CIVIL CODE OF THE REPUBLIC OF ARMENIA

CIVIL CODE OF THE REPUBLIC OF ARMENIA

Adopted by the National Assembly

on 5 May 1998

FIRST SECTION

GENERAL PROVISIONS

CHAPTER 1

CIVIL LEGISLATION AND OTHER LEGAL ACTS CONTAINING NORMS OF CIVIL LAW

Article 1. Relations regulated by civil legislation and by other legal acts containing norms of civil law

1. The civil legislation of the Republic of Armenia consists of this Code and other laws containing norms of civil law.

Norms of civil law contained in other laws must comply with this Code.

2. Civil legislation, as well as the decrees of the President of the Republic of Armenia and the decisions of the Government of the Republic of Armenia containing norms of civil law (hereinafter referred to as “other legal acts”) shall determine the legal status of participants in civil circulation, the grounds for arising and the procedure for the exercise of the right of ownership and other property rights, exclusive rights to the results of intellectual activity (intellectual property), shall regulate contractual and other obligations as well as other property relations and personal non-property relations related thereto.

Participants in relations regulated by civil legislation and other legal acts shall be deemed to be natural persons — the citizens of the Republic of Armenia, citizens of foreign states, stateless persons (hereinafter referred to as “citizens”) — and legal persons, as well as the Republic of Armenia and the communities (Article 128).

Rules prescribed by the civil legislation and other legal acts shall apply to the relations with the participation of foreign legal persons, unless otherwise provided for by law.

3. Civil legislation and other legal acts shall regulate the relations among persons exercising entrepreneurial activity or those with the participation thereof.

4. Family, labour relations, relations pertaining to the use of natural resources and protection of the environment shall be regulated by civil legislation and other legal acts, unless otherwise provided for by family, labour, land, nature conservation and other special legislation.

5. Relations pertaining to the exercise and protection of inalienable human rights and freedoms and other intangible assets shall be regulated by civil legislation and other legal acts, unless otherwise arises from the essence of these relations.

6. Civil legislation and other legal acts shall not apply to property relations, including tax, financial and administrative relations, based on administrative or other authoritative subordination of one party over another, unless otherwise provided for by the legislation.

Article 2. Entrepreneurial activity

Entrepreneurial activity shall be considered the independent activity of a person conducted at own risk, the basic purpose of which is to gain profit from the use of property, sales of goods, performance of works, or provision of services.

Article 3. Principles of civil legislation

1. Civil legislation is based on the principles of equality, autonomy of will, and property autonomy of the participants of relations regulated thereby, inviolability of ownership, freedom of contract, impermissibility of arbitrary interference by anyone in private affairs, necessity of unhindered exercise of civil rights, ensuring the reinstatement of violated rights, judicial protection thereof.

2. Citizens and legal persons shall acquire and exercise civil rights upon their will and to their benefit. They shall be free in the establishment of their rights and responsibilities on the basis of a contract, in determining any condition of the contract not contradicting with the legislation.

Civil rights may be restricted only by law, where it is necessary for the purposes of protection of state and public security, public order, health and morals of the public, rights and freedoms, honour and good reputation of others.

3. Goods, services and financial means shall move freely in the entire territory of the Republic of Armenia.

Restrictions on movement of goods and services may be introduced in accordance with law where those are necessary for ensuring the safety of people, protection of life and health, preservation of nature and of cultural values.

Article 4. Other legal acts

1. (Part repealed by HO-10-N of 16 December 2016)

2. On the basis of this Code and other laws and for the execution thereof, the President of the Republic of Armenia shall have the right to adopt decrees containing norms of civil law.

3. On the basis of this Code and other laws, of the decrees of the President of the Republic of Armenia and for the execution thereof, the Government of the Republic of Armenia shall have the right to adopt decisions containing norms of civil law.

4. In case a decree of the President of the Republic of Armenia, a decision of the Government of the Republic of Armenia contradicts this Code or other law, this Code or the respective law shall apply.

5. The operation and application of norms of civil law contained in the decrees of the President of the Republic of Armenia and the decisions of the Government of the Republic of Armenia shall be determined by the rules of this Chapter.

6. Ministries and other bodies of executive power, as well as local self-government bodies may issue acts containing norms of civil law only in the cases and to the extent provided for by this Code, other laws and legal acts.

(Article 4 amended by HO-10-N of 16 December 2016)

Article 5. Operation of civil legislation and other legal acts in time

1. Acts of civil legislation and other legal acts shall not have retroactive effect and shall apply to relations having arisen after the entry into force thereof.

The operation of law shall extend to the relations having arisen before the entry into force thereof only in the cases where it is directly provided for by law.

2. With respect to the relations having arisen before the entry into force of an act of civil legislation or other legal act, it shall apply to the rights and responsibilities having arisen after the entry into force thereof. Relations of parties to a contract concluded before the entry into force of an act of civil legislation or other legal act shall be regulated in accordance with Article 438 of this Code.

Article 6. Civil legislation, other legal acts and international treaties

1. International treaties of the Republic of Armenia shall apply directly to the relations mentioned in Article 1 of this Code, except for the cases when it follows from the international treaty that promulgation of a domestic act is required for the application thereof.

2. Where an international treaty of the Republic of Armenia prescribes norms other than those provided for by the civil legislation and other legal acts, the norms of the international treaty shall apply.

Article 7. Customary business practices

1. Customary business practice shall be the rule of conduct developed and widely applied in any area of entrepreneurial activity, not provided for by the legislation, regardless of the fact of being fixed in any document.

2. Customary business practices contradicting the mandatory provisions of legislation or contract shall not be applied.

Article 8. Interpretation of civil law norms

Civil law norms must be interpreted in accordance with the literal sense of the words and expressions contained therein.

In case of different interpretations of the words and expressions used in the text of civil law norms, preference shall be given to the interpretation complying with the principles of civil legislation as stated in point 1 of Article 3 of this Code.

Article 9. Application of civil law norms by analogy

1. In the cases where relations provided for in Article 1 of this Code are not directly regulated by law or upon agreement of the parties and there is no customary business practice applicable thereto, the norms of civil legislation regulating similar relations (analogy of statute) shall be applied to such relations, unless it contradicts the essence thereof.

2. In case of impossibility to use analogy of statute, the rights and responsibilities of parties shall be determined on the basis of principles of civil legislation (analogy of law).

