DECREE OF THE PRESIDENT OF AZERBAIJAN

On approval of the Rules on operation of the State registry for encumbrance of movable property, and “The fees for usage of the state registry for encumbrance of movable property”

 

Governed by Clause 32 of Article 109 of the Constitution of the Republic of Azerbaijan, pursuant to the enforcement of the Law of the Republic of Azerbaijan No.667-VQ of May 2, 2017 “On encumbrance of movable property”, I hereby resolve as follows:

   1. To approve the “Rules on operation of the State registry for Encumbrance of Movable Property” (attached).

   2. To approve the “The Fees for usage of the State registry for Encumbrance of Movable Property” (attached). 

   3. To have the Cabinet of Ministers of the Republic of Azerbaijan:

   3.1. prepare, proposed modifications on aligning Presidential acts with this Decree and submit them to the President of the Republic of Azerbaijan within three months.;

   3.2. prepare proposed modifications on aligning normative legal acts of the Cabinet of Ministers of the Republic of Azerbaijan with this Decree and submit them to the President of the Republic of Azerbaijan within three months,

   3.3. supervise the process of aligning of normative legal acts of central executive authorities with this Decree, and report the respective progress to the President of the Republic of Azerbaijan in five months;

   3.4. identify a list of information systems to be integrated in the State registry for Encumbrance of Movable Property in order to allow filing of notices of state and municipal encumbrances with the registry according to the Article 4.2 of the Law of the Republic of Azerbaijan “On encumbrance of movable property” within three months, and take steps as necessary to integrate such information systems into the registry;

   3.5. address any other issues as may arise in connection with this Decree.

   4. To have the Financial Market Supervisory Authority of the Republic of Azerbaijan address any pertinent matters as may arise in connection with this Decree.

   5. To have the Ministry of Justice of the Republic of Azerbaijan arrange the alignment of the normative legal acts and acts of normative nature issued by central governmental agencies with this Decree, and report back to the Cabinet of Ministers of the Republic of Azerbaijan.

Ilham Aliyev

The President of the Republic of Azerbaijan

Baku city, 29 March 2018

№ 1901

 

                                                                                 Approved by the Decree of the President

             of the Republic of Azerbaijan

             №1901, dated 29 March 2018

 

RULES

for the operation of the State registry for Encumbrance of Movable Property

1. General provisions

 

   1.1. These Rules govern the issues related to arrangement of activities of the state registry for encumbrance of movable property (hereinafter - registry), , as well as to its operation, use and data protection ” pursuant to Article 20.10 of the Law of the Republic of Azerbaijan “On encumbrance of movable property” (hereinafter – Law).

   1.2. The Registry is a state information system encompassing a systematic database of notices on registration of encumbrance of movable property, as well as modification to, termination of, and objection against such encumbrance.

   1.3. The Registry shall be arranged in the form of an electronic information system, operating continuously to enable registration and search of notices.

   1.4. Terms used in these Rules shall have the following meanings:

   1.4.1. Operator - Financial Market Supervisory Authority of the Republic of Azerbaijan;

   1.4.2. user - any security holder, grantor, debtor or a person conducting search in the registry.

   1.5. Any other terms used in the Rules shall have the meanings defined in the Law.

 

2. Principles of operation of the registry

 

   2.1. The registry is operated in the official language of the Republic of Azerbaijan. The registry’s interface is compiled in Azerbaijani, English and Russian languages.

   2.2. The registry is unified, and is operated based on unified form, methods and principles.

   2.3. Formation, operation and use of the registry, and protection of the data stored in it is conducted by an information system ensuring mutual data exchange based on electronic technologies.

   2.4. The information system shall ensure the following:

   2.4.1. ensure the expeditious entrance of the data into the database, maintain that data unaltered and readable, and process that data;

   2.4.2. record the notices entered into the registry;

   2.4.3. integrate with other relevant state and municipal information systems.

