egb5OLfZVjmLD1X1 953

Full name of the course: Business law
Lesson 1: Introduction to law. Foundations
Source:
Copyright © 2021, Gulnar Zulfugarova

WHAT ABOUT THIS COURSE?
Lesson 3 -
Lesson 4 — Structure,
Entrepreneurial forms of Lesson 5 — Antitrust laws
Lesson 1 — Introduction Lesson 2 —Introduction reorganization and
conducting business. and unfair trade
to law. Foundations to business law dissolution of legal
Formation of legal practices
entities
persons
Lesson 9 — Corporate
Lesson 8 — Limited
social responsibility.
Lesson 7 — Joint-stock liability companies and Lesson 10 — Introduction
Lesson 6 — Partnerships Criminal liability of
companies other forms of business to employment law
1C-YoreWM-yaLuhak-vomn
| A guAK—
evanhn Keys
collar crimes
Lesson 1] —- Termination
of employment Lesson 15 — Agency
Lesson 12 —-Introduction Lesson 13 — Other issues Lesson 14 - Intellectual
agreement. Other issues relationships in
to contract law relating with contracts property law
related with business
yaaye)Koyisnitvaum Chis

PAA arehae tmentee
¢ Law and other social rules

« Some characteristics and functions of law
2. Differences between legal rules (law) and

ve) dao ae a ba Koss)
3. Sources of law
4. Hierarchy of legal acts
5. Legal families
* Civil law family

* Common law family
6. Summary of the 1*t lesson

* Sets of rules that
* regulate the conduct of us (individuals, businesses,
and other organizations within society);
* intended to protect persons and their property
against unwanted interference from others;
* prescribed by controlling authority
¢ And having binding legal force (means: these rules
must be obeyed and followed by citizens, subject
to sanctions or legal consequences).
* keeping the peace;

* shaping moral standards;
* promoting social justice;
* maintaining the status quo;
* facilitating orderly change;
¢ facilitating planning;
* providing a basis for compromise;
* maximizing individual freedom
@
FLEXIBILITY
(ADAPTABILITY) OF
THE LAW
= “Law must be stable and yet it cannot
stand still.”” Roscoe Pound
= “Much of the uncertainty of law is not an

unfortunate accident; it is of immense
social value.” Judge Jerome Frank
= Law evolves and changes along with

the norms of society, technology, and
the growth and expansion of
commerce in the world.

DEFINITION OF LAW
« Rules, norms, sometimes principles
« But society is governed by other different norms which include:

«= Customary rules;
« Religious rules;
« Ethical rules;
« Technical rules
« Technical norms — ones which determine the manner to achieve desired end. Rules of hygiene, pedagogy,
architecture
« Ethical norms are different. They based upon moral judgement and determine the correlation of the different
ends of human activity. Technical norms determine the distinct ends.

CUSTOMS
= Sometimes settled customs are a source of law. (depending on area of implication)
= Business and family law, public international law are the most important area of
customs.
= In criminal law there is no space for customs (usually)

Law and morality
Law and customs
Law and ethics (etiquette)

Law and religion
Main difference is — state enforcement.
Being written is not the main difference. (A law

that has been laid down/written is called positive
law.)
= Source of the rules also can be helpful to identify
legal norms.
@
Moral
standards
Religious Customary
rules aVV rules
Ethics
There is a link between legal rules and other rules that govern society. That’s why all of these
rules affect our legal tradition, legal system. It means our moral standards actually shape the way
we create legal rules.

A substantial
part of law exists State
in the form of enforcement;
rules.
Legal certainty —
Being laid itis often easy to
down=written know/identify
(we call it the contents of
positive law); legal rules
beforehand.

CONSTITUTIONS (the supreme law of the land)
TREATIES (with foreign governments)
STATUTES (CODIFIED LAW)
ORDINANCES (law enacted by local government bodies, such as cities and municipalities, counties,
school districts, and water districts)
EXECUTIVE ORDERS (An order issued by a member of the executive branch of the government)
REGULATIONS AND ORDERS OF ADMINISTRATIVE AGENCIES — Some administrative agencies that
enforce and interpret statutes enacted by Congress/Parliament regulate business. Legislatures
usually empower these agencies to adopt administrative rules and regulations to interpret the
statutes that the agency is authorized to enforce.
JUDICLAL DECISIONS? (WHAT IS PRECEDENT?)
JUDICLAL DECISIONS - WHAT IS PRECEDENT?
" Precedent —A rule of law
established in a court decision.
Lower courts must follow the
precedent established by higher : Is precedent one of the main sources
courts. of law in our country?
\ Doctrine of stare decisis - Latin: : Devaluation and the decision of the
to stand by the decision”. Constitutional Court of AR about bank
Adherence to precedent. credits/contracts.
(CHY OF LEGAL ACTS
sources of law have different legal force, they form so-called “hierarchy” of legal acts:
= Constitution has the greater legal force,
= Itis followed by legislation (laws produced by the parliament. Generally we call it statutes -
qanunilar),
= Executive decrees (acts of the government), administrative regulations, etc.
In federal states — special rules concerning correlation between federal and state law;
Besides, international law rules (sometimes they call it soft law) have special effect on national law
of the country.
source: Hana Horak’s slide from the address http://slideplayer.com/slide/5984778/ (22.09.2016)

= Article 148 of the Constitution of AR
states that our legislative system consists
of the following legal acts:
= Constitution
= Acts accepted by referendum
= International treaties signed by Azerbaijan
HIERARCHY OF government
THE LEG AL « Laws (these are actually statutes - qanunlar)
= Orders (farmanlar) — of the President of AR
(Difference between ordinance and
order?)
of AR
= Decrees of Cabinet of Ministers
Pe tbe (qorarlar)
» Normative acts of the central
executive bodies
= Every inferior rule in this hierarchy

should not be contrary to the superior
rule. It means, for example ...

LEGAL FA
- Common law family
- Civil law family
- Canon law (the law of the church - espicially, Roman Catholic Church)
- Islamic law
- Jewish law
- Hindu law
- African (indigenous) customary law
- Other religions also affected some legal systems, as well as some
theories (like Marxism)
- European law

MAP OF LEGAL FAMILIES
@ Civit Law
@ ComMMon Law
B@ Customary Law
® Reticious Law
@ MIXED (COMMON & CIviL) Law
) UNKNOWN
DIFFERENCE BETWEEN COMMON LAW AND
CIVIL LAW SYSTEMS
= Common Law - Anglo- = Civil Law - Romano-Germanic civil law
American common law system system
- Law developed by judges who *!N contrast to the Anglo-American
issued their opinions when Common law, In which laws are
deciding a case. The principles created by the judicial system as
announced in these cases well as by congressional legislation,
became precedent for later the Civil Code and parliamentary
judges deciding similar cases. statutes that expand and interpret it
are the sole sources of the law in
most civil law countries. Thus, the
adjudication of a case is simply the
application of the code or the
statutes to a particular set of facts.
In some civil law countries, court
decisions do not have the force of
La~wwas
What is law?
What is the main difference between

legal rules and other social rules?
Sources of law
Hierarchy of legal acts
Legal families
Sa OF ey Your main course book:
pe eee ee een
R L Mill Gaylord A. t
18T LESSON
Jaap Hage, Bram Akkermans, Introduction
to Law
Sarah Riches, Vida Allen, Keenan&Riches”
Business Law (9th edition), Pearson
Education Limited, 2009
Related legislative acts

Business law
Lesson 2: Introduction to business
law
EX guinar.zulfugarova@gmail.com
WHY STUDY THE LAW OF BUSINESS?
~
},
The focus is on how to
recognize legal problems
concerning business issues,
and then how to avoid these
legal problems if possible,
and then how to resolve
them as quickly as possible
if or when they do arise.
Another reason to study the
law of business is that it will
help you develop valuable
decision-making skills.
Legal style of analysis
can be used in business
decision making.
courT SYSTEMS AND DISPUTE RESOLUTION
¢ What is jurisdiction? — Yurisdiksiya (mahkeme aidiyyati)

¢ Court system in our country:
¢ AR Supreme Court - AR Constitutional Court
¢ Courts of Appeals
¢ District courts (general-jurisdiction trial courts) + Special
courts
¢ Is there a need for specialized courts for hearing commercial
disputes? Why?
tele tatehiskeped
ee inziD : otisac _ tft
~~
MOHKONeST — comes! — MeHKeMast |
Peston = Lear
Malki kollegiya MOlki kollegiya MOlki kollegiya MUIki kollegiya MGlki kollegiya MOlki kollegiya
Inzibati-iqtisadi inzibati-iqtisadi inzibati-iqtisadi Inzibati-iqtisadi Inzibati-iqtisadi Inzibati-iqtisadi

kollegiya kollegiya kollegiya kollegiya kollegiya kollegiya
Cinayat Cinayot Cinayat Cinayot Cinayat Cinayet kollegiyas:

kollegiyass kollogiyas: kollegiyasi kollegiyasi koliegiyasi
Herbi kolleglya Herbi kolleglya Herbi kollegiya Harbi kollegiya Herbi kollegiya Merbi kollegiya
Naxcrvan Muxtar
inzibati-iqtisadi Agir Cinayatler Respublikasinain rayon
Harbi mehkemealer mehkemeler Mohkemeleri (geher) mehkameleri
Naxcrvan Muxtar
Naxgrvan Muxtar
Respublikasensn Ager
Cinayetior Menhkemesi
SPECIALIZED COURTS HEAR COMMERCIAL DISPUTES
¢ As trade developed in the Middle Ages, the merchants who traveled

around England and Europe developed certain rules to solve their
commercial disputes. These rules, Known as the “law of merchants,” or the
Law Merchant, were based on common trade practices and usage.
Eventually, a separate set of courts was established to administer these
rules. This court was called the Merchant Court. In the early 1900s, the
Merchant Court was absorbed into the regular court system of England.
¢ In some countries, business and commercial disputes are heard by the

same courts that hear and decide criminal, landlord-tenant, medical
malpractice, and other non-business-related cases. But businesses tend
to favor special commercial courts because the judges presiding over
them are expected to have the expertise to handle complex commercial
lawsuits. The courts are also expected to be more efficient in deciding
business-related cases, thus saving time and money for the parties.
¢ In our country we call these courts as commercial courts=kommersiya

mehkemeleri. The adequate circuits we have in appellate and supreme
court stages/instances as well.
Litigation process
Only in some
cases, not
Generally the last common type of

Litigation process in AR legal system looks like this, if instance court in court
you decide to proceed till the end ... AR
2nd instance courts ~.

that reviews the Constitutional ECHR
decisions of trial Court
courts Supreme
Court
1° instance courts
Appellate
that here cases courts
Meanings of some
terms related with
litigation process
Jurisdiction Standing to sue
In rem and in personam jurisdiction
Justiciable
controversy —
Other litigation
Dispute Resolution processes:
discovery
(deposition,
Judicial interrogatories,
production of
Alternative (ADR) documents,
— methods of resolving physical or
disputes other than litigation. mental
Negotiation, arbitration, examination),
mediation (vasiteg1) and other dismissals and
forms exist. pretrial
judgements
Online (ODR) — (motion for
online arbitration and online judgement on
mediation services the pleadings,
motion for
summary
judgement),
settlement
conference, trial,
Litigation — the Pleading — the Pleadings process: Statute of limitations
— a statute that
appeal
process of paperwork that is complaint and
summons, answer, establishes the period
bringing, filed with the court during which a
to initiate and cross-complaint
maintaining, and plaintiff must bring a
respond toa and reply,
defending a intervention and
lawsuit against a
lawsuit. defendant.
lawsuit consolidation
Probable disadvantages of judicial lawsuit
¢ The probability of winning or losing;

¢ The amount of money to be won or lost;
¢ Lawyers’ fees and other costs of litigation;
¢ Loss of time by managers and other personnel;
¢ The long-term effects on the relationship and reputation of the parties;
¢ The amount of prejudgment interest provided by law;
¢ The aggravation and psychological costs associated with a lawsuit;
¢ The unpredictability of the legal system and the possibility of error;
¢ Other factors peculiar to the parties and lawsuit
ALTERNATIVE DISPUTE RESOLUTION
Mediation
¢ The simplest form of ¢ The parties choose an A form of negotiation in which
a neutral third party assists the
ADR impartial third party to
disputing parties in reaching a
¢ Parties try to reach a hear and decide the settlement of their dispute.
voluntary settlement of dispute. The mediator is usually a
their dispute. ¢ This neutral party is person who is an expert in the
called the arbitrator. area of the dispute, or a lawyer
¢ Parties often represented
or retired judge. Unlike an
by attorneys Arbitrators are usually arbitrator, however, a mediator
¢ During negotiation members of one of the does not make a decision or an
proceedings, the parties arbitration associations. award.
usually make offers and ¢ If there is no arbitration After discussing the facts of
clause, the parties can the case with both sides, the
counteroffers to one mediator will encourage
another enter into a submission settlement of the dispute and
¢ If a settlement of the agreement whereby they will transmit settlement offers
dispute is reached agree to submit a dispute from one side to the other
to arbitration after the giving her or his opinion to
through negotiation, a each side about why they
settlement agreement is dispute arises.
should decrease or increase
drafted that contains the ¢ Rules similar to those their settlement offers.
terms of the agreement. followed by courts are If the parties to a settlement, a
usually followed at an settlement agreement is drafted
arbitration. that expresses their agreement.
Some facts about
ADR
¢ Arbitration is not actually a court as known in
some countries, like Azerbaijan. It’s only one
of the alternative dispute resolution methods.
¢ ADR also has its own drawbacks. Like,

enforcement of decisions, or costing much
more money than expected. So that’s why,
there is an offer that one can use ADR,
especially arbitration for the expensive cases,
disputes, instead of minor issues.
Lesson 3 - Entrepreneurial forms of
conducting business. Formation of legal
persons
Business law by Gulnar Zulfugarova

1. Difference between natural persons and legal
entities as they are subject of law
2. Doing business as a sole proprietor
Overview of 3. Advantages and disadvantages of sole

proprietorships
4. Types of legal entities
the 3™ lesson Formation of legal entities
WN
Your main course book:
1. Roger Leroy Miller, Gaylord A. Jentz, Business
Law Today, 9th Edition.
2. Jaap Hage, Bram Akkermans, Introduction to Law
3. Sarah Riches, Vida Allen, Keenan&Riches-
Business Law (9th edition), Pearson Education
Limited, 2009
4, Related legislative acts: Civil Code of AR, Law on
state registration and state register of legal
entities in the Azerbaijan Republic, Law of the
Azerbaijan Republic about Public legal entities,
Law of the Azerbaijan Republic about Business
activity
Natural persons
and legal
persons/entities
o Legal subjects impose duties upon, and _ assign
competences and rights to, legal subjects. These legal
subjects are typically human beings, but in theory the
law can give the status of a legal subject to anyone or
Legal
anything it wants. For example, a foundation, a
company, a state, and a municipality, all of these can —
and in many countries do — count as legal subjects.
subjects Human beings are called natural persons. Sometimes,

you can see physical persons in this manner. — Fiziki
Saxslar.
Organizations that have received the status of legal

subjects are called legal persons or legal entities.
o There are some differences between natural and legal

persons. Such as, some duties and rights can not be
realized by legal persons. Natural persons gain there
legal status from the time they are born. But, legal
persons get this status after registration in some
specific governmental agencies.
Civil Code of AR
5.1. Any natural person or legal entity,
whether or not involved in entrepreneurial
activity, may be the subject of civil legal
relationships.
24.1. A natural person is an_ individual

participating in legal relationships on his own
behalf.
Civil Code of AR
Chapter 4. Legal Entities
§1. General Provisions
Article 43. Definition and Types of Legal Entities
43.1. A legal entity is a specially established organization, which has completed state
registration as provided by law, owns its own property, bears liability for its obligations
to the extent of its property, has the right to acquire and exercise property and personal
non—property rights on its own behalf, is liable for its obligations, and acts as a plaintiff
or defendant in court. A legal entity has its own balance sheet.
43.2. A legal entity may be established by one natural person or legal entity, or a group of
natural persons and legal entities, may be based upon membership, may or may not
depend on the existence of members, and may or may not be engaged in entrepreneurial
activity.
43.3. The Republic of Azerbaijan participates in civil relationships in the same manner as
other legal entities. In such cases, the power of the Republic of Azerbaijan is exercised by
its body’s authorities which are not legal entities.
Entrepreneurial Forms of Conducting
Business
In Azerbaijan:
¢ Sole Proprietorship, Sole trader/Fardi sahibkar
¢ Ordinary Partnership /Unincorporated company/
Proprietorship = Fardi mUuassisa/Birga mUuassisa/Adi sirket
These business organizations are separate legal entities:
¢ General Partnership/Tam ortagliq
¢ Limited Partnership/Komandit ortagqliq
¢ Limited Liability Company/MMC
¢ Corporation/Joint-stock company/ASC, QSC
¢ Cooperative/Kooperativ
Sole
proprietorship
=sole trader
Ferdi sahibkar=fiziki sexs

sahibkar
Sole Proprietorship
O Fordi sahibkar/fiziki sexs sahibkar
O Owner is actually the business
O No separate legal entity
Advantages:
O Easy to form and low cost
O Owner makes management decisions
O Owner receives all profits
O Ownership can be easily transferred or sold
Sole Proprietorship
Disadvantages:
© Capital is limited to personal funds and loans. The sole proprietor’s access to
capital is limited to personal funds plus any loans he or she can obtain.
© The sole proprietor is legally responsible for the business's contracts and the
torts committed by the proprietor and his or her employees in the course of
employment (Owner is legally responsible for all activities).
Creation:
o No formalities
o No government approval
o No taxes at business level — in USA
Earnings and losses are reported on personal income tax filing (fiziki s@xsin gelir
vergisi) in USA. But in Azerbaijan ...
A sole proprietorship can operate under the name of the sole proprietor or a
trade name.
Personal Liability of
Sole Proprietors
o The sole proprietor bears the risk of loss
of the business.
o The owner will lose his or her entire
capital contribution if the business fails.
o The sole proprietor has unlimited personal
liability.
o Creditors may recover claims against the
business from the sole proprietor’s
personal assets. ,
a.
Win: mem se! |

Personal Liability of a Sole Proprietor
Debt or obligation
To) (2 owed
Proprietorship Third Party
Capital investment
Sole
Proprietor
Personal liability for sole
(Owner) proprietorship’s debts and
obligations
There are some differences between civil law
Types of eel and common law countries related with the
formation of some business entites.
alaleie(as
Types of legal entities
What are the main differences between these
legal entities?
Kommersiya Publik Qeyri-

hugqugi huqugi kommersiya
soxslori soxslor hugqugi
soxslori
Commercial legal Public legal Non-commercial

entities entities legal entities
stow
O Sue or be sued in their own names
eelmaralelay
means:
O Enter into and enforce contracts
O Hold title to and transfer property
O Be found civilly and criminally liable

for violations of law
In Azerbaijan
Commercial legal entities: Ministry of Taxes
General Partnership/Tam ortagliq
Limited Partnership/Komandit ortagqlig
Limited Liability Company/MMC
Corporation/Joint-stock company/ASC, QSC
Cooperative/Kooperativ
Non-commercial legal entities: Ministry of Justice
Public associations /ictimai birliklar
Funds /fondlar
unions of legal entities/ hUquai saxslarin ittifaglari
and in other forms stipulated by law (qanunvericilikda nazarda tutulan digar formalarda)
A noncommercial legal entity may engage in entrepreneurial activity only in furtherance of its
primary purpose for which it was established and where such activity corresponds to such purpose. A
non-commercial legal entity may establish LLC or Joint Stock Company or participate in such
companies to conduct entrepreneurial activity (AR Civil Code, art 43.6).
Example for public legal entities
QDF
Se.
eae
ARABS DIRGELIE FONDU
ANA SSHIFa Malumat
MoLUMAT
Azarbaycan Respublikasinin Prezidenti Ilham Sliyevin 4 yanvar 2021-ci il Farmant asasinda yaradilan Qarabag Dirgalis
Fondu Azarbaycan Respublikasinin isgaldan azad edilmis arazilarinin barpasi, yenidan qurulmasi, habela dayaniqli
iqtisadiyyata va yUksek rifaha malik regiona cevrilmasi istiqamatinds hayata kecirilan tedbirlara maliyya dasteyinin
gésterilmasini va sarmayalarin calb edilmasini, bu sahada dévilat-dzal tarafdasliginin inkisaf etdirilmasini, habela olka
daxilinda va xaricinda zeruri tasvigat islarini hayata keciran publik hUquqi saxsdir.
Fond 6z faaliyyatinda Azarbaycan Respublikasinin Konstitusiyasini, Azarbaycan Respublikasinin qanunlarini, Fondun