3. Application by analogy of norms restricting civil rights and prescribing liability shall not be permitted.

CHAPTER 2

ARISING OF CIVIL RIGHTS AND RESPONSIBILITIES. EXERCISE OF CIVIL RIGHTS

Article 10. Grounds for arising of civil rights and responsibilities

1. Civil rights and responsibilities shall arise from the grounds provided for by law and other legal acts, as well as from the actions of citizens and legal persons which, despite not being provided for by law or other legal acts, give rise to civil rights and responsibilities by virtue of principles of civil legislation.

In accordance therewith, civil rights and responsibilities shall arise:

(1) from contracts and other transactions provided for by law, as well as from the contracts and transactions which, despite not being provided for by law, do not contradict thereto;

(2) from the acts of state and local self-government bodies that are provided for by law as grounds for the arising of civil rights and responsibilities;

(3) from a judicial act prescribing civil rights and responsibilities;

(4) as a result of obtaining property on the grounds permitted by law;

(5) as a result of creating works of science, literature, art, of inventions and other results of intellectual activity;

(6) as a consequence of causing damage to another person;

(7) as a result of unjust enrichment;

(8) as a result of other actions of citizens and legal persons;

(9) as a result of events with respect to which the law or other legal act envisages generation of civil law consequences.

2. Rights to property, subject to state registration, shall arise from the moment of the registration thereof.

Article 11. Exercise of civil rights

1. Citizens and legal persons shall at their discretion exercise the civil rights belonging thereto, including the right of protection thereof.

2. Renunciation by citizens and legal persons to exercise their rights shall not entail termination of these rights, except for the cases provided for by law.

Article 12. Extent of exercise of civil rights

1. Actions of citizens and legal persons exercised solely with the intention to cause damage to another person, as well as abuse of a right in other form shall not be permitted.

Use of civil rights for the purpose of limiting the competition, as well as abuse of a dominant position in the market shall not be permitted.

2. In case of not maintaining the requirements provided for by point 1 of this Article, the court or the arbitration tribunal may refuse a person in respect of the protection of the right belonging thereto.

(Article 12 amended by HO-68-N of 25 December 2006, edited by HO-74-N of 19 June 2015)

CHAPTER 3

PROTECTION OF CIVIL RIGHTS

Article 13. General provisions

1. Protection of civil rights shall be carried out by the court or the arbitration tribunal (hereinafter referred to as “court”), in accordance with the jurisdiction over cases prescribed by the Civil Procedure Code of the Republic of Armenia.

2. A contract may provide for regulation of a dispute between the parties before applying to court.

3. Protection of civil rights through administrative procedure shall be carried out only in the cases provided for by law. A decision taken under administrative procedure may be appealed against in the court.

(Article 13 supplemented by HO-74-N of 19 June 2015)

Article 14. Ways of protection of civil rights

Protection of civil rights shall be carried out through:

(1) recognition of the right;

(2) restoration of the situation having existed before the violation of the right;

(3) prevention of actions violating the right or creating a threat for the violation thereof;

(4) applying the consequences of the invalidity of a void transaction;

(5) declaring a disputable transaction as invalid and applying the consequences of the invalidity thereof;

(6) declaring an act of a state or local self-government body as invalid;

(7) not applying by the court of the act of a state and local self-government body that contradicts the law;

(8) self-protection of the right;

(9) enforcing the performance of the duty in kind;

(10) compensation for damages;

(11) levy a default penalty;

(12) termination or alteration of a legal relation;

(13) other ways provided for by law.

Article 15. Declaring as invalid the act of a state or local self-government body

1. The act of a state or local self-government body not complying with law or other legal acts and violating the civil rights and interests protected by law of a citizen or a legal person may be declared as invalid by the court.

In case of declaration of an act as invalid by the court, the violated right shall be subject to protection by ways provided for by Article 14 of this Code.

2. The Constitutional Court of the Republic of Armenia shall, in accordance with the Constitution of the Republic of Armenia, determine the compliance of the laws, the decisions of the National Assembly, the decrees and executive orders of the President of the Republic, the decisions of the Government and the Prime Minister, secondary regulatory legal acts, with the Constitution.

(Article 15 edited by HO-10-N of 16 December 2016)

Article 16. Self-protection of civil rights

A person shall have the right to self-protection of his or her civil rights by all the means not prohibited by law.

Ways of self-protection must be proportionate to the violation and not go beyond the limits of actions necessary for the restraint.

Article 17. Compensation for damages

1. A person whose right has been violated may require full compensation for the damages caused thereto, unless a lesser amount for the compensation of damages is provided for by law or by contract.

2. Damages shall comprise expenses, incurred by the person whose right has been violated, which have been or must be covered by said person in order to restore the violated right, the loss of or harm to the property thereof (actual damage), unearned income that this person would have received under the usual conditions of civil practices had the right thereof not been violated (lost benefit), as well as intangible damages.

3. Where the person, having violated the right, has received income as a result thereof, the person whose right has been violated shall have the right to claim compensation for the lost benefit along with other damages in the amount not less than such income.

4. Intangible damages shall be subject to compensation only in cases provided for by law.

5. The content of, procedure and conditions for the redress for victims of torture shall be prescribed by this Code.

(Article 17 edited, supplemented by HO-21-N of 19 May 2014, amended by HO-184-N of 21 December 2015, supplemented by HO-241-N of 16 December 2016)

(The provision of the Article, declared as contradicting the Constitution upon Decision SDVo-1121 of 5 November 2013, was brought into compliance with the Constitution upon the amendment to Article 1 of the Law HO-21-N of 19 May 2014)

Article 18. Compensation for damages caused by state or local self-government bodies

Damages caused to a citizen or a legal person as a result of illegal actions (omissions) of state and local self-government bodies or the officials thereof, including as a result of rendering an act of a state or local self-government body that does not comply with law or other legal act, shall be compensated by the Republic of Armenia or by the respective community.

Article 19. Protection of honour, dignity and business reputation

(Title edited by HO-97-N of 18 May 2010)

1. Honour, dignity and business reputation shall be protected from insult and slander publicly expressed by other person in the cases and under the procedure provided for by this Code and other laws.

2. The protection of the honour and dignity of a citizen may, upon the request of interested parties, be permitted also following his or her death.

3. In case of impossibility of identifying the person who has disseminated information disgracing a person’s honour, dignity or business reputation, the person in respect of which such information was disseminated shall have the right to apply to court with a request of declaring the disseminated information as not corresponding to the reality.

(Article 19 edited by Ho-97-N of 18 May 2010)

SECOND SECTION

PERSONS

(SUBJECTS OF CIVIL RIGHTS)

CHAPTER 4

CITIZENS

Article 20. Passive legal capacity of the citizen

1. The capacity of holding civil rights and bearing obligations (civil passive legal capacity) shall be recognised equally for all the citizens.

