News

The following changes have been made to the provisions of the Civil Code of the Republic of Azerbaijan related to transactions, debt and credit agreements:

1) There is an instruction regarding the consideration of contracts concluded with the help of electronic or other technical means as written contracts.

2) The provision regarding the inadmissibility of interest payment has been removed from the Civil Code.

3) Provisions related to the definition and regulation of debt and credit agreements have been differentiated and provisions related to consumer credit agreements have been added to the Civil Code:

1. Changes to the loan agreement:

a)     The concept of "the day the debt was issued" was added to the Civil Code. Thus, the day on which the borrower or a third party indicated by him has the right to dispose of the subject of the loan agreement is considered the day on which the loan was issued.

b)    It is prohibited to give a loan for the purpose of buying a share (share) in the authorized capital or to act as a guarantee for the performance of a debt obligation.

c)     The procedure for determining and calculating interest on the loan agreement is indicated:

- the lender has the right to receive interest from the borrower in the manner and amount stipulated in the contract;

-        if interest is provided for using the debt and the relevant amount is not specified in the contract, that amount is calculated by adding two percentage points to the discount rate determined by the Central Bank of the Republic of Azerbaijan;

-        interests, including interest calculated for the delayed time and other fees, are calculated only on the amount of the unpaid principal balance until the day of repayment of the debt;

- Interest and (or) fees on the loan agreement must be paid at the end of each year of the agreement, and if the debt must be repaid before the end of one year, the interest and (or) fees must be paid simultaneously with the repayment of the debt.

- Lending money regularly and to unlimited entities for the purpose of obtaining income can only be carried out by a person who has the right to carry out lending activity in accordance with normative legal acts.

d) The procedure for unilateral cancellation of borrowing and lending obligations is defined:

- the borrower may unilaterally refuse to receive the loan in whole or in part until the subject of the loan agreement is given to him;

-        when it is clear that the debt will not be repaid on time due to a significant deterioration of the borrower's property condition or due to the borrower providing any wrong information to the lender, or if the borrower does not fulfill his obligation provided for in the loan agreement, including if he does not provide security, the lender shall fully cancel the loan obligation or can unilaterally refuse to perform partially.

e)     Debt repayment provisions

- the borrower must return the debt (as well as interest and (or) fees) to the lender within the period and in the manner stipulated in the loan agreement;

- the creditor can demand the repayment of the debt at any time if the contract does not specify the term for repayment of the debt. The borrower, who received the creditor's demand for execution, must repay the debt within one month, as well as pay interest and (or) fees, provided that a longer period is not provided by agreement of the parties.

- If the Civil Code does not provide for a different rule, the borrower can repay the debt before the due date by paying the interest and (or) fees calculated from the date of issuance to the day of repayment.

2.    Changes to the loan agreement

a)     The definition of the loan agreement is given in the new edition. According to the loan agreement, the lender undertakes to give ownership rights to the funds to the borrower in the amount and under the conditions specified in the agreement, and the borrower undertakes to return the received funds to the lender for the period specified in the agreement, subject to the payment of interest and (or) other payments specified in the agreement;

b)     The lender under the loan agreement can only be a person who has the right to provide loans in accordance with normative legal acts;

c)     The loan agreement is concluded between the parties in written form and a copy of the loan agreement is given to the borrower;

d)     The actual annual interest rate on the loan agreement is calculated in accordance with the rules established by the Central Bank of the Republic of Azerbaijan.

e)     Unless otherwise specified in the loan agreement, interest due to the delay in loan payments is calculated by adding the discount rate determined by the Central Bank of the Republic of Azerbaijan for the day of execution of the monetary obligation or its relevant part to the annual interest rate provided for in the loan agreement. When late payment interest is applied within the limits specified in this article, it is prohibited to demand additional money (fine, penalty) or any other form of payment.

f)      The claim period for the creditor's claims arising from the credit agreement is one year.

3.    News related to the consumer credit agreement

a)     According to the consumer credit agreement, the lender shall lend money to the borrower (consumer) who is a natural person for purposes not related to entrepreneurial or professional activity, and the consumer shall pay the interest and (or) other payments specified in the agreement in the manner determined by the agreement. and undertakes to return in time;

b)    The scope of credit agreements that do not apply to consumer credit agreements is defined;

c)     Consumer credit agreement is drawn up in written form. In addition, the requirements for the distance conclusion of the consumer credit agreement are also defined;

d)     If interest due to late payments is stipulated in the consumer credit agreement, the amount of such interest cannot exceed the amount calculated by adding five percentage points to the annual interest rate stipulated in the consumer credit agreement. In this case, additional dabba money (fine, fine), commission or any other form of payment cannot be requested. The calculation of late interest cannot last more than 180 days. If the loss to the creditor is greater than the amount of late interest, the creditor may require the consumer to pay for the loss in excess of that amount.

e)     It is prohibited for the lender to unilaterally change any condition of the consumer loan agreement. This requirement does not apply to cases that improve the consumer's situation, including alleviating the debt burden.