State Registration of Non-Commercial Legal Entities

In our previous articles, we discussed which types of commercial legal entities may be selected and the procedures for their state registration. In this article, we will address the registration of non-commercial legal entities.

1. Introduction

First, let us examine the concept of a non-commercial legal entity.

The classification of this type of legal entity is set out in the Civil Code.

Pursuant to Article 43.5 of the Civil Code, legal entities may be entities whose principal purpose is not the generation of profit and which do not distribute any profit obtained among their participants (non-commercial legal entities).

According to Article 43.6 of the same Code, legal entities that are non-commercial organizations may be established in the form of public associations, foundations, unions of legal entities, as well as in other forms provided for by legislation.

Non-commercial legal entities may engage in entrepreneurial activity only where such activity serves the purposes for which they were established and is consistent with those purposes.

For the purpose of carrying out entrepreneurial activities, non-commercial legal entities may establish business companies or participate in them.

As follows from the substance of the provision, the primary purpose of a non-commercial legal entity is not profit generation, and profit-making is only permissible in exceptional circumstances.

Non-commercial legal entities may take the following forms:

• - Public associations
• - Foundations
• - Unions of legal entities
• - Other forms provided by law

2. Legislation Governing the Registration of Non-Commercial Legal Entities. Competent Authority

The authority responsible for the registration of non-commercial legal entities is the Main Department for Notary, Registration and Registry of the Ministry of Justice of the Republic of Azerbaijan.

The registration of non-commercial legal entities is governed by the following legislative acts:

• - Civil Code of the Republic of Azerbaijan
• - Law of the Republic of Azerbaijan “On State Registration and State Register of Legal Entities”
• - Decision of the Collegium of the Ministry of Justice approving the Rules for State Registration of Non-Commercial Organizations
• - Law of the Republic of Azerbaijan “On Non-Governmental Organizations (Public Associations and Foundations)”
• - Law of the Republic of Azerbaijan “On State Duty”

3. Registration Procedure. State Duty

At the outset, it should be noted that the application for registration must be notarized, and the following documents must be attached thereto:

• 1. Charter (in 2 copies);
• 2. Founding resolution regarding:
  -  establishment of the entity;
  -  approval of the charter;
  -  formation of management bodies;
  - Document confirming payment of the state duty;
  
  3. For foundations: document confirming payment of at least AZN 10,000 as charter capital;
  4. Founder-related documents:
  -  if the founder is an individual - copy of the identity document;
  -  if the founder is a local legal entity - state registration documents and notarized copy of the charter;
  -  if the founder is a foreign legal entity — registration and incorporation documents;
  -  Document confirming the legal address;
  -  Copy of the identity document of the legal representative;

• Additional documents where applicable:
  -  if the founder is a foreign citizen or stateless person permanently residing in Azerbaijan - document confirming the right of residence;
  -  if religious activity is envisaged - opinion of the State Committee for Work with Religious Organizations;
  -  if documents are submitted through a representative - power of attorney / authorization document;
  -  if the word “Shusha” is used in the name - relevant approval document.

Pursuant to Article 20.3 of the Law “On State Duty,” the state duty for registration of other legal entities amounts to AZN 15.

Once the application is submitted to the competent authority, the application and attached documents are reviewed.

If deficiencies are identified that do not constitute grounds for refusal of state registration, the documents are returned to the applicant, and an additional 20-day period is granted for rectification of such deficiencies.

If the deficiencies are not remedied within the prescribed period, state registration shall be refused.

4.  Grounds for Refusal of State Registration

State registration may be refused in the following circumstances:

• - where the submitted documents contradict the Constitution of the Republic of Azerbaijan or other legislative acts;
• - where the information indicated in the application and/or attached documents is inaccurate;
• - where the objectives, tasks, or forms of activity of the non-commercial organization or educational institution contradict legislation;
• - where requirements relating to protection of trade names are violated, or an identical non-commercial organization or educational institution has already been registered, or where the NGO’s name includes the names of state authorities of the Republic of Azerbaijan or names of prominent Azerbaijani persons without permission from their close relatives or heirs;
• - where the charter of a non-governmental organization provides for appropriation of powers of state or local self-government authorities, or state supervision and inspection functions;
• - where deficiencies identified in the founding documents are not remedied within the statutory timeframe.

5. Conclusion

As can be seen, non-commercial organizations may take various organizational and legal forms, and their state registration requires the proper and sequential completion of a number of legal procedures.

Ironwood Consulting is ready to provide professional legal support at every stage of the establishment and state registration of non-commercial organizations.