2. The passive legal capacity of a citizen shall arise from the moment of his or her birth and shall terminate by death.

Article 21. The content of passive legal capacity of citizens

Citizens may:

(1) have property by the right of ownership;

(2) inherit and bequeath property;

(3) engage in entrepreneurial and any other activity not prohibited by law;

(4) establish a legal person independently or jointly with other citizens and legal persons;

(5) conclude transactions not contradicting the law and bear obligations;

(6) select the place of residence;

(7) hold author’s rights of works of science, literature and art, inventions and other results of intellectual activity protected by law;

(8) hold other property and personal non-property rights.

Article 22. Name of the citizen

1. A citizen shall acquire and exercise rights and responsibilities under his or her own name which includes his or her surname and first name, and also the patronymic name if he or she wishes so.

A citizen may use a pseudonym (fictitious name) in the cases provided for and as prescribed by law.

2. A citizen shall have the right to change his or her name as prescribed by law. Changing the name of a citizen shall not constitute a ground for the termination or alteration of his or her rights and responsibilities acquired under the previous name.

A citizen shall be obliged to inform his or her debtors and creditors about the change of the name and shall bear the risk of damages caused as a result of lack of information of these persons on the change of his or her name.

A citizen having changed his or her name shall have the right to require at his or her expense the entry of respective changes in the documents formalised under his or her former name.

3. The name received by the citizen at birth, as well as a change of his or her name shall be subject to registration under the procedure prescribed for the registration of civil status acts.

4. Acquisition of rights and responsibilities under the name of another person shall not be permitted.

5. The damage caused to a person upon illegal use of his or her name shall be subject to compensation in accordance with this Code.

In case of distorting or using the name of a citizen in a way or in a form that affects his or her honour, dignity or business reputation, the rules provided for by Article 1087.1 of this Code shall apply.

(Article 22 amended by HO-97-N of 18 May 2010)

Article 23. Place of residence of a citizen

1. The place of residence shall be deemed to be the place where the citizen permanently or primarily resides.

2. The place of residence of minors who have not attained the age of fourteen or of citizens under guardianship shall be considered the place of residence of their legal representatives — parents, adopters or guardians.

Article 24. Active legal capacity of the citizen

1. The capacity of a citizen to acquire and exercise civil rights, to create civil responsibilities therefor and perform them by his or her actions (civil active legal capacity) shall arise in full from the moment of reaching the age of majority, namely upon attaining the age of eighteen.

2. A minor having attained the age of sixteen may be declared as having full active legal capacity where he or she works under an employment contract or, with the consent of his or her parents, adopters or the curator, is engaged in entrepreneurial activity.

Declaration of a minor as having full active legal capacity (emancipation) shall be made on the basis of the decision of the guardianship or curatorship body, upon the consent of their parents, adopters or the curator; whereas in case of the absence of such consent — upon the civil judgment of the court.

Parents, adopters, and the curator shall not be liable for the obligations of a minor declared as having full active legal capacity, in particular for the obligations that have arisen as a result of the damage caused thereby.

3. (Part repealed by HO-328-N of 10 September 2024)

(Article 24 amended by HO-328-N of 10 September 2024)

Article 25. Impermissibility of depriving a citizen of his or her passive legal capacity and active legal capacity and that of limitation thereof

1. The passive legal capacity and active legal capacity of a citizen may not be limited otherwise than in the cases provided for and as prescribed by law.

2. Failure to observe the conditions and procedure prescribed by law for the limitation of the active legal capacity of citizens or the rights thereof to engage in entrepreneurial or other activity shall entail the invalidity of the act of the state authority or other body having imposed the respective limitation.

3. Transactions aimed at full or partial renunciation by a citizen of his or her passive legal capacity or active legal capacity and those aimed at limitation of his or her passive legal capacity or active legal capacity shall be considered as null and void.

Article 26. Entrepreneurial activity of a citizen

1. A citizen shall have the right to establish business companies or be a participant therein with a view to engage in entrepreneurial activity.

2. From the moment of being recorded as an individual entrepreneur, the citizen shall have the right to engage in entrepreneurial activity without forming a legal person. Citizens shall have the right to engage in entrepreneurial activity without state registration (without forming a legal person or being registered as an individual entrepreneur) in case they have been record-registered with the tax authority and have obtained a patent as prescribed by law or have concluded a joint venture agreement for the purpose of producing agricultural products, as well as in other cases prescribed by laws. A citizen engaged in agricultural production shall be considered as a subject of entrepreneurial activity only within the limits of the given joint venture agreement.

3. The rules of this Code that regulate the activities of legal persons regarded as commercial organisations shall be applied to the entrepreneurial activity of citizens conducted without the formation of a legal person, unless otherwise derives from law, other legal acts or the essence of the legal relation.

4. With respect to the transactions of a citizen conducting entrepreneurial activity in violation of the requirements of points 1 and 2 of this Article, the court may apply the rules of this Code concerning the obligations related to the conduct of entrepreneurial activity.

(Article 26 supplemented by HO-243-N of 26 December 2008, amended, supplemented by HO-217-N of 21 December 2010, supplemented by HO-176-N of 20 November 2014, amended by HO-295-N of 21 December 2017)

Article 27. Property liability of a citizen

A citizen shall be liable for his or her obligations with all the property belonging thereto, except for the property whereon execution is not levied in accordance with law.

Article 28. Bankruptcy of a citizen

1. A citizen, including an individual entrepreneur, may be declared as bankrupt upon a court judgment where he or she is unable to satisfy the claims of creditors.

2. The grounds and procedure for declaring a citizen as bankrupt by the court shall be prescribed by law.

3. In case of declaring a citizen as bankrupt by the court, the procedure for satisfaction and the grounds for cessation of creditors’ claims, as well as the specific aspects of satisfaction of creditors’ claims shall be prescribed by the law regulating bankruptcy relations.

(Article 28 amended by HO-163 of 3 April 2001, edited by HO-54-N of 25 December 2006)

Article 29. Active legal capacity of minors under the age of fourteen

1. Transactions for minors who have not attained the age of fourteen (juniors) may be concluded on their behalf only by their parents, adopters or guardians, with the exception of the transactions referred to in point 2 of this Article.

2. Juniors aged six to fourteen shall have the right to conclude independently:

(1) small household transactions;

(2) transactions directed at obtaining gratuitous benefits, not requiring notary certification or state registration of rights arising from transactions;

(3) transactions for the disposal of means provided by the legal representative or, with the consent of the latter, by a third person, for a certain purpose or for free disposal.

