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As the highest governance body in limited liability (‘LLC’) and joint-stock companies (‘JSC’), the General Meeting of Shareholders has some exceptional powers to adopt certain decisions, such as, making changes to the Articles of Association and paid-in capital, appointing Supervisory Board, distributing profit and loss, dissolving the entity, etc. In order to exercise these authorities, the General Meeting of Shareholders must be organized in compliance with the law.

The requirement

The Civil Code of the Republic of Azerbaijan (‘Civil Code’) is quite flexible when it comes to LLCs. Thus, LLCs can call a General Meeting of Shareholders in a manner envisaged by their Articles of Association. However, the Civil Code implies strict obligations for JSCs. Meaning that they must ensure the shareholders’ right to be informed about the upcoming General Meeting by informing the shareholders via an announcement on the media and by personally notifying the shareholders in advance. Obviously, the law in fact is straightforward when a company has multiple shareholders.

Yet, the case is different when a JSC is owned by a sole shareholder. Unlike for LLCs, the law does not specify if a sole shareholder can adopt decisions without making any announcement on media, which would lead to avoidance of time loss before making decisions on significant matters.

Opinion and Practice

Due to their size and perception, the JSCs are subject to relatively more complete rules than the LLCs. This is also the case when the General Meetings are to be called, and the law does not leave the fate of shareholders into the hands of the company charter as in the case of LLCs, but rather defines precise deadlines to inform the shareholders well in advance. Though considering that sole shareholder’s solo decision-making wouldn’t breach anyone’s right to be informed under the law, it is possible to mention that sole shareholders of JSCs can adopt decisions just like the LLCs, by avoiding the notification requirements.

Needless to say, the national authorities responsible for the registration of commercial legal entities recognize the decisions of sole JSC shareholders made in such a manner.

About the author: Ruslan Bayramov is a business lawyer with more than 12 years of expertise both in the corporate and consulting industry. He mainly specializes in corporate law, law of contracts, labor law, ABC/AML compliance, and Corporate Governance. He is the founding partner at Legalize Law Firm. For more information about the author please follow the link:

https://legalize.az/en/team/ruslan

Implementation of anti-bribery management systems standard by the author:

https://www.azernews.az/business/189652.html

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