Jamil Asadov – Teacher at Zardab Vocational Lyceum
The director of a Limited Liability Company (LLC) is its sole executive body, acting on behalf of the company and representing its interests. Information about the director is entered into the state register, and when concluding any transaction, the parties must verify the authority of the person signing the agreement. When the director of an LLC is changed, the relevant bodies of the State Tax Service must be notified in order to update the information in the state register.
The agreement between the sole executive officer and the LLC is signed by the director and by the person presiding over the general meeting of the company’s participants that made the decision on the appointment (or by an authorized representative). If the company is established by a single founder, the contract with the director is signed by that founder. The director’s powers are exercised by an individual; however, if provided for in the company’s charter, the powers of the executive body may be transferred to an external manager, either an individual or a legal entity.
The executive body of a limited liability company (including the sole executive body), the procedure for its election or appointment, as well as its powers and obligations, are defined by Article 91-2 of the Civil Code of the Republic of Azerbaijan. These rules also apply when changing the director of an LLC.
The sole executive officer may not be elected as a member of the board of directors (supervisory board) or as a member of the audit commission (or appointed as an auditor).
On the one hand, the director is the employer for the company’s employees. On the other hand, the director is a hired employee who is responsible for the economic success of the limited liability company. Like other employees, the specifics of the director’s employment relationship are regulated by the Labor Code of the Republic of Azerbaijan.
There may be various reasons for changing the director of an LLC, for example:
at the request of the current director;
expiration of the employment contract;
by mutual agreement of the parties;
at the initiative of the company’s participants;
change of ownership;
other reasons.
It should also be noted that if the sole founder of a legal entity also serves as its director, no employment contract is concluded.
The process of changing the director of an LLC is carried out in the following sequence:
convening the general meeting and preparing the necessary documents;
terminating the employment contract with the current director;
appointing and hiring the new director;
submitting an application to update the information in the state register;
notifying the bank about the change.
It is also recommended to inform contractors and creditors about the change of the director. At the very least, this should be done for companies with which there is ongoing cooperation or significant transaction volumes. There is no need to renew existing contracts with counterparties.
To change the director of an LLC, a general meeting of the company’s participants is convened. The agenda includes the following items:
termination of the director’s powers and cancellation of the employment contract;
election of a new director and conclusion of an employment contract with them.
For the meeting to be considered valid, participants holding more than 50 percent of the company’s shares must be present.
At the meeting, decisions are made on dismissing the current director and appointing a new one. These decisions are formalized in the minutes of the meeting.
If the company has a single founder, the decisions are prepared and signed by that founder.
The simultaneous change of both the founder and the director of a single-member limited liability company is possible through a sale and purchase agreement.
Termination of the employment contract is the next step in the process of changing the director of an LLC. For this purpose, the following actions are required:
preparing a dismissal order;
making the necessary entries in the personal employment record;
paying the director their salary, compensation for unused leave, and other amounts due.
Before terminating the employment contract, it is necessary to prepare an inventory of material assets as well as a handover and acceptance report.
Before hiring a new director, it is recommended to collect certain information about the candidate, for example:
information confirming the absence of a criminal record;
information on any temporary restriction on the right to leave the country.
When concluding an employment contract with the new director, it is important to ensure that the hiring date and the dismissal date of the previous director are the same, in order to avoid a situation where two people formally hold authority at the same time.
It should be noted that when changing the director of an LLC, employment contracts are formalized through the e-social unified social registry system.
The following documents are provided to the newly appointed director:
the original decision on changing the director of the LLC;
the company’s charter;
the tax identification number, statistical code, and all records of changes made to the company.
According to Article 9 of the Law on State Registration and the State Register of Legal Entities, any subsequent change to registered information about a legal entity must be registered. To register a change, an application must be submitted to the State Tax Service no later than 40 days from the date the change occurs. The application must indicate the change and include documents confirming it.
When changing the director of an LLC, the application to update the state register must be accompanied by the decision on dismissing the previous director, the decision on appointing the new legal director, and a copy of the new director’s identity document.
After the change has been registered with the tax authority, it is essential to inform the bank that services the company. Otherwise, the new director will not be able to manage financial matters on behalf of the company. It is advisable to clarify the list of required documents with the bank in advance. As a rule, the following documents are requested:
the decision or meeting minutes regarding the change;
the order appointing the director;
an extract from the unified state register of legal entities;
a specimen signature and seal card.
In general, changing the director of an LLC is a responsible process that requires compliance with specific rules and deadlines. To ensure that everything is done correctly and on time, companies may also seek assistance from external specialists.
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