‘Approved’
State Committee for Securities of
the Republic of Azerbaijan
Resolution № 18-q
3 February 2016
Chairman

_______________ Rufat Aslanly

Regulations on issuance of shares during merger, split and increase of nominal value of shares

1. General provisions

1.1. These Regulations have been developed in accordance with Article 104.1 and 1077.7 of the Civil Code of the Republic of Azerbaijan and regulate issuance of shares during merger, split, increase and decrease of nominal value of shares.
1.2. When shares are merged, two or more shares merged are exchanged for one share with a par value equal to total par value of those shares.
1.3. When shares are split, one split share is exchanged for two or more shares with total par value equal to the par value of that share.
1.4. When the nominal value of shares is increased, the shares with a lower nominal value are exchanged for shares with a higher nominal value.
1.5. When the nominal value of shares is decreased, shares with a higher par value are exchanged for shares with a lower par value.

2. Decision on issuance of shares

2.1. Shares are merged, split, the nominal value of shares is increased and decreased at the decision of the general meeting of shareholders on issuance of shares.
2.2. The decision on issuance of shares should indicate the following:
2.2.1. issuer’s full name and address
2.2.2. the date of the decision on issuance of shares;
2.2.3. the name of the managerial body of the issuer that took the decision;
2.2.4. the type of shares;
2.2.5. nominal value of shares, the number and total amount of shares in the issuance;
2.2.6. the rights of the owner of shares specified with one security;
2.2.7. liabilities of the issuer due to the owner of shares;
2.2.8. the means and order of placement of shares;
2.2.9. start and end days of placement of shares
2.2.10. terms and procedure for payment of the value of shares (when the nominal value of shares increases).
2.3. In the decision on issuance of shares during merger of shares the number of shares exchanged per placed share should be indicated in full numbers. In case of availability of shares that cannot be completely exchanged during merger of shares a decision on issuance of shares may not be taken.
2.4. The decision on issuance of shares during split of shares should indicate the number of shares every split share is exchanged for in full numbers.
2.5. Increase of issuer's authorized capital by increasing the nominal value of shares is carried out only against issuer’s retained earnings or payments made by shareholders
2.6. A decision on issuance of shares when the nominal value of shares is increased or decreased may be taken in the absence of shares repurchased by the issuer.
2.7. The decision to issue shares should specify the procedure for exercising the rights of shareholders established by shares in the event of an exchange of shares.

3. State registration of issuance of shares

3.1. To have shares state registered the issuer applies to the State Committee for Securities of the Republic of Azerbaijan (hereinafter – the Committee). The application (Annex №1) is delivered via mail or a special electronic service section in the official Internet information resource of the Committee. The application is attached with the following documents:
3.1.1. a decision on issuance of shares;
3.1.2. copies of issuer’s state registration as a legal entity and charter notarized or approved in accordance with Article 9 of the Law of the Republic of Azerbaijan on Administrative Proceedings;
3.1.3. when the nominal value of shares is increased against retained earnings – issuer’s financial statements for the recent financial year ended and a copy of an audit opinion on their audit review and financial statements on the last quarter approved by the persons designated by the charter of the issuer;
3.1.4. when the nominal value of shares is decreased – a document confirming issuer's sending notifications to its creditors on reduction of authorized capital;
3.1.5. when shares are merged and split – the number of owners whose shares are merged or split, and a list showing the number of shares owned by each of them.
3.2. The documents delivered for state registration of issuance of shares are reviewed within 15 (fifteen) days upon their submission and the issuance of shares is state registered in case of no grounds for refusal.
3.3. When the issuance of shares is state registered the Committee sends an Extract from the state register of securities to the issuer on state registration of issuance of shares.
3.4. State registration of issuance of shares is refused if:
3.4.1. the documents specified in Item 3.1 herein are not delivered;
3.4.2. it is discovered that the decision on issuance of shares (other documents that are the basis for state registration of issue of shares) includes inaccurate, or distorted information;
3.4.3. a report on results of the previous issuance of issuer’s shares is not approved.3.5. If the cases specified in Item 3.4 herein are identified, the Committee takes a reasoned decision on refusal to state register the issuance of shares and sends the decision to the issuer within 2 (two) working days.
3.6. The decision to refuse state registration of a share issue may be appealed in administrative or judicial order.

4. Placement of shares

4.1. The issuer obtains the right to place shares from the moment of the state registration.
4.2. Shares are placed by the private/closed method of placement in accordance with the decision on the issue of shares
4.3. To exchange shares, the issuer should apply to the central depository no later than 30 (thirty) days from the date of state registration of the issue of shares.
4.4. When securities are split, one security that is split in the depository system is exchanged for two or more securities of a new issue, the total face value of which is equal to the face value of that security.
4.5. When securities are merged, two or more securities merged in the depository system are exchanged for one security of a new issue, the nominal value of which is equal to the total nominal value of those securities.
4.6. When increasing authorized capital of a joint-stock company by increasing the nominal value of shares, shares with a lower nominal value in the depository system are exchanged for shares with a higher nominal value.
4.7. When decreasing authorized capital of a joint-stock company by reduction of the nominal value of shares, shares with higher nominal value are exchanged for shares with lower nominal value in the depository system.

