Client Alert On Latest Legislative Developments

New legislative developments in Azerbaijan on banking, telecommunications and licensing

During the past several weeks the Azerbaijani Parliament has adopted a number of laws, introducing amendments to the Law On Banks, the Civil Code, the Civil Procedure Code, the Administrative Procedure Code, the Law On Telecommunications and the Law On Licenses and Permits.

We summarize the major aspects of above-mentioned amendments below.

Law "On Introducing Amendments to the Law 'On Banks'"

The amending law, which is dated April 7, 2017 (effective as of April 16, 2017), introduces significant changes to the cornerstone of banking legislation in the country, completely rewriting sections of the Law on Banks dealing with the appointment of temporary administration and the financial rehabilitation of troubled banks. The amendments come at the time when liquidations in bankruptcy of several small and mid-sized Azerbaijani banks are currently underway, in relation to one of which (Bank Standard) the newly established regulator, the Financial Markets Supervisory Authority (the "Regulator" or "FIMSA") attempted, unsuccessfully, to introduce a financial rehabilitation program.

Disposition of an Insolvent Bank

A new section is introduced to the Law on Banks, entitled "Disposition of an Insolvent Bank", which deals with various matters related to the appointment of a temporary administrator by FIMSA for an initial period of nine months, which could be extended for a further three months. This section sets forth in detail events that would warrant the appointment of a temporary administrator by FIMSA, the principles under which the temporary administrator would manage the insolvent bank and the powers of the administrator, as well as the possible outcomes for troubled banks. These include the following:

merger of an insolvent bank into a healthy bank; transfer of assets and liabilities of an insolvent bank (fully or partially) to an acquiring bank; establishment of a bridge bank, the transfer of healthy assets and liabilities of an insolvent bank (fully or partially) to the bridge bank, and the sale of the bridge bank to investors; sale of an insolvent bank to investors; liquidation of an insolvent bank. Voluntary debt restructuring of bank obligations

Another important novelty is a previously unavailable framework that would allow banks to force a voluntary debt restructuring of the bank's obligations vis-à-vis its creditors, except for claims of depositors...

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