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  Law about credit union

Law of the Azerbaijan Republic About The Credit Union

This law is determined the creation of credit unions in Azerbaijan Republic, and economical, legal and organizational bases of the activity.


Clause 1. Credit Union Conception
• Credit Union is non-bank credit organization that is created by the volunteer natural persons and (or) juridical persons who have the little entrepreneurship subject by the gather of free cash means for mutual crediting of themselves.
• Mutual crediting is a short time and long time credit that give for paying agricultural and social needs of members on account of cash means that gathered in Credit Union.
• Credit Union has the own property, on behalf of itself can get property and non-property laws, can be plaintiff and respondent in court.

Clause 2. Legislation about Credit Unions
Legislation about the Credit Unions consists from the Constitution of the Azerbaijan Republic , from this law and from other legislation acts of the Azerbaijan Republic .

Clause 3. Main principles of the Credit Union activity.
1. Main principles of the Credit Union are the followings:
1.1. Unite of Members on basis of interest community and mutual trust;
1.2. Voluntaries of membership;
1.3. Clearness of activity;
1.4. Connection of personal interest with the collective interest;
1.5. Members' Legal Equality independent from volume of shares;
1.6. Members' personal participation in management of Credit Union;
1.7. Direction of means to the entrepreneurship activity;
1.8. Organization of activity based on self-control;

Clause 4. Rights of Credit Union
2. Credit Union has the following rights:
1.1. To buy credit, grant from banks, international and foreign finance-credit organizations;
1.2. To give credits to own members as indicated in regulation;
1.3. To deposit free cash means to the banks, other Credit Unions, also spend to buying of securities.

Clause 5. State and Credit Unions
• To take measures on creation of State Credit Unions and stimulation of activity;
• After the Constituent Assembly Credit Union according to the legislation of the Azerbaijan Republic shall state register as a judicial person;
• If Credit Union shall not state registered during the determined term then this Credit Union will not consider as constituent and during the 15 days all shares must be returned.
• If the Credit Union will not be state registered then constitutors can apply to the court. In this case return of the shares can be prolonged till the decision of the court.
• State is not bear for responsibilities to the obligations of the Credit Union and also Credit Union is not bear for responsibility to the obligations of the State.
• State is guarantee to protection of Credit Unions and legal rights and interests of theirs members.
• If during the inactivity of State Power Bodies will damage to the Credit Unions then such damages must be paid by that bodies.
• For carried out bank operation Credit Union must get special license according to the legislation.
• If Body which give special license to the bank operation will refuse to give such licenses this Body must base it. Refuse about given of such license must be looked through in court according to the application of the constitutors.
• Body which give special license to the bank operation can determine requests and can apply the sanctions about the Economical regulation normative to the Credit Union and about the trade activity of administrative personnel members;
• To request carry out of measures that directed to the prevent of discovered violations;
• To stop or to abolish special license;

2. High governance organ of Credit Union is the general meeting of constitutors. The superior governance body of the Credit Union is the General Meeting of constitutors called at least once in a year. Calling of extraordinary general meeting is determined according to the regulation. Executive body is declared calling of general meeting till the 20 days.

3. The following subjects and decisions are concern to the exception authorities of the General meeting:
3.1. Acceptance of regulation, make amendments and appendixes to it;
3.2. Determine of rules of acceptance to membership and (or) terminate of membership;
3.3. To choose Observation Council, Executive Body, Chief of Executive Body, Credit Commission, listen to their accounts and terminate their authorities;
3.4. Certify of annual report and balance;
3.5. Determine of volume of shares and other payments and payment rules;
3.6. Division of Credit Union benefits and determine of usage rules;
3.7. Determine of conditions and rules of issuing of credits;
3.8. Creation of funds of Credit Union and determine of usage rules;
3.9. Determine of rule of recovering of losses and determine of limit of administrative executive expenses;
3.10. Enter of Credit Union of the Unity of Credit Unions and to leave from the Unity;
3.11. Decide about the Reorganization and liquidation of the Credit Union;
3.12. Carried out audit and decide about the choose of auditor;
3.13. According to the regulation Resolve of other subjects connected to the activity of the Credit Union;

4. If 51% of members will participate in general meeting then general meeting will be considered as competent.
If two thirds of members that participated in general meeting will vote then decision about the questions that entered to the exception authorities of the general meeting will be considered as accepted by the majority vote of members. But about the votes, vote of chief will be casting.

4. Decision in general meeting can be accepted with the open or confidential way as indicated in the regulation.

Clause 13. Control to the activity of the Credit Union
• In General meeting for carried out control to the activity of the Credit Union must be selected Supervisory Council from the members of the Credit Unions. Content of the Supervisory Council must not be less than 3 persons.
• Member of the Supervisory Council can not be member of the Executive Body and Credit Commission.
• Supervisory Council:
• is control to the execution of the decisions of the General Meeting;
• Analyze activity of the Credit Union, Executive Power and Credit Commission, and carry out control to the finance-agricultural activity.
• Present report, annual balance of the Executive power and Credit Commission with its own opinion to the General Meeting.
• Gives a warning for the prevent of shortages that in activities of the Executive power and Credit Commission and for abolish of illegal decisions or must about it inform to the General Meeting.
• Must look through to the complaints from the Executive Body and Credit Commission.
• Must carry out functions that indicated in this regulation;
• One of members of the Supervisory Council must have auditor practice. If one of the members of the Supervisory Council must not have auditor practice then auditor can drawn according to the contract.

