|                                                                                                                                                                                     |  | Establishing a Business Presence in Azerbaijan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           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|**BISNISHome PageSearchBISNISEmbassyReportsCountryReportsIndustryReportsCustomsCornerPublicationsSourcesof FinanceFinanceLinkLeadsand EventsExchangeRatesState ExportsOtherSources** |  | April 1999Adapted with permission from an article by Ledingham Chalmers/Jura Consultants, Baku,
and
provided courtesy of  the U.S.-Azerbaijan Chamber of Commerce, Washington, D.C.There are three main ways that a foreign investor may establish a direct trading presence within
Azerbaijan: (1) by establishing a joint venture involving foreign and local participation, (2) by
creating an Azerbaijani corporate entity that is wholly foreign owned, and (3) by establishing a
branch office of a foreign legal entity. Under current legislation, these entities are treated
differently
in such areas as tax and currency regulations. Joint ventures and wholly foreign-owned legal
entities
incorporated in Azerbaijan are considered to be Azerbaijani legal entities, whereas representative
offices and branch offices are considered to be "nonresident" legal entities on the basis that they
are
only involved in trading activities in Azerbaijan on behalf of a foreign company. However,
according to the latest interpretation of the law "On Enterprises" by the Ministry of Justice, a
representative office is not entitled to conduct trading activity.Azeri Legal Entities as Vehicles for InvestingThe joint venture or wholly foreign-owned Azeri legal entity may benefit the foreign investor by
formalizing the relationship with an Azeri partner, thereby creating the opportunity to obtain
certain
licenses or consents. To register a joint venture, the participants must fulfill certain requirements
including, inter alia, submitting the following documents to the Ministry of Justice (duly
notarized
and legalized where appropriate): the draft charter and founding agreement; an extract from the
foreign participant's Company Register (such as a Certificate of Incorporation); a letter of good
standing from the foreign participant's bank; and an application for registration, together with the
fee (currently approximately US$200). A power of attorney may also be needed to allow local
representatives to complete certain formalities in Azerbaijan on behalf of the foreign
investor.
Both joint ventures and Azerbaijani entities that are wholly foreign owned may be structured in a
number of ways, including a full partnership, a limited partnership, a limited liability company, a
closed joint-stock company, or an open joint-stock company.
Joint-stock companies are governed by the law "On Joint- Stock Companies" and can either be
closed or open, but must have a minimum of three founders. In a closed joint-stock company,
prior
to the founding meeting, 50 percent of the nominal value of stocks must be prepaid and the
amount
of the declared charter fund must be in place within a year of the date of the company's
registration.
Currently, the minimum charter capital, depending on circumstances, will vary between
US$1,200
and US$2,400 (approximately). It should be noted, however, that it is not uncommon for foreign
participants to be required to contribute US$5,000-20,000 to the charter fund to meet local
requirements.Opening a Branch/Representative OfficeRepresentative offices may be established by obtaining the registration certificate from the
Ministry
of Justice. To register a representative office various documents need to be filed and certain
formalities need to be completed:-- An application letter stating basic details about the company, any business connections with
Azerbaijani organizations, and details of commercial transactions entered into in
Azerbaijan;
-- A notarized and legalized Certificate of Incorporation and Memorandum of Association (or
equivalent);
-- A copy of the passport of the proposed director/representative together with three passport
photographs;
-- A copy of the lease agreement or other document of title verifying the address of the
branch/representative office;
-- The regulations of the branch/representative office setting out provisions as to the purpose and
obligations of the branch/representative office and detailing the powers of the director/general
representative;
-- A sample of the company seal;
-- The appropriate fee (currently US$2,000 for a representative office and about US$200 for a
branch
office); and
-- Any power of attorneys (as appropriate), duly legalized and notarized to enable any formalities
in Azerbaijan to be undertaken by individuals on behalf of the foreign company in establishing
and
operating their office.The branch/representative office must register with the Azerbaijani tax authorities within one
month
of the date of the issuance of the registration certificate by the Ministry of Justice. If the branch
office is not registered before that date, then it is deemed that the office is concealing income for
the
purposes of tax avoidance and penalties will be incurred. Recently, it has been held that a
representative office is not entitled to carry on economic activity and earn revenues
therefrom.For more information on the legal environment in Azerbaijan, contact the U.S.-Azerbaijan
Chamber
of Commerce in Washington, D.C., at tel: (202) 898-0900, fax: (202) 898-0015.For more information on Azerbaijan, visit BISNIS Online at
www.mac.doc.gov/bisnis/country/caucasus.htm#Azerbaijan.This report is provided courtesy of the Business Information Service for the Newly
Independent States (BISNIS)