obligations shall be deemed modified from the moment the agreement on modification is concluded, and, in the case of judicial modification or termination, from the moment the court decision on the modification or termination shall acquire legal force.
424.4. Unless otherwise provided by this Code or by the parties’ agreement, the parties
may not demand the return of what they have performed under the obligations until the moment the contract is modified or terminated.

424.5. If the modification or termination of the contract is based on a significant breach by
one of the parties, the other party may claim compensation for the damage caused by the modification or termination of the contract.
Chapter 21
Performance of obligations
Article 425. Good will in the performance of obligations
425.1. In the course of the performance of rights and obligations, each party shall act in
good will, namely at a set time and in due manner, which will comply with the conditions of the obligations and the requirements of this Code, while in absence of such conditions and requirements, pursuant to business practices or other commonly introduced requirements.
425.2. In the course of performance of obligations, the parties shall, in order to create
preconditions for the contract to be carried out, act together and refrain from any actions, which may impede achievement of the contract’s goals or endanger the obligations performance.
Article 426. Place of performance of the obligations
426.1. The place of performance of obligations, if not separately determined by this Code or
by the contract, and if no separate rule arises from the nature of the obligation, shall be determined by the intention of the parties.
426.2. If the place of performance of an obligation is not determined, performance shall take
place at the following locations:
426.2.1. for an obligation to transfer a plot of land, building, structure, or other immovable
property – at the location of the property.
426.2.2. if the obligation consists of delivering a specific item – at the location of the item at
the time the contract was concluded.
426.2.3. for all other obligations – at the debtor’s place of residence. if the debtor is a legal
entity – at its location at the time the obligation relationship arose.
426.3. If an obligation arises at the debtor’s production enterprise, and if the enterprise is
not at the debtor’s place of residence, it shall be performed at the location of the debtor’s enterprise.
426.4. It cannot be concluded that the place of destination is the place of performance of the
obligation solely based on the fact that the debtor has assumed the shipping costs
Article 427. Term for performance of an obligation
427.1. If the term for performance of an obligation has been determined, the creditor may
not demand its performance before that term expires. however, the debtor may perform the obligation prematurely.
427.2. If the term for performance of an obligation has not been determined, or if it cannot
be determined based on the circumstances, the creditor may demand immediate performance of the obligation, and the debtor is obliged to perform it within a reasonable period.

427.3. If the obligation specifies the date of performance or a period during which it should
be performed, or allows such determination, the obligation should be performed on that date or at any time within that period.
427.4. An obligation that has not been performed within a reasonable period, as well as an
obligation for which the term of performance is defined by the moment of demand, should be performed by the debtor within seven days from the date the creditor makes a demand for performance, unless the Code, the terms of the obligation, business practices, or the nature of the obligation require performance within another period.
427.5. If the performance of an obligation depends on the occurrence of a certain condition,
the obligation should be performed from the day that condition occurs.
Article 428. Early performance of an obligation
428.1. Unless the creditor refuses to accept performance for a valid reason, the debtor may
perform the obligation before the due date.
428.2. In cases where the obligation is connected with the entrepreneurial activities of the
parties, early performance of the obligation shall be permitted only if the possibility of early performance is provided for by this Code or by the terms of the obligation, or if it arises from business practices or the nature of the obligation.
428.3. If the time of performance is specified, it shall be presumed, in case of doubt, that the
creditor may not demand performance before that time, but the debtor may perform the obligation earlier.
428.4. If a period for performance has been set in favor of the debtor, and the debtor
becomes insolvent, reduces the agreed security, or fails to provide such security at all, the creditor may demand immediate performance, unless otherwise provided by law or by the contract
Article 429. Determination of the performance of obligations terms – deleted.
Article 430. Refusal to perform an obligation
430.1. Unless otherwise provided by this Code, unilateral refusal to perform an obligation
or unilateral modification of its terms shall not permitted.
430.2. In cases where the obligation is connected with the entrepreneurial activities of the
parties, unilateral refusal to perform the obligation or unilateral modification of its terms shall be permitted in cases provided for by the contract, unless otherwise arises from this Code or from the nature of the obligation.
430.3. Deleted.
430.4. In electronic commerce, refusal to perform an obligation shall be permitted in
accordance with the legislation of the Republic of Azerbaijan on electronic commerce.
Article 431. Performance of an obligation by a third party
431.1. The debtor should personally perform the obligation in cases where performance
depends on debtor’s own actions, or when such a requirement arises from this Code, the contract, or the nature of the obligation. In all other cases, the obligation may be performed by a

third party on behalf of the debtor, and the debtor’s consent shall not be required. In this case, under the Law of the Republic of Azerbaijan ‘On Banks,’ no modification to the contract concluded between the creditor and the bank shall be required.
431.2. The creditor may refuse to accept performance offered by a third party if the debtor
objects to such performance.
431.3. If the creditor enforces collection against property belonging to the debtor, any
person whose rights to that property are endangered by such enforcement may satisfy the creditor. When the third party satisfies the creditor, the creditor’s claim rights shall be transferred to that person. The transfer of the claim should not cause any loss to the creditor.
Article 432. Performance of an obligation in parts
432.1. If the creditor agrees, the debtor may perform the obligation in parts (performance of
the obligation in parts).
432.2. Unless otherwise provided by this Code, by the terms of the obligation, or by the
nature of the obligation, the creditor may refuse to accept performance of the obligation in parts.
432.3. If a debtor is obliged to perform several obligations of the same type to a creditor,
and the debtor’s performances are insufficient to discharge all such obligations, the obligation selected by the debtor shall be satisfied first. If the debtor does not specify which obligation is to be satisfied, then among the obligations whose maturity has arrived, the obligation secured to a lesser extent with the creditor shall be paid first. of obligations with equal security, the one more burdensome to the debtor shall be paid first. if obligations are equally burdensome, the older obligation shall be paid first. and if obligations have the same maturity, all of them shall be discharged simultaneously.
432.4. If, in addition to the principal obligation, the debtor should also pay interest and
expenses, and the performance is insufficient to cover the total debt, the payment shall first be applied to expenses, then to interest, and finally to the principal debt. Any other order of allocation determined by the debtor shall be invalid.
Article 433. Performance of an obligation to an authorized person
433.1. The debtor should perform the obligation to the creditor or to the person authorized
by law or by a court decision to receive performance.
433.2. If performance of the obligation is accepted by an unauthorized person, the
obligation shall be deemed performed only if the creditor consents to or derives a benefit from such performance.
433.3. At the time of performance, the debtor may require proof that the performance is
being accepted by the creditor or by a duly authorized person, and the debtor bears the risk of any consequences resulting from failure to make such a demand.
Article 434. Alternative obligation
434.1. When one of several obligations should be performed (an alternative obligation), the
right of choice belongs to the debtor, unless otherwise provided by the contract, this Code, or the nature of the obligation. If the right of choice belongs to the creditor, the debtor may require

the creditor to make the choice within a reasonable period. If the creditor fails to choose within that period, the right of choice shall pass to the debtor after the period expires.
434.2. If the debtor has the right to refuse to perform one of the two acts to be performed,
the obligation to perform the other act shall remain in force.
434.3. The selection of an alternative obligation is carried out by notifying the other party or
through the performance of the obligation. The obligation so selected shall be deemed, from the outset, as an obligation to be performed.
434.4. The provisions of Articles 434.1, 434.2, and 434.3 of this Code also apply in cases
where the subject of choice consists of more than two obligations to be performed.
Article 435. Creditor’s right to accept a different performance
The creditor shall have the right to accept a performance different from that provided for in the contract, but is not obliged to do so. This rule shall appliy even if the alternative performance has a higher value.
Article 436. Quality of the performance of an obligation
If the quality of performance is not specifically defined in the contract, the debtor should perform at least work of average quality and deliver goods of average quality.
Article 437. Performance of an obligation when the subject of the contract is an
individually specified item
437.1. If the subject of the contract is an individually specified item, the creditor shall not be
obliged to accept another item, even if its value is higher.
437.2. If the debtor is obliged to deliver an individually specified item, he should deliver
that item of the same type and average quality. If the debtor has done everything necessary, within his control, for the delivery of that item, his obligation shall be limited to that item.
Article 438. Performance of an obligation when the subject of the contract is a generic
item
If the subject of the contract is a replaceable (generic) item, the debtor shall be always obliged to perform the obligation.
Article 439. Performance of monetary obligations
439.1. A monetary obligation should be expressed in manats. If one of the parties is a
foreign individual or legal person, the parties may, unless prohibited by law, determine the monetary obligation in foreign currency.
439.2. If a monetary obligation denominated in foreign currency is to be performed in the
Republic of Azerbaijan, it shall be paid in manats, unless it is expressly agreed that payment should be made in foreign currency. Recalculation shall be made at the exchange rate of the place of payment at the time of payment.