Clause 14. Leadership to the activity of the Credit Union.

• Period between the general meetings Executive body and chief of the executive body must carry out leadership to the activity of the Credit Union. Member of the Executive body can be member of the Supervisory Counsel and Credit Commission.
• Number of members of the Executive Body, election term, right, power and duty of Executive Body, its members and chief is determine according to the regulation. Content of the Executive Body must be less than 3 persons.
• Executive Body:
• Must look through to the acceptance of new members and abolish of the powers to the Credit Union;
• Must represent the Credit Union and in connection with the third person in court;
• must organize passing of the General meeting;
• must sign a labor contract with the workers and must contract with own members and third members;
• must give credit on basis of opinion of the credit commission;
• must prepare accountant balance and other finance balance;
• must carry out other functions that intended in the regulation;
• Salary of the Executive Body is determined according to the rule that intended in this regulation;

Clause 15. Give of credits

• Decision about give of credit is accepted by the Executive Body on basis of opinion of the credit commission.

In General Meeting that consists of less than 3 members is selected from the Credit Union. Power of the Credit Union, duties, rights and obligation is determined with the regulation.

• Member of the Credit Commission can not be member of the Supervisory Council and Executive Body;
• Members of the Credit Commission must look through the applications about buying the credits, issue of credits and return conditions and must give offers about it to the Executive Power. Without any opinion of the Credit Commission Executive Body can not sign a contract with the members.
• Also can request guarantee according to the legislation of the Azerbaijan Republic .
• Credits Commission can give offers to the general meeting for determine percentage degree of the credits.
• Credit Commission must give report about itself activity to the General Meeting.

Clause 16. Responsibility of Supervisory Board, Administrative Staff and Credit Commission

The members of the supervisory board, administrative staff and credit commission bear responsibility for their action (inaction) by the rule determined in the legislation of Azerbaijan Republic .

Clause 17. Rules of tax deduction, accounting and report in the Credit Unions.
• Determined by tax code Azerbaijan Republic in Credit Union.
Rules of accounting, character, structure and period of presenting of report are determined by the agency giving special assent for banking activity in accordance with the legislation.


Clause 18. Authorized capital

• Authorized capital of Credit Union is formed by the shares of members.
• Minimum amount of authorized capital of Credit Union is determined by the agency giving special assent for banking activity, and shares of members, rules of payment and responsibility for violation of rules are determined by the regulation.
• By the decision of general meeting, for the activity of Credit Union cash assets can be allocated from authorized capital to get necessary building, equipment and inventories.
• Using of debt, getting by Credit Union for forming the authorized capital is banned.
• Members of Credit Union can take their shares back only after disaffiliation with membership.

Clause 19. Auxiliary fund

• With the purpose of payment of damage, made as a result of activity of Credit Union, auxiliary fund is formed.
• Auxiliary fund is formed in regulation provided in legislation.

Clause 20. Mutual Credit Fund

• Credit Union creates the mutual credit fund that is the source of crediting. Mutual credit fund is formed by the account of authorized capital, Credit Union profit, and also other means drawn from other sources in accordance with the Act. Means of this fund are used only to give credits to members.

Amount of credit paid by credit fund, can not exceed share of member getting credit, for 10 times, and means of credit fund – for 10%.


Clause 21. Abolition of Credit Union

• Basis of abolition of Credit Union:
• Decision of General Meeting about abolition of Credit Union;
• Decline of minimum amount of members and minimum authorized capital of Credit Fund.
• Decision of court, come into an effect, about abolition of bankrupted Credit Union;
• Decision of court, come into an effect, about abolition of Credit Union for violation of the acts of Azerbaijan Republic .
• Agency that made a decision about abolition creates the abolition commission and functions of administrative staff are delegated to the abolition commission.
• Abolition of Credit Union is executed by the regulations determined by the legislation of Azerbaijan Republic . After abolishment of Credit Union shares and profits according to shares distributed among the members of Credit Union after executing all duties.

Clause 22. Reorganization of Credit Union

• Credit Union can be reorganized by the regulations provided in the legislation. Dividing, and also uniting of one or more juridical persons from the staff of reorganized Credit Union, is carried out by the decision of general meeting.
• To reorganize the Credit Union the project is made out by administrative staff. The project is given response by the independent auditor.
• In reorganizing project the following information is given:
• name and the address of Credit Union;
• amount of members;
• authorized capital;
• valuation of credits and properties given;
• hereditary terms and duty period;
• criteria and rules to instruct upon the shares of members in Credit Union after reorganization;
• criteria of giving of the credits before and after reorganization;
• material and non-material rights and duties of members after reorganization, period of coming into an effect these rights and duties;
• Except reorganization project, after reorganization the regulation of each Credit Union is made out.
• Each member is given written information not earlier than 20 days, and each member can get to know the reorganization project.
• Reorganized Credit Union should get special asset for banking activity I accordance with this Act.

Clause 23. Adjudication

Disputes, originated among the members or among members and administrative staff, are investigated in the general meeting. In the case absence of mutual agreement dispute is investigated in the court.

Clause 24. Final provisions

• Credit Unions created before coming into an effect of current Act, works in accordance with current Act.

Special asset for banking activity, given before coming into an effect of current Act, remains in the effect until indicated time.
Haydar Aliyev President of the Azerbaijan Republic
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