This Law determines economic, legislative and organizational bases of creation and
operation of the Credit unions in the Republic of Azerbaijan.
Item 1. Conception of the Credit union
1. The Credit union is a non-bank credit organization created for the mutual crediting of
members collecting free cash of voluntarily joined physical and (or) juridical persons of
small entrepreneurship united on the community of interests.
2. Mutual crediting is a short- and long-term credit to cover the economic and social
demands of members on the expense of the collected money in the Credit union.
3. The Credit union has its own property, can obtain property and non-property rights,
may act as pretendant and defendant party in the court.
Item 2. Legislation about the Credit unions
Legislation about Credit unions consists of The Constitution of the Republic of
Azerbaijan, this Law and other legislative acts of the Republic of Azerbaijan.
Item 3. Main principles of the Credit union’s activities
1. Main principles of the Credit union’s activities are as follows:
1.1. association of the members on the basis of common interest and mutual confidence;
1.2. voluntary membership;
1.3. lucidity of activities;
1.4. correlation of personal interest with common interest;
1.5. equality of rights independently of share’s size;
1.6. personal participation of members in the management of the Credit union;
1.7. direction of the gained means to entrepreneurship activities;
1.8. self-controlled activity arrangement.
1. The Credit union possesses the following rights:
1.1. to obtain credits and grants from banks, international and foreign financial and credit
1.2. to give credits to its own members as established in the charter;
1.3. to deposit free cash to banks, other Credit unions and to use it for the purchase of
2. Credit unions conduct obligations considered in tax and other legislations of the
Republic of Azerbaijan.
Item 5. Government and Credit unions
1. Government takes measures for the establishment of Credit unions and stimulation of
2. After a constituent assembly the Credit union passes the state registration as a juridical
person according to the legislation of the Republic of Azerbaijan.
3. The Credit union is considered as non-constituted if it does not pass the state
registration during the legislatively determined period and shares are returned during 15
return period of shares may be prolonged till the court decision.
not responsible for liabilities of Government.
6. Government guarantees the protection of legal rights and interests of the Credit union
and its members.
7. The damage caused to the Credit union by actions (inactions) of the state institutions is
recovered by the same institutions.
8. The Credit union has to obtain a special permission in legal order to perform banking
9. The institution giving a special permission for banking activities has to substantiate its
refusal. This case may be subject to legal investigation in the court on the basis of
10. The institution that gives a special permission for banking activities may define
regulatory guidelines for the Credit unions and requests for the professional suitability of
members of the Management Board and may apply sanctions:
10.1. to request the implementation of measures directed to the prevention of the
10.2. to suspend or revoke the special permission.
1. The Credit union can be constituted by not less than 11 physical and (or) juridical
persons in the statutory order.
2. Constituent assembly of the Credit union takes a decision on the establishment of the
Credit union, affirms the charter, and elects the management and control institution.
Item 7. Charter of the Credit union
1. The below given are reflected in the charter of the Credit union:
1.1. name and address of the Credit union;
1.2. aim and subject of activities of the Credit union;
1.3. membership admittance and termination rules, as well as termination criterions;
1.4. rights, liabilities and responsibilities of the members;
1.5. appointment tenure of the management organizations of the Credit unions;
1.6. arrangement rules of extraordinary session;
1.7. rules of payment for the damage to the Credit union caused by the members;
1.8. minimum initial share to the Credit union, rules of its payment, its period and
1.9. property creation of the Credit union and management of incomes;
1.10. terms and rules of the credit granting to the members;
1.11. management and control authorities of the Credit union, their competence, rules of
establishment and decision making;
1.12. establishment of the Credit union funds;
1.13. interruption and termination rules of the Credit union’s activity;
1.14. rules of share retrieval at the termination of the membership;
1.15. other legal matters relevant to the activity of the Credit union could be considered
in the charter.
The Credit unions may establish associations to protect the interests of the members, to
coordinate their activities, to support development of inter-regional and international
relations and to assist other joint problems.
must inform the institution that gives special permission for banking activities during 10
days when number of the members decreases and must increase the number of members
to 11 during three months maximum. Special permission is revoked if the minimum
number is not restored during this period.
2. Admittance of new members is conducted in accordance with this Law after the
registration of the Credit union.
3. A person willing to be the member of the Credit union forwards a petition to the
Management Board of the Credit union and undertakes to obey the charter. The applicant
is considered as a member after the decision of the Management Board.