Nizamnamasini, Azarbaycan Respublikas! Prezidentinin farmanlarini, hamcinin sarancamlarini, Azerbaycan
Respublikasi Nazirlar Kabinetinin garar va sarancamlarini, digar normativ hUqudi aktlari rahbar tutur.
Fond 62 vazifalarini yerina yetirarkan va hoqualarini hayata kecirarkan doévlat ve yerli 6zUntidaraetme organlari,
beynalxalg va qeyri-hékumat taskilatlari ile, digar hUquai ve fiziki saxslarla garsiliqhi slaqada fealiyyat gésterir.
Azarbaycan Respublikasinin Prezidenti Ilham Sliyev tarafindan tasdig olunmus Nizamnamaya asasan, Fond
Umumdévlat va ictimai ahamiyyat dasryan fealiyyatls masgul olur.
Fondun veasaitlari fiziki va hUquai sexslerin ianaleri, qrantlar va qanunla qadagan olunmayan digar manbalar
hesabina formalasir.
Google Translate
Azarbaycan Respublikasinin Doviat Imtanan

Markazi publik hiiquqi saxsin yaradilmas!
haqqinda Azarbaycan Respublikast
Prezidentinin Farman
11 aprel 2016, 22:05
Doviet quilugu UcUn Kadriarin secilmesini va Azerbaycan Respublikas! Prezidentinin 2013-cu il 24

oktyabr tarixli 13 nomreli Serancam ile tasdiq edilmis “Azerbaycan Respublikasinda tehsilin
inkisafl Uzre Doviet Strategiyasi"na ssaslanaraq, tehsil mUsssisslérins telebs qsbulunu
beynelxalg tecrubeya uygunilasdirmag meqsedi ils, AZearbaycan Respublikas! Konstitusiyasinin
109-cu maddeasinin 32-ci bendini rshber tutaragqqerara aliram:
1. Azerbaycan Respublikasinda doviet quilugu UcUn kadriarin mUsabiqs esasinda secilmesini,

Umumi tehsil pillesinds tehsilalanlarin yekun giymetiandirilmesini (attestasiyasin!), orta ixtisas
tehsili mUessiselerins, ali tahsil muessiselerinds ali tshsilin bakalavriat va magistratura (tibb tehsili
Uzre esas tehsil ve rezidentura) seviyyelerins, Azerbaycan Milli Elmlar Akademiyasinda
magistratura seviyyasins merkezlesdirilmis qabul imtahanlarinin kecirilmssini teskil etmek
measedi ila Azerbaycan Respublikasinin Dévist Imtahan Merkezi publik hUquai sexs varadilsin.
Registration of
legal entities
Formation of legal entities
1) Agreement between owners of the legal entity or the For example, in USA they call this agreement as “articles of
decision of the owner, or related order of the executive partnership”, “articles of organization” or “articles of
body incorporation”
a) This agreement must include — the name with indicating
type of the legal entity (must include one of this words at
the end of every legal entity — for exp. LLC, OJSC etc.), the
name of the owners (partners, members or shareholders),
location of the business (hUqugi Unvan), purpose of the
business, management structure of the business, sharing of
profits and loses
2) Capital contribution — nizamnamea kapitali (stated capital)
3) Charter of the legal entity
4) Supplemented documents
5) Registration
The Registrar of Companies
AZARBAYC AN KESPUBLIKASS
VIERGILOR NAZIRLIY!
Kommersiya haquai goxslorinin

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Haqugi varistik —Axorbaycan Respublikasmin Odliyye Nazirliyi Hiquai gxsloria divlot qeydiyyal: Uzro
Baks bulges ySbosinds déyvit qeydiyyatina alinmuy “AZITERANE IT" MMC-nin ( geydiyyat tariai:
11.10.2006-cs i, geyd. mimwosi. 0106-P26146919) "DELTA TELEKOM LTD" MMM-na qogulmas: ile
slagadar homnin togkileten hiqua! varisliyi "DELTA TELEKOM LID" MMM-no kegmigdir
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Sdaliyya (41
Hagugi unan AZ1012, BAKL SOHORI YASAMAL RAYONU, SORIFZADG, ev 24!
Coarse verildiyi tarix va J& = 15.05.2008. 0801020025658809
-ci il tori xti

Hitqugi yous Acarbayean Respublikas: Prezidenti liham Oliverin 30.04.2007
Formanina ssason “bir pomcors™ prinyipi ils déviot geydiyyatina alumuydir,
Rehevew
Qcydiyyat X.V-
organumin reobbor Plenih,
The Registrar of Companies
AZORBAYCANNRESrUDLICAg
VERGILOR NAZIRLIYI
Kommersiya hiquai soxslorinin

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— =i. . Shere)
Agen9cay,
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qizi/oglu
Idara raisi: Lala Cafarova
of a3
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NIZAMNAMOSI
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COMIYYOTI Idarasi cemiyyot MORKOZIi, MORT.12 KARAKAS
24
“The future belongs
to those who believe in
the beauty of their
olay neem
Eleanor Roosevelt
Lesson 4 - Structure, reorganization and dissolution of legal entities
Business law by Gulnar Zulfugarova

SELECTED.
Structure of legal entities
Reorganization of legal entities
Overview of the 4" lesson

Dissolution of legal entities
Introduction to bankruptcy law and

main concepts about bankruptcy
regulation.
©O® ©
SELECTED.
otructure of legal entities
Huqudi sexslerin strukturu va idareetme organiar!
©O® ©
SELECTED.
General Meeting (of

members/shareholders/partners)
All members/shareholders, partners
(pay sahibleri, seohmdarlar, ortaqlar)

have the right to attend the general
meeting of legal entity.
Executives
otructure of most legal entities They manage day to day activities of
legal entity. CEO, COO, CFO, CLO
etc.
© (Board of) Directors

Directors are the supervising
authority over the executives.
©O® © 4
SELECTED.
§] Sahmdarlarin Umumi yigincag C> M
1 1 | - Miusahidea Surasi .) Audit Komitasi

Boyuk Strategiya —sRisklari_~—_sInsan Resurslan
| vo vaBidea tdaraetma va Mikafatian-
Komitasi —_Komitasi_ Komitasi —_dirma Komitasi
Daxili Audit
idara Heyati
Kicik Kredit ‘Aktivlarin va
Komita si | Passiviarin
idaraetma
Komitasi
idara Heyatinin Sadri / Bas icraci QO
Direktor
CRORES 5
SELECTED.
Branch office
Filial
What is “power of attorney’?
Representative
office
Numayendelik
Institutions — idare
©O® ©
Ayrilma
Seperation
A new legal entity is formed by separating from still existing legal entity
Birlasme Bolunme
Consolidation Division
Consolidation of legal entities and forming a new legal Legal entity is divided in two or more new legal entities
Reorganization of entity
legal entities
Qosulma Cevrilme
Merger and acquisition (M&A) Transformation
The acquisition of one legal entity by another legal entity Change of legal organizational form of legal entity
SELECTED.
, Dissolution of legal entities
Or termination of legal entities
©O® ©
SELECTED.
Liquidation ofa
legal entity
Huquai sexsin legvi

In process of liquidation
©O® ©
SELECTED.
The agreement between owners of business (legal
entity) can contain rules regarding dissolution of the
business entity or can specify duration of the
business.
Dissolution of legal There can be a court decision (judicial decree) about
entities Can be In dissolution of the entity either as a punishment (for

d iffe rent forms . criminal activity) or as the result or illegal activity.
Bankruptcy is also one of the ways to dissolve the

Li Li aa» legal entity.
Winding up — lagvetme proses!
O © © 10
SELECTED.
Introduction to bankruptcy law and main concepts about bankruptcy regulation
©) ® ® 11
Bankruptcy Law (Iflas hiiququ)
° In some countries like USA there are special courts (U.S. Bankruptcy
Courts) that hear and decide bankruptcy cases.
° In Azerbayan commercial courts hear and decide bankruptcy cases.
Types of Bankruptcy
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Filed by the creditor

26 filed by the debtor
Involuntary pe tition
° Meeting of creditors
Voluntary petition
° Filine the Petition
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Bankruptcy Procedure
° Discharge: A court order that relieves a debtor of the legal liability to pay his
ot her debts that were not paid in the bankruptcy proceeding.
° All or part of a debt can be discharged
° Some debts are not discharged
° Bankruptcy estate: The debtor’s property and earnings that comprise the
estate of a bankruptcy proceeding.
° Exempt property: Property that does not become part of the bankruptcy
estate.
Liquidation
° Liquidation: A form of bankruptcy in which the debtor’s non-exempt

property is sold for cash, the cash is distributed to the creditors, and any
unpaid debts are discharged.
° Also termed as straight bankruptcy
° Debtor’s future income cannot be reached
° Once the decision to liquidate has been taken, the company goes under the
control of a liquidator who must be a qualified and authorized insolvency
practitioner.
° Liquidator (in UK system)=Trustee (in US system)=0mlak inzibatets1

‘ = —oooo = — = —_— -— - Sees ss = ——s— . = —=
—- se =? > ~ = — — = a> o* -_ _ a -*F = - * > = = . 2 - - = : = - = - —=- lee
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~ - Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

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the company documents must state that the company is in liquidation and the
° Once insolvency procedures have commenced, share trading must cease,
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Order of payments on liquidation
In a compulsory liquidation (and often in a voluntary one) the liquidator follows a prescribed order for
distributing the company's assets:
1 Costs — These include the liquidator's remuneration and all costs incidental to the liquidation procedure
2 Preferential debts: any damages to employees that occurred during worktime and also any claims related to
dead employees.
3 Employees’ wages;
4 Contributions to an occupational pension fund; Any compulsory payments to the state (like taxes, fees, etc.);
5. Debts owed to unsecured ordinary creditors
6 Members (owners of legal entity) — Any surplus (unlikely in compulsory and creditors’ voluntary
liquidations) 1s distributed to members according to their rights under the articles or the terms of issue of
their shares.
= a a - . . ie = = 2 _ ————— = —EE — - - — . - _
Order of payments on liquidation
° ° 0 |
, |
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Adjustment of Debts of an
Individual with Regular Income — USA
Rehabilitati on form of bankruptcy

Coutt supetvises p/an for payment of unpaid debts by installments.
Advantages:
° Debtor may avoid stigma, retain more property, incur fewer expenses
° Creditor may recover greater percentage of debts
Voluntary filing of petition by debtor with regular income
Cannot be filed involuntarily by a creditor.
Debts must be primarily consumer debt.
Amount of debt must not exceed certain dollar amounts.
SS =— = == ——————S = = = = —_—_——S SSS
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Reorganization
° A bankruptcy method that allows the reorganization of the debtor’s financial

affairs under the supervision of the bankruptcy court.
° For individuals, partnerships, corporations, and other business entities
° Debtor reorganizes with new capital structure
° May be relieved of portion of debts, burdensome executory contracts and unexpired leases
° Plan of Reorganization: Sets forth a proposed new capital structure for a debtor.

a = = 2 _ ————— = —EE -- = - ~ - - —
Reorganization-Administration
In English system, reorganization 1s administration, in Azerbaijan we call it saglamlastirma.
Although there are some differences in these countries, but the main idea is similar.
° An administrator is appointed primarily to try to rescue the company as a going concern. A
company may go into administration to carry out an established plan to save the company.
° The administrator has fiduciary duties to the company as its agent, plus some legal duties.
° The administrator must either propose a rescue plan, or state that the company cannot be
rescued.
° The administrator takes on the powers of the directors.
° Administration can last up to 12 months.
° Administration has many advantages for the company, the members and the creditors.
Lesson 5
COMPETITION?
Competition law has three main
functions:
1) prohibits agreements aimed to

restrict free trading;
4) prohibits agreements aimed to

dominate the market;
3) supervises the mergers and

acquisitions of very large
corporations.
€
ANTITRUST LAWS: a series of laws enacted to limit
anticompetitive behavior in almost all industries, businesses, and
professions.
Legal acts in Azerbaijan Legal acts in USA
= Law of the Republic of Azerbaijan on = The Sherman Act — 1890

Unfair Competition (Unfair
Competition Act) — 1995 = The Clayton Act —- 1914
= Law of the Republic of Azerbaijan on
Antitrust Practices (Antitrust Practices » The Federal Trade Commission Act
Act) - 1993 (FTC Act) - 1914
= Law of the Republic of Azerbaijan on = The Robinson-Patman Act — 1930
Natural Monopolies (Act)
= Other acts:Some articlesofAR |
Criminal Code; Law of the Republic of
Azerbaijan on Consumer Protection
(Consumer Protection Act) — 1995 and
etc.
AR Iqtisadiyyat Nazirliyi Antiinhisar SIYASOTI VO ISTEHLAKGILARIN
HUQUQLARININ MUDAFIOS! DOVLOT XIDMOTI
Antiinhisar Siyasati va Istehlakcilarin HUquqlarinin Mudafiasi Déviat Xidmati - Google Chrome
() www.consumer.gov.az/index.php7lang=en
24th Apni 2016 Sunday 17:59
THE REPUBLIC OF AZERBAIJAN MINISTRY OF ECONOMY
State Service for Antimonopoly Policy and Consumer

Rights protection
A country with strong economy is capable of everything!
Heydar Aliyev
Home page | About

of service | Legislation | News | International cooperation | Publications | Consumer mustknow | Applications
B25.AzZ e em
EE ~
~~ DORMAN __ Doviet xidmeti maarifiendirme tedbirlerini davam etdirir Daxil et...
VASITEL iN Published on Friday, 15 April 2016 15:00
“TONZIML< is Igtisadiyyat Nazirliyinin Antiinhisar Siyaseti va istehlakcilarin Hiiquglarinin Miidafiasi htt pil shale
Doviet Xidmati terefinden istehlakcilarin maariflendirilmasi tadbirleri davam etdirilir. Bu eri RELL
QIYMSTLORI~ magsadia konfranslar, seminarlar ve s. tadbirlar taskil edilir, KiV-larda istehlakci CETTECR Tere Ec)
hiiquglari ila bagl malumatiar yayilir, video-carxlar yayimlanir, ticaret ve ictimai-iase Parti dig le
obyektlerinin xidmet personal ticiin telimler kecirilir, istehlakc) hiquqlarina dair mixtalif
Information on the Services | |mévzularda bukletlar, yaddas kitabcalari ve diger syani vesaitler hazirlanarag
for Business Entities by the | |istehlakcilar arasinda paylanilir.
State Service for istehlak olunan mallarin
Antimonopoly Policy and eri (islarin, xidmatlorin
Consumer Rights Protection _
and on the documents keyfiyyatina va tahlikasizliyina
needed for the use
of these = = = : - ; zamanat almaq
activities Baki Qida Senayesi Kollecinda istehlak¢i hUquglarinin mUdafiesine hosr
olunmus seminar kecirilmisdir
Published on Friday, 08 April 2016 17:42
FORMS OF UNFAIR COMPETITION
According to Unfair Competition act of AR forms of unfair competition are:
=" copying of economic activity of competitor (raqibin tesarrufat fealiyyatinin taqlidi);
= discrediting of economic activity of competitor (reqibin taserrufat foaliyyetinin
nufuzdan salinmasi);
= interference with economic activity of competitor (reqibin taserrufat fealiyyetina
mudaxila);
= unfair entrepreneurship (haqsiz sahibkarliq faaliyyati);
= unscrupulous business behavior (haqsiz isguzarliq davranis1);
= delusion of consumers (istehlakcilarin casdirilmasi).
CLASSIFICATION IN AMERICAN LAW
Unilateral refusal to
Horizontal Vertical restraints ;
‘ deal and conscious
restraints of trade osimnaskers BEC re
¢ Price-fixing ¢ Resale price ¢ Is not a violation

(qiymotlorin manipulyasiyas1) g -
© Division
ae of ;
maintenance ° Because there is
¢ Non-price vertical no concerted
markets . . :
restraints action with others
Group boycotts
Other horizontal
agreements
EXHIBIT 1 — HORIZONTAL RESTRAINT OF
TRADE — UFUOQI SAZISLOR
Copyright© 2013 Pearson Education, Inc. Publishing as Prentice Hall.

EXHIBIT 2 - GROUP BOYCOTT BY SELLERS
Seller Agreement Seller

een) 0 § COmpetitor
No. 1 not to deal No. 2
with a customer
Boycotted
Customer

EXHIBIT 3 GROUP BOYCOTT BY PURCHASERS
Boycotted
Supplier
Purchaser Agreement Purchaser

Ch SS —— Comperiitor
No. 1 not to deal No. 2
with a supplier

RESTRAINTS OF TRADE: SECTION 1 OF THE SHERMAN ACT
= Other horizontal agreements:

«Trade association activities and rules, exchange of non-
price information, participation in joint ventures
= Reasonable restraints are lawful
= Unreasonable restraints violate Section 1 of the Sherman Act

EXHIBIT 4 - VERTICAL RESTRAINT OF
TRADE — SAQULI SAZISLOR

Monopolization
Defenses to
monopolization
¢ Innocent
acquisition
¢ Natural monopoly
Monopoly Willful act of (tobii inhisar)
Attempts and
Defining the power monopolizing
conspiracies to
relevant market (hokmran (inhisargiliq
monopolize
movqe) foaliyyoti)
PREDATORY PRICING
= Predatory pricing involves an attempt by one firm to drive its competitors from the
market by selling its product at prices substantially below the normal costs of
production. Once the competitors are eliminated, the firm will attempt to recapture
its losses and go on to earn higher profits by driving prices up far above their
competitive levels.
o Section 2 of the Sherman Act essentially condemns the act of
monopolizing, not the possession of monopoly power.
“0 Violation of Section 1 (restraints of trade) requires two or

more persons, as a person cannot contract or combine.or
conspire alone. Thus, the essence of the illegal activity is
act of joining together.
o Section 2 (monopolization), though, can apply either to on
person or to two or more persons because it refers to “every
person”. Thus, unilateral conduct can result in a violation of 7
Section 2. >
o Competition, however, is not necessarily diminished solely
as a result of market concentration. One factor of particular
importance in evaluating the effects of a merger is whether
the merger will make it more difficult for potential /
competitors to enter the relevant market.
MONOPOLIZATION: SECTION 2 OF THE SHERMAN ACT
= Section 2 of Sherman Act: Prohibits act of monopolization as well as attempts or

conspiracies to monopolize trade
= Proving that a defendant is in violation of Section 2 means proving that the
defendant: (both of these elements are required)
= Possesses monopoly power in the relevant market
= Engaged in a willful act of monopolization to acquire or maintain
that power
= To prove monopoly power indirectly, the plaintiff must show that the firm has a
dominant share of the relevant market and that there are significant barriers for
new competitors entering that market.

MONOPOLIZATION: SECTION 2 OF THE SHERMAN ACT
= Relevant product or service market: Includes substitute products or services that

are reasonably interchangeable with the defendant’s products or services
= Relevant geographical market: Area in which the defendant and its competitors
sell the product or service
= Monopoly power: The power to control prices or exclude competition
= Measured by the market share the defendant possesses in the relevant market
= Willful act of monopolizing: An act that is required to find a violation of Section 2

of the Sherman Act
= Possession of monopoly power without such act does not violate Section 2

EXAMPLE EU Files Formal Charges Against Google Over Android Conduct - WS) - Google Chrome
¢ C | GB www.wsj.com/articles/eu-files-formal-charges-against-google-over-android-conduct-1461145354
THE WALL STREET JOURNAL.