439.3. When interest is to be accrued on a debt under law or contract, unless otherwise
established by this Code or the contract, such interest shall be calculated at the official refinancing rate determined by the Central Bank of the Republic of Azerbaijan plus two percentage points, but not less than five percent per annum.
439.4. Money paid without an obligation to do so may be reclaimed in accordance with the
rules governing unjust enrichment.
439.5. If there is doubt about the place of performance of a monetary obligation, the
obligation shall be performed at the creditor’s location (the place of residence of an individual or the place of business of a legal entity).
439.6. If, at the place or in the country where payment is to be made, the creditor has a bank
account intended for money transfers, the debtor may fulfill the monetary obligation by transferring the amount to that account, unless the creditor objects.
439.7. If, before the due date for payment, the value (exchange rate) of the currency unit
increases or decreases, or the currency changes, the debtor should make payment at the exchange rate applicable at the time the obligation arose, unless otherwise provided by this Code or the contract. In the event of a currency change, the exchange rate between the old and new currency units on the day of the change shall form the basis of the conversion.
Article 440. Priority in payment of monetary obligations
440.1. In the event the debtor is subject to several performances in favor of the creditor,
resulting from different obligations and the performance made is not enough to repay all the debts, then the debtor shall repay the obligation chosen at performance, while in absence thereof, the repaid debt shall the first due payable.
440.2. If multiple debts become due at the same time, the debt that is more burdensome for
the debtor shall be paid first.
440.3. If the debts are equally burdensome, the debt that is less secured shall be paid first.
440.4. If the payment is insufficient to cover all debts that have fallen due, the payment
shall first be applied to court costs, then to the principal debt, and finally to interest..
Article 441. Reciprocal performance of obligations
441.1. When the performance of one party’s obligation is conditional on the other party
performing its obligation under the contract, this shall constitute reciprocal performance.
441.2. If the obligated party fails to perform the obligation stipulated in the contract, or it
becomes evident that such performance will not occur within the specified time, the party obliged to perform reciprocally may suspend its own performance or refuse to perform and claim compensation for the resulting damage.
441.3. If the obligation stipulated in the contract is not fully performed, the party obliged to
perform reciprocally may suspend its own performance or refuse to perform to the extent that the other party has failed to perform.
441.4. If reciprocal performance is carried out despite the other party’s failure to perform its
contractual obligation, the other party should still perform its obligation.
441.5. The provisions of Articles 441.2–441.4 of this Code shall apply unless the contract
provides otherwise.

Chapter 22
Non-performance of obligations
Article 442. Definition of non-performance of obligations
Non-performance of obligation shall mean its violation or improper performance (untimely performance, performance with the breach of other terms and conditions, certain defects in goods, works and services, or performance with the violation of other terms of the obligation).
Article 443. Compensation for damages caused by non-performance
443.1. The debtor, who fails to perform obligations, shall be subject to compensate damages
caused to the creditor. Such procedure shall not apply if the debtor is not liable for the violation of the obligation.
443.2. Damages shall be determined in accordance with the rules, envisaged by Article 21
hereof.
443.3. If this Code or the contract does not provide otherwise, when determining damages,
the prices existing on the day the debtor voluntarily fulfills the creditor’s claim at the place where the obligation was to be performed shall be considered. if the claim is not voluntarily fulfilled, the prices existing on the day the court issues its decision shall be considered.
443.4. When determining lost profits, the measures taken by the creditor to obtain them
and the preparatory work carried out for this purpose shall be taken into consideration.
443.5. If the debtor delays performance, the creditor may set a reasonable time period for
the fulfillment of the obligation. If the debtor still fails to perform within that period, the creditor may demand compensation for damages instead of performance of the obligation.
443.6. If it is evident that setting an additional time period would yield no result, or if there
are special circumstances justifying the immediate exercise of the right to demand compensation for damages, taking into account the interests of both parties, then setting an additional time period shall not be required.
443.7. Unless otherwise provided in the obligation or arising therefrom, the debtor shall be
obliged to compensate only for damage caused by intentional or negligent acts.
443.8. An advance agreement between the parties releasing the debtor from liability for
damages arising from intentional non-performance of the obligation shall not be permitted.
443.9. The debtor shall be liable to the same extent as for his own fault for the acts of his
legal representative and for those of other persons whose services he uses to perform his obligations.
443.10. If the debtor is required to obtain the subject matter of performance from another
person and fails to do so, he shall be liable for non-performance, unless otherwise provided by the contract.
Article 444. Adjusting contracts to changed circumstancies – deleted.
Article 445. Delay in performance by the debtor

445.1. A debtor who has delayed performance shall be liable to the creditor for the damage
caused by the delay, as well as for the consequences of any accidental impossibility of performance that occurs during the delay.
445.2. The following situations shall be considered a delay in performance by the debtor:
445.2.1. failure to perform the obligation within the period established for its performance.
445.2.2. failure to perform the obligation after the creditor’s reminder made before the
expiration of the performance period.
445.3. If the debtor fails to perform the obligation after the performance period expires
despite the creditor’s reminder, the debtor shall be deemed to have delayed performance upon such reminder. Filing a claim for performance of the obligation or delivering a written demand for performance shall be considered equivalent to a reminder.
445.4. When a specific calendar date is set for performance, if the debtor fails to perform the
obligation by the specified time, the debtor shall be deemed to have delayed performance without the need for any reminder. If the obligation is terminated before performance, and if the performance period has been set and can be calculated from the date of termination according to the calendar, the same rule shall apply.
445.5. If the obligation cannot be performed due to circumstances that have arisen without
the debtor’s fault, this shall not be deemed a delay.
445.6. Unless the debtor proves that the damage would have occurred even if the obligation
had been performed on time, the debtor shall also be liable for accidental events.
445.7. Unless otherwise provided by this Code or by contract, when the debtor delays payment of a
monetary amount, the creditor may demand payment of an annual five percent interest on the delayed amount for the period of delay.
445.8. If, as a result of the debtor’s delay in performance, the creditor loses interest in the
performance, he may refuse to accept performance and demand compensation for damages. As long as performance cannot be effected due to the creditor’s own delay, the debtor shall not be deemed to have delayed performance.
445.9. When the debtor delays performance, the creditor may grant an additional period for
the fulfillment of the obligation. If the debtor performs the obligation within this additional period, the debtor shall no longer be considered to have delayed performance.
Article 446. Delay of performance by the creditor
446.1. A creditor shall be deemed to have delayed performance if he refuses to accept
performance that is due and has been offered to him, or if he fails to take the actions that the debtor reasonably expects from him in order to perform the obligation.
446.2. Delay in performance by the creditor gives the debtor the right to claim
compensation for damages caused by such delay, unless the creditor proves that the delay occurred due to circumstances for which neither he nor the persons authorized to accept performance are responsible.
446.3. In the case of a monetary obligation, the debtor shall not be required to pay interest
for the period during which the creditor delays performance.
446.4. While the creditor delays performance, the debtor shall be liable for non￾performance of the obligation only if performance becomes impossible due to the debtor’s intent
or gross negligence.

446.5. During the period of the creditor’s delay, regardless of the creditor’s fault:
446.5.1. The creditor should reimburse the debtor for any additional expenses incurred in
maintaining the subject matter of the contract.
446.5.2. The risk of accidental loss or damage to the item passes to the creditor.
446.5.3. The creditor loses the right to claim interest on a monetary obligation.
446.6. If the debtor is not in a position, within the time frame set to the creditor, to perform
by the time proposed, then the creditor shall not be deemed as delaying performance
446.7. If the debtor should perform the obligation only after the creditor has fulfilled a
reciprocal obligation, the creditor shall be deemed to have delayed performance only if, without refusing the performance offered, they fail to offer the required reciprocal performance.
446.8. If no time period has been established for the performance of the obligation, or if the
debtor does not have the right to perform before a certain time, the creditor shall not be deemed to have delayed performance merely because he is temporarily unable to accept the performance, except in cases where the debtor has made an offer of performance within a reasonable time prior to that moment.
446.9. If the subject matter of the obligation is an individually specified item, and the
creditor’s delay results from refusing an item of the same kind that was properly offered, the debtor’s duty of performance shall be limited to that offered item, and the risk of its loss or accidental damage shall pass to the creditor.
Article 447. Non-performance of obligations in bilateral contracts
447.1. If one party to a bilateral contract fails to perform the obligations arising from the
contract, the other party may withdraw from the contract after the additional period granted for performance expires without result. If, based on the nature of the breach, no additional period is granted, a notice of breach shall be considered equivalent to granting an additional period. If only part of the obligation has not been performed, the creditor may withdraw from the contract only if he has lost interest in the performance of the remaining part.
447.2. There shall be no need to set an additional period or give notice when:
447.2.1. it is evident that such action would produce no result.
447.2.2. the obligation is not performed within the period specified in the contract, and
under the contract the creditor links the continuation of the relationship to timely performance.
447.2.3. for special reasons and considering the mutual interests of the parties, immediate
termination of the contract is justified.
447.3. Withdrawal from the contract shall not be permitted when:
447.3.1. the breach of obligation is insignificant.
447.3.2. the creditor is wholly or largely responsible for the breach.
447.3.3. prior to or immediately after the withdrawal, the debtor has already asserted or
will assert a counterclaim against the creditor under the contract.
447.4. If it becomes evident that grounds for withdrawal from the contract will arise, the
creditor may withdraw from the contract before the expiration of the performance period.
447.5. The debtor may set a reasonable period for creditor to withdraw from the contract.
447.6. If, under a bilateral contract, the debtor may refuse to perform the obligations
imposed upon him, and the circumstances granting that right arise due to the creditor’s fault,