3. Property liability for the transactions of a junior, including transactions concluded independently thereby, shall be borne by his or her parents, adopters or the guardian, unless they prove that the obligation has been violated without their fault. These persons shall, in accordance with law, bear liability also for the damage caused by the junior.

Article 30. Active legal capacity of minors aged fourteen to eighteen

1. Minors aged fourteen to eighteen may conclude transactions upon the written consent of their legal representatives — the parents, adopters or the curator — with the exception of transactions referred to in point 2 of this Article.

The transaction concluded by such minor shall be valid also in case of a later written approval given by his or her parents, adopters or curator.

2. Minors aged fourteen to eighteen shall — without the consent of the parents, adopters or the curator — have the right to:

(1) dispose their salary, stipend and other income;

(2) exercise author’s rights of a work of science, literature or art, of invention, or of other result of intellectual activity protected by law;

(3) make deposits to credit institutions and dispose them in accordance with law;

(4) conclude small household transactions and other transactions provided for by point 2 of Article 29 of this Code.

Upon attaining the age of sixteen, a minor shall also have the right to be a member of a cooperative in accordance with the laws on cooperatives.

3. Minors aged fourteen to eighteen shall independently bear property liability for the transactions concluded thereby in accordance with points 1 and 2 of this Article. Such minors shall bear liability for the damage caused thereby in accordance with this Code.

4. Upon the motion of parents, adopters or the curator or the guardianship and curatorship body the court may — in case of sufficient grounds — restrict the right of a minor aged fourteen to eighteen to independently dispose his or her salary, stipend or other income or may deprive him or her of that right, except for the cases where the minor has acquired active legal capacity in full in accordance with point 2 of Article 24 of this Code.

(Article 30 amended by HO-328-N of 10 September 2024)

Article 31. Declaring a citizen as having no active legal capacity

1. A citizen who as a result of mental disorder is unable to realise the meaning of his or her actions or control them, may be declared by the court as having no active legal capacity as prescribed by the Civil Procedure Code of the Republic of Armenia. Guardianship shall be established over him or her.

2. The transactions on behalf of a citizen who has been declared as having no active legal capacity shall be concluded by his or her guardian.

3. Where the grounds, by virtue whereof a citizen has been declared as having no active legal capacity have been eliminated, the court shall recognise him or her as having active legal capacity. Guardianship established over him or her shall be terminated on the basis of a court judgment.

Article 32. Limiting the active legal capacity of a citizen

1. Active legal capacity of a citizen having driven his or her family into a difficult material situation as a result of alcohol or drug abuse, as well as addiction to gambling, may be limited by the court as prescribed by the Civil Procedure Code of the Republic of Armenia. Curatorship shall be established over him or her.

He or she shall have the right to independently conclude only small household transactions.

He or she may conclude other transactions, as well as receive salary, stipend and other income and dispose them only upon the consent of the curator. Such citizen shall independently bear property liability for the transactions concluded and the damage caused thereby.

2. Where the grounds, by virtue whereof the active legal capacity of a citizen has been limited, have been eliminated, the court shall abolish the limitation of the active legal capacity thereof. Curatorship established over a citizen shall be terminated on the basis of a court judgment.

Article 33. Guardianship and curatorship

1. Guardianship and curatorship shall be established for the protection of the rights and interests of citizens having no or limited active legal capacity. Guardianship and curatorship shall be established over minors also for the purpose of their upbringing. In accordance therewith, the rights and responsibilities of guardians and curators shall be prescribed by the Family Code of the Republic of Armenia.

2. Guardians and curators shall without special authorisation act in protection of the rights and interests of their wards in the relations with any persons, including in the court.

3. Guardianship and curatorship shall be established over minors in case of absence of parents, adopters, in case of depriving the parents of parental rights by the court, as well as in the cases where minors have been left without parental care for other reasons, particularly, where the parents have avoided to raise or protect the rights and interests thereof.

Article 34. Guardianship

1. Guardianship shall be established over minors who have not attained the age of fourteen, as well as over citizens who have been declared by the court as having no active legal capacity as a result of a mental disorder.

2. The guardians shall be deemed as the representatives of their wards by virtue of law and shall conclude all necessary transactions on behalf and in the interests thereof.

Article 35. Curatorship

1. Curatorship shall be established over minors aged fourteen to eighteen, as well as over citizens who have been declared as having limited active legal capacity.

2. Curators shall give consent to conclude transactions that persons under curatorship are not entitled to conclude independently.

Curators shall support the persons under curatorship in exercising their rights and performing their responsibilities, as well as shall protect them from abuse by third persons.

Article 36. Guardianship and curatorship agencies

1. Guardianship and curatorship agencies shall be prescribed by law.

2. Within three days after the date of entry into force of the judgment on declaring a citizen as having no active legal capacity or on limiting the active legal capacity thereof, the court shall be obliged to inform thereon the guardianship and curatorship agencies of the place of residence of the citizen for establishing guardianship or curatorship over him or her.

3. The guardianship and curatorship body of the place of residence of the ward shall exercise oversight over the activities of guardians and curators.

Article 37. Guardians and curators

1. A guardian or a curator shall be appointed by the guardianship and curatorship body of the place of residence of the person needing guardianship or curatorship, within a period of one month from the day when the mentioned body has become aware of the necessity of establishing guardianship or curatorship over the citizen. Prior to the appointment of a guardian or a curator over a person needing guardianship or curatorship, the responsibilities of the guardian or the curator shall be performed by the guardianship and curatorship body.

The appointment of a guardian or a curator may be appealed against in the court by interested persons.

2. Adult citizens with active legal capacity shall be appointed as guardians and curators. Citizens having been deprived of parental rights may not be appointed as guardians and curators.

3. The appointment of a guardian or a curator shall be carried out upon the consent thereof. Moreover, his or her moral and other personal qualities, ability to perform responsibilities of a guardian or a curator, relationships between him or her and the person needing guardianship or curatorship and, if possible, also the wish of the ward must be taken into account.

4. The guardians and curators of citizens needing guardianship or curatorship and kept or placed in respective upbringing, medical institutions or in those for social protection of population or other similar institutions shall be deemed to be these institutions.

Article 38. Responsibilities of guardians and curators

1. Guardianship and curatorship responsibilities shall be performed gratuitously, with the exception of cases provided for by law.

2. Guardians and curators of minor citizens shall be obliged to live jointly with their wards. The guardianship and curatorship body may permit a curator to reside separately from his or her ward who has attained the age of sixteen where this has no adverse impact on the upbringing of the ward, protection of the rights and interest thereof.

