The Foreign Investment Laws provide the legal framework for foreign investment in Azerbaijan. They stipulate the types of entity foreign companies can invest in, the rules governing the repatriation of profit, and the general rights and guarantees provided to foreign investors. Foreigners can invest in a business venture in Azerbaijan in a number of ways, such as:
• Establishing a fully-owned subsidiary
• Acquiring shares of an existing company
• Establishing a joint venture with Azerbaijani companies and individuals
• Entering into other acceptable forms of investment agreement.
Various registration requirements apply to foreign companies establishing a business presence in Azerbaijan. A special license to conduct business is required for companies operating in telecommunications, sea and air transportation, insurance and other regulated industries. Business presence of commercial legal entities is registered by the Ministry of Taxes of Azerbaijan based on the “one-stop-shop” principle.
Forms of business presence
The following forms of commercial legal entity exist in Azerbaijan:
• Open and closed joint-stock companies
• Additional and limited liability companies
• General and limited partnerships.
Foreign investors wishing to establish a presence in Azerbaijan may opt for any of the above forms. Foreign entities may also operate in Azerbaijan through either a branch or representative office.
Joint-stock companies (JSCs)
JSCs are regulated by the Civil Code. A JSC is established by at least one legal entity or individual. A JSC shareholder’s liabilities are limited to the amount of its shares’ value. JSCs fall into two categories — “closed” and “open” JSCs. The shares of closed JSCs are not freely transferable and the company must have a minimum capital of AZN 2,000. The shares of open JSCs are not subject to the transfer restriction, but the company must have a minimum capital of AZN 4,000
Limited liability companies (LLCs)
LLCs can be founded by one or more legal entities and/or individuals with the founding members having a portion of capital/ interest in the LLC proportionate to the amount paid into the charter capital. Each owner’s liability is limited to the amount invested in the LLC. LLCs do not issue shares.
Participation interest in LLCs is freely transferable to third parties, unless provided otherwise under the charter of the LLC.
General and limited partnerships are governed by the Civil Code. A general partnership is established by at least two legal entities or individual entrepreneurs with all partners having unlimited liability. A limited partnership is established by at least two legal entities and/or individual entrepreneurs with at least one partner having unlimited liability.
Branch or Representative Office
Foreign companies may operate in Azerbaijan without establishing a local legal entity if they instead register a branch or representative office with the Ministry of Taxes of Azerbaijan. Branches and representative offices are allowed to conduct commercial activities in Azerbaijan.The state duty for registration of a branchor representative office is AZN 220.
Other forms of legal entity
Apart from commercial legal entities, Azerbaijani legislation also provides fornon-commercial legal entities and publiclegal entities.
A non-commercial legal entity is an entity neither generating profits as its main purpose nor distributing profit among its members. Non-commercial legal entities may be created in the form of public associations, funds or unions of legal entities.
Public legal entities are engaged in activities of state and public significance. They can be founded by the executive authorities designated by the President of Azerbaijan on behalf of the government or by municipal bodies on behalf of municipalities. Further, public legal entities may be founded by other public legal entities in case their charters envisage such authority.