the debtor shall retain the right to claim the counter-performance. This rule shall not apply if the grounds for counter-performance arise during the creditor’s delay in accepting performance.
447.7. Upon withdrawal from the contract, the creditor may demand compensation for
damages caused by the non-performance of the contract. This rule shall not apply if the grounds for withdrawal did not arise due to the debtor’s fault.
Chapter 23
Liability for non-performance of the obligations
Article 448. Debtor’s liability for non-performance of the obligations
448.1. The debtor shall be liable for all the events of non-performance of the obligations,
entering the extent of his risks, if nothing otherwise is envisaged by this Code.
448.2. The debtor shall be liable for every violation of the obligation (action or inaction).
Any advance indemnification for a fault, willful misconduct, or gross negligence, is prohibited.
448.3. The debtor shall be liable for the action or inaction of his lawful representatives and
persons, whose services he uses for complete or partial performance of his obligation, to the same extent as for his own action or inaction.
448.4. The debtor shall not be liable for the violation of the obligation, if he proves that the
violation was caused by the circumstances beyond his control and that he was not able to take account thereof at the time of entering the contract or wait until he can exclude or eliminate the said circumstance and the consequences thereof. If the debtor knows or is supposed to know of the obstacle, then he is obliged to notify the creditor immediately of the said obstacle and of its influence over the ability to perform. If the creditor did not receive the immediate notification, then the debtor shall be liable for the damages caused thereto in connection with the failure to receive the timely notification.
Article 449. Liability for non-performance of the monetary obligations
449.1. In the event someone’s monetary funds are utilized and are illegally not returned, or
in the event of any evasion from return thereof, or other delay of repayment thereof, or groundless acquisition or accumulation of funds, interest is due payable on the amounts of such funds. The amount of interest shall be determined by the bank as of the date of the monetary obligation performance or the relevant part thereof, unless otherwise established by law or contract. In case of the debt collection under a court procedure, the creditor’s claim can be satisfied by the court on the basis of the bank rate as of the date of the court’s award.
449.2. The bank refinancing rate shall be determined by the Central Bank of Republic of
Azerbaijan.
449.3. In the event the losses caused to the creditor, resulting from the lawless utilization of
his funds, exceed the amount of interest due payable to him in accordance with Article 449.1 hereof, the creditor may demand compensation from the debtor to the extent of the exceeding
part of the said amount.

449.4. The interest for the utilization of someone’s monetary funds shall be deducted until
the date of the final repayment of the said amount to the creditor unless this Code or contract envisages any shorter term for the calculation of interest.
Article 450. Performance of obligation in kind
450.1. In the event of non-performance of the obligation in due manner, compensation of
the forfeit and losses shall not release the debtor from performing the obligation in kind, if nothing otherwise is set forth in this Code or the contract.
450.2. In the event of non-performance of the obligation, compensation of the forfeit and
losses for the obligation thereof shall release the debtor from performing the obligation in kind if nothing otherwise is set forth in this Code or the contract.
450.3. In the event the creditor denies to accept performance due to the loss of interest
thereto resulting from a delay, as well as the payment of the forfeit, determined as compensation, shall release the debtor from performing the obligation in kind.
Article 451. Performance of obligation at the expense of the debtor
In the event of the debtor’s non-performance of the obligation to prepare and transfer property to the ownership or use of the creditor, or performance of a certain work for him, or performance of certain services for him, the creditor, if nothing otherwise results from this Code, the agreement or the heart of the obligation, may assign obligation performance for a reasonable payment and within a reasonable time, to third parties, or perform it on his own, or demand compensation of the necessary expenses and other losses incurred from the debtor.
Article 452. Consequences of non-performance of the obligation to deliver an
individually specified item
452.1. If the obligation to deliver an individually specified item into the ownership or
compensated use of the creditor is not fulfilled, the creditor may demand that the property be taken from the debtor and delivered to them under the terms provided in the obligation. This right ceases if the property has been transferred to a third party under ownership rights. If the property has not yet been delivered, priority belongs to the creditor in whose favor the obligation arose earlier. if it is impossible to determine this, priority is given to the creditor who first filed a claim.
452.2. Instead of demanding the delivery of the property that is the subject of the
obligation, the creditor may demand compensation for damages.
Article 453. Subsidiary liability
453.1. Before bringing claims against a person who, under this Code or the terms of the
obligation, bears additional (subsidiary) liability for another person who is the principal debtor, the creditor should first bring a claim against the principal debtor.

453.2. If the principal debtor refuses to satisfy the creditor’s claim or the creditor does not
receive a response to the claim within a reasonable period, the claim may then be brought against the person bearing subsidiary liability.
453.3. If the creditor’s claim against the principal debtor can be satisfied through the offset
of a counterclaim of the principal debtor, the creditor may not demand satisfaction of that claim from the person bearing subsidiary liability.
453.4. The person bearing subsidiary liability should notify the principal debtor before
satisfying the creditor’s claim against them, and if a claim has been brought against that person, they should involve the principal debtor in the proceedings. Otherwise, the principal debtor has the right, in response to a recourse claim by the person bearing subsidiary liability, to assert any objections that they could have raised against the creditor’s claims.
Article 454. Limitation of the extent of liability for obligations
454.1. By law, the right to full compensation for damages may be limited (limited liability)
for certain types of obligations or for obligations related to specific types of activities.
454.2. An agreement limiting the extent of the debtor’s liability under an adhesion contract,
or under another contract in which the creditor is an individual acting as a consumer, shall be void if the extent of liability for that type of obligation or for that type of breach is determined by this Code, and if the agreement was concluded before the occurrence of circumstances giving rise to liability for non-performance or improper performance of the obligation.
Article 455. Special bases of responsibility for breach of liability of person engaging in
entrepreneurship – deleted.
Article 456. Debtor’s liability for the behavior of his employees
The actions undertaken by the debtor’s employees for the performance of the obligation, shall be deemed as actions of the debtor. In the event such actions resulted in non-performance or improper performance of the obligation, then the debtor shall be liable for such employees.
Article 457. Debtor’s liability for the behavior of third parties – deleted.
Article 458. Consequences of breach of an obligation due to the fault of both parties
458.1. If the non-performance or improper performance of an obligation occurs through the
fault of both parties, the court shall appropriately reduce the extent of the debtor’s liability. The court may also reduce the debtor’s liability if the creditor has intentionally or negligently contributed to the increase in the amount of damage resulting from non-performance or improper performance, or has failed to take reasonable measures to mitigate the damage.
458.2. The provisions of Article 458.1 of this Code shall apply correspondingly to cases
where, under this Code or the contract, the debtor is liable for non-performance or improper performance of an obligation regardless of their fault.

Article 459. Duty to restore the initial state
459.1. The person, subject to compensation of losses, shall have to reinstate the initial
situation, which would have been present, if the case causing compensation would have not happened.
459.2. If the injured person has lost or reduced his ability to work as a result of bodily
injury or harm to health, or if his needs have increased, compensation for damages shall be made by paying them a monthly subsistence allowance.
459.3. The injured person may demand advance payment of medical expenses. The same
rule shall apply if it becomes necessary for the injured person to acquire a new profession.
459.4. If there are valid reasons, the injured person may demand compensation instead of
regular subsistence payments.
459.5. If compensation for damages through restoration of the initial state is impossible, or
would require disproportionately large expenses, the creditor may be granted monetary compensation instead.
459.6. It is impermissible to waive, by prior agreement, the right to claim compensation for
damages arising from a breach of obligation.
459.7. When determining the amount of damages, the creditor’s interest in proper
performance of the obligation shall also be taken into account. The place and time of performance of the contract shall likewise be considered when determining the amount of damages.
Chapter 24
Securing the performance of obligations
§ 1. General provisions on securing the performance of obligations
Article 460. Methods of securing the performance of obligations
460.1. The performance of obligations may be secured by pledge, forfeit, retention of the
debtor’s property, warranty, guarantee, earnest money (deposit), and by other methods provided for in this Code or in the contract.
460.2. The invalidity of an agreement on securing the performance of an obligation shall
not entail the invalidity of the principal obligation.
460.3. Unless otherwise provided by this Code, the invalidity of the principal obligation
shall entail the invalidity of the obligation securing it.
Article 461. Substitution of security for performance of an obligation
461.1. A person who has provided security for the performance of an obligation may, with
the creditor’s consent, replace it with another form of security.
461.2. Deleted.

