AZERBAIJAN Law and Practice Contributed by: Ismail Askerov and Amil Jafarguliyev, MGB Law Offices
regulatory transparency are still evolving, sectoral opportunities, particularly in energy transition, water management, logistics and reconstruction, continue to anchor Azerbaijan’s attractiveness for strategic inbound investment.
• creation of joint ventures jointly controlled by founders. These thresholds guide foreign investors in structuring transactions, particularly where incremental purchas - es or minority investments may inadvertently trigger concentration rules. 3.2 Regulation of Domestic M&A Transactions The Competition Code serves as the primary frame - work for reviewing domestic concentrations. Trans - actions falling within Article 26 must be notified to and approved by the Competition Authority before completion. This applies where mergers, acquisitions of control, significant asset transfers or joint venture formations meet the Competition Code’s thresholds. The regulator assesses whether the concentration could distort competition or strengthen an existing dominant position. Beyond merger control rules, corporate registration requirements are essential: • for LLCs, changes in ownership of participatory interests must be registered with the State Tax Ser - vice under the Ministry of Economy, which main - tains the official registry of companies; and • for JSCs, share transfers must additionally be reg - istered with the National Depositary Centre, which records all changes in ownership of dematerialised shares. 4. Corporate Governance and Disclosure/Reporting 4.1 Corporate Governance Framework Corporate governance requirements in Azerbaijan are primarily set out in the Civil Code of the Republic of Azerbaijan. In addition, certain regulated entities such as banks, investment companies and insurance companies must comply with mandatory corporate governance standards adopted by the Central Bank of the Republic of Azerbaijan. Foreign investors typically establish their presence in Azerbaijan by opening a branch or representative office, or by incorporating a subsidiary in the form
3. Mergers and Acquisitions 3.1 Transaction Structures
M&A transactions in Azerbaijan typically follow stand - ard structures, with share acquisitions being the most commonly used approach for both foreign and domestic investors. For private companies, transac - tions generally involve the direct transfer of partici - patory interests from existing owners to the acquirer. Asset acquisitions are used where the buyer seeks to acquire specific business units or isolate liabilities, but they are less common than share purchases. The new Competition Code of the Republic of Azer - baijan, effective from 1 July 2024, is a central factor in determining transaction structure. It introduces a comprehensive framework governing mergers and acquisitions and defines “economic concentration” broadly. Article 26 identifies the following as concen - trations: • merger or combination of two or more independent economic entities or their separate fields of activity; • acquisition of control over voting shares in a joint stock company JSC at the thresholds of 25%, 50% and 75%; • acquisition of ownership in a joint stock company (LLC) at one-third, 50% and 75%; • transfer of more than 20% of the balance sheet value of main assets or intangible assets; • long-term or indefinite rights over key assets; • acquisition of significant assets of financial institu - tions; • acquiring rights to perform entrepreneurial or executive functions of another entity; • acquisition of more than 50% of voting shares in foreign entities operating in the same or a related market; • joint management arrangements affecting market behaviour; and
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