The availability and accessibility of information on commercial companies depend on the level of transparency in the country. In some countries, this information is fully disclosed to the public, while in offshore areas, they are practically inaccessible. According to another evaluation, an increase in levels of corruption leads to a decrease in official information on companies, their founders, and their financial data. Just like in Azerbaijan…
In Azerbaijan, information on company founders and their shareholding is considered a trade secret and, since July 2012, is protected like any other confidential information.. Since January 2008, commercial entities were registered with the Ministry of Taxes based on the principle of “one window”, with previously confidential information being made available to the public on the website and in the media of the ministry. During that period, any person could, by means of a written request and at no cost to themselves, have unrestricted access to information from the state register on any person or company, even the ones registered in years previous. On 1 July 2012, made to the Lawson State Registration and State Register of Legal Entities and Commercial Secrets, which, to put it mildly, made it much more difficult to access information on founders of commercial companies.
Information about founders is only revealed when…
The Ministry of Taxes does not reveal information about the founders of commercial entities unless under exceptional circumstances. For example, judicial and investigative bodies can access this information after sending a query and proving their need for it. In case of violations of the Law on Fight against the Legalization of Money and Other Property Gained through Crime and Financing of Terrorism, then the names of founders can be revealed to the Financial Monitoring Service. Under the Law on Operation-Search Activities, if aspects of a company’s operation garner the suspicion of law enforcement agencies, they can access information from the Ministry of Taxes on company founders that are placed under surveillance. Along with that, if the execution of the court decision is aimed at the property of a company founder, then the court executors can get information about the identity of the said founder. Lawyers and notaries can also get acquainted with register information on companies within the circle of interest of their clients and persons they are providing services to, within the frame of their authority. If you are one of the founders of the company or the heir of the founder, you have a right to learn the identity of any other founders through the Ministry of Taxes. The Law allows information about founders to be given to a third party, but this requires approval from the company leadership. In practice, this happens very rarely, since any company that is unafraid of providing information about the identity of the founders will simply provide that information themselves, instead of involving the Ministry of Taxes (moreover, it is required to send an approval letter to the Ministry to do this, anyway).
What can we find out about companies?
Currently, the state registration body provides only limited information about commercial enterprises. This information includes: the name of a company (office or branch of a foreign company in Azerbaijan), their electronic taxpayer’s number, their legal-organizational form, the amount of statute capital, the start and end dates of their financial year, the names of any legal representative the company may have retained, and the date of the company’s registration. Presenting the legal-organizational form and the dates of the financial year are unnecessary and redundant, since the former is already mentioned in the name of any registered commercial enterprise, and the latter is the same for everyone, coinciding with the calendar year.
Since the beginning of 2018, the Ministry of Taxes has displayed information on any tax structure that registers a commercial arm, even though it is not required by law. Starting in February 2019 the Ministry took the step to separate out the date of the latest change in the register information of a commercial enterprise. While this does not appear to have any significant practical use, it can be considered a step towards an increase in the amount of published information, which deserves positive acclaim.
The Law allows: to receive more information
The registering structure can reveal more information about commercial organizations (which do not affect their interests). This is allowed under the Law on State Registration of Legal Entities and the State Register. The State Register of legal entities, offices, and branches of foreign legal entities reflects information on their registration, along with their reorganization and abolishing. In other words, the state registration structure can present information on names of companies, dates of changes to their legal-organizational form, along with information on abolishing of a company in its public register database. For example, NN-2013 Company Ltd. was established in Baku on 31 October 2013 with 10 AZN of statute capital and is currently named Yalama Aqropark. The company’s statute capital increased to 27193185 AZN after a number of decisions made by the founder.
Should company originally registered as Ltd. decide to reorganize itself into an OJSC or CJSC, can later be further redesignated as an Ltd. apartment-construction cooperative Ltd. again. In such cases, it would be prudent to retain any records from the old legal-organizational form of the venture. After abolishing a company and removing it from the state register, the company’s records can be kept for a certain period (at least 5 years) with an addendum noting that it was “abolished”.; this is standard practice in many countries, including Turkey, Russia, and the UK. This being the case, establishing a restriction on using the name of a previously abolished company (within a certain period of time following the original company’s registered abolishing) is another issue to be taken into consideration when developing such a law. This would help to prevent manipulation.