§ 2. Forfeit
Article 462. Definition of a forfeit
462.1. A forfeit (penalty, fine) is a monetary amount determined by law or by contract that
the debtor should pay to the creditor in the event of non- or improper performance of an obligation, including delay in performance. If the obligation consists of refraining from an act, the forfeit shall be charged from the moment the act is committed. When demanding payment of the forfeit, the creditor shall not be required to prove that they have suffered damage.
462.2. If the debtor is not responsible for the non-performance or improper performance of
the obligation, the creditor may not demand payment of the forfeit.
462.3. The parties to a contract may freely determine the amount of the forfeit, and it may
exceed the amount of potential damage.
462.4. If a promise to perform an obligation is deemed invalid under this Code, any
agreement regarding the forfeit for non-performance of that obligation shall also be invalid, even if the parties were aware of the invalidity of the promise.
462.5. If the debtor disputes the payment of the forfeit on the grounds that the obligation
has been fulfilled, the debtor should prove performance, unless the obligation consisted of refraining from an act.
Article 463. Forfeit agreement form
463.1. The agreement on forfeit should be done in writing, irrespective of the form of the
main obligation.
463.2. Failure to comply with the written form requirement shall render the agreement on
the forfeit invalid.
Article 464. Payment of forfeit prescribed by law
464.1. The creditor may demand payment of a forfeit prescribed by law, regardless of
whether the parties’ agreement provides for such payment.
464.2. Unless prohibited by law, the parties may increase the amount of the statutory
forfeit.
Article 465. Payment of penalty for non-performance of an obligation
465.1. If the debtor promises to pay a penalty for non-performance of an obligation, the
creditor may demand payment of the forfeit instead of performance of the contract. Once the creditor declares that they demand payment of the penalty, the right to demand performance of the obligation shall be excluded. If the creditor is entitled to compensation for damages resulting from non-performance, they may claim the penalty amount as the minimum measure of damages. This shall not exclude the creditor’s right to claim additional damages.
465.2. If the debtor promises to pay a penalty for improper performance of an obligation,
including delay in performance, the creditor may demand both payment of the penalty and performance of the obligation. If the creditor is entitled to compensation for damages resulting

from improper performance, they may also claim such compensation. If the creditor has accepted performance, they may demand payment of the penalty only if they expressly reserved this right at the time of acceptance.
465.3. If the debtor promises to perform another act instead of paying a monetary penalty,
the provisions of Articles 465.1 and 465.2 of this Code shall apply accordingly.
Article 466. Damage and forfeit
466.1. If a forfeit has been established for non-performance or improper performance of an
obligation, compensation shall be paid for the part of the damage not covered by the forfeit.
466.2. The law or contract may stipulate the following:
466.2.1. only the forfeit, but not damages, may be recovered.
466.2.2. damages exceeding the forfeit may be recovered in full.
466.2.3. at the creditor’s discretion, either the forfeit or the damages may be recovered.
466.3. Where limited liability has been established for non-performance or improper
performance of an obligation, compensation for damages not covered by the forfeit, exceeding it, or payable instead of it, may be recovered only within the limits of that liability.
Article 467. Reduction of forfeit by the court
Taking into account the circumstances of the case, the court may reduce a disproportionately high forfeit. When determining proportionality, both the creditor’s property interests and all legitimate interests shall be considered. Once the forfeit has been paid, its amount cannot be reduced. § 3. Retention/withholding
Article 468. Definition and grounds of retention
468.1. If property to be delivered to the debtor or to a person designated by the debtor is in
the possession of the creditor, and the debtor fails to fulfill their obligation to pay for that property or to compensate the creditor for related expenses or other damages in due time, the creditor shall have the right to retain the property until the corresponding obligation is fulfilled.
468.2. Even when the property or related expenses and damages are not directly connected,
claims arising from obligations between parties acting as entrepreneurs may also be secured by retention of the property.
468.3. The creditor may retain property in their possession even if a third party has
acquired rights to the property after it entered the creditor’s possession.
468.4. The provisions of this Article shall apply unless otherwise agreed by the parties in
the contract.
Article 469. Satisfaction of claims from retained property
The creditor retaining the property shall have their claims satisfied from the value of the property in the same amount and manner as claims secured by a pledge.

§ 4. Warranty/suretyship
Article 470. Warranty agreement
470.1. Under a warranty agreement, the surety assumes responsibility before the creditor
for the full or partial performance of another person’s obligation.
470.2. A warranty agreement may also be concluded to secure an obligation that will arise
in the future.
Article 471. Warranty agreement form
A warranty agreement should be concluded in writing. Failure to comply with the written form requirement shall render the warranty agreement invalid.
Article 472. Guarantor’s liability
472.1. If the debtor fails to perform, or improperly performs, an obligation secured by
warranty, the guarantor and the debtor shall be jointly liable to the creditor, unless this Code or the warranty agreement provides that the guarantor bears subsidiary liability.
472.2. Unless otherwise provided in the warranty agreement, the guarantor shall be liable
to the creditor to the same extent as the debtor, including payment of interest, court expenses related to debt recovery, and compensation for any other damages incurred by the creditor due to non-performance or improper performance by the debtor.
472.3. Co-guarantors shall be jointly liable to the creditor unless otherwise stipulated in the
warranty agreement.
472.4. If the warranty agreement provides that the guarantor bears subsidiary liability for the
secured obligation, the guarantor’s liability shall be suspended for the period between the debtor’s death and the acceptance of the inheritance.
Article 473. Guarantor’s fees
Guarantor shall be entitled to fees for the services provided to the debtor, provided nothing otherwise is envisaged by the warranty agreement.
Article 474. The Guarantor’s right to object against the creditor’s demand
474.1. Unless otherwise stipulated in the warranty agreement, the guarantor may raise
against the creditor any defenses that the debtor could have raised. The guarantor shall retain this right even if the debtor has waived such defenses or has acknowledged the debt.
474.2. Before satisfying the creditor’s demand, the guarantor should notify the debtor
thereof, and if a claim is brought against the guarantor, he should invite the debtor to participate in the proceedings.
474.3. If the guarantor fails to fulfill the obligations set out in Article 474.2 of this Code, the
debtor may raise against his recourse claim any defenses that the debtor could have raised against the creditor.

Article 475. Rights of the guarantor who has performed the obligation
475.1. When the guarantor performs the obligation, the creditor’s rights under that
obligation, as well as the rights held by the creditor as a pledgee, shall be transferred to the guarantor to the extent of the payment made. The guarantor may also demand from the debtor payment of interest on the amount paid to the creditor and compensation for other damages incurred in connection with assuming the debtor’s responsibility.
475.2. After the guarantor has performed the obligation, the creditor shall be obliged to
provide him with documents confirming the claim against the debtor and transfer to him the rights securing that claim.
475.3. The rules established in this Article shall apply unless otherwise provided by this
Code, the agreement between the guarantor and the debtor, or the nature of their relationship.
Article 476. Notification of the guarantor of the debtor’s performance of the obligation
A debtor who has performed an obligation secured by warranty should immediately notify the guarantor of such performance.
Article 477. Termination of warranty
477.0. The warranty shall be terminated when:
477.0.1. when the obligation secured by the warranty is terminated, as well as that
obligation is modified without the guarantor’s consent and such modification increases the guarantor’s liability or leads to other adverse consequences for the warranty.
477.0.2. the debt under the obligation secured by the warranty is transferred to another
person, unless the guarantor has agreed with the creditor to be liable for the new debtor.
477.0.3. the creditor refuses to accept proper performance offered by the debtor or the
guarantor.
477.0.4. when the term specified in the suretyship agreement expires. If no such term is
specified, the warranty shall terminate if the creditor fails to bring a claim against the guarantor within one year from the date the obligation secured by the warranty becomes due. If the time for performance of the principal obligation is not specified, cannot be determined, or is defined as being upon demand, the warranty shall terminate if the creditor fails to bring a claim against the guarantor within two years from the date the warranty agreement was concluded. § 5. Guarantee
Article 478. Definition of a guarantee
According to the guarantee, the guarantor (a bank, another credit institution, or an insurance organization) provides a written commitment that, at the request of another person (the principal), it will pay the principal’s creditor (beneficiary) the amount of money specified, upon receipt of the beneficiary’s written demand for payment in accordance with the terms of the guarantee obligation.

Article 479. Securing principal’s liability by the guarantee
479.1. Guarantee ensures the proper performance by the principal of his obligation (the
main obligation) to the beneficiary.
479.2. For the issuance of the guarantee, the principal shall pay the guarantor an agreed fee.
Article 480. Independence of the guarantee from the main obligation
The guarantor’s obligation to the beneficiary under the guarantee is an independent obligation and is not dependent on the main obligation for the performance of which the guarantee was issued, even if the guarantee refers to that obligation.
Article 481. Irrevocability of the guarantee
Unless otherwise provided in the guarantee, it cannot be revoked by the guarantor.
Article 482. Non-transferability of rights under the guarantee
Unless otherwise provided in the guarantee, the right of the beneficiary to make a demand against the guarantor cannot be transferred to another person.
Article 483. Entry into force of the guarantee
Unless otherwise provided in the guarantee, it becomes effective from the date it is issued.
Article 484. Submission of a demand under the guarantee
484.1. The beneficiary’s demand for payment under the guarantee should be submitted in
written form to the guarantor, accompanied by the documents specified in the guarantee. In the demand or its attachments, the beneficiary should indicate how the principal has breached the main obligation for which the guarantee was issued.
484.2. The beneficiary’s demand should be submitted to the guarantor before the expiry of
the period specified in the guarantee.
Article 485. Duties of the guarantor when considering the beneficiary’s demand
485.1. Upon receiving the beneficiary’s demand, the guarantor should immediately inform
the principal and provide him with a copy of the demand and all attached documents.
485.2. The guarantor should review the beneficiary’s demand and attached documents
within the period specified in the guarantee, or, if not specified, within a reasonable time, and exercise due diligence to determine whether the demand and documents comply with the terms of the guarantee.
Article 486. Refusal by the guarantor to satisfy the beneficiary’s demand