4. A document affirming the membership and share is given to the member.
Item 10. Rights, obligations and responsibilities of the members of the Credit union
1. A member of the Credit union has the following rights:
1.1. to use services of the Credit union;
1.2. to participate at the meetings of the Credit union, in its management, to vote and to
be voted into the management and control authorities;
1.3. to obtain a credit according to terms and rules considered in the charter of the Credit
union and other normative documents;
1.4. to pass his share into the ownership of others as considered in the Charter according
to the legislation of the Republic of Azerbaijan;
1.5. to obtain the necessary information on the activities of the union from the authorities
of the Credit union;
1.6. to return his share together with the last calculations and terminate the membership
acting on the basis of the procedure of the charter;
1.7. to use other rights considered in the charter;
1.8. to bring an action against the decision of general meeting or Management Board;
2. Obligations of the member of the Credit union:
2.1. to pay the share in the order and time considered in the charter;
2.2. to obey demands and rules and other documents considered in the charter;
2.3. to give true information on targeted appointment of the credit while obtaining it;
2.4. to repay the given debt on time and in accordance with the contract terms;
2.5. to fulfill competent decision of management and control institutions of the Credit
3. Responsibilities of the members of the Credit union:
3.1. The Credit union is responsible for its liabilities in proportion to its own property and
is not responsible for irrelevant liabilities of its members to activities of the Credit union.
Members of the Credit union are responsible to the Credit union with all their property.
Item 11. Membership termination of the Credit union
1. Membership of the Credit union may be terminated at the following cases:
1.1. when shareholder is expelled from the membership as determined in the charter;
1.2. when shareholder willingly resigns his membership;
1.3. when the Credit union is revoked.
2. When the member of the Credit union willingly resigns his membership he must at
least 3 months prior petition to the Management Board.
3. When the member of the Credit union is expelled from the membership by the decision
of the Management Board, he can file an appeal against the decision to the observation
council or general meeting. He can take the matter into court when unsatisfied with the
decision of the general meeting.
4. Heir-at-law can substitute the member after his death or he can get the share of the
1. The Credit union is managed by the general meeting of the members, the observation
council, the Management Board and the credit commission.
2. The supreme management institution of the Credit union is a general meeting of its
members. Next in turn general meeting is convened during the period determined in the
charter, but at least once a year. Rules of extraordinary meeting convention are
determined by the charter. Convention of the general meeting is announced at least 20
days prior to the meeting by the Management Board.
3. The general meeting possesses emergency powers for the following problems and
3.1. adoption of the charter, inclusion of changes and addenda to the charter;
3.2. determination of the rules for the membership admittance and termination;
3.3. Election of the observation council, the Management Board, chief of the
Management Board, the credit commission, listening of their reports and termination of
3.4. affirmation of annual report and balance;
3.5. determination of the amounts and payment rules of shares and other payments;
3.6. determination of benefit distribution of the Credit union and its utilization rules;
3.7. determination of terms and rules for credit granting;
3.8. determination of the establishment and utilization rules of funds of the Credit union;
3.9. determination of repayment rules of damage and limit for the administrative
3.10. the Credit union’s entrance to and exit from the Association of The Credit unions;
3.11. decision making on the reconstruction and abolishment of the Credit union;
3.12. decision making on auditing and on the selection of auditor;
3.13. resolution of other problems dealing with the activities of the Credit union
according to the charter.
4. The general meeting is considered to be competent with the participation of 51% of the
members. Resolution of problems relevant to emergency powers of the general meeting
are passed by two-third majority and remaining problems by simple majority. Be the
meeting equally divided, the chairman of the meeting has the decisive vote.
5. In the general meeting the resolution can pass by open or closed voting as considered
in the charter.
Item 13. Control over activities of the Credit union
1. An observation council is selected among the members of the Credit union to control
its activities in the general meeting. The observation council consists of at least 3
2. Member of the observation council can not be a member of the Management Board
and the credit commission.
3. The observation council:
3.1. controls the execution of decisions of the general meeting;
3.2. analyses the activities of the Credit union, the Management Board and the credit
commission, controls financial and economic activities;
3.3. presents reports of the Management Board and the credit commission, annual
balance to the general meeting attaching his own reference;
3.4. warns about the elimination of shortcomings in the activities of the Management
board and the credit commission, about abolishment of illegal decisions or informs the
general meeting about the matter;
3.6. fulfils other duties considered in the charter.
4. One of the observation council members should have auditor experience. An auditor
could be attracted in the absence of a member with the appropriate experience.
1. The Management Board and its chief manage the activities of the Credit union through
the intervals between general meetings. Member of the Management Board can not be a
member of the observation council or credit commission.
2. Number of members of the Management Board, their competent period, rights, duties
and competence of the Management Board and its members is defined by the charter. The
Management Board consists of at least 3 members.