   2.5. The registry shall be equipped with a protection system to prevent any loss, distortion or an unauthorized access to the data.

   2.6. The Financial Market Supervisory Authority of the Republic of Azerbaijan shall be responsible for formation of technical-software complex for the purposes of establishing, arrangement, improvement and effective use of information system of the Registry and provision of technical service to it.

   2.7. Only licensed technical-software and certified protectiondevices are used in the registry’s information system.

 

3. Functions of the Operator

 

   3.1. The Operator shall have the following functions:

   3.1.1. to operate and manage the registry, ensure that the registry provides sustainable, continuous, effective and secure services, and continually improve and expand the registry’s functionality;

   3.1.2. to safely and securely integrate information systems into the registry, and ensure their coordinated operation;

   3.1.3. to ensure that the data entered into the registry is reliable and accessible, as well as stored and secured;

   3.1.4. to operate the registry’s technical and technological infrastructure in accordance with their purpose of use, as well as provide technical service to, repair and maintain it, and provide preventive measures based on compiled schedule;

   3.1.5. in the event of a security breach or accident (error) of the key hardware, to launch the operation of an alternate center of the registry, and to inform users about such a breach or an accident (error), as well as the owners of the information systems as specified under sub-paragraph 3.1.2 of these Rules, and to take appropriate measures to rectify the accident (error);

   3.1.6. to monitor sustainable and continuous operation of the information systems integrated into the registry;

   3.1.7. to ensure data protection in accordance with the normative legal acts, and to protect the data with restricted availability under the laws;

   3.1.8. to monitor the sequential consistency of registration numbers assigned by the registry to notices;

   3.1.9. to place technical support information and other user guidance materials, as well as answers to frequently asked questions on the registry’s web-site;

   3.1.10. to ensure that the registered notices and the information they contain for disclosure are accessible for search by anyone;

   3.1.11. to provide a report in the form of an electronic documents on search results or a certified hard copy report, pursuant to paragraph 11.2 of these Rules, to individuals conducting a search based on their request;

   3.1.12. to perform such other functions as may arise from these Rules.

 

4. Notices registered in the registry

 

   4.1. The following notices shall be entered into the registry:

   4.1.1. notice on encumbrance;

   4.1.2. notice on modification of encumbrance;

   4.1.3. notice on termination of encumbrance;

   4.1.4. notice on objection against the encumbrance.

   4.2. Notices of state and municipal encumbrances may be entered into via other electronic information systems integrated into the registry.

   4.3. Damages caused by registering a notice that contains information which is substantially different from the encumbrance contract or by failing to register a notice as required by Article 25.1 of the Law shall be compensated by the entity or individual who registered or was supposed to register such notice.

   4.4 The registry’s operation shall be financed using fees collected according to the Article 27 of the Law on use of Registry and other sources not prohibited under the laws.

 

5. Entering a notice on encumbrance into the registry

 

   5.1. A notice on encumbrance registered pursuant to the Article 21.1 of the Law (hereinafter - notice of encumbrance) shall include:

   5.1.1. if the security holder is an individual, full name and address of registration, personal identification number (PIN) and if available taxpayer’s identification number (Tax ID), contact details, for foreigners their passport number, series and contact details;

   5.1.2. if the security holder is a government or municipal authority, or a legal entity, its name, legal address, taxpayer’s identification number (Tax ID) and contact details, for foreign legal entities, its full name and contact details in Latin script;

   5.1.3.if the debtor or grantors an individual, full name and address, PIN and if available taxpayer’s identification number (Tax ID), contact details, for foreigners, their passport number, series and contact details;

   5.1.4. if the debtor or grantor is a government or municipal authority, or a legal entity, its name, legal address, taxpayer’s identification number (Tax ID) and contact details, for foreign legal entities, full name and contact details in Latin script;

   5.1.5. description of the subject of encumbrance;

   5.1.6. term of validity of the notice on encumbrance;