486.1. If the beneficiary’s demand or attached documents do not comply with the terms of
the guarantee, or if they are submitted after the expiry of the period specified in the guarantee, the guarantor shall refuse to make payment. The guarantor should immediately inform the beneficiary of the refusal.
486.2. If, before payment of beneficiary’s demand, the guarantor learns that the main
obligation secured by the guarantee has been fully or partially performed, otherwise terminated, or is invalid, the guarantor should promptly inform the beneficiary and principal. After giving such notice, if the beneficiary resubmits the demand, the guarantor should make the payment.
Article 487. Limits of the guarantor’s obligation
487.1. The guarantor’s obligation to the beneficiary shall be limited to the amount specified
in the guarantee.
487.2. Unless otherwise provided in the guarantee, the guarantor’s liability to the
beneficiary for failure to perform or improper performance of the guarantee shall not be limited to the guaranteed amount.
Article 488. Termination of the guarantee
488.1. Guarantor’s obligation to the beneficiary under the guarantee shall terminate when:
488.1.1. the guaranteed amount is paid to the beneficiary.
488.1.2. the period specified in the guarantee expires.
488.1.3. the beneficiary waives his rights under the guarantee and returns it to the
guarantor.
488.1.4. the beneficiary waives his rights under the guarantee by submitting a written
statement releasing the guarantor from his obligation.
488.2. Termination of the guarantor’s obligation in the cases specified in Articles 488.1.1,
488.1.2, and 488.1.4 shall not depend on whether the guarantee has been returned to the guarantor.
488.3. Upon learning that the guarantee has been terminated, the guarantor should
immediately inform the principal.
Article 489. Guarantor’s rights of recourse against the principal
489.1. The guarantor’s right to demand reimbursement from the principal for the amounts
paid to the beneficiary under the guarantee shall be determined by the agreement between the guarantor and the principal regarding the issuance of the guarantee.
489.2. Unless otherwise provided in the agreement between the guarantor and the
principal, the guarantor may not demand reimbursement from the principal for amounts paid to beneficiary in violation of guarantee terms or due to guarantor’s own breach of obligations to the beneficiary.
Article 490. Debtor’s guarantee – deleted.

§ 6. Earnest money/deposit
Article 491. Definition of earnest money/deposit
491.1. A deposit is a sum of money given by one of the parties, at the expense of payments
to be made under the contract, to confirm conclusion and ensure performance of the contract.
491.2. Regardless of the amount of the deposit, the deposit agreement should be made in
writomg. If the deposit agreement concerns the conclusion of a contract related to the disposal of immovable property, it should be notarized. When notarizing the deposit agreement related to the conclusion of a contract for the disposal of immovable property, the rules set forth in Article 225.6 of this Code shall apply to the recipient of the deposit.
491.3. If there is doubt as to whether a sum paid from the payments under a contract
constitutes a deposit, including cases where such doubt arises due to non-compliance with the rule established in Article 491.2 of this Code, that sum shall, unless proven otherwise, be deemed as an advance payment
Article 492. Consequences of termination or non-performance of an obligation secured
by deposit
492.1. If, before the performance of the obligation has begun, the obligation is terminated
by mutual agreement of the parties or due to impossibility of performance, the deposit shall be returned.
492.2. If the party who gave the deposit is responsible for the non-performance of the
contract, the deposit shall remain with the other party. If the party who received the deposit is responsible for the non-performance of the contract, that party shall pay the other party twice the amount of the deposit. In addition, unless otherwise provided by the contract, the party responsible for the non-performance of the contract shall, taking into account the amount of the deposit, compensate the other party for any damages caused.
Chapter 25
Creditors’ or debtors’ dominance in the obligation
Article 493. Joint creditors and joint authorities
493.1. If several persons are authorized to demand performance the way such complete
performance can be demanded by each of the parties, and if only a single performance is placed on the debtor, they shall be deemed as joint creditors.
493.2. Joint authorities shall result on the basis of a contract, a law or indivisibility of the
subject of obligation.
Article 494. Performance of the obligation to any creditor
If one of the creditors did not object to the debtor with a demand envisaged by Article 493.1 hereof, the debtor at his discretion shall be entitled to perform the obligation to any of the creditors.

Article 495. Performance of the obligation to one of the creditors
Complete performance of the obligation to one of the joint creditors shall release the debtor from the obligation to the rest of the creditors.
Article 496. Consequences of the withdrawal of one of the joint creditors
If one of the joint creditors withdraws his demand with respect to the debtor, the debtor shall be released from payment of the share due payable to such creditor.
Article 497. Inadmissibility to use facts relating to anther creditor
The debtor may not use facts relating to other creditor, with respect to one of the creditors.
Article 498. Rights of joint creditor’s successors
If a joint creditor has several successors, the part relevant to their inherited share shall be passed to each of them.
Article 499. Obligations of a joint creditor before other joint creditors
499.1. The creditor receiving complete performance from the debtor shall be obliged to pay
other joint creditors their due shares.
499.2. Joint creditors shall have equal shares in their mutual relations if nothing otherwise
is established between the joint creditors.
Article 500. Joint debtors and joint obligations
500.1. If performance of the obligation is placed on several persons, each of them being
obliged to participate in the complete performance of the obligation, and the creditor having the right to demand only a single performance, such persons shall be deemed as joint debtors.
500.2. A joint obligation results on the basis of an agreement, a law or indivisibility of the
subject of obligation.
Article 501. Creditor’s right to demand performance from any debtor
The creditor can at his own discretion demand performance from a debtor in full or in parts. Obligations of the rest of the debtors shall remain in force until the complete performance of the obligation.
Article 502. Joint demand of the joint debtor with respect to the creditor
The joint debtor shall have the right to put forward against the creditor any demands, resulting from the essence of the contract or the demands, to which only he has the right, or the demands which are common to all joint debtors.

Article 503. Consequences of complete performance of the obligation by one of the
debtors
Complete performance of the obligation by one of the debtors shall release the remaining debtors from performance. The same rule remains in force with respect to the substitution made by the debtor with respect to the creditor.
Article 504. Inadmissibility to use facts relating to another joint debtor
Facts relating to one of the joint debtors can be used only with respect to such person, if nothing otherwise results from the essence of relations under the obligation.
Article 505. Claim to one of the joint debtors
A claim to one of the joint debtors shall not deprive the creditor of the right to claim to the rest of the debtors.
Article 506. Consequences of the performance acceptance delay
506.1. Consequences of the performance acceptance delay by the creditor from one of the
joint debtors shall remain in force with respect to the rest of the joint debtors.
506.2. Consequences of the non-observance of the performance terms by one of the joint
debtors may not be used with respect to the rest of the joint debtors.
Article 507. Rights of the joint debtors’ successors
If one of the joint debtors has several successors, each of them shall be obliged to perform the claim in compliance with his inherited share. In the event of indivisibility of the claim, this rule shall not apply.
Article 508. Creditor’s claim consolidation with the debt of one of the joint debtors
If the creditor’s claim is consolidated with the debt of one of the joint debtors, the obligation of the rest of the debtors shall be terminated to the extent of the share of such debtor.
Article 509. Regressive claim right in the event of complete performance of the
obligation by one of the debtors
509.1. The debtor, who has performed the joint obligation, shall have the regressive claim
right, net of his share, relevant to the shares of the joint debtors if nothing otherwise is stipulated in this Code or in the contract.
509.2. In the event the extent of liability of the debtors can not be determined they will be
liable to each other equally.

509.3. When a joint debtor performs a joint obligation to the creditor, the creditor’s claim
against the other debtors, as well as the creditor’s rights in relation to the other debtors under the procedure established by Article 196 of this Code, are transferred to that joint debtor.
Article 510. Consequences of the joint debtor’s insolvency
If one of the debtors is insolvent, then his share shall be proportionately distributed among other solvent debtors.
Article 511. Joint debtor’s compensation
If a joint debtor has benefited from the joint obligation, another joint debtor who has not derived such benefit may demand security from the benefiting joint debtor to ensure the performance of his own obligation.
Article 512. Consequences of the term expiration
A suspension or a termination of the term with respect to one of the joint debtors shall not have force with respect to other debtors.
Chapter 26
Transfer of obligations
§ 1. Assigment of claims – deleted.
§ 2. Transfer of obligations – the name of the paragraph is deleted.
Article 522. Grounds and procedures for the obligations transfer
522.1. Based on an agreement with the creditor, an obligation may be transferred to a third
party. as a result, that third party replaces the original debtor.
522.2. If the debtor and a third party reach an agreement on the transfer of the obligation,
such transfer shall be valid only with the consent of the creditor.
522.3. Consent may be given only if the creditor has been informed of the transfer of the
obligation by the debtor or the third party. Until such consent is given, the parties may amend or terminate the agreement. If consent is refused, the obligation shall not be deemed transferred.
522.4. If the debtor or the third party requests the creditor to declare his consent within a
specified period, such consent should be declared before that period expires. if not, it shall be considered that the creditor has refused to give consent.
522.5. Until the creditor gives consent, the person who has assumed the obligation, in case
of doubt, shall be obliged to secure the creditor’s interests in relation to the debtor in a timely manner. The same rule shall apply if the creditor refuses to give consent.
Article 523. Transfer of obligations by the alienator of a land plot

523.1. If the acquirer of a land plot, under an agreement with the alienator, assumes the
alienator’s obligation concerning a mortgage on the land plot, the creditor may give consent to the transfer of the obligation only if the alienator has sent a notice to the creditor regarding this matter.
523.2. If six months have passed since the receipt of the notice, the creditor shall be deemed
to have given consent unless the creditor has refused during that period. The alienator may send such notice only if the acquirer has registered ownership of the immovable property in the state register.
523.3. The notice shall be made in writing and shall indicate that the person assuming the
obligation replaces the former debtor, provided that the creditor does not refuse within six months. At the request of the acquirer, the alienator should send the creditor a notice regarding the transfer of obligations. Immediately after consent is given or refused, the alienator shall notify the acquirer accordingly.
Article 524. Objections of the person assuming the obligation
A person who has assumed an obligation may raise against the creditor any objections arising from the legal relationship between the creditor and the former debtor. However, that person may not set off any claims belonging to the former debtor. The person who has assumed the obligation may not raise against the creditor any objections arising from the legal relationship between himself and the former debtor that served as the basis for the transfer of the obligation.
Article 525. Cancellation of the warranty obligation as a result of transfer of rge
collateral and mortgage right
Waeeanty and collateral rights provided as security for a claim shall be terminated as a result of the transfer of the obligation. If a mortgage exists to secure the claim, the same consequences shall apply as when the creditor releases the mortgage. These provisions shall not apply if the warranty or the person who owns the encumbered property at the time of the transfer of the obligation has consented. In the event of bankrupcy, any preferential rights related to the claim may not be exercised with respect to the property of the person who has assumed the obligation
Article 526. Liability of the person who has assumed the obligation
If any person, under a contract, acquires the property of another one, the creditors of that person may, from the moment the contract is concluded, assert against the acquirer their existing claims that had arisen up to that time, even though the liability of the former debtor continues. The liability of the acquirer shall be limited to the assets received and to the claims belonging to him under the contract. The liability of the acquirer may not be excluded or limited by an agreement between him and the former debtor.

