Related extractions from Civil Code of the Republic of Azerbaijan

 

Article 197. Priority of Claim Owners

If the claimant is conditioned by several persons about the concession of the same claim, the claim passes to the person who has previously made the relationship with the claim owner, unless otherwise stipulated in the Law of the Republic of Azerbaijan "On Encumbrance of Movable Assets".  İf it is not possible to identify it, the request passes to the person previously reported to the debtor. The same rule is applicable to future claims.

 

Article 205.Enforcement of the Property for the Owner’s Liabilities

205.1. Acquisition of property through enforcement on the property for the Owner’s Liabilities shall be carried out pursuant to the Law of the Republic of Azerbaijan "On Encumbrance of Movable Assets" or to the court decision unless otherwise specified in the contract.

205.1.2. The ownership rights of the owner of the enforced property shall terminate from the moment the person to whom the enforced property was transferred acquires the ownership right thereto.

 

Article 274. Consequences of changing of owner of pledged or mortgaged property

Ownership changing of pledged or mortgaged property does not change the pledge or mortgage right.

274.1. Ownership changing of mortgaged property does not change mortgage right.

274.2. Ownership changing of pledged property does not change the pledge right, except for the cases established in the Law of the Republic of Azerbaijan " On Encumbrance of Movable Assets”.

 

Article 278. Property to which pledge right is applicable

The right of the pledgor to the thing which is the subject of the pledge (the right of pledge) shall apply also to its belongings, unless otherwise specified in the contract. Pledge right to yield, product and profit obtained as a result of use of pledged property shall apply in circumstances stipulated in contract. Pledge right to yield, product and profit obtained as a result of use of pledged property shall apply in circumstances stipulated in contract.

Unless otherwise provided in the contract, pledge right automatically extends to equipment and other assets specified in the Law “On Encumbrance over Movable Properties”.

 

Article 280. Pledge agreement

280.1. Pledge agreement shall be concluded in written form.

280.2. The pledge agreement shall contain the name and place of residence of the parties, the object of pledge, the nature, size (maximum limit) and duration of the obligation provided with the pledge. The description of the pledged object may indicate that it consists of all existing or future movable property of the pledgor. Such description may also include a specific type (category) of movable property, receivables, or a part of thereof. 

280.3. Pledge agreement shall, in circumstance provided in this Code, be notarized, whereas pledge right shall be state registered.

280.4. Non-observance of provisions of this article shall result in invalidity of pledge agreement. Such agreement shall be considered void.

 

Article 282. Subsequent pledge

282.1. Pledged property may be subject of another pledge (subsequent pledge).

282.2. Subsequent pledge shall be permitted if not prohibited by prior pledge agreements.

282.3. Taking into account the circumstances defined in the Law of the Republic of Azerbaijan "On Encumbrance of Movable Assets", in the subsequent pledge, the subsequent pledgee's claims are paid out of the value of the pledge object after the previous pledgee's claims are satisfied.

 

Article 289.1. Retention of pledge in case of transfer of ownership right to pledged property

289.1. Taking into account Article 274.2 of this Code the pledge right remains in force when the right of ownership to the pledged property is transferred to another person from the pledgor as a result of the price or non-price alienation of that property or the right of universal legal succession. Pledgor’s legal successor shall take pledgor’s place and bear pledgor’s all obligations, unless provided otherwise in the contract with pledgee.

289.2. In the event of transfer of pledgor’s property being subject of pledge to several persons in order of universal succession, each of legal successors (property acquiring persons) shall bear, in proportion to transferred to him share of that property, responsibility for arising-out-of-pledge consequences of non-performance of guaranteed by pledge obligations. However, in the event of indivisibility of subject of pledge or where it remains in legal successors’ common ownership due to other grounds, they shall become joint pledgors.

