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LAW OF THE AZERBAIJAN REPUBLIC

of November 29, 1996 No. 208-IG

About approval of the Regulations on procedure for transformation of the state company to joint-stock company

(as amended on 11-11-2016)

Millie decides Majlis of the Azerbaijan Republic:

1. Approve "Regulations on procedure for transformation of the state company to joint-stock company".

2. This Law becomes effective from the date of its publication.

President of the Azerbaijan Republic

Heydar Aliyev

Approved by the Law of the Azerbaijan Republic of November 29, 1996 No. 208-IG

Regulations on procedure for transformation of the state company to joint-stock company

I. General provisions

1. This Provision establishes rules of transformation of the state companies to joint-stock companies in case of privatization of state-owned property.

2. When transforming the state companies to joint-stock companies and their privatizations of the right of the workers working at these companies, and also social protection of the population are provided according to the current legislation of the Azerbaijan Republic.

3. The decision on transformation of the company to joint-stock company are accepted by relevant organs of the executive authority according to classification of objects of state-owned property in relation to privatization.

4. In case of privatization of the state companies their transformation to joint-stock company is performed on the basis of the plans of privatization developed by the Commissions on privatization created at these companies, and approved by relevant organ of the executive authority of the Azerbaijan Republic.

5. In case of privatization of the state companies as the founder of joint-stock companies to which the state companies will be transformed on behalf of the state the relevant organ of the executive authority enters.

6. Activities of the joint-stock company formed on the basis of incorporating in case of privatization of the state company, are performed according to the current legislation, taking into account the features determined by this Provision.

II. Procedure for transformation of the state companies to joint-stock companies in the course of privatization

7. Transformation of the state companies to joint-stock companies in the course of privatization is performed in the following procedure:

7.1. Transformation of the state companies to joint-stock companies is performed taking into account the developed technological and managerial communications. Independently business entities will be transformed without any additional terms and restrictions.

7.2. The relevant organ of the executive authority establishes joint-stock company according to the plan of privatization of the companies, and submits constituent documents to the relevant organ of the executive authority performing state registration according to the current legislation. State registration of the joint-stock company founded as a result of transformation of the state company is performed in the terms established in the legislation.

7.3. The joint-stock company founded as a result of transformation of the state company to joint-stock company in the course of privatization from the moment of state registration leaves subordination of the ministries, state committees, concerns, companies, associations and other industry governing bodies and local executive bodies (except as specified when the controlling stock remains in state-owned property).

From the moment of state registration of the joint-stock company founded as a result of transformation of the state company to joint-stock company in the course of privatization according to the State program, the company is considered transformed, and its property - transferred to fixed assets of joint-stock company.

The property of the state company constituting its authorized capital is transferred to fixed assets of joint-stock company.

7.4. The amount of the authorized capital of joint-stock company is established based on the corresponding regulatory legal act approved by relevant organ of the executive authority of the Azerbaijan Republic.

7.5. The joint-stock company founded as a result of transformation of the state company to joint-stock company in the course of privatization is considered the legal successor of the transformed company.

7.6. Taking into account industry features of privatization of state-owned property restriction for privatization can be established only in the form of fixing of controlling stakes (51

%) and the blocking shares (25, suffice %) ordinary (with voting power) shares in state-owned property.

7.7. Relevant organs of the executive authority enter as the owner on behalf of the state in the joint-stock companies founded as a result of transformation of the state company to joint-stock company in the course of privatization and also when preserving controlling stakes or any part of shares of this joint-stock company in property of the state, and through the representatives exercise control at general shareholder meetings and in other bodies of joint-stock company created according to the Civil code of the Azerbaijan Republic.

7.8. Before holding the first general meeting of shareholders of the joint-stock company founded as a result of transformation of the state company to joint-stock company in the course of privatization, the chairman of the board of joint-stock company is appointed by the relevant organ of the executive authority which made the decision on transformation of the company to joint-stock company.

Board members of joint-stock company are appointed by the relevant organ of the executive authority exercising control on behalf of the state.

During this period of power of the Supervisory board of joint-stock company, according to its charter, are performed by relevant organ of the executive authority.

7.9. The first general meeting of shareholders of the joint-stock company founded as a result of transformation of the state company to joint-stock company in the course of privatization is held no later than 12 (twelve) months from the date of state registration of joint-stock company.

7.10. Standing bodies of management of the joint-stock company founded as a result of transformation of the state company to joint-stock company in the course of privatization are created at the first general shareholder meeting, except for the case specified in Item

7.11 this provision.

7.11. When preserving part of shares of joint-stock company behind the state, representatives of state bodies for participation in general meeting of society are appointed by relevant organ of the executive authority according to the number of the shares which remained in property of the state.

III. Procedure for sale of shares of the joint-stock companies founded as a result of transformation of the state company to joint-stock company in the course of privatization

8. The beginning moment, procedure and methods of sale of shares (parts of the authorized capital) of the joint-stock company founded as a result of transformation of the state company to joint-stock company in the course of privatization the privileges represented in case of privatization, etc. are established by the legislation.

9. The relevant organ of the executive authority performing powers of the owner on behalf of the state acts as the seller of shares.

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