Guardians and curators shall be obliged to inform the guardianship and curatorship agencies about the change of their place of residence.

3. Guardians and curators shall be obliged to provide for the maintenance of their wards, ensure their care and medical treatment, education, and upbringing, protect their rights and interests.

4. The responsibilities referred to in point 3 of this Article shall not be assigned to curators of adult citizens declared by the court as having limited active legal capacity.

5. Where the grounds by virtue whereof a citizen has been declared as having no or limited active legal capacity have been eliminated, the guardian or the curator shall be obliged to file a motion with the court for declaring the ward as having active legal capacity and terminating the guardianship or curatorship over him or her.

Article 39. Disposal of the property of the ward

1. The income of the citizen considered as ward — including the income to be received by the ward from the management of the property thereof, with the exception of the income that the ward may dispose independently — shall be expended by the guardian or the curator only in the interests of the ward upon the prior permission of the guardianship and curatorship body.

A guardian or a curator shall have the right to make necessary expenditures at the expense of the income of the ward for the maintenance of the ward, without prior permission of the guardianship and curatorship body.

2. Without the permission of the guardianship and curatorship body the guardian shall not have the right to conclude and the curator shall not have the right to give consent to the conclusion of transactions for alienation of the property of the ward, including exchange or gift, lease transactions, transactions on the transfer of property for gratuitous use or pledge transactions entailing a renunciation of rights belonging to the ward, to divide his or her property or to separate shares therefrom as well as conclude any other transaction entailing reduction of the property of the ward.

The procedure for the management of the property of the ward shall be prescribed by law.

3. The guardian, the curator, their spouses and close relatives shall not have the right to conclude transactions with the ward, with the exception of the transfer of property to the ward as a gift or for gratuitous use, as well as to represent the ward in course of concluding transactions between the ward and the spouse of the guardian or curator and the close relatives thereof or in the course of conducting court cases.

Article 40. Trust management of the property of the ward

1. In case of necessity of permanent management of immovable and valuable movable property of the ward, the guardianship and curatorship body shall conclude a trust management agreement for such property with the manager appointed thereby. In this case the guardian or the curator shall retain his or her powers in respect of the property of the ward, which has not been assigned for trust management.

The rules provided for by points 2 and 3 of Article 39 of this Code shall extend to the trust manager of property of the ward.

2. Trust management of the property of the ward shall terminate on the grounds provided for by law for the termination of the agreement on trust management of property, as well as in case of termination of guardianship or curatorship.

Article 41. Releasing guardians and curators from the performance of their duties

1. The guardianship and curatorship body shall release a guardian or a curator from the performance of the duties thereof in case the minor is returned to his or her parents, or adopted.

2. In case of placing a ward in a respective upbringing, medical institution, in that for social protection of population or other similar institution, the guardianship and curatorship body shall release the previously appointed guardian or curator from performing his or her duties, unless this contradicts the interests of the ward.

3. In case of reasonable excuses (illness, change in property status, absence of mutual understanding with the ward, etc.), the guardian or curator may — upon his or her request — be released from performing his or her duties.

4. In cases of improper performance of duties by a guardian or a curator, including the cases of using guardianship or curatorship for mercenary purposes or leaving the ward without supervision and necessary help, the guardianship and curatorship body may release the guardian or curator from performing those responsibilities and take necessary measures for subjecting him or her to liability provided for by law.

Article 42. Termination of guardianship and curatorship

1. Guardianship and curatorship over adult citizens shall terminate upon the request of the guardian, the curator or the guardianship and curatorship body, on the basis of a court judgment on declaring the ward as having active legal capacity or on abolishing the limitations of his or her active legal capacity.

2. Guardianship over a junior ward shall terminate upon his or her attainment of the age of fourteen, and the citizen performing the responsibilities of the guardian shall become — without an additional decision thereon — the curator of the minor.

3. Curatorship over a minor shall terminate — without a special decision — upon his or her attainment of the age of eighteen, as well as in the cases prescribed by part 2 of Article 24 of this Code.

(Article 42 edited by HO-328-N of 10 September 2024)

Article 43. Patronage over citizens having active legal capacity

1. Patronage may be established over an adult citizen having active legal capacity upon his or her request, who cannot exercise and protect his or her rights and perform responsibilities due to bad health.

Establishment of patronage shall not entail limitation of the rights of the citizen.

2. The guardianship and curatorship body shall appoint a patron (assistant) for an adult citizen having active legal capacity upon the consent of the given citizen.

3. The property of an adult citizen having active legal capacity shall be disposed by the patron (assistant) on the basis of a delegation contract or trust management contract entered into with the citizen. Household and other transactions aimed at the maintenance of the citizen and satisfaction of the household needs thereof shall be entered into by a patron (assistant) upon the consent of the citizen.

4. In accordance with point 1 of this Article, patronage established over an adult citizen with active legal capacity shall terminate by the request of the citizen under patronage.

A patron (assistant) of a citizen under patronage shall be released from the performance of his or her responsibilities in the cases provided for by Article 41 of this Code.

Article 44. Declaring a citizen as missing

1. Upon application of interested persons, the court may declare a citizen as missing when, in the place of his or her residence, there is no information on the place of location thereof within a one-year period.

A military servant or other citizen missing due to military operations may be declared as missing by the court, where there is no information about the whereabouts of the military servant or the citizen within three months.

2. Where it is impossible to determine the day of receipt of the last information on the missing person, the start of calculating the term for declaration as missing shall be considered the first day of the month following the month when the last information on the missing person has been received, and in case it is impossible to determine this month — the first of January of the following year.

(Article 44 supplemented by HO-504-N of 29 December 2020)

(Law HO-504-N of 29 December 2020 contains a transitional provision)

Article 45. Consequences of declaring a citizen as missing

1. In case of necessity for permanent management of the property of a citizen declared as missing, the property thereof shall be transferred to the person appointed by the guardianship and curatorship body, who is acting on the basis of a trust management contract entered into with that body.

2. The manager of property of a citizen declared as missing shall redeem his or her debts on the account of the property of the missing person, shall dispose the property to the benefit of that person, shall provide allowances to the persons whose maintenance was the obligation of the missing person.

3. The guardianship and curatorship body may, where appropriate, before the expiry of one year from the day of receiving the last information on the missing person, appoint a manager of his or her property on the basis of a court judgment.

4. Where the court judgment on declaring the citizen as missing has not been abolished after three years from the date of appointing a manager, and no application has been filed with the court on declaring the citizen as dead, the guardianship and curatorship body shall be obliged to apply to court for declaring the citizen as dead.

