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Legal Report / Stock Option Plan / Grant / Azerbaijan

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Executive Summary

  • Securities Laws and Regulatory Issues:

    There are no securities law restrictions, registrations or filings required. 

  • Exchange Controls:

    Payments to purchase shares in foreign legal entities is one of the permitted types of foreign currency transfers outside of the Republic of Azerbaijan (2016 Rules No. 45/1). The local bank may require a copy of the Plan documentation before releasing the funds from the Participant's local account.

  • Other Filings and Reports:

    There are no particular reporting requirements (not covered elsewhere in the legal report) that are likely to impact on the Company’s operation of the Plan.

  • Award Documents and Communication:
    • Plan Documentation:

      It is common practice that the Plan documentation is made available to Participants.

    • Award Document Wording:

      It is recommended to have a local version of the Award documents which includes wording to deal with local tax and legal issues.

    • Translations:

      Consideration should be given to providing a translated version of the key Plan documents in appropriate circumstances.

    • Electronic Communications:

      There are no issues with the use of electronic communications. 

    • Acceptance by Participants:

      Whether Award documents need to be counter-signed by Participants will be determined by the laws of the country in which the Plan is stated to be subject. 

    • Jurisdiction Issues:

      The local courts will generally respect the laws under which the Plan documents are stated to be subject. 

    • Salary Deductions:

      The Local Company may make deductions from Participants' salaries in connection with the Plan.  These deductions must be agreed to by Participants.

  • Consultation and Employment Rights:
    • Works Councils:

      Any agreements with local works councils or trade unions must be respected in connection with the implementation of the Plan.

    • Local Laws:

      Anti-discrimination laws will apply to the offer of Awards and the operation of the Plan.

    • Exclusion of Liability:

      It is not permissible to exclude liability for compensation for the loss of Award on the termination of employment. 

    • Compensation:

      Only in limited instances may the loss of Awards be included in a claim for compensation. For example, where a Participant successfully claims unfair dismissal under the Labor Code (1999). 

    • Clawback Provisions:

      It is possible to provide that value derived from Awards may be clawed back in certain circumstances.

    • Restrictive Covenants:

      It is possible to provide that Awards may be forfeited in certain circumstances.

  • Data Privacy:

    The Local Company needs to ensure compliance generally with the Law On Personal Data (2010) and it is recommended to add language to confirm that the Local Company is operating the Plan in accordance with the applicable data privacy notice. Participants are required to consent to the collection, use and worldwide transfer of their data in connection with Awards. 

  • Other Issues:

    There are no legal issues specific to the provision of Awards to employees (not covered elsewhere in the legal report) that are likely to impact on the Company’s operation of the Plan.

Legal Report


Securities Laws and Regulatory Issues


There are no securities law restrictions, registrations or filings required. 



Exchange Controls


Payments to purchase shares in foreign legal entities is one of the permitted types of foreign currency transfers outside of the Republic of Azerbaijan (2016 Rules No. 45/1). The local bank may require a copy of the Plan documentation before releasing the funds from the Participant's local account.




Other Filings and Reports


There are no particular reporting requirements (not covered elsewhere in the legal report) that are likely to impact on the Company’s operation of the Plan.



Award Documents and Communication


Plan Documentation

There is no legal requirement to provide Participants with a copy of the Plan documentation. However, it is common practice that the Plan documentation (for example, the rules of the Plan) is made available to Participants in order to avoid misinterpretation of the rights and restrictions under the Plan.


Award Document Wording

It is recommended that the following is included in the Award documents:

  1. wording to state that the Award is separate from and does not form part of the Participant’s employment benefits to exclude any liability on the part of the Company or Local Company for the loss of an Award as a result of the Participant’s termination of employment; 
  2. a full indemnity in respect of income tax and social security contributions; 
  3. language to confirm that the Local Company is operating the Plan in accordance with the applicable data privacy laws;
  4. language to obtain the consent of Participants for collecting, using and transferring their personal data abroad in connection with the Awards; and
  5. where deductions are to be made to Participants' salaries in connection with the Plan, that Participants agree to such deductions being made.

Cost: EUR 2000 - Per Award type.


Translations

There is no legal requirement to provide a translated version of the Plan documentation. However, if there are any concerns that the Participants will not understand the Plan, consideration should be given to providing a translated version of the key Plan documents (for example, the Award certificate and any FAQs).


Electronic Communications

There are no issues with the use of electronic communications. 


Acceptance by Participants

Whether Award documents need to be counter-signed by Participants will be determined by the laws of the country in which the Plan is stated to be subject. 


Jurisdiction Issues

The local courts will generally respect the laws under which the Plan documents are stated to be subject. 


Salary Deductions

The Local Company may make deductions from Participants' salaries in connection with the Plan.  These deductions must be agreed to by Participants.




Consultation and Employment Rights


Works Councils

There is no legal obligation to consult works councils before implementing the Plan unless the Local Company is bound to do so under the terms of a collective agreement or trade union arrangement. Where such agreements are in place these must be respected, and the Local Company should consult with the employees or their representatives before implementing the Plan.


Local Laws

Discrimination (both direct and indirect) against employees on the grounds of protected characteristics (age, being married or single or divorced, being pregnant or on maternity leave, disability, race, religion or belief, sex, sexual orientation) is prohibited. Consideration should be given to these issues when determining who should participate in the Plan, what should happen during a Participant’s period of absence and what should happen when a Participant leaves employment. 


Exclusion of Liability

It is not permissible to exclude liability for compensation for the loss of Award on the termination of employment. 


Compensation

Only in limited instances may the loss of Awards be included in a claim for compensation. For example, where a Participant successfully claims unfair dismissal under the Labor Code (1999). This position has not, however, been tested in any detail by the local courts. 


Clawback Provisions

It is possible to provide that value derived from Awards may be clawed back in certain circumstances, but we are not aware of any such cases being considered and decided by the local courts. This position has not, however, been tested in any detail by the local courts. 


Restrictive Covenants

It is possible to provide that Awards may be forfeited in certain circumstances, but we are not aware of any such cases being considered and decided by the local courts. This position has not, however, been tested in any detail by the local courts. 




Data Privacy


There are no specific requirements to make an external filing or registration for data protection purposes in respect of the Plan or the making of Awards. 

The Local Company needs to ensure compliance generally with the Law On Personal Data (2010) in relation to the way it handles data and by having proper data privacy procedures in place, including a data privacy notice for employees. The Local Company should ensure that its data privacy notice sufficiently captures participation in the Plan. 

There is no legal requirement to add data privacy language to Award documentation. However, it is recommended to add language to confirm that the Local Company is operating the Plan in accordance with the applicable data privacy notice. 

Participants are required to consent to the collection, use and worldwide transfer of their data in connection with Awards. 




Other Issues


There are no legal issues specific to the provision of Awards to employees (not covered elsewhere in the legal report) that are likely to impact on the Company’s operation of the Plan.



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