Home World U.S. Politics Economy Business Tech Markets Opinion Arts Life Real Estate
TECH
EU Files Formal Charges Against Google Over Android Conduct

EU says Google imposed restrictions on Android device makers, network operators
7
Big Player
Global mobile Internet
EXAMPLE ad-revenue market share
Others Google
= European Union vs. Google 30% — 35%
= Ongoing process
2015
$70.5B
Facebook Tencent
gle 19% | 2%
im Alibaba 8% Baidu 7%
€
Source: eMarketer
CINDROID
THE WALL STREET JOURNAL.
MERGE RS (SIRKOTLORIN BIRLOSMOSI VO QOVUSMASI)
section of the
country
Probability of a
substantial lessening
of competition
TYPES OF MERGERS
rs reer
abhi. Ae eG et
‘
—
NO LIABILITY FOR MERGERS IF:
octrine
le
The small company doctrine
Two or more small companies

can merge without any
liability
= Tying arrangements are vertical trade restraints
that involve the seller’s refusal to sell a product (the
tying item) to a customer unless the customer
TYING
purchases a second product (the tied item). ARRANGEMENTS
As it was in Microsoft case...
=A tying arrangement is lawful if there is some Microsoft was alleged to have used
“bundling” of its software products
justifiable reason for it.
(its web browser Explorer) with its
operating systems to eliminate
competitors (especially Netscape) from
the software marketplace.
Eventually Court held that Microsoft had

used predatory and anticompetitive
conduct to illegally maintain its
monopoly in the Windows operating
system, in violation of Section 2 of
Sherman Act.
Source: Henry Cheeseman, Business Law,
7» Edition, pp. 726.
€
EXCLUSIVE-DEALING CONTRACTS
A contract under which a seller forbids a buyer to purchase products from
the seller’s competitors is called an exclusive-dealing contract. A seller is
‘ prohibited from making an exclusive-dealing contract if the effect of the
j; contract is “to substantially lessen competition or tend to create a
monopoly”.
PRICE DISCRIMINATION
Defenses to
Direct price Indirect price
price
discrimination discrimination
discrimination
Commodities of . Less readily i !
like grade and apparent than Cost justification
quality direct forms of
price
discrimination —
sales to two or af Changing
more purchasers conditions
e.g., favorable
credit terms Meeting the
Injury
competition
€
EXEMPTIONS FROM ANTITRUST LAWS
« Statutory exemptions: Exemptions from antitrust laws that are expressly provided
in statutes enacted by Congress. Include labor unions, agricultural cooperatives,
export activities of American companies, and insurance business that is regulated
by a state, also, railroad, shipping industries as well.
= Implied exemptions: Exemptions from antitrust laws that are implied by the
federal courts. Example, airlines.
= State action exemptions: Business activities that are mandated by state law are
exempt from federal antitrust laws. Example, public utilities such as gas, electric,
and cable television companies (in these cases price-fixing are set mostly by
government).

FORMS OF UNFAIR COMPETITION
According to Unfair Competition act of AR forms of unfair competition are:
=" copying of economic activity of competitor (raqibin tesarrufat fealiyyatinin taqlidi);
= discrediting of economic activity of competitor (reqibin taserrufat foaliyyetinin
nufuzdan salinmasi);
= interference with economic activity of competitor (reqibin taserrufat fealiyyetina
mudaxila);
= unfair entrepreneurship (haqsiz sahibkarliq faaliyyati);
= unscrupulous business behavior (haqsiz isguzarliq davranis1);
= delusion of consumers (istehlakcilarin casdirilmasi).
COPYING OF ECONOMIC ACTIVITY OF COMPETITOR
(rogibin tosorriifat foaliyyatinin toqglidi)
UNFAIR ENTREPRENEURSHIP (hagsiz
sahibkarliq faaliyyati}
= One type of this is:
=sale of goods with compulsory
additional assortment/bundling
«= Example:
« Microsoft case
= Microsoft was alleged to have used
“bundling” of its software products
(its web browser Explorer) with its
operating systems to eliminate
competitors (especially Netscape) from
the software marketplace.
= Eventually Court held that Microsoft had
used predatory and anticompetitive
conduct to illegally maintain its
monopoly in the Windows operating
system, in violation of Section 2 of
Sherman Act.
» Source: Henry Cheeseman, Business Law,
7 Edition, pp. 726.
DELUSION OF CONSUMERS
(istehlakcilarin casdirilmasi) EXAMPLE
= use of illegal methods to advert
goods, affecting freedom for choice
of consumer under acquisition or
conclusion of deal;
= incorrect comparison of good, which
can delude consumer and make
public as advertisement or
information material;
(1)
DELUSION OF CONSUMERS (istehlakcilarin
casdirilmasi) EXAMPLE
AVEA’ya faturali reklam yasagi! | BUtUnlesik Pazarlamada Marketing Turkiye - Google Chrome
CG www.marketingturkiye.com.tr/haber/aveaya-faturali-reklam-yasagi
10
Aralik 2012
AVEA‘ya faturali reklam yasag!!

Reklam Ozdenetik Kurulu (ROK) Avea‘nin Turkcell’e gonderme yapan reklamini
haksiz rekabet ve kotuleme gerekceleri ile durdurdu. Avea‘nin Turkcell'in “Hayat
Paylasinca Guzel” sloganina go6nderme yaptigi reklam yapilan inceleme
sonucunda kéttlleme igermesinden dolayi ROK tarafindan durdurularak
ozdenetim esaslarina uygun bir sekilde duzenlenmedigi surece
yayinlanmamasina karar verildi. Turkcell’in reklamin yayininin durdurulmas!
talebi ile yaptigi basvuru neticesinde mahkeme, reklamin haksiz rekabet
yarattigi ve kotuleme icerdigi gerekcesi ile internet, televizyon, radyo ve diger
her turlG mecrada yayininin durdurulmasina karar verdi. Hem ROK'Un hem de
mahkemenin durdurma karar! verdigi reklamda, Turkcell'in “Hayat Paylasinca
Guzel” sloganina gonderme yapilarak Fasulye “Fatura Paylasinca Guzel” diye
dusunuyor ve faturasini paylasmak icin aradigi arkadaslarinin ve yakinlarinin
tepkisiyle karsilastyor.
Madds 197. Jmtso nisanlarindan qanunsuz
istifads etma
Criminal
Madds 198. Bils-bils yalan reklam etms
Maddo 199. Inhisargiliq horakatlori va roqaboti
mohdudlasdirma
charges in Maddo 200. Istehlakeilari aldatma vo ya pis
Azerbaijan law
keyfiyyotli mshsul istehsal etms va satma
Madds 202. Kommersiya vo ya bank sirri olan

moalumatlar1 qanunsuz yolla olds etma va ya
yayma
MADDO 199. Inhisarciliq horakotlori vo
roqabot! mohdudlasdirma
= 199.1. Tasarriifat subyektlarinin digar ragiblari bazardan kanarlasdirmag va ya yeni ragiblarin
bazara daxil olmasinin garsisini almag magsadila raqabati mahdudlasdiran vasitalarin tatbigi
barada kartel s6vdalasmasi, bela sbudalasmada istirak etma, yaxud raqabatin garsisinin
alinmasina, aradan galdirilmasina va ya mahdudlasdirilmasina sabab olan va ya sabab ola bilan
bazar manealarini yaratma, mahdudlasdirict faaliyyat vasitalarindan istifada etma va ya digar
inhisar¢ilig harakatlarini etma -
cinayat naticasinda vurulmus ziyanin (alda edilmis galirin) iki misli miqdarinda carima edilmakla
iki il miiddatina miiayyan vazifa tutma va ya miiayyan faaliyyatla masgul olma hiiququndan
mahrum etma va ya iki il miiddatina miiayyan vazifa tutma va ya miiayyan faaliyyatla masgul
olma hiiququndan mahrum edilmakla va ya edilmamakla tic iladak miiddata azadliqdan mahrum
etma ila cazalandirilir.
FEDERAL TRADE COMMISSION ACT
« A federal government administrative agency (FTC) that is empowered to enforce

the Federal Trade Commission Act
= Section 5 of the Federal Trade Commission Act: A section that prohibits unfair
methods of competition and unfair or deceptive acts or practices in or affecting
commerce

DELUSION OF
CONSUMERS?
For your consideration
x
UBER CASE
Uber is banned in Italy after court rules app is unfair competition to taxis - Googie Chrome
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| The Italian courts have given Uber 10 days to shut down its
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By Alahna Kindred
2
© @) COMMENTS
UBER has been banned in Italy after local cabs filed a lawsuit claiming the company
poses unfair competition.
The international hire firm now has 10 days to shut down its services in the country or
face fines of €10,000 (£8,500) for each day that it defies the courts.
PARTNERSHIPS
In Azerbaijan
m Commercial legal entities: Ministry of Taxes
- General Partnership/Tam ortaqliq
- Limited Partnership/Komandit ortaqliq
- Limited Liability Company/MMC
- CorporationfJJoint-stock company/ASC, QSC
- Cooperative/Kooperativ
= Non-commercial legal entities: Ministry of Justice

- Public associations /ictimai birlikler
- Funds /fondlar
- unions of legal entities 7 huqugqi sexslorin ittifaqlari
- and in other forms stipulated by law (qanunvericilikda nezerda tutulan diger formalarda)
m Anoncommercial legal entity may engage in entrepreneurial activity only in furtherance of

its primary purpose for which it was established and where such activity corresponds to
such purpose. A non-commercial legal entity may establish LLC or Joint Stock Company or
participate in such companies to conduct entrepreneurial activity (AR Civil Code, art 43.6).
Difference between partnerships and
companies
m Partnerships (general and limited partnership)
Main factor is partner.
Change in personality of a partner (death, bankruptcy, leave or smth else)
can change the existence of a partnership.
Transferability of shares depend on other partners consent.
Duties of partners are more severe than in companies.
= Companies (LLC and Joint Stock Company)
Main factor is capital.
Change in personality of a member/shareholder generally does not affect to
the existence of a company.
Shares can be transferred (sold, gifted, pledged or smth else) to other
people easily.
Duties of partners are not severe as in partnerships.
Capital Contributions
m Contribution may be in cash, property, services rendered, or

promissory notes or other obligations to contribute cash, property, or
to perform services.
m Partner or creditor may bring lawsuit to enforce promise to make

contribution.
Copyright
© 2013 Pearson Education, Inc. Publishing as Prentice Hall.
Note that ...
In most common law countries (like USA and UK) partnerships do not have a
separate legal entity status like in civil law countries (example, Azerbaijan, Turkey,
Germany etc.).
Most rules in business law are facilitative rules, not mandatory. It simply means that,
owners of business can easily change them and create their own laws. But if there is
no arrangements Civil Code or related special acts contain a lot of rules about
business organizations and their management or other topics.
GENERAL PARTNERSHIP
Tam Ortaqlig
General Partnership
m Jam ortaqliq/Kolektif sirket (tr)
m Voluntary association of two or more persons for carrying on a business as co-owners for
profit.
m Creates rights and duties among partners and with third parties.
m Partners are personally liable for debts and obligations.

m Formed with little or no formality.
m Can operate under name of any one or more of the partners. Cannot be similar to name
used by another business. In Azerbaijan the name of the general partnership should be
like this: oli oliyev va Vahid Haciyev Tam ortaqligi; or oli Aliyev va ortagi/ortaglan!' Tam
ortaqligi
m Partnership agreement (articles of partnership) ...
m If not specified, in AR Civil Code provides that profits and losses are shared on the basis of
value of the partner’s capital contribution.
opyright© 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Rights of General Partners
m Right to participate in management
m Right to share in profits
m Right to compensation
m Right to indemnification or reimbursement
m Right to return of loans
m Right to return of capital contributions
m Right to demand true and full information

Duties of General Partners
Duty of
Obedience
Duty to
Inform
Copyright
= Duty of loyalty: partner should not act adversely to the interests of the partnership.
m Forms of breach of loyalty:
- Self-dealing
— Usurping a partnership opportunity
—- Competing with the partnership
— Making secret profits
— Breach of confidentiality
- Misuse of partnership property

= Duty of care:
- Obligation to use same level of care and skill that a

reasonable person would use
- Breach of duty of care is negligence
= Dutyto inform:
- Provide all information relevant to affairs of the partnership

— Other partners are imputed with knowledge of all notices

= Duty of obedience:
- Adhere to provisions of partnership agreement and

decisions
m Action for an accounting: formal judicial proceeding in which court is authorized to:
— Review partnership and partners’ transactions

- Award each partner his or her share of partnership
assets

Liability of General Partners
General Debt or obligation :

owed Third Part
Partnership | y
t Personal liability for
partnership’s debts and
Capital investment obligations
General General General

eel anit-ye ae adii-ye eel atit-ys

Liability of General Partners
= Contract liability:
— Unlimited personal liability for contracts of partnership.
— Joint liability/Birgea mesuliyyet: for contracts and debts of
partnership
Plaintiff must name all partners as defendants in a lawsuit
= The liability of new partners - they will be liable for all debts of
partnership even if they occurred before their entrance to the
partnerhip.
= The liability of retiring partners - they will be jointly and
unlimitedly liable for the debts of partnership (which occurred
during their period) for 2 years after their resignation.
Copyright
The authority of partners
m The authority of each partner to take decisions for the business, and enter into
transactions with other parties, may be specified in the partnership agreement.
Since the partnership agreement is a contract, its terms are the terms of a
contractual agreement between the partners.
m= Partners act as agents for their partnership.
m When a partner enters into a contractual agreement that is outside his actual
authority, the other partners are able to approve the contract retrospectively and
ratify what he has done. Or if they don’t approve or ratify that contract the partner
who concluded it will be personally liable, not the partnership.
m lf there is no agreement between partners, the rule is that every general partner has
managing rights and can act on behalf of the partnership. Or as it indicated above
they can assign certain partners for certain types of deals/contracts.
Dissolution of a general partnership
A partnership is dissolved when:
= a partner leaves the partnership
= a new partner is admitted into the partnership

= the partners agree that the partnership should be dissolved, perhaps because it is losing
money
= the partnership is for a fixed time or project and the time has expired or the project is
completed
= a partner dies or is personally made bankrupt.

In all these above indicated cases instead of dissolving partnership the remaining partners can
agree to continue their partnership even one of the partners leaves. In that case they should
accept the entrance of a new partner or the heir of the deceased partner or at least their should
be more than one partner left. If their left only one partner he/she can continue his/her
business either as a sole proprietor (in this scenario dissolving partnership) or can convert the
general partnership to the company (LLC or joint-stock company).
LIMITED PARTNERSHIP
Komandit Ortaqligi
Limited Partnership
m Komandit ortagligi/Komandit sirket (tr)

m Atleast one general partner and one limited partner
m Name must contain the words, “limited partnership”
In Azerbaijan the name of the limited partnership should be like this:

ali Jliyev ve ortagi/ortaqlar! Komandit ortagqligi.
m Two types of partners:
— General partners (tam ortaq): invest capital, manage the business,

and are personally liable for partnership debts
- Limited partners (komandit ortaq): invest capital, but do not
participate in management and are not personally liable for
partnership debts beyond their capital contributions.

Limited Partnership Agreement
m Document that sets forth the rights and duties of general and limited
partners
m Terms and conditions regarding operation, termination, and
dissolution of partnership
m Approval of transactions by partners
m Agreement may specify how profits and losses are to be allocated

among the general and limited partners
m If not specified, in Azerbaijan AR Civil Code provides that profits and
losses are shared on the basis of value of the partner’s capital
contribution.

Liability of General and Limited Partners
m General partners have unlimited liability for debts and obligations of

the partnership
m Limited partners are liable only up to their capital contributions
m Creditor may enforce personal guarantee and recover payment from

limited partner who guaranteed repayment of loan

Liability of General and Limited Partners
_. Debt or obligation
TLC aeee
Partnership
Capital investment
l
Limited Limited General General

Partner Partner Partner Partner
t
Liability limited to capital
contribution
No personal liability for partnership’s | Personal liability for partnership’s
debts and obligations debts and obligations
pyright© 2013 Pearson Education, Inc. Publishing as Prentice Hall.
Summary: Liability of Limited Partners
Exceptions to the General Limited partners are individually liable for

Rule the debt, obligations, and tortious acts of the
partnership in three situations:
1. Defective Formation
2. Participation in Management (if they
participate In management, they will be
accepted as general partners)
3. Personal Guarantee
Dissolution of a limited partnership
A partnership is dissolved when:
m the partners agree that the partnership should be dissolved, perhaps because it is losing
money
m the partnership is for a fixed time or project and the time has expired or the project is
completed
m lf there left no limited or general partner. Limited partnership will continue until there are at
least one general and one limited partner.
m lf their left only one partner he/she can continue his/her business either as a sole proprietor
(in this scenario dissolving partnership) or can convert the general partnership to the
company (LLC or joint-stock company).
Osea arias
PARTNERSHIP
Limited Liability Partnership (LLP)
m Aspecial form of partnership in which :

- There are no general partners.
- Some states (in USA) only allow LLP status for professional partnerships, like
accountants, lawyers or architects.
- All partners are limited partners (no liability for other partners’ acts).
- However, each partner still has unlimited liability for his or her own acts (in
USA).
In UK and USA they accept this type of partnership for some reasons: because it
is a partnership and in common law countries there will be no legal entity status
and partners will be taxed through their personal income; no double taxation. And
also it will make it easy to establish, also being limitedly liable is the other
advantage.
In Azerbaijan we don’t have such type of organization.

Examples of LLPs
m Most examples of LLPs include partnerships among physicians, attorneys, accountants,
architects, licensed financial advisers, veterinarians and undertakers. California only allows LLPs
for lawyers and accountants. The “Big Four” accounting firms (Deloitte, Earnst&Young (EY), KPMG,
PricewaterhouseCoopers (PwC)) are represented in the United States by LLPs, as is the world’s
largest law firm, DLA Piper, whose American affiliate is DLA Piper LLP. Doctors and lawyers often
form LLPs instead of general partnerships to protect themselves from the malpractice suits of
their partners. LLPs generally protect partners from each other’s professional legal problems,
such as negligence or malpractice. Liability is limited to the amount of money each partner
contributes to the LLP.
m The Public Company Accounting Oversight Board (PCAOB) said the fine against Deloitte Touche
Tohmatsu Auditores marked the largest civil penalty it has ever imposed, and that it has
separately sanctioned 12 former partners and other officials for their role in the scheme.
m Deloitte LLP and firm partner John Clennett got a record fine for misconduct after the accounting
regulator said the audit and financial statements of Aero Inventory Plc fell short of acceptable
standards. The Financial Reporting Council fined Deloitte 4 million pounds ($5 million) and
Clennett 150,000 pounds for their work on the aircraft parts supplier's 2006, 2007 and 2008
fiscal year accounts, the regulator said Thursday. The fine is the highest imposed by the FRC for
misconduct.
JOINT-STOCK
COMPANIES
JOINT-STOCK
COMPANIES=CORPORATIONS
Sehmdar Comiyyet
Characteristics of Corporations
m Free Transferability of Shares=Sohm

- National securities markets have been developed for the
organized sale of securities
m Centralized Management
- Board of directors makes policy decisions concerning the
operation of a corporation
m Limited Liability of Shareholders

- Corporations are liable for their own debts and obligations
Debt or
obligation
eae ——
Capital investment
Share- Share- Share- Share-

holder holder holder holder
Liability limited
to capital
contribution
No personal liability
for company’s
debts and obligations
Publicly Held (public companies) and Closely Held (private
companies) Corporations
m /n Azerbaijan the name of a corporation must contain ASC (Open Joint

stock Company) or QSC (Closed Joint Stock Company)
m Publicly Held Corporation=Open Joint Stock Company (=Aciq sehmdar

camiyyet)=public company (plc) in UK
- Many shareholders
- Shares traded on organized security markets
- Shareholders rarely involved in management
m Closely Held Corporation=Closed Joint Stock Company (= Qapal!

sehmdar Camiyyet)=private companies in UK
- Few shareholders
- Shareholders may have buy-ana-sell agreements - pre-emption
rights of shareholders (ustun satinalma huququ) like in LLCs.
- Shareholders often involved in management

Articles of Incorporation=Nizamname
(=Charter)
m Promoters=Incorporaters will be jointly liable before the registration of a legal entity.
m Basic governing document of the company

- Must be filed with secretary of state of state of incorporation -— Huquqi sexs
doviat qeydiyyatina alindigi andan qurulmus Sayilir.
- Contains name of corporation, number of shares authorized, name and
address for registered agent (ticaret va ya kommersiya tamsilcisi) and
incorporators (qurucular/tesiscilar).
- May contain term, purpose, limitations, regulations of affairs.
Corporate Bylaws
m A detailed set of rules adopted by the board of directors after the corporation is
incorporated
- Contains provisions for managing the business and the affairs of the
corporation
- Governs internal management structure
- May be amended by the board of directors
m Corporate seal - A design that contains the name of the corporation and the date
of incorporation

