3.1 Transactions subject to approval

Under the provisions and requirements of the antimonopoly law of Azerbaijan the following transactions, concluded between economic subjects shall require prior approval and consent of AMSAR:

• amalgamation and association of economic subjects (if it results in the establishment of economic subjects, the share of which exceeds 35% at respective commercial market);
• association and amalgamation of economic subjects, the total value of whose assets exceeds 75 000 times the minimum salary (which is 6,373.000 AZN);
• liquidation (except for cases of liquidation of enterprises as a result of a court decision) and division of the enterprises, the total value of assets of which exceeds 50 000 times of the minimal amount of salary, and also national and municipal enterprises (if it results in the establishment of economic subjects, the share of which exceeds 35% at respective commercial market).

Establishment, reorganization and liquidation of economic subjects, envisaged above is to be carried out on the basis of the consent of AMSAR. The persons or economic subjects, making the decision about the establishment, reorganization and liquidation of specified economic subjects must apply to AMSAR for its prior consent. The respective agreement and/or resolution on establishment, reorganization or liquidation of the business entities and information about volumes of sale of main products (goods, services, and works) at the respective commercial market should be enclosed in the application.

Also according to the provisions of Article 13-1 ("State control over observance of antimonopoly legislation in carrying out of transactions, concluded between economic subjects when purchasing the shares") of the Law of the Azerbaijan Republic "On Antimonopoly Activity", the following transactions concluded between economic subjects such as:

• when purchasing more than 20% of shares constituting partnership capital of one economic subject and giving the voting right to another economic subject - association of economic subjects or group of persons carrying out control over property of each other (these restrictions are not applied to the constitutors or founders when establishing an economic subject);
• if in a case of transfer of main means of production and/or non-material assets of one economic subject to the ownership or use of another economic subject (association of economic subjects or group of persons carrying out the control over property of each other), the balance value of the property, being the subject of the transaction, exceeds 10% of the main means of production and non-material assets of economic subject, alienating this property;
• when an economic subject (association of economic subjects or group of persons carrying out the control over the property of each other) purchases the rights of the other economic subject specifying the terms of business activity and/or giving the possibility to carry out the functions of its supreme management body

are also subject to obtaining the prior consent of AMSAR if:

• total balance value of assets of economic subjects specified above exceeds the amount of 75 000 times of the minimal amount of salary (which is 6,373,000 AZN);
• the commercial market share of one of economic subjects exceeds 35%;
• the economic subject, purchasing shares controls the activity of an economic subject, alienating these shares.

The applicant for the conduct of transactions such as establishment, reorganization and liquidation of economic subjects and also the transactions, concluded between economic subjects on purchasing shares which meet the "antimonopoly approval" criteria specified above should submit to AMSAR: i) the application; and ii) the respective agreement and/or resolution on establishment, reorganization or liquidation of the business entities; and iii) information and\or documents about the volumes of sale of main products (or services) at the respective commercial market enclosed in the application. In spite of the strict provision of the law prohibiting AMSAR from demanding any other documents from the applicant(s) or economic subjects , in practice AMSAR may demand some additional documents depending upon the specifics of the case. For example, the aforementioned list does not include submission of any By-laws, documents or information about shareholders\founders, decisions makers - competent officials, annual reports, etc of the applicant including the other parties to transaction, however, those documents can and will be required by AMSAR.

If AMSAR refuses to grant its prior consent for whatever reason, the applicant has a right: i) to appeal in an administrative order to the highest state body; and to also ii) raise a claim in the relevant Economic Administrative court of Azerbaijan for the annulment of the decision of AMSAR.

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3.2 Approval / notification thresholds

All transactions of the economic subjects on establishment, reorganization and liquidation of specified economic subjects and also transactions, concluded between economic subjects on purchasing the shares meeting the criteria provided under p. 3.1 must be carried out upon receipt of a prior written consent of AMSAR.

However, the law does not clearly specify the time limits or deadlines when (at what stage of transaction) and namely by whom (from the various parties in the transaction) the application for approval should be made.

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3.3 "Groups" and "intragroup deals"

The acting Azerbaijani antimonopoly and competition legislation does not specifically provide any express rules or exemptions for so called "groups" or "intra-group" transactions. Both group and intra-group transactions are still subject to the prior approval of AMSAR to determine if such transactions meet the required criteria.

Under the requirements of antimonopoly law the intra-group transactions between the economic subjects on:

1. purchasing more than 20% of shares constituting partnership capital of one economic subject and giving the voting right to other economic subject-association of economic subjects or group of persons controlling each other's property (however, these restrictions are not applied to the constitutors or founders of economic subjects at the initial stage of establishment of the economic subject);
2. transfer of main means of production and/or non-material assets of one economic subject to the ownership or use of another economic subject (association of economic subjects or group of persons controlling each other's property), the balance value of the property, being the subject of transaction, exceeds 10% of main means of production and non-material assets of economic subject, alienating this property;
3. acquisition of the rights of the other economic subject specifying the terms of business activity and/or giving the possibility to carry out the functions of its supreme management body (when the economic subject - association of economic subjects or group of persons controlling each other's property)

are also subject to prior approval and consent of AMSAR if:

• total balance value of assets of economic subjects specified above exceeds 75 000 times of the minimal amount of salary (which is 6,375,000 AZN);
• the respective commercial market share of one of economic subjects exceeds 35%;
• the economic subject purchasing shares controls the activity of economic subject, alienating these shares.

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3.4 Exceptions from transaction approval requirements

The acting antimonopoly and competition legislation does not provide any approval and/or consent requirements by AMSAR:

1. for the transactions on the transfer of the rights of economic subjects to inventions, trade marks and authorship except cases of deliberate use of such rights with the aim of the restriction of competition;
2. transactions on the establishment of economic subjects by the constitutors or founders of economic subjects even if the newly established economic subject falls under the criteria which require AMSAR's prior approval and consent;
3. the transactions covered by the laws on ratification of the Azerbaijani Production Sharing Agreements (PSA) and main pipeline and other similar agreements and deals;
4. all other kind of transactions which are not covered by the provisions of p. 3.1. above.

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3.5 General approval procedure

The general rule is that the parties to transaction must apply to AMSAR requesting its prior approval for the transactions on establishment, reorganization and liquidation of the economic subjects and also the transactions concluded between the economic subjects on purchasing the shares that meet the necessary criteria provided by antimonopoly law to obtain prior approval and the consent of AMSAR.

But the law does not clearly specify exactly which of the parties to transaction should act as an "applicant" for getting the prior consent of AMSAR – the party alienating the shares and/or purchasing party or the economic subject whose shares are subject to alienation. Therefore, due to the gap in the current legislation, in practice these issues are usually negotiated and agreed with the competent officials of AMSAR before filing the application.

According to the provisions of Article 13 of the Law "On Antimonopoly Activity", AMSAR should inform the applicant in writing about its decision not later than 15 days after the receipt of the required documents attached to the application.

There is no payment of "filing fee" required by law.

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3.6 Implications of a failure to obtain approval

First of all, the transactions conducted without obtaining a prior consent of AMSAR which are subject to such consent under the requirements of law may be considered invalid by court following the claim and action raised by AMSAR.

Besides, a financial sanction up to five thousand five hundred manats can be applied by AMSAR to the economic subjects for the conduct of such transactions without obtaining a prior consent and also for non-presentation of information and documents specified by the antimonopoly law.

The transaction can be restored only after payment of financial sanctions applied by AMSAR and receipt of prior consent of AMSAR.

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