                                                       

Article 294. Termination of pledge

294.1. Pledge shall be terminated in the following circumstances:

294.1.1. upon termination of obligation guaranteed by pledge;

294.1.2. upon pledgor’s demand in the event of presence of grounds specified in Article 283.3 of the Code;

294.1.3. upon destruction of pledged property or termination of pledged right, in the event pledgor has not used right provided in Article 288.2 of this Code;

294.1.4. upon sale of pledged property from open auction due to enforcement on pledged subject.

294.2. In the event of termination of pledge as a result of performance of obligation guaranteed by pledge or upon pledgor’s demand, pledgee keeping pledged property shall be obligated to immediately return it to pledgor.

 

Article 296. Procedure for enforcement of pledged property

296.1 Repayment of pledgee’s claim on behalf of pledged property without application to court shall be allowed on the basis of notarized agreement between pledgor and pledgee. Court may consider such agreement invalid upon claim of person whose rights have been violated by such agreement. In the absence of such agreement, repayment of pledgee’s (creditor’s) claim from value of pledged property shall be carried out through court decision. Enforcement on pledged subjects to which the Law of the Republic of Azerbaijan "On Encumbrance of Movable Assets” applies, shall be carried out in accordance with the procedure established by the Law.

296.2. Enforcement on pledged subject may be carried out through court decision only in the following circumstances only through court decision in the following circumstances:

296.2.1. where other person’s approval or consent is required for conclusion of pledge agreement;

296.2.2. where subject of pledge is property of significant historical, artistic or cultural value to society.

 

Article 297. Realization (sale) of pledged property

The pledged property is realized (sold) by specialized organizations only through open auctions.

The pledged property can be sold in auction (open auction) or in any way in cases specified by the Law of the Republic of Azerbaijan "On Encumbrance of Movable Assets

 

Article 298. Distribution of amount received from sale of pledged property

298.1 From amount received from sale of pledged property a pledgee’s claims shall be repaid after withholding of an amount necessary for compensation of expenses incurred in respect of enforcement on  that property and its sale, and the remaining sum shall be transferred to pledgor.

298.2 In the event amount received from sale of pledged property is not sufficient for repayment of pledgee’s claim, pledgee shall have the right to receive missing amount from pledgor’s other property, unless otherwise  provided in agreement. In that case, pledgee shall not have priority right based on pledge.

298.1. The amount received from the sale of the pledged property are distributed in the following sequence:

298.1.1. payment for maintenance, salvage, improvement of the pledged property and its sale;

298.1.2. Payment of claims that have superior rights in the cases and in the manner prescribed by the Law of the Republic of Azerbaijan "On Encumbrance of Movable Assets";

298.1.3.payment of pledgee’s claims;

298.1.4. Payment of claims that have lower rights in the cases and in the manner prescribed by the Law of the Republic of Azerbaijan "On Encumbrance of Movable Assets".

298.2. After the payments specified  in Article 298.1 of this Code, the remaining sum received  from the sale of the pledged property shall be transferred to the pledgor within 10 (ten) business days of the sailing of pledged property.

298.3. In the event amount received from sale of pledged property is not sufficient for repayment of pledgee’s claim, pledgee shall have the right to receive missing amount from pledgor’s other property, unless otherwise  provided in agreement. In that case, pledgee shall not have priority right based on pledge.

 

Article 299. Termination of enforcement of and sale of pledged property

299.1.  Debtor or third-party pledgor may, by performing guaranteed by pledge claim or part of claim in respect of which performance is late, terminate enforcement on and sale of pledged property at any time. Until sale of pledged property due to enforcement on pledged subject (until concluding of purchase contract or until signing of the protocol on the results of the auction), or until transferring the pledge object to the ownership of pledgee according to the Law of the Republic of Azerbaijan "On Encumbrance of Movable Assets” the pledgor and (or) the debtor may terminate the enforcement on the pledged object by performing the obligation provided with pledge or delayed part of the obligation. Agreement restricting that right shall be void.

299.2. Person demanding termination of enforcement of and sale of pledged property shall be obligated to compensate pledgee for expenses incurred in respect of enforcement and sale of that property.