5. Report on results of issuance of shares

5.1. Within 10 (ten) business days from the date of completion of placement of shares, the issuer submits a report on results of the issuance of shares (Annex №3) together with an application for its approval (Annex №2) to the Committee by mail or special electronic service section of the Committee's official website.
5.2. The Committee reviews the report on results of the issuance of shares within 15 (fifteen) days and approves it in case of absence of grounds for refusal specified in Item 5.3 herein, and provides the issuer with an extract from the state register of securities.
5.3. If the fact of violation of the terms of the issuance of securities, as well as the requirements of Chapter II of the Law of the Republic of Azerbaijan ‘on the Securities Market’ is revealed during review of the report on results of issuance of shares, the Committee should take one of the following decisions specifying the grounds:
5.3.1. on elimination of violations by the persons who committed them within the established timeframe;
5.3.2. in case it is impossible to eliminate the violations, on refusal to approve the report on results of issuance of shares.
5.4. In case the decision specified in sub item 5.3.1 herein is taken, the person who committed violations should deliver a report on elimination of those violations attached with relevant supporting documents to the Committee within the timeframe set by the Committee. If the Committee identifies from the report that the violations have been eliminated, it approves the report on results of issuance of shares; in case the violations have not been eliminated or no report is delivered on the case at all, the Committee takes the decision specified in sub item 5.3.2 herein and informs the issuer accordingly.
5.5. Refusal to approve the report on results of issuance of shares is the basis for deeming the issuance of shares failed. The issuer should ensure the return of funds received from the placement of shares to investors within 10 (ten) days from the date of publication by the Committee of information on the failure to issue shares.
5.6. The issuer may appeal against the refusal to approve the report on results of issuance of shares in administrative or judicial order.

Annex №1
to the Regulations on issuance of shares
during merger, split and increase of
nominal value of shares

APPLICATION
FOR STATE REGISTRATION OF ISSUANCE OF SHARES

………………………………………………………………..................………………………………..
(Issuer’s full name)
is asking to state register shares………………………………………………………………………..
(type of placed shares)
……………………………………………………………………………………………………………
(nominal value and number of shares to be placed)
to be placed by means of closed/private placement at the decision of the general meeting of
shareholders ……………………………………………………………………………………………
(the date of the decision on issuance of shares and the number of the protocol)

(Names and the number of pages per documents to be attached with the application on state registration of issuance of shares)
…………………………………………………………………..................……………………………..
(Issuer’s address, indicating zip code)
………………………………………………………………………......................……………………..
(Issuer’s contact numbers, indicating long distance phone code)
………………………………………………………………………..................………………………..
(1st, last names of the head of the collegial executive body or the sole executive body of the issuer and signature, certified by the seal of the issuer)
……………………………..
(Date of application)

Annex №2
to the Regulations on issuance of shares
during merger, split and increase of
nominal value of shares

APPLICATION
FOR APPROVAL OF THE REPORT ON RESULTS OF ISSUANCE OF SHARES

..…………………………………………..…………………………………………………...………….
(Issuer’s full name)

..…………………………………………..……………………………………………...……………….
(the date of state registration of issuance of shares)

state registered on

..…………………………………………..………………………………………………..…………….
(state registration number of issuance of shares)

..…………………………………………..…………………………………………..………………….
(nominal value and number of placed shares)

..…………………………………………..……………………………………………………..……….
(type of placed shares) is asking to approve the report on results of issuance of shares.

..…………………………………………..…………………..........…………………………………….
(Issuer’s address, indicating zip code)

..…………………………………………..…………………………………………………..………….
(Issuer’s contact numbers, indicating long distance phone code and e-mail address (if any))
..………………………………………..…………………………………………………………..…….
(1st, last names of the head of the collegial executive body or the sole executive body of the issuer and signature, certified by the seal of the issuer)

..…………………………………
(Date of application)

Annex №3
to the Regulations on issuance of shares
during merger, split and increase of
nominal value of shares

SAMPLE FORM OF THE REPORT ON RESULTS OF ISSUANCE OF SHARES

1. TITLE PAGE FORM OF THE REPORT ON RESULTS OF ISSUANCE OF SHARES

..………………………………………….....…………………………………………………………….
(Issuer’s full name)
..…………………………………………..……………………………………………………...……….
(Shares’ nominal value and number)
..…………………………………………..………………..…………………………………………….
(Type of shares)

REPORT ON RESULTS OF ISSUANCE OF SHARES

..…………………………………………..……………………………..……………………………….
(state registration number of issuance of shares)
..…………………………………………..……………………………….......………………………….
(Issuer’s address, indicating zip code)
..…………………………………………..………………………………………...…………………….
(Issuer’s contact numbers, indicating long distance phone code and e-mail address (if any))
..…………………………………………..………………………………………...…………………….
(1st, last names of the head of the collegial executive body or the sole executive body of the issuer and signature, certified by the seal of the issuer)
..…………………………………
(Date of report)

2. INFORMATION INCLUDED TO THE REPORT ON RESULTS OF ISSUANCE OF SHARES

1. The type and form of shares.

Type of shares (common or preferred).

2. The number of shares.

The number of shares in numbers and letters.

3. Nominal value of shares.

Nominal value of shares in numbers and letters.

4. Aggregate nominal value of shares.

Aggregate nominal value of shares in numbers and letters.

5. Period of placement of shares.

The date of actual placement of shares is indicated.

6. Information on placed shares.
The number of owners of placed shares and the number of shares placed per each of them, the order of exchange of shares, the type, form, number of shares exchanged for placed shares, the state registration number and registration date of that issuance of shares.