LAW OF THE AZERBAIJAN REPUBLIC

On June 13, 1997 No. 326-IG

About insolvency and bankruptcy

Chapter I. General provisions

Article 1. Basic concepts

The basic concepts used in this Law mean:

insolvency - insolvency of the debtor;

the applicant - person, the filed a lawsuit application (request) for bankruptcy;

debtor enterprise - the legal entity who is the debtor performing or with the suspended activities in the territory of the Azerbaijan Republic;

the individual debtor - physical person entrepreneur who is the debtor performing activities without formation of legal entity;

the voluntary settlement - the agreement between the debtor and the creditor on payment deferral to creditors, payment by parts, concession of certain part of debt, reorganization of debtor enterprise;

asset of the company - the property of the company consisting of its fixed assets, other long-term attachments, current assets and financial assets (including intangible assets);

liability of the company - the obligation consisting of debt and the raised enterprise assets including accounts payable (except subventions, grants, etc.);

sanitation - method of recovery of solvency of the debtor by financial assistance by his owner, creditors and other legal entities and physical persons for the purpose of prevention of its liquidation;

the plan of sanitation - the document reflecting package of measures, performed by mutual consent of the debtor and the creditor (creditors) and directed to improvement of the debtor during sanitation process application, with indication of the table of satisfaction of requirements of the creditor (creditors) for the purpose of recovery of solvency of the debtor and jobs preservation, and also the achieved results, the used resources and possible risks;

property of the debtor - all property proprietary for the debtor or transferred to ownership to the debtor at the time of initiation of process of bankruptcy, and all property acquired by the administrator of property and (or) the temporary administrator of property and also all property acquired by the debtor from the moment of initiation of process of bankruptcy before its termination (except for, in case of the individual debtor, such property on which collection according to the current legislation cannot be turned);

the moment of initiation of process of bankruptcy - the timepoint determined in article 2 of this Law;

the bankruptcy moment - the timepoint determined in article 18 of this Law;

the administrator of property - the official designated in case of insolvency of the debtor characterized in Chapter V of this Law;

the temporary administrator of property - the official designated in case of insolvency of the debtor characterized in Chapter VI of this Law;

the managing director - person given according to constituent documents of the debtor authority on adoption of the binding decisions concerning economic activity of the debtor, including, among other, the president, the director, their deputies, the chief accountant, and also other persons who actually manage activities of the debtor by regular orders or any otherwise;

the secured creditor - the creditor who is the holder of pledge (mortgage);

the unsecured creditor - the creditor who is not the secured creditor whose claims are paid in the fifth queue according to this Law;

credit institution - the legal entity performing or performing in the past banking activity in the Azerbaijan Republic according to the procedure determined by the legislation;

residents - the physical persons having the permanent residence in the Azerbaijan Republic, including temporarily living outside the Azerbaijan Republic; legal entities of the Azerbaijan Republic and their branches and representations abroad; diplomatic and other official representations of the Azerbaijan Republic abroad;

nonresidents - the physical persons having the permanent residence outside the Azerbaijan Republic, including temporarily living in the Azerbaijan Republic, the legal entities, the companies and the organizations who are not legal entities, located abroad, their branches and representations in the Azerbaijan Republic, the foreign diplomatic and other official missions located in the Azerbaijan Republic and also the international organizations including their branches and representations.

Article 2. General procedure for initiation of process of bankruptcy

1. The procedure for excitement and hearing of cases about bankruptcy is regulated by the existing procedural legislation, taking into account specific requirements of this Law.

2. This Law extends to all commercial (except for banks) and non-profit organizations.

This Law does not extend to legal entities of the public law.

The relations in the field of insolvency and bankruptcy in the Alyatsky free economic zone are regulated according to requirements of the Law of the Azerbaijan Republic "About the Alyatsky free economic zone".

The concept "debtor" used in this Law belongs to the company and the individual debtor - debtors.

The joint-stock investment fund and the insurer appear the bankrupt taking into account requirements both this Law, and, respectively, the Laws of the Azerbaijan Republic "About investment funds" and "About insurance activity".

3. In cases when the total amount of requirements of creditors constitutes less than 10 (ten) percent of authorized capital of the company, property claims of creditors to the debtor decide according to general procedure for consideration by court of receivership proceeding.

4. it is excluded

5. The filed a lawsuit statement of the creditor (creditors) or the debtor forms the basis for initiation of proceedings about bankruptcy. The moment of initiation of process of bankruptcy through court is date of submission of the specified petition. The request about bankruptcy can be filed a lawsuit based on the decision made by governing body of debtor enterprise (the decision made by relevant organ of the executive authority if the debtor is the state company).

The request about bankruptcy can be filed a lawsuit also by the legal entities and physical persons authorized by the state. If the debtor is individual debtor, the application can be submitted by him or his representative.

6. Only in case of debtor enterprises process of bankruptcy can be also begun without participation of court, according to the procedure, stated by this Law.

7. Cases on bankruptcy (insolvency) are considered at the place of residence or in the place of stay of the debtor.

Article 3. Value of concept of insolvency

The debtor is exposed to bankruptcy process if is insolvent. The debtor is considered insolvent if itself recognizes that he is that or if by court or the creditor it is proved that:

a) the debtor did not perform fully within 2 (two) months in a row from the moment of the beginning of completion date of the obligation on compensation of damage caused to life and health, collection of the alimony, obligations on the employment and related relationships, obligations to the creditors connected with remuneration under the author's agreement;

b) the debtor did not perform fully tax (percent and the applied financial sanctions) and other state payments within 10 (ten) months in a row from the date of their charge;

c) the debtor did not fulfill at the scheduled time the obligation to other creditors.

Chapter II. Initiation of process of bankruptcy through court

Article 4. Initiation of process by the debtor

1. The application for bankruptcy submitted by the debtor shall be constituted in the form established by the legislation and is signed. The power of attorney or other document confirming powers or official position of such representative shall be attached to the application of the debtor submitted by his representative.

2. The statement for bankruptcy which is filed a lawsuit shall contain the following:

a) the name of court to which the application is submitted;

b) name (surname, name, middle name of the individual debtor or his representative) and debtor's address;

c) names (surnames, names and middle names), the postal address of all famous creditors and the amount of the claim made by them to the debtor;

d) information concerning debt obligations of the debtor which term comes during 1 year after giving in court of the statement for bankruptcy;

e) confirmation of insolvency of the debtor or recognition of insolvency of the debtor according to this Law;

e) the list of the documents enclosed to the application of the debtor;

g) any other information which according to the debtor is necessary for court for legal proceedings on case, including, in case of the individual debtor, the detailed information in confirmation of the requirement of the debtor that certain assets shall be excluded from property of the debtor, and also other data, stipulated by the legislation.

Article 5. The documents enclosed to the application of the debtor for bankruptcy

1. In addition to the documents established by the legislation are enclosed to the application of the debtor for bankruptcy:

a) the document confirming payment of the court fees established by the legislation, except as specified when the debtor asks in the application for bankruptcy for payment deferral of legal costs;

b) the list of creditors and debtor's debtors with detailed specifying of the amounts which are subject to payment and the amounts which are receivable;

c) the document specifying the sum of claims determined according to provisions of this Law.

2. Also following documents are enclosed to the application of debtor enterprise:

a) the copy of the decision of authority of the debtor on the appeal to court about initiation of process of bankruptcy;

b) if the debtor is the state company, - the copy of the decision of relevant organ of the executive authority on the appeal to court about initiation of process of bankruptcy;

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