Key Term Ie we CyN
CORPORATION_USA
REGULATION

Management of joint-stock companies in Azerbaijan
General meeting (GM) of shareholders- Umumi yigincaq, genel kurul (tr). Gathering at least once a year (annual GM). Makes
important decisions about the company. Beside of annual meetings special meetings of GM also can take place.
Board of directors (supervisory board) or just a director - direktorlar va ya musahide surasi. Inspects and supervises the
executives. Appointed and dismissed by GM. Can be outside or inside of a company. Not compulsory unless it is stated in the
charter or there is a legal requirement. Legal requirement_- When the number of shareholders are more than 50 in a
company; or if it is a financial institution (like credit company, insurance company, bank or investment company etc.) it is
compulsory to create a board of directors.
Executive authority (icra orqani)/executives - can be outside (manager-managed, kenar idareci) or inside of a company.
Appointed and dismissed by GM. This is compulsory body of the management. Always there should be at least one executive
(even that person also can be the only owner of the company). Because they (or he/she) represents the company, creates the
contracts on behalf of the company etc.
Inspector (mufettis) or inspecting committee (teftis komissiyasi) - Inspects financial activities and documents of the
company. Appointed and dismissed by GM. Not compulsory unless it is stated in the charter or there is a legal requirement.
Legal requirement_- When the number of shareholders are more than 50 in a company; or if it is a financial institution (like
credit company, insurance company, bank or investment company etc.) it is compulsory to create an inspecting committee.
Auditing committee (auditor) (daxili audit komitesi) - Not compulsory unless it is stated in the charter or there is a legal
requirement. Legal requirement_- When the number of shareholders are more than 50 in a company; or if it is a financial
institution (like credit company, insurance company, bank or investment company etc.) it is compulsory to create an auditing
committee. Appointed and dismissed by directors and accountable in front of director(s). Can consist of only by natural
persons.
Calculation comission (hesablama komissiyas!) - in companies when the number of shareholders is more than 100. They
calculate results of the elections in the general meetings. Consist of at least 3 persons.
Preemptive powers (special competences) of the
General Meetings in companies (LLC and joint-stock
companies
Every member/shareholder has the right to participate (personally or by Alte

representative) in the general meetings of the company and vote according
Preemptive powers that belong only to the GM: So below indicated decisions will be accepted
Oa ae) AeIe
* Changing the charter

* Changing the stated capital (increasing and decreasing the capital)
*Decision about the termination of the company
*Decision about the merger, acquisition, division or changing the type of the company
* Approving the annual financial reports of the company
* Division of the profits and looses
* Appointing and dismissal of the directors, executives and inspectors of the company.
Also GM can decide about any topic related to the company.
In the charter of the company some other competences also can be delegated to the general
meeting of the company.
Directors owe their duties to the company, not
the members. This means that the only
company itself can take action against a
director who breaches them. However, it is
possible for a member to bring a derivative
claim against the director on behalf of the
company.
Duties of L] Act within their powers
L] Promote the success of the company
directors L] Exercise independent judgement
L] Exercise reasonable skill, care and diligence
L] Avoid conflicts of interest

L] Not to accept benefits from third parties
L] Declare an interest in a proposed

transaction or arrangement
Civil Code of AR
m 49.3. Hiquqi soxs adindan ¢ixis edon sexs, o climledan htiquqi soxsin idaraetma
organlarinda (miisahida (direktorlar) suras1, icra orqant) tamsil olunan har hans
saxs tamsil etdiyi htiquqi soxsin monafeloari tictin vazifalarini yerina yetirarkan
vicdanla, pesakar qaydada va mantigla harakat etmak, hiiquqi saxsin va onun
biitiin istirakcilarinin maraglarina sadiq olmag va hiiquqi saxsin maraqlarim 6z
maraglarindan iistiin tutmag va ehtiyath olmaga borcludur. Hamin sexs, bu
vozifalorin htiquqi sexsin maraqlarina uygun olaraq yerina yetirilmesi icin
mosuliyyat dasiyir. Hiiquqi sexsin istirakcilarinin talabi ilo 0, vezifalerini
pozdugu halda, pozuntu noticesinda hiiquqi sexsa daymis zarorin ovezini
Odomolidir.
m A lawsuit a shareholder brings against
De rivative
an offending party on behalf of a
i ie corporation when the corporation fails
ro ASOT to bring the lawsuit.
m Court may dismiss if the lawsuit is not in

best interests of corporation.
m Any award goes to corporate treasury

- Corporation pays shareholder’s
ey Olea oxS
Piercing the Corporate Veil
m If ashareholder dominates a corporation and uses it for improper purposes, a court

of equity can disregard the corporate entity and hold the shareholder personally
liable for the corporation’s debts and obligations.
m Occurs when
- There is thin capitalization
- No separateness is maintained between the corporation and its shareholders
Parent companies and subsidiary companies
Companies, as legal persons, may own shares in other companies.
= A parent company (holding) is a company that owns shares in another company, and exercises control
over that company. The law defines ‘control’, but control is generally considered to exist when one
company owns more than 50% of the voting shares in another company.
7 A subsidiary company is a company that is controlled. by another company. Again, a company is
usually considered to be a subsidiary of another if the other company owns more than 50% of its voting
shares.
A parent company may have many subsidiary companies. Some parent companies may themselves be a
subsidiary of another company.
A parent company and its subsidiaries (and sub-Ssubsidiaries etcetera) is a group of companies. In company
law, some special rules apply to groups. For example, parent companies are required to prepare
consolidated financial accounts for the group as a whole.
However, it is important to recognize that each company in a group is a separate legal person. If someone
lends money or gives credit to a Subsidiary company in a group, the subsidiary has the legal liability to pay
the debt, but the parent company does not, nor do other subsidiaries in the group. A subsidiary in a group
can be put into liquidation for inability to pay its debts, but the other companies in the group will be
unaffected - unless they have accepted liability for the debts of the subsidiary, for example by providing the
lender with a guarantee.
Dissolution of a company (LLC and joint-stock
companies)
\
x
Voluntary dissolution: always with the Involuntary dissolution: always with the
decision of the owners of the company decision of the court
Decision of general meeting to terminate the Administrative resolution about the dissolution of the
company company - relevant administrative body (exp: FIMSA,
If the company is for a fixed time and the time has Ministry of Justice etc.) asks from the court to
expired terminate the company for some stated reasons
lf the company is for a special project(s) and the Bankruptcy

project is completed

Termination
Huqudi sexsin lagvi bu barada qeydin huqudi sexslerin doviat reyestrina daxil edildiyi andan
basa catmis, hiquqi sexs isa mMovcudiuguna son qoymus Sayilir. — The liquidation of a legal
entity is deemed completed and the existence of the legal entity is deemed terminated from
the moment of the entry of the liquidation notation in the state registry of legal entities (AR
Civil Code, art 61.7). This rule is accepted for all legal entities in Azerbaijan.
The ending of a corporation that occurs only after the:
¢ Winding-up of the corporation’s affairs

¢ Liquidation of its assets
¢ Distribution of the proceeds to the claimants

Limited liability companies (LLC) and
other forms of business entities
Business Law — Lesson 8

¢ In Azerbaijan:
¢ Sole Proprietorship, Sole trader/Fardi sahibkar
i aldg-)°)¢-1al-10 Late) * Ordinary Partnership /Unincorporated company/
Fo rms of ern = Fardi miiassisa/Birga muiassisa/Adi
Cond ucti N g These business organizations are separate legal entities:

* General Partnership/Tam ortagqliq
Maes Limited Partnership/Komandit ortagliq
Limited Liability Company/MMC
Corporation/Joint-stock company/ASC, QSC
Cooperative/Kooperativ
Limited liability company
Mahdud Masuliyyatli Caomiyyat/MMC
Some principles about companies (LLC and joint-
stock companies) ...
¢ Separation of ownership from control

¢ The liability of a company itself and its directors - Limited liability applies to the
members/shareholders of a company. It does not apply to the company itself. A company is fully
liable for all its debts and other liabilities, just as any other person is fully liable for the debts that he
or she incurs. The directors and other officers of a company act on behalf of the company, and
provided that they act within their powers and in accordance with the law, they will not be personally
iable for debts of the company. However, the concept of limited liability does not apply to them.
* Transfer of ownership and perpetual succession (or perpetual existence) — even if the owners of the
company leave, the company will continue to exist unlike partnerships.
* Capital maintenance- Another aspect of separate legal personality for companies is the need to
provide some protection to their creditors.
* acompany’s shares will be paid for in full, and
* the company will not return any capital to its shareholders
* In most countries there is stated minimum capital requirement for establishing companies and
special procedure to decrease and increase it.
¢ Public information about companies
Limited Liability
Company (LLC)
Copyright© 2013 Pearson Education, Inc. Publishing as Prentice Ha

Debt or
Limited obligation
Liability owed Third
Company Party
(LLC)
Limited Capital investment
Liability
Company (LLC)
Member Member Member Member
Liability limited
to capital
contribution
No personal liability
for company’s
debts and obligations

a
[e}
ao)
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ms
(oie)
Management of an LLC
=
+
©
IS)
Oo
par
et)
vu
oO
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ay
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Member-managed The members do not designate managers to

LLC manage the LLC. The LLC is managed by
its members.
Manager-managed The members designate certain members or
LLC non-members to manage the LLC. The
LLC is managed by the designated
managers; non-manager members have no
right to manage the LLC.
Management of LLCs in Azerbaijan
General meeting (GM) of members — Umumi yigincag, genel kurul (tr). Gathering at least once a year (annual GM). Makes important decisions
about the company. Beside of annual meetings special meetings of GM also can take place.
Board of directors (supervisory board) or just a director — direktorlar va ya mUusahidsa surasi. Inspects and supervises the executives. Appointed
and dismissed by GM. Can be outside or inside of a company. Not compulsory unless it is stated in the charter or there is a legal requirement.
Legal requirement— if it is a financial institution (like credit company, insurance company, bank or investment company etc.) it is compulsory to
create a board of directors.
Executive authority (icra orqani)/executives — can be outside (manager-managed, kanar idaraci) or inside of a company. Appointed and
dismissed by GM. This is compulsory body of the management. Always there should be at least one executive (even that person also can be the
only owner of the company). Because they (or he/she) represents the company, creates the contracts on behalf of the company etc.
Inspector (mifattis) or inspecting committee (taftis komissiyasi) — Inspects financial activities and documents of the company. Appointed and
dismissed by GM. Not compulsory unless it is stated in the charter or there is a legal requirement. Legal requirement— if it is a financial
institution (like credit company, insurance company, bank or investment company etc.) it is compulsory to create an inspecting committee.
Auditing committee (auditor) (daxili audit komitasi) - Not compulsory unless it is stated in the charter or there is a legal requirement. Legal
requirement— When the number of members are more than 50 in a company; or if it is a financial institution (like credit company, insurance
company, bank or investment company etc.) it is compulsory to create an auditing committee. Appointed and dismissed by directors and
accountable in front of director(s). Can consist of only by natural persons.
Preemptive powers (special competences) of the General
Meetings in companies (LLC and joint-stock companies
¢ Every member/shareholder has the right to participate (personally or by his/her representative) in

the general meetings of the company and vote according to his/her share.
¢ Preemptive powers that belong only to the GM: So below indicated decisions will be accepted only
by GM.
Changing the charter
Changing the stated capital (increasing and decreasing the capital)
Decision about the termination of the company
Decision about the merger, acquisition, division or changing the type of the company
Approving the annual financial reports of the company
Division of the profits and looses
Appointing and dismissal of the directors, executives and inspectors of the company.
¢ Also GM can decide about any topic related to the company.
¢ In the charter of the company some other competences also can be delegated to the general
meeting of the company.
Duties of directors
—_s ¢ Directors owe their duties to the company, not the members.
This means that the only company itself can take action
against a director who breaches them. However, it is possible
for a member to bring a derivative claim against the director on
behalf of the company.
¢ Act within their powers
¢ Promote the success of the company
¢ Exercise independent judgement
e Exercise reasonable skill, care and diligence
¢ Avoid conflicts of interest
¢ Not to accept benefits from third parties
¢ Declare an interest in a proposed transaction or arrangement
Fiduciary Duties to the LLC
Fiduciary
duty
Copyright
© 2013 Pearson Education, Inc. Publishing as Prentice Hall . 39-13
Duty of Loyalty and Duty of Care
¢ Duty of Loyalty — A duty owed by a member of a member-managed
LLC and a manager of a manager-managed LLC to
¢ Be honest in his or her dealings with the LLC
¢ Not act adversely to the interests of the LLC
¢ Duty of Care — A duty owed by a member of a member-managed LLC
and a manager of a manager-managed LLC not to engage in
¢ A known violation of law
¢ Intentional conduct
¢ Reckless conduct
° Grossly negligent conduct that injures the LLC
Copyright
© 2013 Pearson Education, Inc. Publishing as Prentice Hall. 39-14
Basically, a non-manager
member of a manager-
managed LLC is treated
equally to a shareholder ina
corporation
¢ 49.3. Hiiquqi sexs adindan ¢ixis edan sexs,
o cumlodon htiqudi sexsin idaraetma
organlarinda (miisahida (direktorlar)
surast, icra orqant) tamsil olunan har
hans1 saxs tamsil etdiyi huqugqi sexsin
monafelari ugun vazifalarini yerina
yetirarkan vicdanla, pesakar qaydada va
mantigla harakat etmak, hiiquqi saxsin va
onun biitiin istirakcilarinin maraqlarina
sadiq olmag va hiiquqi saxsin maraqlarim
6z maraglarindan iistiin tutmag va
ehtiyath olmaga borcludur. Hamin sexs,
bu vazifalorin huquqi sexsin maraqlarina
uygun olaraq yerina yetirilmasi uciin
mosuliyyat dasiyir. Huquqi sexsin
istirakgilarinin talabi ila o, vazifalorini
pozdugu halda, pozuntu noticasinds
huquqi sexsa daymis zararin avezini
Odamoelidir.
Business Judgement Rule
A rule that says directors and officers are not
liable to the corporation or its shareholders for
honest mistakes of judgment.
Determination of whether duty was met is
measured at the time the decision was made.
Not liable for honest mistakes of judgment.

Protects the decisions of a board of directors
that
e Acts onan informed basis
¢ In good faith
¢ In the honest belief that the action taken
was in the best interests of the corporation
and its shareholders
Defensive strategies employed judged by this

rule.
Copyright
Derivative Lawsuits
° A lawsuit a shareholder brings against an

offending party on behalf of a corporation
when the corporation fails to bring the
lawsuit.
* Court may dismiss if the lawsuit is not in
best interests of corporation.
¢ Any award goes to corporate treasury
* Corporation pays shareholder’s
expenses
Copyright
Piercing the Corporate
Veil
° If a shareholder dominates a
corporation and uses it’ for
improper purposes, a court of
equity can disregard the corporate
entity and hold the shareholder
personally liable for the
corporation’s debts and
obligations.
* Occurs when:
¢ There is thin capitalization
¢ No separateness is maintained
between the corporation and
its shareholders.
Parent companies and subsidiary companies
Companies, as legal persons, may own shares in other companies.

° A parent company (holding) is a company that owns shares in another company,
and exercises control over that company. The law defines ‘control’, but control is
generally considered to exist when one company owns more than 50% of the voting
shares in another company.
° A subsidiary company is a company that is controlled by another company. Again,
a company is usually considered to be a subsidiary of another if the other company
owns more than 50% of its voting shares.
A parent company may have many subsidiary companies. Some parent companies may
themselves be a subsidiary of another company.
A parent company and its subsidiaries (and sub-subsidiaries etcetera) is a group of
companies. In company law, some special rules apply to groups. For example, parent
companies are required to prepare consolidated financial accounts for the group as a
whole.
However, it is important to recognize that each company in a group is a separate legal
person. If someone lends money or gives credit to a subsidiary company in a group, the
subsidiary has the legal liability to pay the debt, but the parent company does not, nor
do other subsidiaries in the group. A subsidiary in a group can be put into liquidation for
inability to pay its debts, but the other companies in the group will be unaffected —
unless they have accepted liability for the debts of the subsidiary, for example by
providing the lender with a guarantee.
Dissolution of a company (LLC and joint-stock
companies)
\
a N
Voluntary dissolution: always with the Involuntary dissolution: always with the
decision of the owners of the company decision of the court
Decision of general meeting to terminate the company Administrative resolution about the dissolution of the
If the company is for a fixed time and the time has company — relevant administrative body (exp: FIMSA,
Ministry of Justice etc.) asks from the court to
expired
terminate the company for some stated reasons
If the company is for a special project(s) and the project
Bankruptcy
is completed

Termination
¢ Huqugi saxsin lagvi bu barada geydin huiqudi saxslarin dovlat reyestrina daxil edildiyi andan
basa catmis, hiqugdi saxs isa mOvcudluguna son qoymus sayilir. — The liquidation of a legal
entity is deemed completed and the existence of the legal entity is deemed terminated from
the moment of the entry of the liquidation notation in the state registry of legal entities (AR
Civil Code, art 61.7). This rule is accepted for all legal entities in Azerbaijan.
¢ The ending of a corporation that occurs only after the:
¢ Winding-up of the corporation’s affairs
* Liquidation of its assets
* Distribution of the proceeds to the claimants
Copyright
Types of business organizations (for profit/commercial
organizations) in Azerbaijan
Limited Liability
General Partnership Joint Stock Company Cooperative
Company
¢ Tam Ortaqliq ¢ Komandit Ortaqlig ¢ Mahdud Masuliyyatli e¢ Sahmdar Camiyyat ¢ Kooperativ

¢ Has separate legal entity ¢ Has separate legal entity Camiyyat (MMC) (ASC/QSC) ¢ Has separate legal entity
status status ¢ Has separate legal entity ¢ Has separate legal entity status
e Should state type of the ¢ Should state type of the status status ¢ There is a membership
company in its name “... company in its name “... ¢ Capital is divided into ¢ Capital is divided into a ¢ Not an ordinary form of
General Partnership” Limited Partnership” shares (paylara) certain number of shares business organizations
¢ 2 or more partners ¢ 2 or more partners ¢ Should state type of the (sahmlara) ¢ For obtaining members’
¢ Unlimited/personal liability e At least one general and company in its name “... e Should state type of the material and other needs
of all partners one limited partners Limited Liability Company” company in its name “... ¢ Should state type of the
e All partners have right for ¢ Unlimited/personal liability ¢ One or more members Open/Closed Joint Stock company in its name “...
managing company (unless of general partners and ¢ Members can be a natural Company” Cooperative”
otherwise is stated in their limited liability of limited person and/or legal entity ¢ One or more shareholders ¢ 5 of more members
charter) partners (liability is limited ¢ Limited liability of all ¢ Members can be a natural ¢ Members can be a natural
to capital contribution) members (liability is limited person and/or legal entity person and/or legal entity
e All general partners have to capital contribution) ¢ Limited liability of all
right for managing shareholders (liability is
company and limited limited to capital
partners have no right for contribution)
managing company (unless ¢ Can be conducted in 2
otherwise is stated in their forms: open joint stock
charter) company (ASC) or closed
joint stock company (QSC)
¢ Free transferability of
shares
Other forms of
doing business
oO
°
ne}
a
ob
oo
Joint Ventures
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oo
(@)
1)
oO
B
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ay)
Ss
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¢ A relationship in which two or more persons or business entities combine their efforts or their property for
a single transaction or project or a related series of transactions or projects. Unless otherwise agreed, joint
venturers share profits and losses equally.
¢ Aspecific commercial enterprise by an association of persons.
¢ A joint venture normally is not a legal entity and is treated like a partnership for income tax purposes.
¢ Joint ventures range in size from very small activities to huge, multimillion-dollar joint actions carried out
by some of the world’s largest corporations. Large organizations often investigate new markets or new
ideas by forming joint ventures with other enterprises.
¢ For instance, Intel Corporation and Micron Technology, Inc., formed a joint venture to manufacture NAND
flash memory, a data-storage chip widely used in digital cameras, cell phones, and portable music players,
including some iPods made by Apple, Inc.
¢ Similarly, Mitsubishi Chemical Corporation formed a joint venture with Exxon Chemical Corporation to start
Mytex Polymers, a company that produces certain plastic compounds used by automakers in the United
States and Japan.
Joint Venture
* An arrangement in which two or more business

entities combine their resources to pursue a
single project or transaction.
* Joint venture partnership: A partnership owned

by two or more joint venturers that is formed
to operate a joint venture.
* Joint venture corporation: A corporation owned

by two or more joint venturers that is created
to operate a joint venture.
* Strategic Alliance: An arrangement between

two or more companies whereby they agree to
ally themselves and work together to
accomplish a designated objective.
* Allows the companies to reduce risks,
share costs, combine technologies, and
extend their markets.
Copyright
Exhibit - Joint Venture Partnership Exhibit - Joint Venture Corporation
AToyiayt Joint a loyrat Joint

WWieval
atl c-) a (om Venturer No, 2 Wietaetlc:] a Coa Venturer No. 2
fer-lecalcimle (partner in (shareholder in (shareholder in
joint venture joint venture the joint venture the joint venture
partnership) partnership) corporation) corporation)
Investment Investment Investment Investment

of capital of capital of capital of capital
Joint Joint
Venture Venture
Partnership Corporation
Joint Venturer No. 1 and Joint Venturer No. 1 and Joint Venturer No. 2
Joint Venturer No. 2 are liable are liable for the debts and obligations
for the debts and obligations of of the joint venture corporation only up to their capital
the joint venture partnership contributions to the joint venture corporation
enosesny|nz JeUuIND ‘QTOZ © 1UBIAdoD
Cooperative
An association, which may or may not be incorporated, that is

organized to provide an economic service (without profit) to its
members. Examples of cooperatives include consumer
purchasing cooperatives, credit cooperatives, construction
cooperatives and farmers’ cooperatives.
Unincorporated cooperatives are often treated like
partnerships for several legal purposes. The members have
joint liability for the cooperative’s acts.
Generally, an incorporated cooperative will distribute
dividends, or profits, to its owners on the basis of their
transactions with the cooperative rather than on the basis of
the amount of capital they contributed. Members of
incorporated cooperatives have limited liability, as do
shareholders of corporations and members of LLCs.
Conducting International
Business Using a Branch
Office
International Corporation A
(in Country A)
Law:
International No limited liability shield—
Corporation A in Country A is liable
for the tort and contract liabilities
Branch Office of its branch office in Country B.
Sielaeam@jiiess |he branch office

(ameeltinienasy) is nota separate
legal entity.