Chapter 27
Termination of obligations
Article 527. Grounds for terminating obligations
527.1. An obligation shall be terminated, in whole or in part, by performance, deposit, set￾off, remission of debt, expiration of the term, or on other grounds provided by this Code or by
the contract.
527.2. Termination of an obligation at the request of one of the parties shall be permitted
only in cases provided for by this Code or by the contract.
§ 1. Termination of obligation due to its performance
Article 528. Termination of obligation due to its performance in favor of creditor
An obligation duly performed in favor of creditor (performance) shall be terminated.
Article 529. Acceptance of the obligation performance
529.1. The creditor, accepting performance, shall be obliged at the request of the debtor, to
issue a note thereto, confirming the performance receipt in full or in part.
529.2. A creditor who accepts an act offered as performance of an obligation shall, if not
intending to recognize it as performance, bear the burden of proving that such act does not constitute performance of the obligation owed, or it is incomplete, or it does not correspond to the proper obligation.
529.3. Where the debtor has issued a debt instrument to the creditor as confirmation of the
obligation, the creditor shall, upon acceptance of performance, return such document. If return is not possible, the creditor shall make a corresponding note in the document confirming receipt of performance. A document evidencing full or partial acceptance of performance may be replaced by an inscription on the returned debt instrument. Possession of the debt instrument by the debtor shall, unless proven otherwise, constitute evidence that the obligation has been terminated.
529.4. A document executed in acknowledgment of receipt of the debt, which does not
contain any information regarding interest, shall be deemed to evidence that interest has been paid and that the monetary obligation has been fully terminated.
529.5. Where a debt is paid periodically or in installments, a document acknowledging
payment of the final installment shall, unless proven otherwise, give rise to a presumption that all previous installments have likewise been paid.
529.6. If the creditor is unable to return the debt instrument, the debtor may require the
issuance of an officially certified statement confirming that the obligation has been terminated.
529.7. A document drawn up by the creditor or an authorized person concerning the
performance shall indicate the amount and type of the debt, the name of the debtor or the person performing the payment, and the time and place of performance.

529.8. By agreement of the parties, an obligation may be terminated by payment of
compensation (money, transfer of property, etc.) in lieu of performance. The amount of such compensation, as well as the terms and procedure for its payment, shall be determined by the parties.
Article 530. Payment of expenses for issuance of a document performing performance
530.1. Unless otherwise arises from an agreement between the debtor and the creditor, the
expenses for issuing the document confirming performance shall be borne by the debtor.
530.2. If the creditor changes his place of residence or dies and his heirs reside in another
place, any additional expenses connected with the issuance of the document confirming performance shall be borne by the creditor or his heirs.
Article 531. Termination of an obligation by novation
531.1. An obligation shall be terminated by agreement between the parties whereby the
original obligation existing between the same parties is replaced by another obligation providing for a different subject matter or method of performance (novation).
531.2. Novation shall not be permitted in respect of obligations for compensation of
damage caused to life or health, or for payment of alimonyies.
531.3. Unless otherwise agreed, novation shall terminate any ancillary obligations related to
the original obligation.
§ 2. Termination of an obligation by a deposit
Article 532. Definition of the termination of an obligation by a deposit
532.1. If the creditor delays acceptance of performance or if the creditor’s whereabouts are
unknown, the debtor may deposit the subject matter of performance with the court or a notary for safekeeping. Monetary funds or documentary securities may be deposited into the notary’s deposit account. The debtor shall, without delay, notify the creditor of such deposit.
532.2. By making the deposit, the debtor is released from the obligation to the creditor.
532.3. If the return of the deposited item is excluded, the debtor is discharged from the
obligation, since in such a case the deposit is deemed equivalent to performance rendered to the creditor.
532.4. If the debtor is required to perform only after the creditor has fulfilled his own
obligation, the creditor may make acceptance of the deposited item conditional upon performance of the reciprocal obligation.
Article 533. Delivery of deposited property to the creditor
533.1. The court or the notary shall deliver the deposited property to the creditor. The court
or notary shall appoint a custodian, while the documents shall remain in the custody of the court or notary.

533.2. The deposit shall be effected at the court or notarial office at the place where the
obligation is to be performed. If the debtor makes the deposit elsewhere, he shall compensate the creditor for any damage that may result therefrom.
533.3. If the deposited item has been sent to the court or notary by post, the deposit shall be
deemed effective as of the date the item was handed over to the postal service for dispatch.
Article 534. Item suitable for deposit
534.1. The item should be suitable for storage. Perishables shall not be accepted for storage.
534.2. If the movable property, the subject of the obligation, is perishable, or if its storage
would involve disproportionately high expenses, such property shall not be deemed suitable for deposit. In such case, the debtor may sell the property by auction at the place of performance of the obligation and deposit the proceeds from the sale.
Article 535. Place of storage
Storage shall be carried out at the place of performance of the obligation.
Article 536. Requirement for the creditor to accept the item
The court or the notary shall notify the creditor that the property has been accepted for storage and require the creditor to accept the item.
Article 537. Payment of storage related expenses
All expenses related to storage shall be borne by the creditor.
Article 538. Claim by the debtor for the return of the item deposited for storage
538.1. The debtor may demand the return of the item deposited for storage until it has been
accepted by the creditor, provided that the debtor has not initially waived the right to reclaim it. If the debtor demands the return of the item, the deposit shall be deemed not to have occurred.
538.2. If the creditor refuses to accept the item, or if the period specified in Article 539 of
this Code has expired, the debtor may reclaim the item delivered for storage.
538.3. If the debtor reclaims the item, storage expenses shall be borne by him.
Article 539. Storage period of the object of performance
The court or notary shall keep the object of performance for a period of up to three years. If the creditor fails to accept the item within that period, the debtor shall be notified and required to reclaim the item delivered for storage. If the debtor fails to reclaim it within a reasonable period necessary for retrieval, the item shall be deemed state property. § 3. Termination of obligations by Set-off of Mutual Claims (Set-off)
Article 540. Possibility of set-off of obligations

540.1. If two persons have mutual claims against each other and the time for performance
of those claims has arrived, such claims may be terminated by way of set-off.
540.2. Set-off may also be possible when the time for performance of one of the claims has
not yet arrived, provided that the party entitled to that claim agrees to the set-off. The set-off is effected by notifying the other party. If the notification is conditional or specifies a time limit, it shall be deemed invalid.
Article 541. Set-off in case of assignment of claim
541.1. When a claim is assigned, the debtor may set off his own counterclaim against the
former creditor with the new creditor’s claim.
541.2. Set-off may be made on the condition that the counterclaim arises from a ground
existing at the time when the debtor received notice of the assignment, and the term for performance of the counterclaim has arrived, or no term was set, or it was determined by the moment of demand.
Article 542. Limitation period for set-off of claims
If the limitation period for the claim has not expired by the time when set-off is still possible, the expiration of the limitation period shall not preclude the set-off of obligations.
Article 543. Claims subject to set-off
If the claims subject to set-off do not fully cover each other, only the smaller amount of the claims shall be set off.
Article 544. Set-off of obligations when places of performance differ
Set-off of obligations shall be permissible even when different places of performance are stipulated for the obligations.
Article 545. Cases where set-off of claims is not permissible
545.0. Set-off of obligations shall not be permitted when:
545.0.1. set-off of claims has been previously excluded by agreement.
545.0.2. enforcement may not be levied on the object of the obligation, or the object of the
obligation is a means of subsistence.
545.0.3. the obligation concerns compensation for harm caused to health.
545.0.4. upon the other party’s application, the claim is subject to a limitation period and
such period has expired.
545.0.5. it concerns the deduction of alimonies.
545.0.6. when it is a claim of the Republic of Azerbaijan or a municipality, except in cases
where the counterclaim of the other party is to be paid from the same authority’s funds and the obligation is to be performed in favor of that authority.