5. The consequences — not provided for by this Article — of declaring a citizen as missing shall be prescribed by law.

Article 46. Consequences of abolishing the judgment on declaring a citizen as missing

In case of appearance of a person declared as missing or identifying his or her place of location, the court shall abolish the judgment on declaring him or her as missing. Trust management of property of that citizen shall be terminated on the basis of a court judgment.

Article 47. Declaring a citizen as dead

1. A citizen may be declared as dead by the court if there has been no information about the place of location thereof in the place of his or her residence within a period of three years, and if he or she has disappeared for six months under such circumstances that threatened death or give grounds for supposing that he or she has died from a certain accident.

2. A military servant or other citizen missing in connection with military operations may be declared as dead by the court not earlier than one year after the end of military operations.

3. The day of death of a citizen declared as dead shall be considered the day of entry into force of the court judgment on declaring him or her as dead. In case of declaring a citizen as dead — who has disappeared under such circumstances that threatened death or give grounds for supposing that he or she has died from a certain accident — the court may declare the day of his or her supposed death as the day of death.

(Article 47 amended by HO-504-N of 29 December 2020)

(Law HO-504-N of 29 December 2020 contains a transitional provision)

Article 48. Consequences of appearance of a citizen declared as dead

1. In case of appearance of a citizen declared as dead or identifying his or her place of location, the court shall abolish the judgment on declaring him or her as dead.

2. Regardless of the time of his or her appearance, the citizen may claim from each person the return of preserved property which gratuitously passed to that person after the declaration of the citizen as dead, except for the cases provided for by point 3 of Article 275 of this Code.

3. The persons having acquired the property of a citizen declared as dead through non-gratuitous transactions shall be obliged to return the property thereto, where it is proved that in the course of acquiring the property they were aware that the citizen declared as dead was alive. In case of impossibility to return that property in kind, its cost shall be compensated.

4. Where the property of a citizen declared as dead has passed to the community by the right of succession and has been realised in observance of the conditions provided for by this Article, the amount received from the realisation of the property shall be returned to the citizen after abolishment of the judgment on declaring him or her as dead.

Article 49. Registration of civil status acts

1. The following acts of civil status shall be subject to state registration:

(1) birth;

(2) marriage;

(3) dissolution of marriage;

(4) adoption;

(5) establishment of paternity;

(6) change of name;

(7) death of citizen.

2. Civil status acts shall be registered by civil status acts registration bodies, through making corresponding records in the registers of civil status acts (Books of Acts) and through issuing certificates to citizens on the basis of those records.

3. The civil status acts registration body shall — in case of existence of sufficient grounds and absence of dispute between the interested parties — correct and amend the records made in the civil status acts.

In case of dispute between the interested parties or in case of refusal by the civil status acts registration body to make a correction or amendment to the record, the dispute shall be resolved by the court.

The body of the registration of civil status acts shall, on the basis of a court judgment, denounce or reinstate the records of civil status acts.

4. The bodies registering civil status acts, the procedure for the registration of those acts, for amending, reinstating and denouncing the records of civil status acts, the forms of books of acts and certificates, as well as the procedure for and terms of maintaining the books of acts shall be determined by the law on civil status acts.

CHAPTER 5

LEGAL PERSONS

§ 1. BASIC PROVISIONS

Article 50. Concept of a legal person

1. A legal person shall be the organisation which has separate property as ownership and bears liability for its obligations with that property, may, in its name, acquire and exercise property and personal non-property rights, bear responsibilities, act as a plaintiff or defendant in court.

A legal person shall have an independent balance.

2. In connection with the participation in the formation of property of a legal person, its founders (participants) shall have or shall not have rights of obligation with respect to that legal person.

3. Economic partnerships and companies are among legal persons with respect to which their founders (participants) have rights of obligation.

4. Non-governmental associations and funds shall be classified under legal persons with respect to which their founders do not hold obligatory rights.

(Article 50 amended by HO-32-N of 16 December 2016)

Article 51. Types of legal persons

1. Legal persons may be, as to their activities, for-profit organisations (commercial organisations) or not-for-profit organisations not distributing the received profit among the participants (non-commercial organisations).

2. Legal persons that are commercial organisations may be established in the form of economic partnerships and companies.

3. Depending on the nature of their activities, cooperatives may be for-profit (commercial) organisations or non-for-profit (non-commercial) organisations.

4. Legal persons considered as non-commercial organisations may be established in the forms of non-governmental associations, funds or in other forms provided for by law.

(Article 51 edited by HO-32-N of 16 December 2016)

Article 52. Passive legal capacity of a legal person

1. A legal person may have civil rights in accordance with the objectives of its activities provided for by its articles of association and bear obligations in connection with these activities.

2. Legal persons may have civil rights necessary for the conduct of any type of activities not prohibited by law and may bear civil obligations.

A legal person may engage in certain types of activities — the list of which shall be prescribed by law — only on the basis of a special permit (licence). In cases prescribed by law, a legal person may engage in certain types of activities only after submitting a notification on engaging in such activities.

A non-commercial organisation may carry out entrepreneurial activities in compliance with the goals prescribed by the statute thereof, where it is provided for by law. A non-commercial organisation may establish a commercial organisation or hold a participation therein for the purpose of carrying out entrepreneurial activities.

The rules pertaining to activities of legal persons deemed as commercial organisations under this Code shall apply to entrepreneurial activities carried out by a non-commercial organisation, unless otherwise arising from law, other legal act or the nature of the legal relation.

3. Rights of a legal person may be limited only in the cases provided for by law and as prescribed by law. A legal person may appeal in the court against the decision on limitation of its rights.

4. Passive legal capacity of a legal person shall arise from the moment of its establishment (point 3 of Article 56) and shall terminate from the moment of completion of its liquidation (point 7 of Article 69).

5. The right of a legal person to engage in such activities for the conduct of which a special permit (licence) or submission of a notification is required, shall arise from the moment of obtaining such a permit (obtaining the right to conduct activities subject to notification) or within the term indicated therein and shall terminate on the expiration of its period of validity, unless otherwise prescribed by law or other legal acts.

(Article 52 supplemented, edited by HO-128-N of 13 November 2015, amended, supplemented by HO-32-N of 16 December 2016)

Article 53. Establishment of a legal person

1. Founders of a legal person shall enter into a contract which shall define the procedure for joint activities for the foundation of the legal person, the conditions of transfer of their property to the legal person and the conditions of their participation in its management.