   5.1.7. confirmation of the grantor’s consent to enter their data into the registry by ticking the relevant field;

   5.1.8. the amount (maximum limit) of the underlying obligation secured by the encumbrance;

   5.1.9. the debtor’s gender (for individuals);

   5.1.10. whether the debtor is a first time or repeated customer;

   5.1.11. the debtor’s line of business;

   5.1.12. type of movable property;

   5.1.13. if the encumbrance originates under a law, confirmation of whether the debtor failed to perform or properly perform its obligations via ticking the relevant field;

   5.1.4. the grounds for registration of the encumbrance (contract, a decision by a government authority, municipality or court, law), and information about the relevant ground.

   5.2. Any data contained in a notice registered in the registry, other than those specified under sub-paragraphs 5.1.8 through 5.1.14 hereof, shall be accessible for search by anyone.

   5.3. The data specified under sub-paragraphs 5.1.8 through 5.1.12 of these Rules shall be used for official statistics.

   5.4. The data specified under sub-paragraphs 5.1.6 through 5.1.12 of these Rules shall not be required to be entered within a notice on encumbrance identified under the Article 4.2 of the Law based on a decision made by a government authority, municipality or court.

   5.5. According to the Article 21.3 of the Law a notice of encumbrance shall be registered by the following parties if any of the following applies:

   5.5.1. for encumbrances originated from a contract – by security holder, based on that contract and prior to the entry into force of that contract in a manner stipulated in the Article 21.4 of the Law;

   5.5.2 for encumbrances originated from the decisions of government or municipal authority or court resolutions – by the person applying to government or municipal authority or court for this purpose, or if these authorities initiate such encumbrances – by these authorities themselves after enactment of the encumbrance decision;

   5.5.3 for encumbrances originated from the requirements of the law – by the security holder after discovery of debtor’s failure to fulfil or properly fulfil obligations.

   5.6. Notice of encumbrance originated from a contract may be registered in the registry by the security holder before signing of the encumbrance agreement between parties upon written consent of the grantor. In such cases, the security holder shall sign the contract with grantor within no later than 30 (thirty) days from the registration date of notice of encumbrance or immediately terminate the notice of encumbrance if failed to sign the contract. If the security holder fails to confirm in the registry that a contract from which the underlying obligation derives from has been signed with the grantor, the notice of encumbrance shall be automatically removed from the registry at 12 pm on the 30th (thirtieth) day from the registration date of the notice of encumbrance.

   5.7. The grantor’s written consent is required to register a notice of encumbrance originating from a contract. Such consent can be given either within the contract or a separate document.

   5.8. The grantor’s consent is not required to register a notice of encumbrance originated from a decision of a government agency, municipality or court, as well as requirements of the law.

   5.9. The subject of encumbrance shall be described in a manner that would allow to reasonably identify a movable asset, rights or claims (replaceable or irreplaceable items, consumer goods, complex asset, as well as their parts or accessories, etc.) as the subject of encumbrance.

   5.10. The description of a subject of encumbrance may collateral that the subject of encumbrance consists of all existing or future movable asset of the grantor. Such description may also include certain type (category) of movable asset, accounts receivable or a portion thereof.

   5.11. The Operator shall post explanatory notes on how to describe a subject of encumbrance in the registry.

 

6. Entering a notice on objection against an encumbrance into the registry

 

   6.1. If the grantor believes any of the information specified in a notice registered to be incorrect and the security holder refuses to modify or terminate the notice within 5 (five) business days from having been informed to this effect, or the grantor or debtor is not satisfied with the modifications thus made, the debtor or grantor may register a notice on objection against an encumbrance (hereinafter referred to as the notice on objection against an encumbrance).