Irrelevant information about companies on topics such as changes to the amount of statute capital of companies, their legal address, or changes in legal representation can be accessed on the state register platform, https://www.e-taxes.gov.az/ebyn/commersialChecker.jsp.
Is the company in a village or city?
According to the law, when talking about the legal address of the structure, the address of the permanently operating structure of this entity is to be referenced. Territorial relevance of the state registration is determined by the legal address of a legal entity, or a local office or branch of a foreign legal entity. For example, if a company has reported Khachmaz District as its legal address to the registration structure, it will be registered at Tax Department 3, situated in Guba. But usually, a legal address has a formal character. For example, the legal addresses of the majority of companies registered in recent years are in villages or individual apartments in cities and district centers. These legal addresses do not coincide with the venues, where the executive bodies of these companies are situated. This creates a significant obstacle in determining the actual physical address of a company in corporate correspondence, post, or in the execution of legal measures and court orders. While it is possible to solve this problem with companies that maintain corporate websites, some of even the most prominent companies in the country do not have a web presence, thus necessitating a legal solution to this problem. It should be a legal requirement for a company to register its true operating address/addresses in the state register information. Old addresses could also be kept in the registration database, another common practice in numerous countries.
Members of the Supervisory Board are left in “shadows”
In joint-stock companies with more than 50 shareholders, along with Ltd. companies applying corporative administrative systems, Supervisory Boards or Board of Directors are established. According to the law, information about the composition of these boards and the details of the chairperson (name, patronymic name, surname) are part of the information in the state register. If a Supervisory Board (Board of Directors) is established to oversee the activities of a company, its composition is reflected in the media publication (the electronic newspaper, Taxes) of the Ministry of Taxes. For some reason, there is no information about these boards in the public state register information.
It is necessary to note that, according to the national legislation, companies with securities in circulation, are supposed to provide information about the composition of their supervisory body, as well. This information should be reflected in any electronic resources the company may have (corporate websites in the Electronic System of Information Description - https://www.fimsa.az/az/esid). The required content of said statement (names of physical or legal entities, their founding shares, and legal registration address) are related to the founders of any companies that have securities in open trade on the market. But the state oversight bodies (Ministry of Finances and the Financial Market Supervisory Authority) are not strict enough in enforcing the required annual reports, and so the number of companies actually following the law is very small.
Another element of the state register information is the name, patronymic name, surname, citizenship, and place of residence of every legal representative of a company. The Ministry of Taxes only enforces the demand related to name, surname and patronymic name, even though the other pieces of information are also necessary and would allow the identity of any legal representative (director, chief director, chairperson of the Board, etc.) to be determined.
A search function can bring money into the budget
The search function for the state register information on commercial structures is in great need of updating. Currently, only two filters are being applied in this system most of the time (name of the commercial structure and electronic taxpayers number). Along with that, when searching the system for information on taxpayers registered by the tax authorities, it is possible to find information through a legal-organizational form or three-letter configuration. Unfortunately, by writing three consecutive letters of the company’s name, the system is going to display in its results all registered companies with these three consecutive letters in its name. The addition of filters for legal and actual address, or the name of the legal representative, would greatly increase the functionality of the search system.
Along with that, if someone wants to get any additional, non-confidential information, the state registration body could offer paid services to assist them, which would help to offset the maintenance expenses of the register.
Normalized attitudes towards global transparency initiatives and public calls to fight corruption will, sooner or later, lead to Azerbaijan giving up the use of the blatantly wrong practice of keeping the names of company founders secret. This will positively affect the country’s ranking in respected lists, as well as its global reputation for business and governance.
Broadening the scope of the state register data necessitates additional or altered legislation, the adoption of the relevant form and preparation of special program support for electronic statements. But all this is small and easy, in comparison to the lofty aims of achieving a positive global image for the standards of transparency and the management of business through corporate management principles in Azerbaijan.