2. Based on the contract, the founders shall draft the statute of the legal person being established.

Article 54. Liability of founders of a legal person

Founders of a legal person shall bear joint and several liability for the obligations that have arisen with respect to the establishment of the legal person before the state registration of the legal person.

Article 55. Articles of association of a legal person

1. The articles of association of a legal person shall be the statute approved by its founders (participants) or the body authorised for it by the statute.

2. The statute of a legal person shall define the name of the legal person, its registered office, as well as shall contain other information provided for by this Code and/or by law for respective types of legal persons.

The statute of a non-commercial organisation shall define the subject and goals of its activities.

The statute of a commercial organisation may provide for the subject and goals of its activities.

3. Amendments to the statute shall acquire legal force for third persons from the moment of their state registration, and in the cases provided for by law — from the moment of informing about these amendments to the state body performing such registration. However, legal persons and their founders (participants) shall not have the right to invoke the lack of registration of such amendments in relations with third persons who have taken such amendments into account.

(Article 55 supplemented, amended by HO-217-N of 21 December 2010)

Article 56. State registration of legal persons

1. A legal person shall be subject to state registration, as prescribed by law. Data for state registration — including the trade name of commercial organisations — shall be recorded in the state register of legal persons, which shall be open for general information.

2. The grounds for rejecting state registration of a legal person shall be prescribed by law.

It shall not be permitted to reject the registration of a legal person on the motive of inexpedience of its establishment.

Rejection of state registration, as well as evasion from registration may be appealed against in the court.

3. A legal person shall be considered established from the moment of its state registration.

4. A legal person shall be subject to re-registration only in the cases prescribed by law.

(Article 56 edited by HO-39-N of 26 December 2008)

Article 57. Bodies of a legal person

1. A legal person shall acquire civil rights and assume civil responsibilities through its bodies which function in conformity with the law, other legal acts and the statute of the legal person.

The procedure for the election or appointment of the bodies of a legal person shall be prescribed by this Code, by law and/or by the statute of the legal person.

2. In the cases provided for by law, a legal person may acquire civil rights and assume civil responsibilities through its participants, as well as through representatives.

3. A person acting in the name of a legal person by virtue of law or the statute thereof must act in good faith and reasonably for the interests of the legal person represented by him or her. Upon the request of the founders (participants) of the legal person, he or she shall be obliged to compensate for the damages caused to the legal person by him or her, unless otherwise provided for by law or contract.

(Article 57 amended by HO-217-N of 21 December 2010)

Article 58. Name of a legal person

1. A legal person shall have its name which shall contain an indication of the organisational and legal form thereof. The name of a non-commercial organisation shall contain an indication on the nature of activities of the legal person.

2. A legal person considered as a commercial organisation shall have a trade name.

A legal person, the trade name whereof is registered as prescribed by law, shall have an exclusive right of using it.

The procedure for the registration and use of trade names shall be prescribed by law and other legal acts.

3. It shall not be permitted to acquire rights and responsibilities under the trade name of another legal person.

A person illegally using the trade name of another person shall be obliged to terminate its use upon the request of the right holder of the trade name and compensate for the damages caused.

Article 59. Registered office of a legal person

The registered office of a legal person shall be the place of location of its permanently functioning body.

Article 59.1. Concept of redomiciliation of a legal person

1. Redomiciliation of a legal person shall be the transfer of the legal person from one jurisdiction to another, resulting in the change of the personal law of the legal person. Redomiciliation shall be certified by a certificate of continuation.

2. All commercial organisations may be redomiciled. All non-commercial organisations, with the exception of political parties, religious and non-governmental organisations, state and community non-commercial organisations, condominiums, as well as with the exception of organisations which have not adopted an organisational and legal form provided for by this Code, or the organisational and legal form of which is impossible to replace by the organisational and legal form chosen by them and provided for by this Code, shall have the right to be redomiciled.

3. A legal person may be redomiciled only when such possibility is not prohibited by its statute.

4. Redomiciliation of a legal person shall be carried out on the basis of the decision of the competent body prescribed by the personal law of the legal person and in the manner prescribed by said personal law.

5. Provisions on redomiciliation of legal persons shall not apply to organisations licensed and controlled by the Central Bank of the Republic of Armenia.

(Article 59.1 supplemented by HO-206-N of 17 November 2016)

Article 59.2. Redomiciliation of a foreign legal person to the Republic of Armenia

1. A foreign legal person may — as prescribed by the legislation of the Republic of Armenia — be redomiciled to the Republic of Armenia after obtaining a statute complying with the requirements of the legislation of the Republic of Armenia and terminating its registration in the foreign country as a legal person of that country or registering the information on redomiciliation.

2. Following the redomiciliation of a foreign legal person, the foreign legal person shall retain all of its rights and obligations, unless otherwise provided for by law.

3. Following the redomiciliation of a foreign legal person to the Republic of Armenia, its registered office shall be transferred to the Republic of Armenia.

4. For the purpose redomiciliation of a foreign legal person to the Republic of Armenia, that foreign legal person shall — as prescribed by law — submit the application for preliminary registration and the information and documents provided for by law to the authorised person within or authorised body of the Government, and shall choose its organisational and legal form.

5. After submitting the data prescribed by law to the registration body, the registration body shall, where there are no grounds excluding the redomiciliation of the foreign legal person to the Republic of Armenia, carry out preliminary registration of the legal person undergoing redomiciliation and provide a relevant excerpt from the register.

6. Simultaneously with applying for preliminary registration or thereafter, the registration body, on the basis of the application for redomiciliation submitted by the legal person undergoing redomiciliation, shall provide the legal person undergoing redomiciliation with an temporary certificate of continuation on redomiciliation to the Republic of Armenia.

7. After preliminary registration of the foreign legal person, the legal person undergoing redomiciliation shall submit to the registration body a duly certified Armenian translation of the document on termination of its registration in the foreign state as a legal person of that country or on recording the information regarding redomiciliation.

8. On the basis of the document on termination of registration of a foreign legal person in a foreign state or on redomiciliation from that country, a record on redomiciliation of a foreign legal person to the Republic of Armenia shall be made in the register and a certificate of continuation considered as recognition of redomiciliation of the legal person to the Republic of Armenia shall be provided by the registration body of the Republic of Armenia.

9. After recognition of redomiciliation, a legal person shall be deemed to be registered in the Republic of Armenia from the moment of preliminary registration, provided that the foreign legal person having applied for redomiciliation has not concluded transactions from the moment of preliminary registration until the moment of recognition of redomiciliation to the Republic of Armenia. Otherwise, that legal person shall be deemed to be redomiciled from the moment of recognition of redomiciliation to the Republic of Armenia.

