Draft laws prepared to expand financial accessibility within the innovation ecosystem have been approved
Amendments to legislation have been approved in order to increase financial accessibility within the innovation ecosystem of the Republic of Azerbaijan, develop alternative financing instruments, and encourage investment in this field.
As a result of these changes, access to finance for startups and micro, small, and medium-sized enterprises will expand through venture funds, crowdfunding, and other modern financial tools. Investor rights will be more effectively protected, and a more favorable environment will be created for attracting foreign capital and intellectual potential.
Within this framework, by a Decree of the President of the Republic of Azerbaijan, amendments have been made to the Labor Code and the Civil Code of the Republic of Azerbaijan, as well as to the laws “On Currency Regulation,” “On Investment Funds,” and “On the Securities Market.” At the same time, a new Law “On Crowdfunding” has been adopted.
To establish a legal framework regulating the activities of venture capital funds, the Law “On Investment Funds” has been supplemented with the concepts of venture capital fund, professional investor, and accredited investor. Additionally, the operation of venture funds under simplified registration or licensing regimes has been legally regulated.
Provisions related to convertible loan agreements (convertible notes) and agreements on future equity participation (SAFE) have been added to the Civil Code. These mechanisms enable startups to attract funding more flexibly at early stages and define the legal basis for converting investments into equity or shares at later stages.
At the same time, the legal foundations for corporate agreements and mechanisms related to specific investor rights (such as tag-along rights, drag-along rights, right of first refusal, liquidation preference, anti-dilution protection, etc.) have been established. These changes will contribute to the protection of investor rights and the improvement of corporate governance.
A legal framework has also been created for employee share ownership plan (ESOP) agreements. This mechanism provides technology companies with additional opportunities to attract, motivate, and retain talented employees over the long term.
The adopted Law “On Crowdfunding” expands access to alternative financing sources for startups and micro, small, and medium-sized enterprises, making financing more оператив and accessible, while also establishing a legal framework that protects investor rights.
The law defines powers related to maintaining a registry of operators, monitoring compliance and security requirements, issuing binding instructions, and suspending activities when necessary.
The law also includes customer due diligence and transparency mechanisms in line with requirements to combat money laundering and the financing of terrorism.
It should be noted that these legislative changes were developed and adopted within the framework of implementing measures предусмотренные in the “Action Plan for 2026–2028 on Accelerating Digital Development in the Republic of Azerbaijan,” approved by Presidential Order No. 953 dated February 27, 2026.
These amendments will ensure the legal regulation of venture capital, crowdfunding, and angel investor activities, and will contribute to creating a more modern and favorable investment environment for the development of the country’s innovation and startup ecosystem.