3. The Management Board:
3.1. deals with the admittance of new members to the Credit union and termination of
membership as defined in the charter;
3.2. represents the Credit union in court and through relations with third parties;
3.3. arranges general meetings;
3.4. concludes labor contracts with new employees on behalf of the Credit union,
contracts civil bargains with the members and third parties;
3.5. gives credits on the basis of credit commission reference;
3.6. prepares accounting balance and other financial reports;
3.7. fulfils other duties considered in the charter.
4. Wages of the Management Board members are defined by the charter.
1. The decision on the credit granting is taken by the Management Board on the basis of
the credit commission reference. The credit commission consisting of at least three
members is selected from the members of the Credit union in the general meeting.
Competency period, duties, rights and responsibilities of the credit commission are
defined by the charter.
2. The member of the credit commission can not be the member of the Management
Board and the observation council.
3. The credit commission deals with applications of the members on credit extension,
defines terms for credit granting and repayment, and makes proposals to the Management
Board about the matters.
4. Credit guarantee may be requested as considered in the legislation of the Republic of
5. The credit commission can present proposals to the general meeting about the
determination of percentage rates of credits.
6. The credit commission reports to the general meeting annually.
Members of the Observation council, Management Board and the credit commission are
responsible for the damages caused by their actions and inactions in the statutory order as
defined in the legislation of the Republic of Azerbaijan.
Item 17. Taxation rules, accounting and reporting in the Credit unions
1. Taxation in the Credit unions is determined by the Tax Code of the Republic of
2. Accounting rules, specification, structure and presentation periods of the report are
statutorily defined by the institution issuing special permission for banking activities.
1. Chartered capital of the Credit union is formed by the shares of its members.
2. Minimum sum of the chartered capital is defined by the institution issuing special
permission for banking activities, but the amount of member’s share, its payment order
and responsibility for the infringement is determined on the basis of the charter.
3. The chartered capital is used for mutual crediting. The necessary amount to start The
Credit union activities may be directed from the chartered capital for the acquisition of
the building, equipment and inventory.
4. Use of the obtained credit by the Credit union for the formation of the chartered capital
5. Members of the Credit union can take their shares back only in the case when their
membership is terminated.
1. A special reserve fund is created to cover losses caused by the activities of the Credit
2. Reserve fund is established in the statutory order.
1. The Credit union establishes mutual credit fund as a source of crediting. The mutual
credit fund is formed by the chartered capital and benefit of the Credit union, as well as at
the expense of the attracted means from other sources according to this Law. Means of
this fund is used only for crediting of the members.
2. Sum of the given credit provided from the credit fund can’t exceed 10 times of the
share of the member that obtains the credit and can’t be more than 10 percent of the
means of the credit fund.
1. Liquidation principles of the Credit union:
1.1. decision of the general meeting on the liquidation of the Credit union;
1.2. decrease of minimum number of members and minimum chartered capital of the
1.3. valid court decision on the liquidation of the bankrupted Credit union;
1.4. valid court decision on the liqudation of the Credit union for the infringement of the
laws of the Republic of Azerbaijan.
2. The institution making the decision on the liquidation establishes the liquidation
commission and functions of the Management Board are transferred to the liquidation
3. Liquidation of the Credit union is proceeded as defined in the legislation of the
Azerbaijan Republic. Shares and the calculated proportionate incomes are divided among
the members after all liabilities of the Credit union are discharged.
1. The Credit unions may be reconstructed in statutory order. Leave of one or several
juridical persons from the reconstructed Credit union, as well as its division is conducted
on the basis of the decision of the general meeting as in the Credit unions’ integration.
2. A project for the reconstruction of the Credit union is prepared by the Management
3. the following information is given in the reconstruction project:
3.1. name and address of the Credit union;
3.2. number of members;
3.3. chartered capital;
3.4. evaluation of the given credits and property;
3.5. inheritance terms and periods of liabilities;
3.6. criterions and rules of management of members’ shares in the Credit union after
3.7. criterions for mutual crediting during reconstruction eve and after;
3.8. other property and non-property rights and duties of the members after
reconstruction, the period till effective date
4. Parallel to the reconstruction project, the charter of the each newly reconstructed
Credit union is prepared.
5. Each member no later than 20 days is informed about the reconstruction by the written
announcement and each of them can get acquainted with the reconstruction project.
6. The newly established Credit union is obliged to get a special permission for the
banking activity, as demanded by this Law.
Disputes among the members of the Credit union and between the members and
management institutions are resolved in the common meeting. In the case of mutual
disagreement between the parties, the matter is taken to the appropriate court.
1. The Credit unions created before the effective date of this Law are operating according
to the items of this Law.
2. The given special permissions for banking activities to the Credit unions before the