‘Approved’
State Securities Committee
of the Republic of Azerbaijan
Resolution № 9-q
03 February 2016

Chairman
______________________
Rufat Aslanly

Regulations on registration, termination and realization of pledged securities

1. General provisions

1.1. These Regulations have been developed in accordance with Article 1078-23.17 of the Civil Code of the Republic of Azerbaijan and the procedure for registration, termination and realization of pledged securities.

2. Registration of the right for pledged securities (except for financial collateral)

2.1. The right for collateral on securities should only be registered in the depository system of the National Depository Center (hereinafter - the Central Depository) at an order of a pledger, who is the owner of collateral.
2.2. The order on registration of the right for collateral on securities should include:
2.2.1. information on the owner and third parties in whose favor the rights are registered (if a legal entity – its full name; if an individual – his/her 1st, last, middle names and address);
2.2.2. individual identification numbers of the owner and the third party in whose favor the rights are registered in the Central Depository;
2.2.3. the type, form, registration number and quantity of securities;
2.2.4. type and term of validity of the rights imposed on securities (if any);
2.2.5. documents confirming transfer of the rights on securities;
2.2.6. the owner’s signature.
2.3. The order on registration of the right for collateral with securities is attached with an original or a notarized copy of a collateral agreement.
2.4. The Central Depository reviews documents submitted for registration of the right of collateral on securities within three working days from the date of their submission. In the absence of the circumstances provided for in Item 2.6 herein for refusal to register, the right for collateral is registered in the depository system and an extract is issued to the pledgee.
2.5. Transactions on pledged securities are suspended during the period of review of documents on the day of receipt of the documents submitted for registration of the right for pledge on securities by the Central Depository.
2.6. The Central Depository refuses to register the right for pledge with securities if:
2.6.1. the documents as per Item 2.2 herein are delivered not in full;
2.6.2. the submitted documents fail to meet the requirements of these Regulations and Article 280 of the Civil Code of the Republic of Azerbaijan;
2.6.3. it is discovered that the order or attached documents include inaccurate, or distorted information.
2.7. If the cases specified in Item 2.6 herein are discovered, the Central Depository should take a reasoned decision on refusal to register the right for collateral on securities and send the decision to the pledger within 2 business days. If the Central Depository refuses to register the right for pledge on securities, transactions suspended on securities are resumed.
2.8. The pledgee should apply to the Central Depository for registration of changes in the right of pledge on securities (in case of alienation of the subject of pledge) if:
2.8.1. the nature, size or term of performance of the obligation secured by the collateral in the collateral agreement change;
2.8.2. the right of claim on the obligation secured by collateral passes to another person;
2.8.3. the subject of collateral changes;
2.8.4. the subject of collateral is alienated.
2.9. To register the changes specified in Item2.8 herein, the pledgee (the pledger, in case of alienation of the subject of collateral) should submit the following documents to the Central Depository:
2.9.1. original or notarized copy of the agreement on changes to the collateral agreement;
2.9.2. original or notarized copy of the agreement on transfer of the right of claim in case of transfer of the right of claim to another person.
2.10. The Central Depository reviews the submitted documents related to the registration of changes in the right of pledge on securities within three working days from the date of their submission. In the absence of the circumstances provided for in Item 2.11 herein for refusal to register, changes in the right for pledge in the depository system are registered and the pledgee is notified accordingly.
2.11. The Central Depository refuses to register changes in the right for pledge with securities if:
2.11.1. the documents specified in Item 2.9 herein are not submitted in full;
2.11.2. the submitted documents fail to meet the collateral related requirements of these Regulations and the Civil Code of the Republic of Azerbaijan;
2.11.3. it is discovered that the order or attached documents include inaccurate, or distorted information.
2.12. In case the circumstances specified in Item 2.11 herein are discovered, the Central Depository should make a reasoned decision to refuse to register changes in the right of pledge on securities and send this decision to the pledgee (also to the pledger in case of alienation of collateral) within two working days.
2.13. Registration of the subsequent right for pledge on securities is carried out in accordance with Item 2.1 herein.