545.0.7. in other cases provided by this Code.
§ 4. Termination of obligation by way of debt forgiveness
Article 546. Definition of the debt forgiveness
An obligation shall be terminated by way of the creditor releasing the debtor from the obligation performance (debt forgiveness), provided that such action does not violate the rights of other parties with respect to the creditor’s property.
Article 547. Consequences of the debt forgiveness for other joint debtors
Debt forgiveness to one of the joint debtors shall release other debtors, however a case of the creditor retaining the claim against them is an exclusion. In this case, the creditor may use only one claim with respect to the remaining joint debtors, minus the released debtor’s share.
Article 548. Consequences of the main debtor’s debt forgiveness
548.1. The debt forgiveness to the main debtor shall release the warrantors as well.
548.2. Release of the warrantor from paying the debt shall not release the main debtor from
performing the obligation.
548.3. Release of one of the warrantors from paying the debt shall release other debtors too.
Article 549. Consequences of claims waiver under bilateral agreement
Waiver by one of the parties under a bilateral agreement of its claim shall not result in the termination of the obligation. Such party, prior to the waiver of the other party of its claims, shall have to perform the obligations envisaged by the agreement. § 5. Termination of obligation at the expiration of the term
Article 550. Term for claims
A claim, that is, the right of a person to demand that another person perform or refrain from performing an act, may be terminated upon the expiration of the period.
Article 551. Terms for terminating obligations
551.1. All claims shall lose their effect at the expiration of 10 years (normal term), if nothing
otherwise is envisaged by this Code.
551.2. The claims listed below shall lose their effect at the expiration of 5 years:
551.2.1. claims with respect to rent and lease payments, interest on capital and other
regular payments.
551.2.2. claims with respect to sale of food products or accommodation of visitors.

551.2.3. Claims related to factory construction, sale of goods, transportation, claims of
independent professionals (such as doctors, lawyers, or consultants), as well as claims of employees arising from employment relations.
551.2.4. A claim arising from a court decision shall become invalid after thirty years. This
rule shall apply even if the claim is subject to a shorter limitation period.
Article 552. Commencement of the limitation period for the termination of obligations
552.1. The limitation period shall begin when the time for performance of the claim arrives.
When calculating the period, the day on which it begins shall not be included. If the content of the obligation is inaction, the period shall begin from the moment this obligation is not fulfilled.
552.2. The running of the limitation period shall not begin, or it is suspended when:
552.2.1. a deferment is granted for the performance of the obligation, or when the obligor
has the right to temporarily refuse performance due to other circumstances.
552.2.2. during the last six months of the limitation period, the entitled person shall be
deprived of the opportunity to exercise judicial protection of his right due to suspension of court proceedings. The same rule shall apply if such impossibility arises as a result of force majeure.
552.2.3. the claim concerns the rights and obligations between spouses until the marriage is
dissolved. The same rule shall apply to claims between parents and children until the children reach the age of majority, as well as to claims between a guardian and a ward during the period of guardianship or trusteeship.
552.2.4. the person concerned is of limited or no legal capacity and has no representative,
the limitation period shall not begin until six months after the person loses legal capacity.
552.3. If the running of the limitation period is interrupted, the time elapsed before the
interruption is not counted. a new period begins only after the interruption ends.
Article 553. Interruption of the limitation period for the termination of obligations
553.1. The running of the limitation period is interrupted when:
553.1.1. the obligated person performs the claim in part, through partial payments,
payment of interest, provision of security, or in any other manner.
553.1.2. the entitled person files a claim with the court.
553.2. The interruption of the limitation period shall continue until a court decision on the
claim enters into legal force.
Article 554. Consequences of expiration of the limitation period for the termination of
obligations
554.1. After the expiration of the limitation period, the obligated person shall have the right
to refuse to perform the obligation.
554.2. Even if the obligation is performed not knowing that the period has expired, the
performance made to satisfy a claim that has lost its validity due to expiry may not be reclaimed.
554.3. Together with the principal claim, any ancillary obligations dependent on it also lose
their validity upon expiration of the limitation period.

554.4. The expiry of the limitation period may not be excluded or made more difficult by
agreement between the parties. However, the parties may agree to simplify consequences of the expiration, including shortening the limitation period. § 6. Other grounds for the termination of obligations
Article 555. Termination of the obligation when the debtro and the creditor is one and
the same person
The obligation shall be terminated if the debtor and the creditor is one and the same person.
Article 556. Termination of an obligation due to impossibility of performance
556.1. If performance becomes impossible, that is, when non-performance arises from
circumstances for which neither party is responsible, the obligation shall be terminated. In such a case, the creditor may not demand performance of the obligation from the debtor.
556.2. If performance of the obligation by the debtor becomes impossible due to creditor’s
culpable actions, the creditor may not demand the return of what has been performed under the obligation.
Article 557. Termination of an obligation based on an act of a public or municipal
authority
557.1. If, as a result of an act adopted by a public or municipal authority, the performance
of the obligation becomes wholly or partially impossible, or the term for performance is extended, the obligation shall be terminated in whole or in the corresponding part. In this case, the state or municipality shall act as the respondent in claims related to the damages caused, and the injured parties may claim compensation for losses in accordance with Articles 19 and 22 of this Code.
557.2. If the act of the public or municipal authority that served as the basis for termination
of the obligation is declared invalid in the prescribed manner, the obligation shall be restored, unless otherwise provided by the agreement of the parties or the nature of the obligation, and provided that the creditor’s interest in performance has not ceased.
Article 558. Termination of an obligation due to the debtor’s death
558.1. If performance is impossible without the personal participation of the debtor, the
debtor’s death shall result in the termination of the obligation.
558.2. If performance is intended to be rendered personally to the creditor, the creditor’s
death shall result in the termination of the obligation.
Article 559. Termination of an obligation due to the liquidation of a legal entity

Upon the registration of the liquidation of a legal entity (whether debtor or creditor), its obligations shall be terminated.
Chapter 28
Implementation of civil rights
Article 560. Prohibition of abuse of rights
560.1. Civil rights shall be exercised in accordance with the law. It is inadmissible to
exercise a right solely for the purpose of causing harm to others.
560.2. Abuse of rights shall not be permitted. Agreements and actions based on such abuse
shall be deemed invalid.
560.3. Abuse of rights includes, in particular, the following cases:
560.3.1. exercise of rights that have been acquired unlawfully or in violation of a contract.
560.3.2. exercise of rights by a person who has grossly violated his or her own obligations.
560.3.3. exercise of the right that does not constitute the basis of the personal interest to be
protected.
560.3.4. exercise of the right contrary to previous conduct that another party relied upon
and had reason to rely upon.
560.3.5. abuse of a dominant position in the market or production sector by one or more
commercial legal entities, if such abuse may result in a significant distortion of market conditions for the circulation of goods or the provision of production services, such as:
560.3.5.1. direct or indirect coercion into disproportionate prices or other terms of sale.
560.3.5.2. restriction of production, sales, or technical development to the detriment of
consumers.
560.3.5.3. application of different conditions to equivalent transactions with contracting
parties, causing harm to their interests in competition.
560.3.5.4. making the conclusion of a contract conditional upon requirements that oblige
contracting parties to provide additional services unrelated to the subject matter of the contract, whether objectively or according to commercial practice.
560.3.6. agreements or concerted practices among commercial legal entities, if they may
result in significant distortion of market conditions for the circulation of goods or the provision of production services, and are intended to or may contribute to the prevention, restriction, or distortion of competition, including:
560.3.6.1. direct or indirect determination of prices or other terms of transactions.
560.3.6.2. restriction of production, sales, technical development, or investment.
560.3.6.3. division of markets or sources of supply.
560.3.6.4. practices described in Articles 560.3.5.3 and 560.3.5.4 of this Code.
Article 561. Monopoly of state authority
The enforcement of civil rights, including the application of force or coercion, is the exclusive prerogative of the state. For this purpose, the state shall apply methods regulated by civil procedural law and enforcement legislation.

Article 562. Delay right
562.1. If, under this Code or a contract, the debtor has a right or a matured claim against the
creditor, the debtor may refuse to perform his obligation until the creditor fulfills the corresponding obligation toward him (the right of delay).
562.2. If, after the conclusion of a reciprocal contract, the situation of the other party
significantly deteriorates and, as a result, the performance of the reciprocal obligation is endangered, the party that is required to perform first under the reciprocal contract may refuse performance until the other party performs its obligation or provides adequate security for its performance.
562.3. If the subject of delay has been obtained unlawfully, the right of delay shall be
excluded.
562.4. If the mutual obligations subject to delay do not arise from a reciprocal contract, the
creditor may prevent the exercise of the right of delay by providing appropriate guarantees.
562.5. The right of retention may be exercised against a creditor’s claim only if the debtor
may be required to perform his obligation simultaneously with the creditor’s performance (simultaneous performance). Based on such requirement, the creditor may, if the debtor delays acceptance of performance, demand enforcement without performing his own obligation.
Article 563. Necessary defence
563.1. An act committed in a state of necessary defence is lawful, that is, it is not contrary to
law, and the damage caused in such a case shall not have to be compensated.
563.2. Necessary defence is a form of self-defence that is required to repel an unlawful and
actual attack directed against oneself or another person.
563.3. If a person has culpably exceeded the limits of necessary defence, or has intentionally
created the situation of necessary defence, or has acted under a culpable mistake regarding the existence of the circumstances required for preventing an unlawful act, such person shall be liable to compensate for the damage caused.
Article 564. Extreme necessity
564.1. An act committed in a state of extreme necessity is lawful, that is, it is not contrary to
law, and compensation for damage caused in such a case shall not be required, provided that the damage is inflicted upon the person or property that created the danger giving rise to the state of extreme necessity.
564.2. Extreme necessity is a situation in which, in order to avert a real danger that cannot
otherwise be prevented, lesser harm is caused in comparison with the harm that was to be prevented.
564.3. Taking into account actual circumstances under which the damage was caused in a
state of extreme necessity, compensation for the damage may be imposed upon the third person in whose interest the person causing the damage acted.
564.4. If the damage caused in a state of extreme necessity exceeds the harm that was
averted, the person who caused such damage shall be obliged to compensate for it.