Conducting International
Business Using a
Subsidiary Corporation
International Corporation A
Law: (in Country A)
International ae
Limited liability shield—Corporation A
|
int in Country A is not liable for the tort
Su bsid | a ry and contract liabilities of its subsidiary
corporation in Country B except up to
Co rpo ration its capital contribution in Corporation B.
elseleleiielamss Corporation Bisa

‘(imeeltinis’a=y8 separate legal entity.

Branch office and Representatives
¢ Branch office (filial) and representative (nUmayandalik) are not seperate

legal entities in Azerbaijan legal system.
¢ Difference between them is:
¢ Representative has no executive powers, only represents the major
company.
¢ Branch office has some or full executive powers that belong to the
major company.

Corporate social
responsibility. Criminal
liability of legal entities.
White collar crimes
Forms of liabilities
ro Other
T&be forms of
liability _ in
Civil (tort) 2) QE
liability
Criminal
liability
Difference between civil and criminal liability
Civil law cases take place between two equal Criminal case is between the state (or whole
parties (between natural persons, or legal persons, community) and the defendant.
or natural and legal persons, or state (when it acts
like a private party) and natural/legal persons.
It is accepted wrong against the society.
It is accepted wrong against the plaintiff.
The state (prosecutor) will seek legal redress, and it
It is up to the person who was wronged to seek
is not up to the plaintiff to relieve wrongdoer
legal redress.
(perpetrator) from legal punishment.
Procedural rules and principles are different from Procedural rules and principles are different from
criminal cases. civil cases.
Punishments are in form of compensation and Punishments are severe, like death penalty,
other less severe forms (like in contract law — imprisonment (or life imprisonment),
performance etc.) expropriation, restraint of liberty, fine, deportation
etc.
MANAGEMENT
aoe | |
Business Ethics
¢ “In civilized life, law floats in a sea

of ethics.”
Earl Warren
¢ “New occasions teach new duties.”

BEHA VIOr ele Raa eee:
James Russell Lowell
‘ai PRINCIPLES
CORPORATE
BUSINESS ETHICS 5
—. PUL DSOPH uate ACADEM,.

yBENEFT&
¢ Ethics is generally defined as the study of what
constitutes right or wrong behavior. In other words,
ethics are moral principles and values applied to
é BTiS Pf cossitnen
ie USINESSPane
social behavior.
t= SERVICE.
¢ Today, business decision makers need to consider not
just whether a decision is legal, but also whether it is i
ethical. FS
¢ Business ethics — ethics in a business context; a

fiONS SOc] h SE T prrizeys STRATEGIE
ELERATED
WBUTIORS E L
consensus of what constitutes right or wrong WSEQUENTIALIST
~ ERESPONSIBILITY 40080",
behavior in the world of business and the application Gasvexnsals DoLicies\= | 5 '
of moral principles to situations that arise in a
business setting.
¢ Note that business ethics is not a separate kind of ALLEGEDLY CONSUMER2S CONCERRING coRSENSUS
ethics. The ethical standards that guide our behavior CAREERSENAVIOR =BASIC CERTAINCONCERNS
as, say, mother, fathers, or students apply equally put {04M so ATTACK
well to our activities as businesspersons. Business
decision makers, though, must often address more
: 0
complex ethical issues and conflicts in the workplace
than they face in their personal lives.
ae
a>
Example of Ethical Codes
Global Code of Conduct - EY - Global - Google Chrome
Cc | @ Wwww.ey.com,
EY nsights Industries
Our Global Code of Conduct
HAE OY &
our values
Our Global de of Conduct provides a series of guiding principles grouped into five categories that cover the breadth of our activities. They
are
Working with one another

2. Working with clients and others
Acting with professional integrity
Maintaining our objectivity and independence
9. Respecting intellectual capital
ering on the promise of our Code, we protect and enhance the reputation of EY, and play a Key role in building a better working world
for our people, for our clients and for our communities
Duty-based ethics — Ethics based on religious beliefs;
philosophical reasoning, such as that of Immanuel Kant; and
the basic rights of human beings (the principle of rights). A
potential problem for those who support this approach is
deciding which rights are more important in a given situation.
Outcome-based ethics — (utilitarianism) Applying this theory
Ethical requires a cost-benefit analysis, weighing the negative effects

against the positive and deciding which course of action
Reasoning produces the best outcome.
Corporate social responsibility — corporations can and should

act ethically and be accountable to society for their actions.
These include the stakeholder approach and corporate
citizenship.
BUSINESS ETHICS AND SOCLAL RESPONSIBILITY
Ethics
“+ Corporations * stakeholders
“+ A set of moral
are considered * employees
principles or
to owe some * suppliers
values that
degree of social ° customers
governs the
responsibility * creditors
conduct of an
for their “* the (local)
individual or
actions. community
a group
“* society
** the firm itself
Starbucks; The Best Coffee Makers and Cold Brew Coffee - Google Chrome
www.starbucks.com
; [a
Example for
NX © COFFEE MENU COFFEEHOUSE RESPONSIBILITY CARD BLOG
Sre) rel B | Serer s] Ethical Sourcing Environment Global Responsibility Report Goals& am
)pportunity for Youth Supplier Diversity Program LEED® Certified Stores es st) NY ae veay BAG
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Looking for Starbucks Information?

PN tig OMe Oe) (Me era cay edie
Social Impact | McKinsey & Company - Google Chrome
SS ee srw Eee —
C| @ Secure | https://www.mckinsey.com/about-us/social-impact xi' OS O
For a long time we have also worked with governments and nonprofits around
the world that have direct social missions. It is our privilege to be able to help
them solve their most difficult problems.
Over the last five years we have completed almost 4,000 projects for social-
sector organizations (foundations and nonprofits), local, regional, national, and
international governments and public-sector bodies.
Learn more about our Public Sector and Social Sector practices.
Global approach to CSR

countries
SOCIAL RESPONSIBILITY | Azersun Holding - Google Chrome [oo |e | x]
Cc |] www.azersun.com/azersun/en/content/social-responsibility SS So Bt
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BE ENV ( Q
AZ E RS UN ABOUT US PRODUCT GROUPS SERVICES SOCIAL RESPONSIBILITY INNOVATION MEDIA
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WWW. azersun.com
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Example for social responsibility in Azerbaijan business environment

- . Veer IN Oe =
Azersun Holding relentlessly pursues a policy of corporate social responsibility through a consistent cooperative approach in relation with its customers
stakeholders and the Azerbaijani public in general. This primarily stems from a deeply held vision that the country development extends far beyond the economic
¢ ; , Sponsorship | Cahan Holding - Google Chrome ; [o |fe
Example for social responsibility in Azerbaijan business environment
Holding” as a mair
cooling drink Train

Difference Is every unethical action/decision also
unlawful?
ea AN ated 8 Can you give some examples of unethical
behavior in business environment?
unlawful and Why businesses act unethically in some
unethical cases? What are the benefits and drawbacks
of such actions?
action/decision What are the consequences of such actions?

Every Case
is Defensible
Introduction:
the nature
‘/> and function
of criminal
law
Each crime can be split into Actus reus, the objective element
of a crime, and Mens rea, the mental or subjective element of
the crime.
In any case, in order to be liable for murder, a perpetrator
needs to fulfill both the Mens rea and the Actus reus
The requirements. “An act does not make a man guilty unless his
mind is (also) guilty”. In other words, human beings consist of
two separate elements, mind and body.
structure Actus reus — “act requirement”. All penal systems generally

agree that the imposition of criminal liability requires at the
very least some form of conduct controlled by the perpetrator.
of acrime
Offences of commission. Positive action — willed bodily
movement
Criminal omissions: liability in the absence of action.
Commission by omission.
The structure of a crime: Actus reus
Actus reus — “act requirement”.

An omission can be defined as a failure to act in situation in which the law would have
required the perpetrator to act in a certain way. Liability for omissions always
presupposes that the perpetrator in question violated a duty of care (towards the
victim). Two separate forms of omission liability:
Offences of failing to act — Legislators in every country can accept some duties of care,
requiring action, in specific statutes. For example, require economic actors to behave
in a certain way to assure the highest possible product safety or to protect the
environment. Or for instance, German Criminal Code imposes liability for the failure to
render assistance during accidents, common danger, or emergency.
Commission by omission
The structure of a crime: mens rea
Mens rea — subjective or mental element of a crime.
Different subjective elements. Generally more serious crimes require the strict intention requirement,
while less serious offences require a less culpable state of mind like negligence.
Intention (or dolus): knowing and wanting
Direct intent (dolus directus ) — The consequence of an intention is actually desired.
Indirect intent (dolus indirectus) — the agent knows his conduct will almost certainly bring about the
result, which he does not actually desire or primarily aim at.
Intent is not motive (the basis/ground/cause of committing a crime).
Negligence (culpa) — based on a violation of the required duty of care that causes a result prohibited
by criminal law. Carelessness, lack of due care, lack of reasonable care expresses the term of
negligence.
Conscious negligence (the defendant is aware of a risk but assumes that the result will not occur) (in
English law they call it recklessness or in some other countries conditional intent (dolus eventualis))
and unconscious negligence (the defendant is not conscious of a risk, but he should and could have
been aware of it).
Structure of a crime
_ Intention=knowing and
- wanting
¢ Direct intent (wanting)
Wrongful act ™~ . y ¢ Indirect intent (knowing)
Negligence (lack of
reasonable care)
¢ Conscious negligence (knowing
the risk but assumes that it will
Failing to act=omission
not occur
e Unconscious negligence (not
aware of a risk, but should and
could have been aware)

Justifications and excuses
¢ Imminent and unlawful attack. The requirement imminence means that the
defendant cannot wait any longer for the official authorities to protect his
interest. So it means, self-defense may only be performed at its earliest
when danger is already close. On the other hand, it may be performed only
as long as the attack continues; otherwise, it would be retaliation. Unlawful
means that self-defense is really a fight of right against wrong. Legal interests
(a person’s life, body, and property) of a 3" party may also be defended.
¢ Necessity. If there is a possibility to retreat (escape, run away) or to get
help, one should use it.
¢ Proportionality. The least intrusive means that are still effective should be
chosen, taking into account all the circumstances.
Insanity (Anlaqsizliq) — the most popular exuce. Those who are not
responsible for their actions are not punishable. In all legal
systems, the insane defendant will therefore be compulsorily
admitted to and/or treated
danger remains and treatm
detained in a mental hospit
an indefinite time).
Requirements: 1) It should
Justifications suffering from a relevant
committed the offense. 2) |
and excuses has substantially impaired t
responsible. 3) There shoul
getting in a situation w
(deliberately).
Diminished capacity. |In cas
have been impaired by the disorder, but not to the extent of legal
irresponsibility, courts can decide to take into account the partial
impairment as reason for mitigating the punishment.
Criminal attempts
Under certain conditions, criminal law will also impose punishment for attempts to commit
a crime.
The task of preventing future harm requires that criminal sanctions are already available
before the offense has actually been committed.
Criminal attempts can be viewed as cases of failure.
The punishment of thoughts is something contrary to liberal penal systems. Because it is
not something punishing what an agent has done but rather what he intends to do in the
future. That’s why many criminal justice systems have adopted a rather restrictive approach
towards attempt liability.
Attempt liability is generally accepted in serious (intentional) crimes, excluding attempt
liability to misdemeanors.
Also, in assessing attempt liability the court can ask if according to the plans of the
perpetrator he had already begun to engage in the crime proper and as subjectively
transgressed the “Here we go!” stage/threshold.
Criminal punishments for legal persons
(only below mentioned sanctions)
e Fine | e Expropriation
Xususi
musadira
Muayyan
faaliyyatla Huquqi
measgul olma Sty.)
¢ Deprive the legal hiiququndan
person from the right malaika) lagvetma
engaging in some e Termination of
special activities legal entity
Crimes that can be committed by legal persons
(in Azerbaijan legal system)
¢ Not all crimes, but only the crimes that are mentioned in Azerbaijan
Criminal Code can be committed (both) by legal persons such as:
° kidnapping;
¢ Human trafficking;
¢ Forced labor;
¢ Illegal actions with documents for trafficking purpose;
¢ Some crimes related with religious activities;
¢ Forcing to membership in political parties;
¢ Infringement of rules on implementing meetings (toplantilar! kecirma qaydasiniI pozma)
¢ Involving a minor to criminal activity;
¢ The manipulation of sports competitions;
¢ Legalization of money or other property obtained by crime;
° Illicit drugs trafficking;
¢ Terrorism;
¢ Financing of terrorism;
e All other crimes related with terrorism, etc.
Although criminal procedure differs significantly
from country to country, the general common
skeleton of the criminal process displays two main
stages: the investigation (or pretrial) phase and the
trial phase. There is no equivalent of such a
bipartition in civil proceedings.
Investigations aim at discovering crimes. Once the
suspicion of a crime comes to the attention of the
The basic
law enforcement authorities, they conduct

investigations in order to find out if an offense has
structure of the been committed and unveil all relevant
criminal process circumstances (the author, the actus reus, the mens
rea, mitigating and aggravating factors). The police
has the primary role in the investigations, generally
under the direction and supervision of the public
prosecutor. If the state authorities deem the original
suspicion to be unfounded, the case is dismissed.
But if they come to the reasoned belief that a crime
has been perpetrated, a formal allegation is drafted
(indictment) and the case is taken to trial, where the
allegation will be tested by judge(s).
The basic structure of the criminal process
At trial, an impartial court (a single judge, a panel, or a jury) decides whether the
defendant is guilty of the alleged crime(s). If the charge described in the
indictment is deemed to be true, the defendant is found guilty and is then
Zulfugarova
sentenced; if it is found to be false, the defendant is acquitted.

Public trial — save for a few exceptions, the trial is public. The publicity of the trial
constitutes a prevention of abuses; it is a form of social control on the criminal
process and so on.
Balance between parties. While during the investigations the suspect has little or
no opportunity to oppose the prosecution’s thesis, at trial the accused has a
possibility to properly rebut the allegations by producing evidence and arguments
in her favor.
Is it preferable that ten guilty persons escape or
that one innocent suffers? — The answer is
presumption of innocence.
The presumption of innocence _is_ the
cornerstone of the criminal process. An
individual is considered innocent and must be
treated as such until a decision of guilt is passed
against him.
There is no equality of arms between the two
conflicting sides during the investigations. The
presumption of innocence tries to cure/remedy
this imbalance between the parties in the early
stage of the criminal process.

Basic principles of According to this principle; the defendant can
be considered guilty only if his guilt has been
criminal justice systems proved beyond reasonable
(in dubio pro reo). As a consequence, the
doubt/undoubtedly
prosecution bears the burden to prove all of the

elements of the alleged offense. This is different
from civil proceedings.
Pretrial detention as _an_ exception _-— The
personal liberty of a suspect cannot be unduly
restricted before a verdict of Built is passed.
Pretrial detention is possible in some
circumstances. If the police catches someone
red-handed, or if the police reasonably assumes
that the suspect might flee/run away or commit
dangerous acts they arrest him.
Basic principles of criminal justice systems
Fair trial (or due process) - The common core of the principle includes the right of the accused
to a public trial in front of an independent and impartial judge and the right to defense. The
accused must be given the opportunity to properly oppose the allegations against him.
e Lawyer’s assistance
¢ Right to silence — the accused has a right to remain silent.
¢ Cross-examination — the possibility to discredit the evidence offered by the prosecution.
e Fair investigations — the rights to legal assistance and to remain silent apply not only to defendants at trial but also to
suspects during the investigative phase.
Proportionality— The main principle concerning the investigation stage is the principle of
“oroportionality”, which entails that state authorities should not make arbitrary use of their
coercive and intrusive powers. Investigative measures cannot be used lightly or for purposes
other than unveiling the elements of a particular offense. Coercive or intrusive action should be
allowed only when and insofar as it is strictly necessary to investigate a specific offense.
Introduction to
Employment law
Business law — Lesson 10
By Gulnar Zulfugarova
Who are independent contractors? — Note that employment law rules (standards) are applied only in case of
employer-employee relationship, not in case of independent contractors (service agreements).
Employment at will doctrine — is not applied in Azerbaijan legal system.
Fair labor standarts. Main warrantees of employment agreements.
Layoffs — ixtisar
Unemployment insurance and other social protections
The main principle of employment relationships — freedom of contract (entering and amendind of
employment contracts up to the consent of both parties).
Example of Service contract
Yl ToB-Consulting 01-2010 AZ-EN (3).pdf (SALMA) - Adobe Reader
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OTKpbITb \2 8 2 @ 8 8{BE)16|[s«[-)|= | MxctTpyMentbl 3anoAHMTb M nogsgnucatTb KomMeHTapnn

1. Xidmetlerin gostarilmasi 1. Provision of Services
1.1. Razilasgmada basga ciir nezerde tutulmadig! hallarda, Meslishetci 1.1. Unless otherwise provided by the Engagement Letter, the
Xidmeatleri Sifariscinin Selahiyyetli NGmayendeleri terafindan teqdim Provider shall render consulting Services based on the Client's
edilmis sifahi va ya yazill sorgulara asasen, hemin sorgulari yerine verbal or written requests submitted by its Authorised
yetireceyini yazili sekilde tesdiq etmasi sertila gosterecekdir. Sifariscinin Representatives, and provided the Provider confirms in writing that it
muracietlerinde Xidmetlerin gdsterilmesinin meqsedieri ve/ve ya vezifeleri agrees to perform the request. Client requests must indicate the
aks etdirilmelidir. aims and/or tasks for rendering the Services.
1.2. Oger Tereflear arasinda konkret middst razilasdiniimayibsa, Sifaris¢i 1.2. If no specific deadline is agreed by the Parties, the Client shall
Xidmetlerin gésterilmesi Ucn lazim olan bitin mslumati Meslehetciye give the Provider all the information needed to render the Services
munasib vaxt cercivasinds taqdim edecekdir. Mesishstci Xidmetlerin within a reasonable timeframe. In the process of providing Services,
gosterilmesi prosesinde Sifarisci terafinden teqdim olunan melumata tam the Provider shall fully rely on the information provided by the Client,
glvenecekdir ve bu mealumati yoxlamayacaq va ya mustaqil melumat and will not attempt to verify it or obtain independent confirmation.
alde etmeya cehd géstermeyecekdir. Measlehatci teqdim edilmis The Client will immediately inform the Provider about any changes
melumatiardaki her hansi deyisiklik barade Sifariscini derhal in the information provided.
melumatiandirmalidir.
1.3. Razilasmada ve ya her hansi diger formada Terefler arasinda 1.3. Unless a specific deadline is agreed by the Parties in the
konkret mUuddet gésterilmediyi taqdirds, xXidmetlerin Neticalarins dair Engagement Letter or otherwise, the Deliverables will be delivered
Sanadler Sifarisciya mUnasib vaxt arzinda taqdim edilecakdir. to the Client within a reasonable timeframe.
1.4. Xidmetlerin gésterilmesi ilé bagli islarin davam etdirilmasi teleb 1.4. If the Provider cannot continue rendering Services without the
olunan melumat teqdim edilmedsn mumktn olmadiqda, Xidmetlerin requested information, the period for providing Services shall be
gosteriilme muddeti bu melumatiarin Masishetciye teqdim edilmesine suspended until the Provider receives the information.
geder dayandirilacaqdir.
1.5. Sifaris¢i Xidmetlerin Neaticelerins dair Sanadlarin konkret formada 1.5. The Deliverables will be presented to the Client in writing and
teqdim edilmasi barada xahis etmediyi ve ya sonrak! merhaleds Sifaris¢i delivered by any means provided for in the Contract unless the
terefinden bu Senedler Sifarisciya teqdim edilmemisden evel onlarin Client indicates a specific means of delivery in its request or at a
teqdim edilmesi formasina dair he¢ bir xahis ireli sUrmediyi teqdirda, later stage, but prior to delivery of Deliverables to the Client. The
Xidmeatlerin Neticelarina dair Senedier Sifarisciyei azili_formada_ve Parties may agree to providing the Deliverables to the Client other
/ Bepeante 34ecb TeKCT AIA Novicka
Labor Code of AR will not be applied in these cases:
seaside aS Ce ge sea
¢ For judges
For military servants
For the deputies of Milli Majlis of AR
For the representatives elected to the municipalities
For foreigners who had signed their employment agreement with foreign
legal persons in that country but working in Azerbaijan
¢ For individuals who perform their obligations according to the special
private contracts — individual contractors
wwe.mispp.gov.az - Google Chrome
=
© @ wewanispp.gov.az/2z'p2ges/3
Watchdog in 0) Azarbaycan Respublikast