   6.2. A notice on objection against an encumbrance shall specify:

   6.2.1. registration number of the notice of encumbrance objected to;

   6.2.2. the details of person entering the notice of objection against an encumbrance into the registry as required under sub-paragraphs 5.1.3 and 5.1.4 of these Rules;

   6.2.3. reasoning for modification or termination of the notice on encumbrance objected to;

   6.2.4. confirmation of notification of erroneous information in the notice to the security holder or the security holder’s refusal to modify or terminate said notice within 5 (five) business days from having received notification to this effect by checking the relevant field.

   6.3. Entry of a notice on objection against an encumbrance shall not terminate the notice of encumbrance, and notices of objection shall be accessible for search by anyone.

   6.4. Appeals of notices of objection against an encumbrance, as well as refusals to modify or terminate notices of encumbrance shall be reviewed by the court of law.

 

 

7. Entering a notice on modification to encumbrance into the registry

   7.1. The security holder shall enter a notice on modification to encumbrance (hereinafter referred to as a notice of modification to encumbrance) as soon as they become aware of any such circumstances if any of the following applies:

   7.2. the subject of encumbrance has been replaced or altered in any manner, as well as a type of movable asset has been transformed to another type of movable asset, or the description of the subject of encumbrance has been modified;

   7.3. the security holder, grantor or debtor has been replaced under the law and contract;

   7.4. any of the information specified under sub-paragraphs 5.1.1 through 5.1.4 hereof has been modified;

   7.5. the duration of the notice on encumbrance has been modified under the law and contract;

   7.6. any other circumstances as may be defined by the law or contract.

   7.7. A notice on modification to encumbrance shall specify:

   7.7.1. registration number of the notice on encumbrance modified;

   7.7.2. details of the entity or person registering the notice of modification to encumbrance as required under sub-paragraphs 5.1.1 and 5.1.2 of these Rules;

   7.7.3. reasoning for entering a notice of modification to encumbrance, other than for notices of collateral or municipal encumbrance registered via other electronic information systems integrated with the registry;

   7.7.4. confirmation of the grantor’s consent to enter their details if the subject of encumbrance is altered or the debtor is replaced by checking the relevant field (except for when the security holder is a government agency or municipality).

   7.8. The confirmation specified under sub-paragraph 7.7.4 above shall require a consent stipulated under paragraph 5.7 of these Rules.

   7.9. Upon entry of the notice of modification to encumbrance with the registry the notice of encumbrance in question shall be immediately replaced with a new one, and the security holder shall replace the old details with new ones in consistency with the modification made.

 

 

8. Entering a notice of termination of encumbrance into the registry

 

   8.1. As the debtor has satisfied the obligation underlying the encumbrance registered with the registry, the security holder shall enter a notice of termination of encumbrance into the registry (hereinafter referred to as notice of termination of encumbrance) within 5 (five) business days, provided that the notice on encumbrance shall not be removed from the registry’s list of readily available information after the notice’s period has expired or via other electronic information systems integrated with the registry.

   8.2. If there are several security holders on a notice on encumbrance (joint holders) and a security holder’s right of encumbrance has been terminated, the notice of termination of encumbrance shall only apply to the right of the security holder that has consented to it.

   8.3. A notice on termination of encumbrance shall specify:

   8.3.1. registration number of the notice of encumbrance terminated;

   8.3.2. details of the person registering the notice of termination of encumbrance as required under sub-paragraphs 5.1.1 and 5.1.2 of these Rules;

   8.3.3. confirmation of the termination of encumbrance by checking the relevant field, in consideration of the provisions of paragraph 8.2 of these Rules.

   8.4. If the security holder fails to enter a notice on termination of encumbrance within the timeframe specified under paragraph 8.1 of these Rules, the debtor may request the security holder to do so in writing.

   8.5. Appeals of the security holder’s refusal to enter a notice on termination of encumbrance shall be reviewed by the court, and forced termination of an encumbrance recorded with the registry may only be conducted if there is an effective court ruling to this end.

   8.6. Upon entry of a notice on termination of encumbrance the notice of encumbrance shall be immediately removed from the registry’s list of accessible information.