Article 565. Self-defence
565.1. Where the assistance of competent public authorities cannot be obtained in time, and
there is a danger that without immediate intervention the exercise of a right would become impossible or significantly more difficult, actions performed for the purpose of self-help, which include taking, destroying, or damaging property. detaining a person obliged to perform who might otherwise flee or hide. or preventing resistance by the person obliged to perform an act that the self-help actor has the right to demand, shall not be deemed unlawful.
565.2. Self-help may not exceed the limits necessary to prevent or repel the danger.
565.3. If an object is taken from someone, a related declaration should be made
immediately.
565.4. If an obliged person is detained, he should be handed over immediately to the
competent public authorities.
565.5. If, immediately after the exercise of self-help, a declaration is not submitted to the
competent public authority for confirmation, or if that authority rejects such a declaration as inadmissible or unfounded, the self-help measures shall be deemed unlawful from the outset. If self-help measures are undertaken due to a mistaken belief that the conditions necessary to prevent an unlawful act exist, the person acting shall compensate the other party for the damage caused, even if the mistake was not due to negligence.
Article 566. Notification on the performance of an obligation
566.1. The creditor shall have the right to receive information from the debtor concerning
the progress of the performance of the obligation.
566.2. The following persons are obliged to provide such information:
566.2.1. the person entrusted with this duty under this Code or the contract.
566.2.2. the person who wholly or partly conducts the debtor’s affairs.
566.2.3. the person required to report on management of income and expenditures.
566.3. If the person obliged to provide information can do so only by incurring significant
expenses, such expenses shall be borne by the creditor.
566.4. If there are grounds to believe that the information provided was not prepared in
good faith, the creditor may demand that the debtor or the authorized person provide a written confirmation that the information has been prepared honestly. In the event of a judicial dispute, such written confirmation shall have evidential force. SPECIAL PART
Section seven
CONTRACTUAL OBLIGATIONS
Chapter 29
Purchase and sale

§ 1. General provisions on purchase and sale
Article 567. Purchase and sale agreement
Under a purchase and sale agreement, the seller shall undertake to transfer an item into the ownership of the buyer, and the buyer shall undertake to accept the item and pay a specified sum of money (price) in return.
Article 568. Seller’s obligation to deliver the item
568.1. The seller shall be obliged to deliver to the buyer the item specified in the purchase
and sale agreement.
568.2. Unless otherwise provided by the purchase and sale agreement, the seller, upon
delivering the item to the buyer, shall also be obliged to deliver its accessories as well as the documents related to the item as required by law or by the contract (the technical passport, quality certificate, operating manual, etc.).
Article 569. Period for performance of the obligation to deliver the item
569.1. The time for the seller’s performance of the obligation to deliver the item to the buyer
shall be determined by the purchase and sale agreement. if the agreement does not specify such time, it shall be determined in accordance with the rules set forth in Article 427 of this Code.
569.2. If it is evident from the agreement that the buyer’s interest in its performance will be
lost in the event of delay, the agreement shall be deemed to have been concluded on the condition that it should be performed within the specified time. The seller may perform the agreement either before the specified term expires or after it has expired only with the buyer’s consent.
Article 570. Moment of performance of the seller’s obligation to deliver the item
570.1. Unless otherwise provided by the purchase and sale agreement, the seller’s
obligation to deliver the item to the buyer shall be deemed fulfilled at the following moment:
570.1.1. if the agreement provides that the seller should deliver the item, at the moment the
item is handed over to the buyer or to a person designated by the buyer.
570.1.2. if the item is to be handed over to the buyer or to a person designated by the buyer
at the place where the item is located, at the moment the item is placed at the buyer’s disposal. The item shall be deemed placed at the buyer’s disposal when, within the period specified in the agreement, it is ready for delivery at the proper place and the buyer has been duly notified thereof in accordance with the terms of the agreement. The item shall not be deemed ready for delivery if it has not been identified for the purposes of the agreement, whether by marking or by some other means.
570.2. If, according to the purchase and sale agreement, the seller is not obliged to deliver
the item or hand it over at the place where it is located, the seller’s obligation to deliver the item to the buyer shall, unless otherwise provided by the agreement, be deemed fulfilled at the moment the item is handed over to the carrier or postal organization for delivery to the buyer.

Article 571. Transfer of the risk of accidental loss or accidental damage of the item to the
buyer
571.1. Unless otherwise provided by the purchase and sale agreement, the risk of accidental
loss or damage to the item shall pass to the buyer from the moment the seller is deemed to have fulfilled the obligation to deliver the item to the buyer in accordance with the agreement.
571.2. The risk of accidental loss or accidental damage of the sold item in-transit shall pass
to the buyer from the moment the purchase and sale agreement is concluded, unless otherwise provided by the agreement or business practices.
571.3. A contractual provision stipulating that the risk of accidental loss or accidental
damage passes to the buyer from the moment the item is handed over to the first carrier may be declared invalid by a court upon the buyer’s request, if at the time of concluding the agreement the seller knew or ought to have known that the item had already been lost or damaged and failed to inform the buyer thereof.
Article 572. Seller’s obligation to deliver an item free from third-party rights
572.1. Except where the buyer has agreed to accept an item encumbered with third-party
rights, the seller shall be obliged to deliver to the buyer an item free from the rights of third parties. Failure by the seller to perform this obligation shall entitle the buyer to demand a reduction in the price of the item or the termination of the purchase and sale agreement, unless it is proven that the buyer was aware of the existence of third-party rights in respect of the item.
572.2. The provisions of Article 572.1 of this Code shall also apply where, at the time of
delivery, there were third-party claims to the item and the seller was aware of such claims, provided that such claims were subsequently recognized as lawful in accordance with the established procedure.
Article 573. Seller’s liability in case the item is reclaimed from the buyer
573.1. If, on grounds arising prior to the performance of the purchase and sale agreement,
third parties reclaim the item from the buyer, the seller shall be obliged to compensate the buyer for resulting losses, unless the seller proves that the buyer was aware of the existence of such grounds.
573.2. Any agreement between the parties excluding or limiting the seller’s liability in cases
where third parties claim the item acquired by the buyer shall be deemed null and void.
Article 574. Duties of the buyer and the seller when the item’s reclamation claim is
brought
574.1. If, on grounds arising prior to the performance of the purchase and sale agreement, a
third party brings a claim against the buyer for the reclamation of the item, the buyer should involve the seller in proceedings, and the seller should join the proceedings on the buyer’s side.
574.2. If the buyer fails to involve the seller in proceedings, the seller shall be released from
liability to the buyer, provided that the seller proves that, by participating in the proceedings, he could have prevented the item sold from being reclaimed from the buyer.

574.3. If the buyer involved the seller in the proceedings but the seller failed to participate,
the seller shall lose the right to claim that the buyer mishandled the case.
Article 575. Consequences of non-performance of the obligation to deliver the item
575.1. If the seller refuses to deliver the sold item to the buyer, the buyer may refuse to
perform the purchase and sale agreement.
575.2. If the seller refuses to deliver an individually specified item, the buyer may bring
claims against the seller as provided in Article 452 of this Code.
Article 576. Consequences of non-performance of the obligation to deliver accessories
and documents related to the item
If the seller fails or refuses to deliver the accessories or documents related to the item that he is obliged to provide, the buyer may set a reasonable period for their delivery. If the seller fails to deliver the accessories or documents within the specified period, the buyer may, unless otherwise provided by the contract, refuse to accept the item.
Article 577. Quantity of goods sold
577.1. The quantity of goods to be delivered to the buyer shall be determined in the
purchase and sale agreement in appropriate units of measurement or in monetary terms. A condition regarding the quantity of goods may also be agreed upon by specifying a method for its determination in the contract.
577.2. If the purchase and sale agreement does not allow the determination of the quantity
of goods to be delivered, the contract shall not be deemed concluded.
Article 578. Consequences of breach of the condition concerning the quantity of goods
578.1. If the seller, in breach of the purchase and sale agreement, delivers to the buyer a
smaller quantity of goods than specified in the contract, the buyer may, unless otherwise provided by the contract, demand delivery of the missing quantity of goods, or refuse to accept and pay for the goods delivered. if payment has already been made, the buyer may demand the return of the amount paid.
578.2. If the seller delivers to the buyer a larger quantity of goods than specified in the
purchase and sale agreement, the buyer should notify the seller thereof in accordance with
Article 595.1 of this Code. If, after receiving the buyer’s notice, the seller fails to dispose of the
corresponding part of the goods within a reasonable time, the buyer may, unless otherwise provided by the contract, accept all the goods.
578.3. If the buyer accepts a larger quantity of goods than specified in the purchase and sale
agreement, the excess goods shall be paid for at the price established for the goods accepted under the contract, unless the parties have agreed on a different price for the additional goods.
Article 579. Assortment of goods