3. Realization of pledged securities (except for financial collateral)

3.1. In case the debtor fails to meet his/her liability or does it not properly, securities are realized to satisfy the pledgee's claim.
3.2. The pledgee begins to realize collateral by sending a notice to the pledger on realization of collateral; a copy of the notice on realization of pledged securities to subsequent pledgees (if any) and joint pledgees (if any).
3.3. The notice on realization of the collateral includes the following information:
3.3.1. date of registration of the right for collateral at the Central Depository;
3.3.2. information on the subject of collateral (the name of the issuer of securities, the registration number, type, form, number, and a series (if any) of securities;
3.3.3. information on the obligation to be implemented;
3.3.4. a proposal to approve a notarized agreement to realize collateral or a notary's execution note or a warning on realization of collateral in the court order, except for the cases when the collateral agreement provides for or a collateral paper is issued on realization of collateral;
3.3.5. date of notice, 1st name, position and signature of the person who gave the notice.
3.4. The pledgee should send a copy of the notice on realization of collateral to the Central Depository within 7 working days from the date of sending the notice to the pledger.
3.5. The Central Depository registers the notice within 3 business days, suspends transactions with pledged securities and informs the pledgee to that end.
3.6. Foreclosure of pledged securities by court decision is carried out on the basis of the pledgee's claim.
3.7. When the court decides to sell the collateral, the collateral is put up for sale on the stock exchange at the price specified in the collateral agreement on the basis of the order given by the executive officer to the investment company.
3.8. If the foreclosure of pledged securities is carried out without going to court, the pledged securities are put up for sale through the stock exchange on the basis of a notarized agreement between the pledgee and the pledger.
3.9. Unless otherwise provided for in the agreement, the Central Depository instructs the investment company to sell the pledged securities.
3.10. After the Central Depository sends the information specified in Item 3.5 herein to the pledgee, the pledged securities are put up for sale after at least 30 calendar days.
3.11. If the collateral agreement does not specify the price for pledged collateral, securities are put up for sale at the stock exchange at par value.
3.12. If the pledged collateral is not sold at the stock exchange, pledged securities are offered to the pledgee.

4. Financial collateral

4.1. If the subject of financial collateral is securities or derivative financial instruments traded in a regulated market, the financial collateral agreement is concluded at the depository system of the Central Depository and registered without fail.
4.2. The financial collateral agreement includes the following information:
4.2.1. name of the agreement;
4.2.2. names and places of residences (location) of the parties;
4.2.3. information on pledged securities and derivatives;
4.2.4. the nature and size of the liability covered with securitization;
4.2.5. maturity of the liability covered with securitization;
4.2.6. type and term of validity of rights imposed on securities (if any);
4.2.7. agreement on transfer of securities or derivative financial instruments owned by the pledger to the pledgee’s ownership in case of non-fulfillment of obligations.
4.3. Pledged securities or derivatives are transferred to pledgee's ownership on the day of expiration of the obligations under the financial collateral agreement concluded in the depository system, in case of failure to inform about the fulfillment of the obligations.

5. Termination of the right on pledging securities

5.1. Collateral is terminated if:
5.1.1. the pledger and the pledgee agree to that end;
5.1.2. the secured liability is terminated;
5.1.3. the subject of collateral is sold as a result of foreclosure;
5.1.4. the pledged property is destroyed or the pledged right is terminated;
5.1.5. the pledger, in gross violation of his/her duty, triggers a threat to lose or damage the pledged property, and the pledger demands premature termination of the collateral.
5.2. If the cases specified in Item 5.1 herein to terminate the collateral occur, the pledgee should inform the Central Depository to that end within three business days.
5.3. The Central Depository releases the securities from obligations within two days on the basis of the information specified in Item 5.2 herein and provides this information to the pledgee and the pledger.