Omak va Ohalinin Sosial Miidafiasi Nazirlivi
Azerbaijan - LS ROSMI INTERNET INFORMASIYA RESURSU :
State Labor
|
pee re ered ee BBE eee eee De nr
18.12 -cil
Inspectorate 3mak haga siyasstinin formalasdinimas: masalelerina dair seminar kecirilir
Service, Ministry _Struktur / Struktura daxil olan qurumlar / Doviet Omak Miffettisliyi Xidmeti
of Labor and
Azarbaycan Respublikas:
Omak va shalinin Sosial Midafiesi Nazirityi yaninda
Dovist Omak Miifettisliyi Xidmati
Social Protection : Muidates waz
of Population of nysnr refindsa zatbayen Resput ann 3 m‘Neclesns

r noematy hiquai ektlann teeblecine ame! olunmasine
z espublikase aX Ganunvenciyi sisemine day
cOvist nezerctni hayate kecran acre hakimmyyet orgemdr.
the Republic of Yidmat O2 fealyetinds Azerbaycan Respublicenin Konstitusiyasm, Azarbaycen Respublicesmen geounlanni, Azerbaycen Respublikes
Preidentinin fermen ve Serencemlanm, Azecbaycen Respublikas Nearer K2binetnin gerar ve serencamianm, Azarbaycen Respublikasnen
beynaixalg migawisien, Azerbaycen Respublikes: Smak ve Shalinin Sosial Midafesi Naziliyinin Ssasnamesini, Azerbaycen
Azerbaijan
erck ve chainin sosial mu: h shcemizem ve Xidmetin Ssasnemesini rehber tutur
t yezfsignni yenne yebrerten e hugualarrs heyeta kegrerken odavasts ve o2 sclatyyetian caulind? mersaz ve veri Te
orgenion, corler tif fier birlideei, yerli doundidarsetms organian, habe beynebal
rls fealyyet gisterir, Midmst ealstagl balansa, gaeurvericliye uygun serencamnda olen 63
nk hesablenns, izerinds Azarbaycen Respublkasinn Dovist gexbinin tesvri ve Oz a3 bakk dunmus mohilre, milvefiq stemplare ve
. Gamanwericiiyins ame! olunm2sm2 divet nazarctinin heyete kecrimasi schesinds divict syesctinin hazriznmasinds istirek
efi daxilings hemin siyasctin heyete kecnimesini temin eair.
Dovist Omak Mirsttsliyi Mimeti sm=k cenunvenciiyns sme olunmas sahesinds, o climledse isolere emak minasibsticnnin amek
Article 35. Right to work Article 36. Right for strikes
I. Labor is the basis of personal and public I. Everyone has the right to be on strike,
prosperity. both individually and together with others.
II. Everyone has the right to choose II. Right for strike for those working based
independently, based on his/her abilities, kind on labor agreements might be restricted
of activity, profession, occupation and place of only in cases envisaged by the law.
AR work. Soldiers and civilians employed in the
Army and other military formations of the
II. Nobody might be forced to work. Azerbaijan Republic have no right to go on
Constitution IV. Labor agreements are concluded strike.
voluntarily. Nobody may be forced to conclude IL. Individual and collective labor disputes
labor agreement. are settled in line with legislation.
V. Based on decisions of the law court there Article 37. Right for rest
might be cases of forced labor, terms and
conditions being specified by legislation; I. Everyone has the right for rest.
forced labor is permissible due to orders of
authorized persons during the term of army II. For those working based on labor
service, state of emergency or martial law. agreements 8-hour working day, national
holidays and at least one paid vacation
VI. Everyone has the right to work in safe and with duration of at least 21 calendar days
healthy conditions, to get remuneration for are guaranteed.
his/her work without any discrimination, not
less than minimum wages rate established by Article 17. Family, Children, and the
the state. State
VII. Unemployed persons have the right to IV. It is prohibited to involve children in
receive social allowances from the state. activities that may cause threat to their
lives, health, and morality.
VIII. The state will do its best to liquidate
unemployment. V. Children under the age of 15 may not be
employed for work.
Employment
agreement
¢ Should be in written form
¢ Probationary period — not more
than 3 months, in some cases it
cannot be applied
¢ Safety in workplace, vacation,
working hours
¢ International Labor Organization (ILO)
¢ https://www.ilo.org/moscow/countries/azerbaijan/lang--
en/index.htm
¢ Azerbaijan’s labor regulations are more favorable than US system.
And one of the reasons is that Azerbaijan’s membership to ILO. Thus
there are several rules in Labor Code of AR that were defined by
international community.
¢ Prohibits child labor (15 year in Azerbaijan)
¢ Establishes minimum wage requirements (250
manats in Azerbaijan for 2021, it will be 300 manats
for 2022. Only 200 manats are excluded from
income tax.)
¢ Establishes overtime pay requirements
¢ Exemptions from Minimum Wage and Overtime
Pay Requirements: (in USA)
* Executives
¢ Administrative employees
¢ Learned professionals
Highly compensated employees
Computer employees
Outside sales representatives

* Guarantees workers unpaid (but ...) time off
from work for family and medical emergencies
¢ Employee must have worked for employer at
least 6 months (in USA at least one year)
° Provides up twelve weeks of unpaid (in USA)
leave for:
¢ Birth of child (in Azerbaijan at least 126
days of paid leave)
¢ Placement of child for adoption or foster
care
¢ Serious health condition
* Care for spouse, child, or parent with
serious health condition
* Employee must be restored to same or
equivalent position upon return

Less than 15 No employment contract
ieee, Non-hazardous jobs; limited hours

Labor . .
Regulations 18 and above Any job, night shift
Hazardous jobs and night shift

(special rules will be applied
according to the art 242 of Labour
Code of AR)

m W a g e a n d LZ
Minimu
Overtime Pay
¢ Employees should be paid the
minimum wage for all hours
worked ©
¢ Students and apprentices can be
paid less than the minimum wage
in USA — =~
¢ Employees should be paid overtime \
pay in Azerbaijan double pay for
every day or one day off depending
on the decision of employee
Copyright© 2013 Pearson Education, Inc. Publishing as Prentice

Hall.
The standard provisions of
Employment agreement
What does it cover?
1. Information on parties to the Employment agreement
2. Term (muddati) of the Employment agreement (probationary period)
3. The Employee's Job Description (amak funksiyas! — vazifa va ohdaliklari)
4. The Employee's Labor Functions (Qmak searaitinin sartlari: compensation,
Occupational safety, Working hours and time off, Vacation, Physical training and
sport
5. Mutual liability of the parties when one party causes damage to the other
6. Social protection
7. Regulation of property relations
8. Information regarding modifications and additions to the Employment
agreement
9. Termination of the Employment agreement
10. Last provisions
11. The Parties’ signatures and addresses
Equal Opportunity in
Employment
What does it mean?
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Madda 16. Omak miinasibatlerinds ayri-seckiliyin yolverilmazliyi

a
10 1. Omek miinasibstlarinda vatendasligina, cinsina, irqine, dinins, milliyyatina,

oe dilina, yasayis yerins, emlak veziyyetine, ictimai-sosial menseyina, yasina, aile
vaziyyetine, agidasine, siyasi baxislarina, hemkarlar ittifaqlarma ve ya basga ictimai
birliklara mensubiyyatine, qulluq mévqeyina, hamcinin iscinin isgiizar keyfiyyetlari,
0 pesekarliq saristasi,
” Insanin immuncatigmazligi virusu ila yasayan saxslarin igslamasina yol verilmayan pesa
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3 malumata malik oldugda bu malumati aciqlamamalidir. =
. Saxsin daginig skleroz xasta olmasi sababina gdra amak miigavilasinin baglanmasindan ”
imtina etmak va ya amak miigavilasina xitam vermak (isagdtiiranin miivafig isi (vazifasi)
olmadig, habela bela saxslarin amayindan istifada olunmasina yol verilmayan is yerlarina isa
t gétirmakdan imtina olunan hallar istisna olmagla) yolverilmazdir. *
2. Qadinlara, alillera, yasi 18-den az olan va sosial mitidafiaya ehtiyac: olan diger
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Race, Colour, National Origin, Religious and
Gender Discrimination
¢ Race discrimination: based on a person’s race
¢ Colour discrimination: based on a person’s colour
¢ National origin discrimination: based on a person’s heritage, cultural characteristics, or country
of the person’s ancestors
¢ Gender Discrimination: Discrimination based on gender
¢ Prohibits discrimination where sexual favours are requested to obtain job or promotion
¢ Pregnancy Discrimination Act: forbids discrimination due to pregnancy, childbirth, or related
medical conditions
¢ Religious Discrimination: Discrimination based on a person’s religion or religious practices
¢ Employer has to reasonably accommodate religious observances, practices, and beliefs of
employees
¢ Permits religious organizations to employ individuals of a particular religion

Sexual Harassment
¢ Lewd remarks, touching, intimidation, posting of indecent materials,

and other verbal or physical conduct of a sexual nature
¢ Sexual harassment that creates hostile work environment violates ...
¢ Same-sex harassment also violates ...
¢ Employer may defend by proving that:
¢ He exercised care to prevent and correct any such behaviour
¢ Plaintiff-employee failed to take advantage of preventive or corrective
\ opportunities provided by employer
~
np
¢ Affirmative action plan: job preferences given to minority groups and other protected-
class applicants when making employment decisions
¢ Legal, if narrowly tailored to achieve compelling interest

Google
@Google
Let’s make every day #Equal!PayDay. All employers can take steps
to eliminate the gender and race pay gaps, today > g.co/go/rework
We're proud to share that we have closed the

gender pay gap globally, and also provide equal
pay across races in the U.S., according to our
annual compensation analysis. At our re:Work site,
we're sharing some of the lessons we've learned,
to help other businesses close the pay gap.
700Gle
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= FORTUNE | »ew 2 SEARCH

SPUNSUREU SIURIES
MOST POWERFUL WOMEN
Google’s Underpayment of Women Is

‘Systematic, Claims U.S. Government
Kristen Bellstrom A Ei
Apr 07, 2017
The app that teaches you
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The U.S. government is charging that Google is systematically paying
women less than their male counterparts.
—
Testifying in a San Francisco court Friday, Department of Labor (DOL) Reet Tet
regional director Janette Wipper said the government “found systemic Tes Mi “ey
compensation disparities against women pretty much across the entire
workforce,” according to a report in The Guardian.
The charges come as part of a lawsuit the DOL filed against Google in
January, seeking access to the company's compensation data and related
personnel records. As a federal contractor, Google is required to permit
the government to inspect records relevant to its compliance with equal
opportunity laws.
Termination of
by Gulnar Zulfugarova
employment
agreement. Other
issues related
with employment
law
¢ Basis of termination of labor contracts.
* Guarantees to employees in case of termination of labor contracts. (notice period,

ert CANNEL TET Tit:
&
The right of workers to form, join,
and assist labor unions is a
statutorily protected right in the
United States — Also in Azerbaijan
COPYRIGHT
© 2013 PEARSON EDUCATION,
INC. PUBLISHING AS PRENTICE HALL.
Organizing a
Union
- Employees have right to:
Form, join, and assist labor
organizations
Bargain collectively through chosen
representatives
Engage in concerted activity to
promote these rights
COPYRIGH
U4
INC.
Collective Bargaining
- Act of negotiating contract terms between an

employer and the members of a union
- Subjects of collective bargaining:

Compulsory subjects: wage, hours, and other terms and
conditions of employment
Permissive subjects: not compulsory or illegal
Illegal subjects: cannot be negotiated or agreed upon
COPYRIGH
U4
INC.
Strikes
« A union can call a strike:
If a collective bargaining agreement cannot
be reached
To obtain economic benefits
To correct an unfair labor practice
* Union members refuse to work during a strike
- Illegal Strikes:
Violent strikes
Sit-down strikes
Partial or intermittent strikes
Wildcat strikes
Strike in violation of no-strike clause
COPYRIGH
INC.
Cooling-Off Period
- Amandatory sixty days’ notice before a strike can
commence (in Azerbaijan 10 days before written notice
should be submitted to the employer)
- Gives the employer and union enough time to negotiate a
settlement
- Illegal for a strike to commence during the sixty- day period
- Crossover workers: employees who choose not to strike or
return to work after joining the strikes
- Replacement workers: hired on temporary or permanent
basis to take the place of the striking employees
COPYRIGH
Us
INC.
Employer Lockout
Employer Lockout
eo
Act of the employer to prevent employees
from entering the work premises when
the employer reasonably anticipates a
strike.
COPYRIGHT
© 2013 PEARSON EDUCATION,
INC. PUBLISHING AS PRENTICE HALL.
- Strikers walking in front of the employer’s premises, carrying
signs announcing their strike
- Picketing is lawful unless it:

Is accompanied by violence
Obstructs customers from entering employer’s place of
business
Prevents entry of non-striking employees
Prevents pickups and deliveries at employers place of
business
Secondary Boycott Picketing

Unions try to bring pressure against an employer by picketing
the employer’s suppliers or customers
Picketing Lawful only if it is product picketing, that is, picketing against
the employer’s product
Illegal, if directed against the neutral employer
COPYRIGH
U4
INC.
Basis of termination of
labor contracts
Termination of Guarantees to employees in
case of termination of labor
contracts
Grounds and rules for termination of
employment contract
Art 68
* a) the initiative of one of the parties;
* b) expiration of the employment contract;
* c)achange in terms and conditions of employment;
- d) cases related to a change in the ownership of an enterprise (employees indicated in
Paragraph II of Article 63 of this Code);
* e) Cases not depending on the will of the Parties;
* f) Cases established by the Parties in the employmentcontract.
Grounds for Termination of an Employment
Contract at the Employers Initiative
Art 70 - An employment contract may be terminated at the employer's initiative in the following
cases:
a) the enterprise is liquidated;
b) there is a personnel cutback at the enterprise;
c) a competent body decides that the employee does not have the professional skills for the
job he holds;
d) the employee does not fulfill his job description or fails to perform his duties as defined by
the employment contract and gross violation of job description as indicated in Article 72 hereof
without valid reason;
e) if the employee has not justified the expectations within probation period;
f) when the employee of the state-funded institutions reaches the limiting age.
Grounds for Termination of an Individual Employment
Contract in Cases not Depending on the Will of the Parties
Art 74
a) the employee is called for military or alternative service;
b) the person who held the job previously is reinstated by a legally valid court ruling;
c) the employee cannot perform his job for more than six months because of full and permanent
disability unless the law sets a longer period;
d) enforcement of a court sentence depriving the employee of his right to drive the transport
facilities, depriving the right to hold some positions or to carry out some activity, deprivation of freedom
for some term or life imprisonment;
e) the employee's disability is confirmed by a court decision that has taken legal effect;
f) the employee dies;
g) if the employee previously worked at this company, uses his right to return to his work place
(position) after reserving from statutory active military service.
Introduction to Contract law
Business law - Lesson 12 eS
Introduction \
CONTRACTS ARE THE BASIS OF MANY OF

OUR DAILY ACTIVITIES.
WITHOUT ENFORCEABLE CONTRACTS,

COMMERCE WOULD COLLAPSE.
What is a Contract? ae Y
— Miagavile a4
* Acontract is an agreement that is i
enforceable by law.
* Contract law deals with, among other i
things, the formation and keeping of \-* |
promises. , »
¢ A promise (vad) —a person’s assurance j
that the person will or will not do i
something or an assertion that | ;
something either will or will not happen _ 7.
in the future. =
¢ If one party fails to perform as promised,
the other party can use the court system
to enforce the contract and recover
damages or other remedy.
Sources of
Contract Law
In Azerbaijan legal system:
¢ Civil Code of Azerbaijan Republic
* Contract provisions between parties
¢ And other sources of law

Facilitative/default and mandatory rules:
- For the matters that are not covered by the

contract provisions, law should provide so-called default
or facilitative rules that are automatically applicable if the
parties have not made any other arrangements.
- It may also happen that parties would like to
contract in a way that is considered contrary to law or
morality (such as hiring someone to steal a painting). In
that case, the law must intervene with so-called
mandatory rules that declare such a contract void or at
least avoidable by one of the parties.
Sources of
Contract Law
Example for default rules:
- Art. 426.2 If the place of the
performance is not determined, then the
performance shall be conducted:
426.2.1 at the place of the property location, in
the event of an obligation to transfer the land
plot, building or other real estate;
Example for mandatory rules:
- Article 16. Restriction on the
Exercise of Civil Rights
Acts of natural persons and legal entities
committed exclusively for the purpose of
causing harm to another person or to violate
any other right are prohibited.
Some important contract law principles
— Ee
e Not only are parties free to decide whether they want to contract at
all and with whom, but they can also determine the contents of their
contracts. This means that no one is obliged to enter into a contract,
but if one does, one is bound by it in the same way as if the rules had
been made by the legislature.
e Every legal system places limits on the freedom of contracting parties
by declaring contracts void if they are contrary to law, public order, or
morality.
Privity of contract — Mugqavilanin nisbiliyi prinsipi
e A contract is a private agreement between the parties who have

entered into it, and traditionally these parties alone have rights and
liabilities under the contract. A third party — one who is not a direct
party to a particular contract — normally does not have rights under
that contract.
Formation of a binding
contract
Elements of a valid (enforceable) contract
1. Agreement = offer + accept
2. Consideration
3. Contractual capacity
4. Legality
5. (Formality)

Parties to a Contract/Agreement
parties
Offeree
Acceptance
Offeror makes an
Offeree has the power
offer to the offeree to accept the offer
and create a contract
Prentice Hall © 2007

Agreement -
Razilasma
¢ Agreement
¢ The manifestation by two
or more persons of the
substance of a contract.
It is mutual assent.
¢ Requires an offer and an
acceptance.
Requirements of an Offer — Taklif
The offeror must objectively intend

to be bound by the offer. JS The terms of the offer must be
definite or reasonably certain.
Objective Intent - The intent to

The offer must be communicated to contract is judged by the reasonable
the offeree. person standard and not by the
subjective intent of the parties.
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Invitation for an offer? —

«Taklifa davat» taklifdan na
ila farqlanir
Invitation or offer?
Termination of an Offer
By operation of law:
¢ Destruction of the subject
By action of the parties: matter
¢ Death or incompetence of the
Revocation of the offer by the offeror
offeror or the offeree
Rejection of the offer by the offeree ¢ Supervening illegality
Counteroffer by the offeree ¢ Lapse of time

Acceptance
wus = Ne Offeree’s acceptance must be unequivocal (birmanall).
The terms of the acceptance must match the terms of the

offer.
e Mirror image rule
Acceptance is effective when sent.
e Mailbox rule (An acceptance is effective when it is dispatched (gondarilmak)

e If an acceptance has been dispatched by the offeree the contract is
concluded when the acceptance reaches the offeror. This rule also applies to
electronic communication, in which case the acceptance is supposed to
have reached the offeree if the message has entered his electronic mailbox.
Prenuice Mall YY 2007

Agreement
Offer Acceptance
¢ An offer is an invitation to make ¢ Examples
a contract. Example: putting a accept the
° Clicking that you
price tag on an item ina store. online contract
S ¢ Winning an e-bay auction
¢ Buying the item from the
store
Something of legal value must be given. What
each side gives the other is called consideration.
There must be a bargained-for exchange.
e Most civil law jurisdictions require this promise to be put ina

notarial deed. After this it will be accepted as a valid contract.
e Also English law requires the donative promise to be put ina
deed.

Promises in the domestic or social sphere are not
enforceable also. Example, if a father promises his
son to pay him driving lessons if he does not smoke
until he is 18 years old, this is such a promise that
does not contain legally acceptable consideration.
Other issues relating
with contracts
Formation of a binding
contract
1. Agreement
Elements of a
oo aldeslors
oie -
Consideration
aKa]elt
Ce oleate) Al, esse

Rt 5. (Formality)
Capacity .

