Failure to make capital contribution will be penalized

 

Until now, no specific legal implications of failure to make initial capital contribution were prescribed by the laws. It was interpreted as a matter left to be determined by the shareholders. For example, the presently effective Article 89 of the Civil Code specifies that the Articles of Association of the Limited Liability Company shall determine the amount of the share capital, as well as liability of the shareholders for failure to make such capital contribution.

 

The latest amendments to the Code of Administrative Offenses, effective from 16 July 2024, specify fines non-payment of share capital or failure to provide information about the paid-up share capital to the state registration authority.

 

Thus, according to Article 405-1 of the Code, officials are fined in the amount of one thousand manats, and legal entities in the amount of two thousand manats, for non-payment of the share capital of a limited liability company within the period stipulated in the Civil Code of the Republic of Azerbaijan.

 

According to the next clause of the same article, failure to provide information on the fully paid-up share capital of the limited liability company to the body (institution) determined by the relevant executive authority within the period provided for in the Law of the Republic of Azerbaijan "On State Registration and State Register of Legal Entities" shall result in the officials being fined five hundred manats, and legal entities in the amount of one thousand manats.

 

It is also worth to mention that these penalties are not applicable to other legal entities, e.g. joint-stock companies, since no post-incorporation share capital payment options are available in these instances. Unlike this, it is allowed to make initial share capital contribution to the limited liability company within up to 3 months of the registration where this is provided for by the Articles of Associtaion. The newly introduced administrative penalty aims to prevent failures of share capital payment in such instances.