Article 306. Pledge of goods in turnover

306.1. In case of pledge of property in turnover, the pledgor retains the property and is entitled to change the content and natural form of the property (commodity reserve, raw materials, materials, half-finished and finished products etc.). provided that their total value does not fall below the value indicated in the pledge agreement. Reduction of value of pledged goods in circulation shall be allowed in proportionally to executed part of the obligation provided by pledge, unless otherwise specified in the contract.

306.2. Goods in turnover alienated by pledgor shall cease to be subject of pledge from the moment of their transfer to acquirer’s ownership, whereas goods acquired by pledgor as well as goods specified in pledge agreement shall become subject of pledge from the moment pledgor acquires ownership right to them.

306.3. Pledgor of goods in circulation shall be obligated to compile book of register of pledges in the event agreement does not provide for other conditions for controlling over pledgor’s activity. Records of last day of operation relating to conditions of pledge of goods and all operations causing change of pledged goods’ content or natural form, including their refining, shall be entered into this book. When property in turnover is pledged, parties may agree that total value of pledged property shall not fall below the value specified in the pledge contract. In this case:

306.3.1. unless otherwise specified in the contract, the value of the pledged property may be reduced in correspondance with the value of performed principal obligations.

306.3.2. the pledgor has to keep a book of registry of pledged property. The book shall contain conditions of pledge, all transactions that resulted in change of natural form or composition of the pledged property, as well as notes on their processing for the last trading day.

306.4. In the event of violation by pledgor of conditions of pledge of property in turnover, pledgee may, until elimination of violation, suspend operations with pledged property by attaching his marks to the property.

 

Article 391. Invalidity of the Contract Made with Respect to a Future Property

A contract on the transfer by one party of all or part of its future property to another party, or a contract on the assumption of an encumbered usufruct obligation, shall be invalid, but the exception is the case where the contract relates to separate items of future property, as well as circumstances determined by the Law of the Republic of Azerbaijan "On Encumbrance of Movable Assets".

 

Article 395. Limits of the Property Encumbrance Contracts

Where a person undertakes to alienate or to encumbrance of his property, this obligation also applies to the fixture of the item, unless otherwise specified in the Law of the Republic of Azerbaijan "On Encumbrance of Movable Assets" or in the agreement.

 

Article 606. Reservations concerning Retention of Right to Ownership

606.1. Where the seller of movable property retains the right to ownership until payment of the price by the buyer (clause concerning keeping the right to ownership), it is presumed that the assignment of the property is delayed until the complete payment of the purchase price, and if the buyer delays the payment of purchase price, the seller shall have a right to cancel the agreement and take the property back.(or) to enforcement on this movable property.

606.2. Persons authorized by the seller, as well as the buyer’s creditors shall also conform to the seller’s right to ownership of the purchased item proceeding from Article 606.1 of this Code. In this case «the authorized person» shall mean a manager or any person appointed to manage the buyer’s property in case of his insolvency for the benefit of his creditors.

606.3. Article 606.2 of this Code shall not restrict the superior or equal rights of creditors. They shall have the right of pledge or other guaranteed rights which do not result from arrest or execution of court decisions or can exercise the right to withhold or use confiscated vehicles, ships or planes.

606.4. In the event that sell and purchasing agreement stipulates that until the payment for commodity the right of ownership of the item passed to purchaser is retained by seller, purchaser shall not before the transfer of the item of ownership to appropriate or otherwise dispose such item, unless otherwise is stipulated under contract or otherwise represents the aim and properties of item.

 

Article 968. Limitation of disposition in respect of account

Restrictions on the client’s rights to dispose of the monetary funds in the account are not permitted, however, the circumstances of imposition through the court decision of an arrest on the monetary funds and suspension of operations on account in cases specified in law, as well as circumstances determined by the Law of the Republic of Azerbaijan "On Encumbrance of Movable Assets" shall constitute the exception.