On February 3, 2016, the President of the Republic of Azerbaijan issued a Decree On the Implementation of Law No. 97-VQ On Public Legal Entities, dated December 29, 2015 (the "Law").
The Law regulates the establishment, operation and organization of public legal entities ("PLEs"). State-owned entities such as State Oil Company of the Azerbaijan Republic (SOCAR) are not covered by the Law.
The Law primarily regulates PLEs established and operating in such fields as education and healthcare. In particular, medical institutions, orphanages, closed and open types of special educational institutions, pre-school educational institutions, secondary schools, primary vocational schools, specialized secondary schools, higher education institutions, special educational institutions established by the state or municipalities are listed among the types of PLEs subject to the Law.
Under the Law, PLEs are non-state or non-municipal organizations established on behalf of the state and municipality or by a public legal entity with the purpose to engage in activities of national and public significance. PLEs may engage in commercial activity provided such activity serves to and complies with the goals established at the moment of its formation and set forth in the charter of the PLE.
PLEs are established on behalf of the state by the relevant executive authority specified by the President of the Republic of Azerbaijan (and by the relevant municipal bodies on behalf of the municipality) and obtain the status of a legal entity upon state registration by the Ministry of Taxes of the Republic of Azerbaijan.
The charter capital of PLEs is formed on the account of assets contributed to by its founder(s). The state or municipal assets contributed may be used only for purposes set out in the charter of the PLE. The profit of the PLE may be transferred to the state or municipal budget for purposes other than those specified in the charter of the PLE only based on the decision of its founder(s).
The state (municipal body) is not responsible for the obligations of PLEs and only bears the risk in the amount of the contributed assets. In the meantime, the state or municipality is not responsible for any obligation undertaken by PLEs.