 

 

9. Registration and publication of notice

 

   9.1. A notice shall be registered by registering the information online with the registry, and assigned a unique registration number comprising a combination of numbers and (or) letters. The registration number is required for registering any subsequent notices relating to the original notice.

   9.2. The registry’s software shall verify whether the information contained in the notice is complete.

   9.3. If the information registered with the registry has any inconsistencies (failure to pay the user charge, notices of modification, termination or objection against an encumbrance reference invalid or wrong notices, fields left blank in the notice), the notice shall not be registered, and the user shall get a real time report of inconsistencies.

   9.4. Once the registry’s software confirms that the notice has been registered with the registry, the notice is entered in the registry and the user shall get a confirmation slip of entry of the notice.

   9.5. The confirmation slip shall specify the registration date and time (hour, minute and seconds) of the notice, and the notice’s details as required hereunder.

   9.6. The notice shall be visible in the registry immediately after a confirmation slip is sent to the user, with the date and time (hour, minute, second) indicated on the published notice.

   9.7. The registry that registers or rejects a notice shall not verify the accuracy and correctness of the information contained in the notice, and shall only examine the notice against the criteria specified under paragraph 9.3 of these Rules.

   9.8. The person registering the notice shall be responsible for the accuracy of the information contained in the notice.

 

 

 

 

 

10. Effect and nullification of notice

 

   10.1. A notice shall be deemed to have taken effect as soon as it becomes accessible in the registry for persons conducting search.

   10.2. The notice shall remain in effect until the date specified therein, and, absent a notice of termination of encumbrance, may only be prematurely terminated by an effective court ruling, except as otherwise provided under paragraph 5.6 of these Rules.

   10.3. The validity term of a notice on encumbrance may be extended by registering one or several notices on modification to encumbrance under the law or contract before the expiry of the notice.

   10.4. Registering a notice on modification designed for an extension shall extend the term by a period specified in the notice of modification. The extension shall commence from the end of the previous term of the notice on encumbrance.

   10.5. The registry’s software ensures to maintain information on invalidated notices within 10 years after they have been invalidated.

 

11.Registry search and transcript

 

   11.1. Debtor or grantor details shall be searchable by one or more of the following parameters in the registry:

   11.1.1. tax identification number (TIN) of the government or municipal authority, as well as legal entity;

   11.1.2. full name of the legal entity in Latin script;

   11.1.3. individual’s PIN;

   11.1.4. passport’s series and sequential numbers for foreigners;

   11.1.5. unique registration number of the notice of encumbrance registered.

   11.2. At the request of a person conducting a registry search, they shall receive a certified electronic or hard copy report of search results, stamped with the seal of the Financial Market Supervisory Authority of the Republic of Azerbaijan, and signed by its Chairman of Management Board (or an authorized officer assigned by the latter).

   11.3. The registry search results report shall specify:

   11.3.1. whether a notice exists meeting the parameters as specified under paragraph 11.1;

   11.3.2. registration number, date and time of the notice;

   11.3.3. information contained in the notice registered with the registry and accessible for search by anyone, other than that specified under sub-paragraphs 5.1.8 through 5.1.14.

   11.4. The registry shall archive and maintain a soft copy of the certified search results report and search date and time as well as search criteria details.

   11.5. An official report of search results shall only be a certified hard copy report as specified under paragraph 11.2 hereof.

 

12. Registry fee

 

   12.1. A fee shall be payable in an amount determined by the President of the Republic of Azerbaijan for registering a notice of encumbrance and notice of modification of encumbrance, as well as for issuing a hard copy certified report of search results at the request of the person conducting the registry search.

   12.2. Registering of notices of objection against an encumbrance, notices of collateral or municipal encumbrance shall be registered, as well as data searches and issue of soft copy reports of search results at the request of the person conducting the registry search shall be free of charge.  

   12.3. Registry fee shall be paid to the Operator’s bank account screened on the registry