BAKU, Azerbaijan, July 24. President of the
Republic of Azerbaijan Ilham Aliyev has approved the law "On
Crowdfunding".
The text of the law was published on the official website of the
President of Azerbaijan.
Under the law, crowdfunding platform operators may only be
established as limited liability companies or joint-stock
companies. Their charter and aggregate capital must meet the
minimum requirements set by the Central Bank of Azerbaijan, and
operators must be entered into a special register maintained by the
regulator before commencing operations.
The law also introduces rules governing significant
shareholdings in crowdfunding platform operators. A stake of 10
percent or more is considered a significant shareholding and may
only be acquired with the approval of the Central Bank. The
regulator will have up to 60 calendar days to review applications
to increase holdings to 20, 33 or 50 percent.
The legislation sets qualification requirements for senior
management, including higher education and an appropriate
professional reputation. At least one executive must have a minimum
of three years' experience in financial services. Individuals who
managed financial institutions declared bankrupt or liquidated for
prudential violations will be barred from holding management
positions in crowdfunding operators for three years.
To prevent conflicts of interest, operators may invest no more
than 20 percent of a project's fundraising target through their own
platforms. Employees and significant shareholders of an operator
may not be direct owners of projects listed on the same
platform.
The law also introduces a seven-day "cooling-off" period for
retail investors. During this period, beginning the day after an
investment offer is made, investors may withdraw their investment
without providing a reason or incurring penalties.
Crowdfunding campaigns may run for a maximum of 90 days from the
publication of the key information sheet. Under equity-based
crowdfunding, only joint-stock companies may act as project owners,
with a limit of two fundraising campaigns within a 12-month
period.
Debt-based crowdfunding will be permitted only through bond
issuance, with a maximum bond maturity of five years. Project
owners using this model will also be limited to two crowdfunding
campaigns over a 12-month period.
Following the successful completion of a campaign, operators
must begin placing securities within three business days, with the
placement process also limited to three business days.
The law will enter into force six months after its publication,
allowing prospective operators time to comply with the new
regulatory requirements.