Contractual capacity
Capacity — faaliyyat qabiliyyati
The law considers certain persons to be incapable of

entering into a valid legal transaction at all. Two
categories of people are put under this special
protective regime:
¢ young children (or minors) and
¢ the mentally ill persons (agil zaifliyi va ya ruhi
xastalik naticasinda 6z harakatlarinin manasini
basa dusmayan va ya 6z harakatlarina rahbearlik
eda bilmayan saxslar (AR Civil Code, art. 28.8).
Persons who may lack the capacity to contract

¢ Minors — Persons who have not reached the age
of majority (generally accepted 18 years old)
¢ Mentally incompetent persons
Parties’ duties at
disaffirmance
e Allows minors e Minor has the duty to

(generally their return the property
parents or other legal he or she received in
representatives) to the condition it is in at
disaffirm (cancel) the time of
most contracts they disaffirmance.
have entered into Competent party has
with adults. the duty to return all
The fact that the the consideration
parents may also received from the
agree with the minor.
minor’s transaction, in
which case the
contract cannot be
invalidated either.
Contract issues with
minors
° Ratification
¢ If a contract is not disaffirmed
within a reasonable time, it is
considered ratified.
¢ Necessaries of life
¢ A minor (or her/his legal
representatives (generally
parents)) may not disaffirm
contracts for necessaries of life.
So it means, there is no need for
legal represents to ratify minor’s
contracts that are about
necessaries. Example, bread, BAGUETTE
pencil, book, daily transportation

fees and such everyday needs.

Intoxicated persons
Most contracts entered into by intoxicated

persons are voidable by that person.
, A person who disaffirms a contract based on

intoxication generally must return the other
party to status quo.
Legality
Every legal system places limits on the freedom of
contracting parties by declaring contracts void if they
are contrary to law, public order, or morality. Exp., to sell
nuclear arms to a terrorist group or agreements among
companies to divide the market among themselves and
to refrain from competition.
Contracts having an illegal object are illegal contracts.
Illegal contracts are void; neither party may enforce.
Contracts contrary to statutes
¢* Gambling statutes
¢ Usury laws
Contracts Contrary to Public Policy
¢ Immoral contracts
* Contracts in restraint of trade
* Certain covenants not to compete
¢ Some exculpatory clauses
Legality
Covenant not to compete — Raqabat Exculpatory clauses — Masuliyyati
etmameaysa dair razilasma istisna edan razilasmalar
A non compete agreement related to an °A contract provision that relieves a
employment contract or sale of a party of tort liability.
business is legal if it is reasonable in 3 ¢ An exculpatory clause is not effective
areas: if:
e The line of business protected
e It is against the public interest.
e The geographical area protected
e It is the result of superior bargaining
¢ The duration of the restriction power.
Formality
¢ In general, contracts do not need to be made in any particular way. Most commercial contracts are
made in writing but there is no legal requirement that this should be so. The types of formalities
which sometimes are required are as follows:
¢ Contracts which must be made by a deed:
¢ A conveyance of a legal estate in land must be made by deed (for example, mortgage
contract)
¢ A promise of a gift is not enforceable unless made by deed.
¢ Contracts which must be in writing:
e Either the law will require it, or the parties can accept it as a binding rule.
¢ Lease contracts (rental agreement) in some cases and countries, contract of surety and
etc.
Genuineness of assent
Adhesion
Mistakes Fraud Undue influence Duress contracts and
unconscionability
ED
Reliance on the
Bilateral There is special kind
misrepresentation
of relationship
between parties
Injury to the innocent

Unilateral
party
Only a mistake of fact

Innocent
aateNAcliloharceel alae: (ele
misrepresentation
to be avoided.
° It is a contract between two parties,
where the terms and conditions of
the contract are set by one of the
parties, and the other party has little
or no ability to negotiate more
favorable terms and is thus placed in
General a “take it or leave it” position.
Sometimes referred to as a contract
conditions of of adhesion or a standard form
contract; or a take-it-or-leave-it
contract contract.
While this types of contracts are not
illegal per se, there exist a very real
possibility for unconscionability.
Third party rights in contracts
¢ Exception of privity of contract
principle, because there is a
transfer of rights or duties to the Delegations
3rd person.
Third party
Assignments a
6 beneficiaries
Performance and discharge
of contract
Mugavilanin icra edilmasi va sona gcatmas!
Conditions of
performance
* Condition — sart
* Contract obligations may be subject to
the following types of conditions:
¢ Condition precedent —a
condition that must be fulfilled
before a party’s promise becomes
absolute.
* Condition subsequent — a
condition that operates to
terminate a party’s absolute
promise to perform.
* Concurrent conditions —
conditions that must be
performed simultaneously. Each
party’s absolute duty to perform
is conditioned on the other
party’s absolute duty to perform.
Discharge of a contract — mugavilanin sonlanmasi
Complete performance e By rescission (canceling the contract e Alteration of the contract by one of the
Substantial performance (if not, there mutually) contracting parties
is a material breach of contract) ¢ By novation (a new party is ¢ Statutes of limitation — in Azerbaijan legal
substituted) system the limitations period for bringing
Performance to the satisfaction of one
suits for breach of contract is 3 years; if
of the parties e By substituted agreement
the subject matter of contract is real
Performance to the satisfaction of a e By accord and satisfaction estate 6 years
third party ¢ Bankruptcy
e Anticipatory repudiation ¢ Impossibility or impracticability of
performance
¢ Frustration of purpose
Discharge by Discharge by
agreement operation of law
Remedies of the parties
Nonperformance could be because 1) the other party is not performing at all, 2) is performing too late (delay), or 3) is
performing in the wrong way. Here are the main remedies of the parties when there is a nonperformance of obligation:
¢ Performance— if a party does not abide by the court decision to perform, it can be forced to do so by an official who
would take the goods or the money from the defaulting party and give it to the creditor. But, in the following
situations claim for performance will not be applied:
¢ lf there is an objective impossibility — such as if the special item had been stolen or if performance is only useful
if it takes place before a fixed date.
¢ |f performance would cause the debtor unreasonable effort or expense.
¢ If performance requires specific personal qualities of the debtor.
* Damages for nonperformance — A claim for damages is allowed only if the party in breach was at fault or can at least
be held responsible for the nonperformance. But no damages are due when the person who is to perform was
prevented from doing so by an irresistible force (force majeure). This means, in some cases, that a party will not be
liable if it can prove that it used its best efforts in performing the contract. If a party claims damages instead of
performance, it still has to perform its own obligations.
* Termination for nonperformance — Legal systems only allow termination in respect of breaches that are sufficiently
serious.
Damages for breach of contract
Compensatory eln breached contract for the sale of goods and for the sale of land, the usual measure of
compensatory damage is the difference between the contract price and the market price.
damages
¢!n breached contract for the services (exp. construction contracts), the measure of damages
depends on which party breached and at what stage of contract the breach occurs.
Consequential
e Damages flow only from the consequences of a breach.
e The damages must be foreseeable result of a breach of contract.
eThe breaching party must have known at the time the contract was formed that special
(special) damages circumstances existed that would cause the non-breaching party to incur additional loss on breach
of the contract.
Mitigation of e The non-breaching party generally has a duty to lessen/reduce the damages incurred
as a result of the contract’s breach.
damages e Because ...
Liquidated
e Damages that may be specified in a contract as the amount to be paid to the non-breaching party
in the event the contract is breached in the future.
e Such clauses are enforced if the damages were difficult to estimate at the time the contract was
damages formed.
e And the amount stipulated is reasonable. The amount should not be like a penalty.
oe, ¢ Cansellation of the contract/Mugqavilanin lagv edilmasi
eA remedy whereby a contract is canceled and the parties are restored to the original
positions that they occupied prior to the transaction.
e Available when fraud, mistake, duress or failure of consideration is present. Prompt
Equitable
notice should be sent to the non-breaching party.
Remedies ¢ Mugavila uzra alinanlarin geri qaytarilmasi

e When a contract is rescinded, both parties must make restitution to each other by
returning the goods, property, or funds previously conveyed.
¢ Prevents unjust enrichment of the parties.
e Requiring exactly the performance that was specified in a contract.

e Usually granted only when money damages would be an inadequate remedy the
subject matter of the contract is unique (for example, real property, paintings,
sculptures, rare books, coins and etc.)
¢ A court-ordered correction of a written contract so that it reflects the true intentions

of the parties.
e Available when an agreement is imperfectly expressed in writing.
e Available when fraud or mutual mistake is present and in oral contracts and
covenants not to compete.
Other issues relating
with contract law
¢ Pre-contractual liability
¢ Interpretation of contracts
¢ Avoidable contracts
* Some issues with general
conditions of contract

Pre-contractual liability — The principle is that a party is bound towards the other
party once the contract is concluded. But, in some cases, even during
Olan
negotiations if one of the parties breaks her/his promise deliberately, the
other/aggrieved party can claim her/his damages. We call it that nobody can rely
on his/her dishonest behavior. So it can change upon on a case.
issues Interpretation of contract terms — Sometimes contracting parties can not agree
or identify the terms of contract that they have entered. All European
jurisdictions accept that the contract is interpreted in the way in which a
relating reasonable person would understand it.
¢ Reasonable person - The reasonable man is a mythical creature of the law whose conduct is the
standard. His conduct is the standard ‘adopted in the community by persons of ordinary
with
intelligence and prudence.
Avoidable contracts — Besides, incapacity there are some cases that the contract
contract
can be avoided. These are: threat (duress), fraud and mistake.
EW
Some issues with general conditions of contract — The contract terms “should be
expressed fully, clearly and legibly, containing no concealed pitfalls and traps. Fair
dealing requires that a supplier should not take advantage of the consumer’s
necessity, indigence, lack of experience, unfamiliarity with the subject matter of
the contract, weak bargaining position”.

Other issues
Election of remedies — The doctrine Waiver of breach — A non-breaching Contract provisions limiting remedies
under which a non-breaching party party may choose to accept a defective — A contract may provide that no
must choose one remedy from those performance of the contract and damages (or only a limited amount of
available. This doctrine prevents thereby waive, or give up, the right to damages) can be recovered in the
double recovery. sue for a particular breach. event the contract is breached.
e Although the parties must ultimately ¢ Ordinarily, such a waiver will not ¢ Clauses excluding liability for
elect which remedy to pursue, operate to waive subsequent, fraudulent or intentional injury or for
modern court procedures do allow additional, or future breaches, unless illegal acts cannot be enforced.
plaintiffs to plead their cases “in the it establishes a pattern of conduct e Clauses excluding liability for
alternative”. When the plaintiff between the parties. negligence may be enforced if both
originally files a lawsuit, she or he can ¢ When the last one occurs, then the parties hold roughly equal bargaining
ask the court to order either non-breaching party should give a power.
rescission (and restitution) or special notice ...
damages, for example.
Intellectu
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property
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¢ Copyrights
¢ Trademarks
Intellectual Sree -BSiaeac
¢ Trade D
Property ° Seaeiia Newnes
Rights
The law on copyright and
The law of Azerbaijan
related rights of the
Republic “On Patent”
Republic of Azerbaijan
Related acts in
The law of AR “On Law of the Republic of
trademarks and Azerbaijan on Unfair
geographical indications” Competition
Azerbaijan legal
system
Law of the Republic of
The law of the Republic Azerbaijan on
of Azerbaijan on legal enforcement of the
protection of intellectual property
compilations of data rights and fight against
eyez
Law of the Republic of Antitrust law of the

Azerbaijan on Trade Republic of Azerbaijan
Secrets and etc.
Information by Country: Azerbaijan - Google Chrome
§/en/details.jsp?country_id=11
Meetings Contact Us
WIPO
membershi
of Aze
Contact Information
National IP offices
WIPO depository libraries
Statistics Cooperation
Number of domain name disputes: Technical assistance activities: Beneficiary | Host
1PO Lex) Complainant | Respondent WIPO meetings
saties notifications
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sa i ification
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Rule for filing a claim related to getting a patent to invention
Rule for filing a claim related to getting a patent to industrial design
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read more
Unfair competition act of AR
Article 4. Copying of economic activity of competitor
The following actions, copying economic activity of competitor, shall
be prohibited:
5 unauthorized copying of good of competitor and form of . ae a
good, its package and out-side design, except those, out-side po Soeee
design of which is conditioned by their technical function;
° direct reconstruction of products of another economic subject
through infringement of his patent-license right,
° illegal use of trademark, geographic specifications,
service mark, proprietary label, trade brand and name of
another economic subject, except cases when subject of the
same name uses proper name as proprietary label with
addition of distinguishing indication.
The law on patent of
Na
Patent — a government grant that gives an inventor the
exclusive right or privilege to make, use, or sell his or her
invention for a limited time period.
Art 1. patent - title of protection issued by appropriate
body of executive power for invention, utility model and
industrial
design.
Intended to provide an incentive for
inventors to make their inventions
public.
USA
Federal
Patent
Statute
USA Federal Patent
Statute, continued
¢ Patents for inventions are valid for 20 years.
¢ Design patents are valid for 14 years.
¢ Patent term runs from date application filed.
¢ U.S. follows first-to-invent rule.
Patent Law of AR
¢ Patents for inventions are valid for 20 years.
faydali model gin — 10 Il;
senaye numuneasi (design patent) Ugun — 10 il.
Patent sahibinin vesateti esasinda patentin quvvede olma
muddati 5 ila qeder uzadilir.
Patent term runs from date application filed.
Novel — new
“se#!= of
To be patented, = capable
an invention application
; ; industrial
. Nonobvious -
mM u st be . involves an
Patenting an
inventive step
Invention
Only certain subject
matters can be patented.
Patentable subject matter includes:
¢ Machines ¢ Designs for an
article of
¢ Processes manufacture
¢ Compositions ¢ Asexually
of matter reproduced
¢ Improvements plants
Ke}
¢ Living material
=a tLaT
machines invented by a
¢ Processes person
¢ Compositions
ey MLAs Le
Must contain a written description
of invention
Must be filed with the U.S. PTO —

In Azerbaijan with the national IP
mech tcy al office.
Applications Patent will be assigned a patent

number if granted.
Any party can challenge the validity

of a patent or the issuance of one.
be That Changed The World - The Patents - Google Chrome o
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ged-the-world-patents,
1gy/gadgets/reviews/g558/1 01-gadgets-that-chan
Sie) AOM Ue) mam mbes mae Cm elma Q
| E! Patent No. 1,394,450
Patent =~ cnstir
Applicatio “1
gate,
&
e Og
AZORBAYCAN RESPUBLIKAS!
a Ss '@ KOND T@S@RRUFAT! NAZIRLIYI
Application teréapows
SS mimeo Qorers ie Koad
Acspetiihes
pent welch vive muilivs odin >
Setetaiya nallyyetrin ac
ae Negivler
Trearrafan
Katunerintn 19059 TY may
Naciritpe weriiee releiiny
"
Ourdutar
MAI prance verniie
ADA —s
fart
sonny
Vyateertery mastuibd
Mootit
Srisenin nderree!
Brivonin vericty tara
| } ere
aiveie eres uments
Kann ber pe 1 1181S Reva) ve
hateeel Ure Downe Kootesrmers
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One-Year “On Sale”’ ¢ Public use doctrine
: ¢ Patents will not be granted if an
invention was in the public
Doctri ihe domain for one year prior to
application filing
¢ Forces inventors to file within
proper time
© 2007 Prentice Hall, Business Law, sixth
edition, Henry R. Cheeseman
Unauthorized use of another’s patent.
Patent holders own exclusive rights to use

and exploit their patent.
Monetary damages equal to

reasonable royalty rate
Successful plaintiff May — otherdamage
recover: Order for destruction of infringing
mee nt
Injunction against infringer
| nfri be halal
© 2007 Prentice Hall, Bu a ee a ada

edition, Hem) R. Cheeseman
Article 22.
Infringement
of exclusive The manufacturing, using, importing,
rights of offering for sale, selling, any other
patent
owner form placing on the market or holding
in stock for such purpose, of a product
(article) of forming the patented
subject matter of industrial property,
as also the use of a process protected
by the patent, form placing on the
market or holding for such purpose of
a product obtained by that process if
they performed without the consent of
The law on the patent owner shall be deemed to
constitute an infringement of the
patent of exclusive rights of the patent owner.
Na
Patent Infringement
Unfair Competition act of AR, art 4;
Article 166. Infringement voting and patent rights
¢ 166.1. Infringement voting and patent rights, is illegal use of invention or efficiency proposal,
disclosure without well of author of essence of invention and efficiency proposal before official
publication of data on them, assignment of authorship, compulsion to co-authorship and as a result
of these acts the damage caused was in significant size — is punished by the penalty at a rate from
hundred up to five hundred of nominal financial unit or public works for the term from hundred sixty
up to two hundred forty hours.
* 166.2. The same acts committed:
166.2.1. repeatedly;
166.2.2. on preliminary arrangement by group of persons and by organized group — is

punished by the penalty at a rate of from five hundred up to one thousand of nominal financial unit or
imprisonment for the term up to three years.
AR Cinayet Mecellesi Madda 166. ixtiracilig va patent hiiquqlarini pozma
* 166.1. ixtiraciliq ve patent hiiquqlarini pozma, yani ixtiradan ve ya semerelesdirici taklifden qanunsuz
istifads etme ve ya ixtira yaxud somerelesdirici tekliflarin mahiyyeti barada melumatlar! musllifin
raziligi olmadan ve resmi derc edilanedek yayma, misllifliyi manimseme, serikli musllifliye mecbur
etma, ager bu emeller neticasinds xeyli miqdarda ziyan vurulmussa — ytiz manatdan bes yuiz
manatadak miqdarda cerime ve ya yuz altmis saatdan iki yz qirx saatadek ictimai islar ile
cezalandirilir.
¢ 166.2. Eyni amellar:
166.2.1. tekrar téredildikds;
166.2.2. qabaqcadan olbir olan bir qrup sexs va ya mitesekkil deste terefinden téredildikds
— bes yliz manatdan min manatadek miqdarda cerime ve ya uc iladak muddsate azadliqdan mehrum
Atma, la ragalangAirilir
Copyright S
¢ The exclusive right of “authors” to publish,
print, or sell an intellectual production for a e
statutory period of time. A copyright has
the same monopolistic nature as a patent
or trademark, but it differs in that it applies
exclusively to works of art, literature, and
other works of authorship (including
computer programs).
=
Copyright Agency of Azerbaijan - Google Chrome
ain9.cgi?l=1;s=54;s2=1;i=5
National IP rt ioe i Azra

office in... A Fs
Azerbaijz Ne 365-IVO/
22 may 2012 "The
intellectual Property Rights and F
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14 september 2004 "The Law of the Republic of Azer
toe] _ of Compilations of Data”
sa
Ne 460-1Q /16 may 2003 "The Law of the Republic of Azerba

Azerbaijani Folklore Expressions”
TE Bees ind
'N8337-11Q/31 may 2002 “The Law of the Republic of Azerbaija Legal P

— Topographies of integrated Circuits"
LL
WIPO
Ne 115-IQ/ 5 june 1996 “The Law on Copyright and Related Ri

Azerbaijan”
Ss
il alg «
_. iv a «>
Distant tahsil
Videokonfrans
USA Copyright Revision Act
of 1976
¢ Establishes the requirements for obtaining a
copyright.
¢ Protects copyrighted works from infringement.
¢ Only tangible writings are subject to
copyright registration and protection. -
Copyright protects the way in which ideas are
expressed, rather than the ideas themselves.

