The liquidation of a legal entity in Azerbaijan is a strictly regulated process involving the complete termination of a company’s activities without the transfer of rights and obligations to third parties. The procedure is governed by the Civil Code of the Republic of Azerbaijan (Article 59), the Tax Code, the Law “On State Registration and the State Register of Legal Entities,” and the “Rules for State Registration of Commercial Organizations and Taxpayer Registration with State Tax Authorities.”
Liquidation may be voluntary (by decision of the founders or an authorized body) or compulsory (by court order, including in cases of insolvency/bankruptcy). The entire process must not exceed 12 months from the date the entry on the commencement of liquidation is made in the state register. If this deadline is exceeded, the procedure must be restarted from the beginning.
Grounds for Liquidation
Under Azerbaijani law, a company may be liquidated in the following cases:
- By decision of the founders (participants) or a body authorized by the charter.
- Upon achievement of the purpose for which the company was established or expiration of its term of activity.
- If the court declares the registration invalid due to violations committed during incorporation.
- Upon declaration of bankruptcy (pursuant to the Law “On Insolvency and Bankruptcy”).
- By court decision due to unlawful activities.
The same rules generally apply to branches and representative offices of foreign companies.
Stage 1: Preparation and Adoption of the Decision
- Official solvency declaration The executive body (director) prepares a declaration confirming the company’s ability to satisfy all creditors’ claims within 12 months. The declaration must be prepared no earlier than 20 days before the founders’ meeting. If the executive body refuses to issue it, an independent auditor may be engaged.
- Decision on liquidation Adopted by the general meeting of founders (unanimously for LLCs) or by the body authorized by the charter. The decision appoints a liquidation commission (or liquidator) and determines the procedure and timeline for liquidation (creditors must be given at least 60 days to submit claims).
Publication and notifications Within 10 days of appointment, the liquidator publishes a liquidation notice in official media (three times, at 15-20-day intervals) and notifies all known creditors and relevant state authorities (including the Ministry of Finance for verification of budgetary debts).
Stage 2: Registration of the Commencement of Liquidation with Tax Authorities
Within 15 days of appointment, the liquidator submits to the territorial tax authority (State Tax Service at the place of registration):
- Application for removal from tax registration.
- Decision on liquidation.
- Solvency declaration.
- Proof of the first publication in the press regarding the procedure, deadlines, and creditor claims (minimum 60 days).
- Company seal.
If the documents comply with legal requirements, the registering authority enters the liquidation record in the state register within 5 days, registers the liquidation commission/liquidator as legal representatives, and issues an extract from the register. From this moment, the phrase “in the process of liquidation” must be added to all company documents, and the seal is updated accordingly.
The tax authority verifies:
- Existence of subsidiaries or branches.
- VAT payer status.
- Active bank accounts, cash registers, and POS terminals.
- Tax arrears to the state budget and unsubmitted declarations.
Any identified issues must be resolved before proceeding.
Stage 3: Settlements with Creditors and Interim Liquidation Balance Sheet
Creditors may submit claims until the final liquidation balance sheet is approved. Upon expiry of 60 days from the first publication:
- The liquidator prepares an interim liquidation balance sheet (listing assets, creditor claims, and receivables).
- The balance sheet is approved by the founders.
If assets are insufficient to satisfy creditors, bankruptcy proceedings must be initiated immediately. Payments to creditors are made in the order of priority established by the Civil Code (employees, budget, other creditors).
Stage 4: Final Balance Sheet and Distribution of Remaining Assets
After all obligations have been fully settled:
- The liquidator prepares the final liquidation balance sheet and a report on asset distribution.
- Documents are approved by the founders within 45 days.
- Remaining assets are distributed among participants proportionally to their shares (within 10 days).
Stage 5: Removal from the State Register
Within 10 days after distribution or utilization of remaining assets, the liquidator submits to the tax authority:
- Application (in duplicate).
- Final liquidation balance sheet.
- Report on asset distribution with supporting documents (transfer acts, bank statements).
- Original certificate of registration and charter.
- Seal marked “in the process of liquidation”.
- For joint-stock companies – certificate from the State Committee for Securities.
If the documents comply with legal requirements, the company is removed from the register within 7 days. Liquidation is considered complete. Final tax declarations and social insurance reports are submitted, and bank accounts are closed.
Special Cases
- Bankruptcy: Requires a court decision or resolution of the creditors’ meeting. Governed separately by the Law of the Republic of Azerbaijan “On Insolvency and Bankruptcy” dated 13 June 1997.
- Branches/representative offices of foreign companies: Same procedure, but submission of the parent company’s decision and apostilled documents is required.
- Pending lawsuits: Liquidation is prohibited until enforcement of administrative or criminal judgments. A court certificate confirming no outstanding claims is required.
Practical Recommendations
- Review the charter for any special liquidation provisions.
- Document retention: Accounting records – 5 years; personnel records – 75 years. Destruction only by official act after expiry.
- Company seal: Destroyed by official act; the destruction report is attached to final documents.
- Time limits: Exceeding 12 months requires restarting the entire procedure.
Risks and Challenges
- Fines for late submission of documents or unresolved debts.
- Inspections by tax authorities, social insurance fund, and customs.
- Delays due to incomplete documentation or disputes with creditors.
- Missed publication or notification deadlines result in procedure restart.
Conducting liquidation independently carries a high risk of errors, especially for companies with debts, branches, or foreign participation.
When to Engage Legal Professionals
It is strongly recommended to involve specialists at all stages:
- Preparation of decisions, declarations, and balance sheets.
- Publications, notifications, and interaction with state authorities.
- Debt settlement and passing inspections.
- Challenging fines and court representation.
Expert SM offers a full-cycle service – from initial consultation to final removal from the register. Fees are determined on a case-by-case basis.
Conclusion
Company liquidation in Azerbaijan is a highly formalized procedure that demands strict adherence to deadlines and documentation requirements. Timely engagement of professional advisors significantly reduces risks and can shorten the process to 6-12 months. For consultations, contact specialized law firms or the State Tax Service directly.