Tangible Writings
Maps
= Vi
Paintings, drawings, sculpture,
jewelry, glassware, tapestry
Books, periodicals, Plays, motion Lectures, sermons,
Photos, slides, filmstrips
newspapers pictures, radio, addresses
television Greeting cards, postcards
Architectural models and drawings
edOl=d 01S) Musical compositions Films, cartoons,

and sound recordings travelogues
© 2007 Prentice Hall, Business Law,

sixth edition, Henry R. Cheeseman
Registration of Copyrights
Must be an original work
= Register with U.S. Copyright Office — In Azerbaijan with national office po
Registration
¢ Permissive
¢ Voluntary
¢ Effected at any time during term of copyright
= No longer required to use © or word “copyright” po

Grants copyright terms to:
Accisineage® “veer =i
¢ Individual Copyright Holder
SRM MSN”
Copyrig ht Te daa ° Corporate Copyright Holder— for
: publishers
Extension Act of ¢ 95 years from the year of first
publication or 120 years from the year
1 998 of creation, whichever is shorter
After copyright expires, work

enters public domain.
+ sie et
THE TRAGEDY.
@) Te is a :
PRINCE OF DENMARK
“To BE,
OR NOT TOBE:
THAT [9 THE QUESTION...”
HOMES |
CO) iulet
Occurs when a party copies a
substantial and material part of the
plaintiff's copyrighted work without
permission.
Copyright successful plaintiff may recover:

Infringement
profit
damages
order requiring impoundment and destruction
injunction
The Fair Use The copyright The law permits
Doctrine holder's rights in
the work are not
certain limited
unauthorized use
absolute. of copyrighted
materials.
Protected Uses:
1. Quotation of the Incidental
copyrighted work reproduction of a
for review or
work in a newsreel
Criticism or ina
scholarly or or broadcast of an
technical work. event being
2. Use ina parody reported.
or satire.
Brief quotation in a
3. Reproduction ofa news report.
work ina
Reproduction by a
legislative or
teacher or student of
judicial
rYe=) 90k) | ey- 1 Ameya tal
proceeding.
work to illustrate a
© 2007 Prentice Hall, Business Law, lesson.
sixth edition, Henry R. Cheeseman
Trademark
¢ Adistinctive mark, motto, device, or emblem that a manufacturer
stamps, prints, or otherwise affixes to the goods it produces so
that they may be identified on the market and their origins made
known. Once a trademark is established, the owner is entitled to
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does one GS
(yillik)
Gizlilik
cam
2018’e kadar (yillik)q QATAR

30 milyon euro
trademark RWAYS
Sea
resmi olarak
rakam
cost?
duyurulmadi.
30 milyon euro
2016'ya kadar (yillik)
Unicef’e verdigi para

5 milyon euro 1.5 milyon euro
2018’e kadar (yillik) 2016'ya kadar (yillik)
abe-Tel=teir- 1s ME as ae
ad McDonaids a
Se@ge”
ks a a d “Just do it” “Im — “I'm lovin’ it" aes ih
is Nothing Expensive
mottos
"The Ultimate “Vorsprung “Because “The Best
Driving Machine” durch Technik" I'm worth it” A Man Can Get"
«<>
TESCO
AE ME EP a a
JohnLlewis HSBC
“Every Little Helps” meyer honey “The World’s “Always Coca-Cola"
ndersold” Local Bank”
De en DIESEL tate:
“A Diamond Is “For Successful “The Totally Tropical “Does exactly what
Forever" Living” Taste" it says on the tin”
The original registration of a mark is valid for
10 years.
It can be renewed for an unlimited number of

10-year periods.
The registrant is entitled to use the registered

USA trademark symbol ® in connection with a
registered trademark or service mark.
Lanham
These rules are same in Azerbaijan.
Trademark
Act
Registration of Trademarks
¢ Distinctive mark, symbol, name,
word, motto, or device that
identifies the goods of a particular
Marks That Can business.
° e.g., Xerox, Coca-Cola
Be Trademarked
Distinguish the services of the
holder from those of its
competitors.
¢ e.g., United Airlines, Weight
Watchers
¢ Certify that goods and services are
of a certain quality or originate from
particular geographical areas.
Marks That Can ¢e.g., “Florida” oranges, “Napa
Be Trademarked Valley” wines
(continued)
¢ Used by cooperatives,
associations, and fraternal
organizations.
¢e.g., Boy Scouts of America
Examples
Certification mark Collective mark
Marks That
Cannot Be
Registered
Distinctiveness of a Mark
To qualify for federal protection,
¢ Amark must be distinctive — \.e., a brand name that is unique
and fabricated, or
¢ Have acquired a “secondary meaning”
¢ When an ordinary term has become a brand name.

Trademark
Infringement
¢ The owner of a mark can sue a third
party for the unauthorized use of a
mark.
¢ The owner must prove that:
¢ Defendant infringed the plaintiff's
mark by using it in an
unauthorized manner
¢ Use likely to cause confusion,
mistake, or deception

Trademark
Infringement
Examples
Trademark
Infringement, continued
¢ Successful plaintiff can
recover:
¢ Profits
¢ Damages to business
and reputation
¢ Order for destruction
¢ Injunction
AR Criminal Code
Article 197. Illegal use of a trademarks
¢ 197.1. Illegal use of another's trademark or service mark, origin name of a place of goods or
similar designations of goods, committed repeatedly or caused damage in the significant size—
is punished by the penalty at a rate from one up to five thousand of nominal financial unit, or
corrective works for the term up to one year, or imprisonment for the term up to one year.
* 197.2. The same act causing damage in the large size —
is punished by corrective works for the term up to two years, or restriction of freedom for the term up
to three years, or imprisonment on the same term.
>>> - — @mtsea nisanlarindan qanunsuz istifada etma

¢ 197.1. Ozgenin emtee ve ya xidmet etme nisanindan, emteenin manse yerinin adindan ve ya
eynicinsli eamteelerin adina oxsar adlardan istifade olunmas! tekrar t6redildikde va ya xeyli
miqdarda ziyan vurduqda—
¢ min manatdan bes min manatadak miqdarda cerime ve ya bir iledak muddete islah isleri va
ya bir iladeak muddete azadliqdan mehrum etme ile cezalandirilir.
* 197.2. Eyni emeller kulli miqdarda ziyan vurduqda—
iki iadak muddete islah isleri ve ya Ug iladek mUuddete azadliqdan mahrum etme ile cezalandirilir.
Generic Name
¢ Aterm for a mark that has become a
common term for a product line or
type of service and therefore has lost
its trademark protection.
¢ Name becomes descriptive rather
than distinctive.

ye
Marks are a valuable property right that should not
be eroded, blurred, tarnished, or diluted in any
way by another.
TIN
a
Protects famous marks from dilution.
rN
a
USA Use by other party must be commercial.
Federal X
rN
a
Dilution Act Use must cause dilution of distinctive quality of mark
ae S wy
© 2007 Pr e Hall, Bu
edition, apelin R. Cheeseman
eT eTal meats ti
amtea nisanlarina roberto Cavalli
numuns
GUCCI
@D
Dior
¢ The Google trademark has
become well known
worldwide. People even refer
to doing an Internet search as
“googling. If anew company
named its search engine
Goole or Joogle, how might
Google respond? Which act
would help Google defend its
n= Tel Van=lOa
Trade dress
¢ The image and overall appearance of
a product-for example, the distinctive
décor, menu, layout, and style of
service of a particular restaurant.
Basically, trade dress is subject to the
same protection as trademarks.
Trade Dress?
Internet and Domain Names... .
¢ Individuals and businesses use the Internet _ : . : ‘ a
¢ Electronic mail , . .
¢ Web sites — 4 i.
* Stored on servers operated by ISPs ,* - :
¢ Viewed through browsers » % - :
¢ Each web site identified by unique domain name " . - . »
¢ Names must be registered 4 a
¢ Yearly fee ! y P
¢ Valuable property right ; «4 ’ |
+
© 2007 Prentice Hall, Business Law, sixth +.
edition, Henry R. Cheeseman 6
International Protection
Berne Convention WIPO Copyright

- Protects Ny
copyrights ¢ Protects
copyrights of
computer
programs
Trade Secrets
a, pattern, Trade secret — business

. ct formul
A produ ae information that is kept
ocean, comple io or confidential to maintain an
advantage over
other business secret. competitors.
© 2007 Prentice Ha usiness La Cp aa

edition, Henr
State unfair competition laws allow
the owner of a trade secret to bring
a lawsuit for misappropriation
against anyone who steals a trade
secret.
Defendant must have obtained the

Trade trade secret through unlawful
Secrets Wis
eel
2007 Prentice Hall, Business Law, sixth
Trade Secrets
(continued}
¢ Owner is obliged to take all
reasonable precautions to
prevent those secrets from
being discovered by others.
¢ If owner fails to take
precautions, the secret is no
longer subject to protection.
Trade Secrets
(continued}
¢ Successful plaintiff can:
¢ Recover profits made by
offender
¢ Recover damages
¢ Obtain injunction prohibiting
offender from divulging
trade secret.
In USA Economic Espionage Act of 1996
¢ To convert a trade secret to his

or her benefit or for the benefit
of others,
¢ Knowing or intending that the
act would cause injury to the
owner of the trade secret.
Article 202. Illegal reception
or disclosure of a data which 202.1. Collecting of a data which is commercial or bank secret, by abduction of
Elem lan-ert:| elm rll 4
secrets
documents, payoff or threats, as well as by other illegal way with a view of
disclosure or illegal use of these data —
is punished by the penalty at a

rate from hundred up to five 202.2. |llegal use or disclosure of a data which is commercial or bank secret, without
hundred of nominal financial
unit, or corrective works for the
consent of their owner, committed on mercenary or other personal interest with
term up to one year, or causing damage in the large amount —
imprisonment for the term up to
two years.
is punished by the penalty at a

rate from five hundred up to one
thousand of nominal financial
unit, or corrective works for the
term up to two years, or
restriction of freedom on the
Teale aap
Madda 202. Kommersiya va

ya bank sirri olan malumatiar 202.1. Kommersiya ve ya bank sirlerini teskil eden melumatiarin toplanmasi hemin
qanunsuz yolla alda etma va
ya yayma melumatiari yaymaq ve ya onlardan qanunsuz istifade etmek meqsedi ile senedlari
ogurlamadla, satin almaqla ve ya hedelamaekle, habela digar qanunsuz Usulla
t6redildikde—
yuiz manatdan bes yuiz

manatadak migdarda cerime va 202.2. Sahibkarin raziligi olmadan kommersiya ve ya bank sirri olan mealumatlarin
ya bir iladak muiddete islah isleri
tamah ve ya basqa sexsi niyyetla qanunsuz yolla istifade edilmesi ve ya yayilmasi
eV O00)
01-
va ya iki iladak muddete
- - azadliqdan mshrum etme ile kulli miqdarda ziyan vurmaqla toredildikde—
Code
el OPA eleTerie e-em tale)
manatadsk miqdarda cearime va
ya iki iladak muddete islah isleri
va ya alti ayadak miiddata
azadliqdan mehrum etma ila
cezalandirilir.
AGENCY RELATIONSHIPS IN
BUSINESS
oe
ee nee ae en ae a ee ee eae
AGENCY
RELATIONSHI
p
Principal (temsil edilon, vakalot veran): A party who
employs another person to act on his or her behalf.
Agent (tamsilgi): A party who agrees to act on behalf of
another.
Use of agents — allows one person to act on behalf of

another.
Principal—agent relationship
AGENCY The fiduciary relationship “which results from the
manifestation of consent by one person to another
that the other shall act in his behalf and subject to
his control, and consent by the other so to act”.
Any person who has the capacity to contract can appoint
an agent to act on his or her behalf.
Persons who lack contractual capacity cannot
appoint an agent.
PRINCIPAL-
Principal's
ra .c = . T obligation
to perform
R E i pal I O N S ls I ad er, the contract
Contract with
third party
Third Party
on behalf
of principal
COPYRIGH a 20
EDUCATION, i} INC. =)
REN
AGENCY RELATIONSHIP
TYPES OF AGENTS, SOME OF THEM
KINDS OF
Principal—agent The agent has authority to act on behalf
EMPLOYMENT of the principal, as authorized by the
principal and implied from the agency.
RELATIONSHIP An employee is often the agent of his
employer.
Employer—employee An employee is hired to perform a task

or service.
An employee cannot enter into contracts
on behalf of the employer.
FORMATION OF
AGENCY
RELATIONSHIPS
The relationship of principal and agent is

created by mutual consent in the vast
majority of cases. This agreement does not
have to be formal or written.
The mutual consent comes about usually by

express agreement, even if it is informal.
However, it may also be implied agreement,
due to the relationship or conduct of the
parties.
Express Authority is expressly Principal and third
given to the agent by party are bound to
FORMATION the principal the contract
OF AGENCY Implied Authority is implied Principal and third

from the conduct of the party are bound to
RELATIONSHIP parties, custom and the contract
usage of trade, or act
) incidental to carrying
out the agent’s duties
By A principal may later Principal and third

ratification ratify an act of an party are not bound
agent retrospectively. to the contract
Principal and third party unless the principal
are bound to the ratifies the contract
contract
FORMATION O | Apparent Authority is created Principal and third
(Agent by when the principal leads party are bound to
AGENCY estoppel) a third party to believe the contract
RELATIONSHIF that the agent has

authority
Incidental Authority that is implied Principal and third

(Agent by to act beyond express party are bound to
necessity) agency powers to take the contract
all actions reasonably
necessary to protect the
principal’s property and
rights
Duty to
indemnify
PRINCIPAL’S Duty to
oe
Principal’s IViNvAe
D U T | E S compensate DTU asks reimburse
Duty to
cooperate
PRINCIPAL’S DUTY TO COMPENSATE
- Aduty that a principal owes to pay an agreed-upon amount

to the agent.
Either upon the completion of the agency or at some other
mutually agreeable time
- Agency contract specifies the compensation to be paid.
- No agreement as to the amount of compensation —

principal will pay the agent the customary fee paid in the
industry.
- The principal owes a duty to reimburse the agent
for expenses incurred by the agent if the expenses
were
Authorized by the principal
Within the scope of the agency
Necessary to discharge the agent’s duties in carrying
out the agency
——tniess otherwise agreed upon
PRINCIPAL’S DUTY TO REIMBURSE

- Aprincipal owes a duty to indemnify
the agent for any losses the agent
suffers because of the principal's
conduct.
PRINCIPAL’S
Duty to cooperate: The principal
DUTY TO
owes a duty to cooperate with and
INDEMNIFY assist the agent in the performance
of the agent’s duties and the
accomplishment of the agency.
Unless otherwise agreed upon
Duty to
account
AGENT’S
DUTIES
Duty to
perform
AGENT’S DUTIES
- Agent’s duty to account — A duty that an

agent owes to maintain an accurate accounting
of all transactions undertaken on the principal’s
behalf.
Requires the agent to:

Maintain a separate account for the principal
Use the principal’s property in an authorized
manner.
AGENT’S MAIN
DUTY -—- DUTY OF
LOYALTY
Duty of loyalty: A fiduciary duty

owed by an agent, not to act
adversely to the interests of the
principal
Common types of breaches of loyalty

Self-dealing
Usurping an opportunity
Competing with principal
Misuse of confidential information
Dual agency
- Generally principal is liable for tortious
conduct of agent acting within the scope of
authority. But principal isn't liable for
TORT intentional torts of agents and employees
that are committed outside the principal’s
LIABILITY OF
scope of business.
AGENTS TO
- Agent is liable for tortious conduct of principal
THIRD only if agent directly or indirectly, aids and
abets the principal's conduct.
PARTIES
- The three sources of tort liability for principals
and agents are negligence, intentional torts,
and misrepresentation.
CONTRACT LIABILITY OF AGENTS TO THIRD
PARTIES
- Agency law imposes contract liability on principals and

agents.
¢ Principal who authorizes agent to enter into a contract with

third party is liable on the contract.
- Third party can enforce and recover damages from

principal.
- Agent can also be held liable in certain circumstances.

LIABILITY OF THE AGENT FOR
CONTRACTS FORMED
An agent contracting for their

principal within their actual and/or Where an agent enters into a
apparent authority generally has collateral contract with the third It can happen that there is joint
no liability on the contract and is party with whom they have liability of agent and principal.
not entitled to enforce it. contracted on the principal's This is usually the case where an
However, there are behalf, there is separate liability agent did not disclose that they
circumstances when the agent and entitlement to enforcement acted for a principal.
will be personally liable and can on that collateral contract.
enforce it.
(a) When they intended to

undertake personal liability — for (b) Where it is usual business (c) Where the agent is acting on
example where they sign a practice or trade custom for an their own behalf even though
contract as party to it without agent to be liable and entitled. they purport to act for a principal.
signifying that they are an agent.
Implied warranty of authority (tamsil
salahiyyati): agent who enters into a contract on
behalf of another party warrants that he or she
has the authority to do so.
AGENT Ratification of a contract: A situation in which a
EXCEEDING principal accepts an agent’s unauthorized
SCOPE OF contract.
AUTHORITY Agent is liable for breaching the implied warranty
(TOMSILGININ of authority.
i ee
Principal is liable, only if he or she ratifies.
waa eee
ASMASI)
Independent contractors: outsiders employed by
principals to perform tasks on their behalf.
Independent contractors are personally liable for their

LIABILITY own torts.
FOR AN A principal is not liable for the torts of its independent

contractors.
INDEPENDENT
Principals cannot avoid liability for inherently dangerous
CONTRACTOR activities that they assign to independent contractors.
"S TORTS AND A principal can authorize an independent contractor to

enter into contracts.
CONTRACTS
The principal is not liable on the contract, if the
independent contractor enters a contract without the
principal’s authority.
TERMINATION OF AGENCY
Unsual
change in Operation of Wrongful
circumstance law termination
S
TERMINATION OF
AGENCY BY ACT OF
PARTIES
- Agency can be terminated by the

following acts
Mutual assent of the parties
If a stated time has lapsed

If a specified purpose is achieved
Occurrence of a stated event
« Notice of Termination
TERMINATION BY AN UNUSUAL CHANGE ay
CIRCUMSTANCES
- Unusual change in circumstances — leads the agent to believe that

the principal's original instructions should no longer be valid
- Termination by impossibility of performance

The loss or destruction of the subject matter of the agency
The loss of a required qualification
A change in the law
- An agency contract is terminated in the following circumstances
The death of either the principal or agent
The insanity of either the principal or the agent
The bankruptcy of the principal
The outbreak of a war between the principal’s country and the
agent’s country
- No duty to notify third parties about the termination
TERMINATION BY OPERATION OF
LAW
WRONGFUL
TERMINATION
- The termination of an agency

contract in violation of the
terms of the agency contract.
The non-breaching party may
recover damages from the
breaching party.

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Full name of the course: Business law

Lesson 1: Introduction to law. Foundations

Copyright © 2021, Gulnar Zulfugarova

Copyright © 2021, Gulnar Zulfugarova

¢ Law and other social rules

2. Differences between legal rules (law) and

4. Hierarchy of legal acts

* Civil law family

6. Summary of the 1*t lesson

Copyright © 2021, Gulnar Zulfugarova

* keeping the peace;

Copyright © 2021, Gulnar Zulfugarova

= “Much of the uncertainty of law is not an

= Law evolves and changes along with

Copyright © 2021, Gulnar Zulfugarova

« But society is governed by other different norms which include:

Copyright © 2021, Gulnar Zulfugarova

Copyright © 2021, Gulnar Zulfugarova

Law and ethics (etiquette)

Main difference is — state enforcement.

Being written is not the main difference. (A law

Copyright © 2021, Gulnar Zulfugarova

Copyright © 2021, Gulnar Zulfugarova

Copyright © 2021, Gulnar Zulfugarova

= Every inferior rule in this hierarchy

Copyright © 2021, Gulnar Zulfugarova

Copyright © 2021, Gulnar Zulfugarova

What is the main difference between

Sa OF ey Your main course book:

Related legislative acts

¢ What is jurisdiction? — Yurisdiksiya (mahkeme aidiyyati)

ee inziD : otisac _ tft

MOHKONeST — comes! — MeHKeMast |

Inzibati-iqtisadi inzibati-iqtisadi inzibati-iqtisadi Inzibati-iqtisadi Inzibati-iqtisadi Inzibati-iqtisadi

Cinayat Cinayot Cinayat Cinayot Cinayat Cinayet kollegiyas:

¢ As trade developed in the Middle Ages, the merchants who traveled

¢ In some countries, business and commercial disputes are heard by the

¢ In our country we call these courts as commercial courts=kommersiya

Generally the last common type of

2nd instance courts ~.

¢ The probability of winning or losing;

¢ ADR also has its own drawbacks. Like,

Business law by Gulnar Zulfugarova

Overview of 3. Advantages and disadvantages of sole

subjects Human beings are called natural persons. Sometimes,

Organizations that have received the status of legal

o There are some differences between natural and legal

24.1. A natural person is an_ individual

Chapter 4. Legal Entities

§1. General Provisions

Article 43. Definition and Types of Legal Entities

Ferdi sahibkar=fiziki sexs

Win: mem se! |

Kommersiya Publik Qeyri-

Commercial legal Public legal Non-commercial

O Hold title to and transfer property

O Be found civilly and criminally liable

ANA SSHIFa Malumat

Fond 6z faaliyyatinda Azarbaycan Respublikasinin Konstitusiyasini, Azarbaycan Respublikasinin qanunlarini, Fondun

Azarbaycan Respublikasinin Doviat Imtanan

Doviet quilugu UcUn Kadriarin secilmesini va Azerbaycan Respublikas! Prezidentinin 2013-cu il 24

1. Azerbaycan Respublikasinda doviet quilugu UcUn kadriarin mUsabiqs esasinda secilmesini,

Kommersiya haquai goxslorinin