10. To obtain a licence for carrying out activities subject to licensing, a foreign legal person may — on the general grounds provided for by the legislation of the Republic of Armenia and from the moment of preliminary registration of redomiciliation to the Republic of Armenia — apply to the bodies provided for by the legislation of the Republic of Armenia, unless otherwise provided for by law.

11. The Government of the Republic of Armenia may define the list of states legal persons of which may not be redomiciled to the Republic of Armenia, as well as the list of states to where legal persons of the Republic of Armenia may not be redomiciled. Redomiciliation may be rejected where the non-commercial organisation in question has not brought its statute in line with the legislation of the Republic of Armenia and where the organisational and legal form chosen by the legal person in question is incompatible with its statutory objectives or it has not submitted the documents provided for by law.

12. In case of redomiciliation of a legal person redomiciled to another state besides undergoing redomiciliation to the Republic of Armenia, the Republic of Armenia shall be deemed to be the country of redomiciliation of that legal person.

(Article 59.2 supplemented by HO-206-N of 17 November 2016)

Article 59.3. Redomiciliation of a legal person of the Republic of Armenia.

1. At the time of redomiciliation of a legal person of the Republic of Armenia, a record on redomiciliation of the legal person shall be made in the unified state register of legal persons and the information prescribed by law shall be preserved. Such information shall be deemed publicly available, unless otherwise provided for by the legislation in force.

2. Redomiciliation of a legal person of the Republic of Armenia shall be prohibited where its liabilities exceed its assets, or where that legal person has liabilities towards the Republic of Armenia, except for cases when consent to redomiciliation has been given upon the decision of the body responsible for management of the mentioned liabilities, or where it has liabilities towards a certain community, except for cases when consent to redomiciliation of the legal person has been given upon the decision of the relevant community council, or an organisation participating in the regulated public services sector.

3. After a decision on redomiciliation has been taken by the general meeting of participants of a legal person of the Republic of Armenia, its executive body shall be obliged to inform the creditors of the legal person undergoing redomiciliation about it in writing as well as issue a public notice on the redomiciliation as prescribed by the Law of the Republic of Armenia "On public and individual notification via the Internet" at least three months prior to the final registration of redomiciliation, unless a longer time limit has been prescribed by the decision on redomiciliation.

4. At the time of redomiciliation of a legal person of the Republic of Armenia, creditors of the legal person shall — prior to the final registration of redomiciliation — have the right to claim additional guarantees of discharge of liabilities or claim termination of redomiciliation or early discharge of liabilities and compensation for damages.

5. A legal person of the Republic of Armenia shall — before the expiry of the specified time limit — discharge its liabilities towards the Republic of Armenia and the community concerned as well as satisfy the early claims of creditors.

6. A creditor’s claim for termination of redomiciliation of a legal person of the Republic of Armenia shall be filed with the court prior to the state registration of redomiciliation. Where the claim is based on an indisputable right and the debtor cannot satisfy it at once and compensate for damages, or where the debtor is the Republic of Armenia, or where there are grounds for insolvency of the legal person undergoing redomiciliation, the court shall terminate the redomiciliation until the elimination of the specified grounds.

7. A legal person of the Republic of Armenia shall, as prescribed by law, submit to the authorised person within or the authorised body of the Government an application for redomiciliation and the information and documents provided for by law: in particular, evidence that its liabilities have been discharged or its creditors have been informed in writing about the redomiciliation as well as that a public notice on the redomiciliation has been issued as prescribed by the Law of the Republic of Armenia "On public and individual notification via the Internet", a statement of information on not being involved in bankruptcy proceedings, a statement of information on not having any liabilities with regard to incomes controlled by the tax authority.

8. Where the information and the documents provided for by point 7 of this Article are not submitted together with the application provided for by the same point, the body registering the specified information shall — based on mutual assistance and in the manner and time limits provided for by law — obtain the information from the state bodies possessing it.

9. After submitting the application, documents and other data prescribed by law to the registration body, where there are no grounds excluding redomiciliation of the legal person of the Republic of Armenia from the territory of the Republic of Armenia, the registration body shall provide the legal person of the Republic of Armenia with a document certifying that the legal person undergoing redomiciliation is in the process of redomiciliation. The form and content of the document on being in the process of redomiciliation shall be defined by the authorised body provided for by law.

10. After the temporary certificate of continuation or the certificate of continuation issued by the authorised body provided for by laws of another state has been submitted to the registration body of the Republic of Armenia, the registration body shall make a record on redomiciliation of the legal person of the Republic of Armenia from the Republic of Armenia.

(Article 59.3 supplemented by HO-206-N of 17 November 2016, amended by HO-100-N of 3 March 2021)

Article 60. Liability of a legal person

1. A legal person shall be liable for its obligations with all the property belonging thereto, except for the cases provided for by this Code.

2. The founder (participant) of a legal person shall not be liable for the obligations of the legal person, and the legal person shall not be liable for the obligations of its founder (participant), except for the cases provided for by this Code or the statute of the legal person.

(Article 60 supplemented by HO-69-N of 18 May 2010)

Article 61. Representations and branches

1. A representation shall be the separated subdivision of a legal person located beyond the registered office thereof, which represents the interests of the legal person and exercises the protection thereof.

2. A branch shall be the separated subdivision of a legal person located beyond the registered office thereof, which exercises all or part of the functions of the legal person, including the functions of representation.

3. Representations and branches shall not be legal persons and shall function on the basis of the statutes approved by the legal person.

Heads of representations and branches shall be appointed by the legal person and shall act on the basis of its letter of attorney.

The statute of a company may contain information about separated subdivisions.

(Article 61 edited by HO-205 of 27 July 2001)

Article 62. Institution

1. An institution shall be the organisation established by a legal person for the exercise of administrative, socio-cultural, educational or other activities of non-commercial nature.

2. An institution shall not be a legal person and shall function on the basis of the statute approved by the legal person.

3. Within the framework prescribed by law, an institution shall, in conformity with the objectives of its activities, the assignments of the legal person and designation of the property attached thereto, possess, use and dispose that property.

4. Liability for the obligations of an institution shall be borne by the legal person having established it.

5. Specific aspects of the legal status of individual types of state and other institutions shall be prescribed by law and other legal acts.

Article 63. Reorganisation of a legal person

1. Reorganisation of a legal person (merger, amalgamation, division, separation, restructuring) shall be effected on the basis of a decision of its founders (participants) or of a body of legal person authorised for that by the statute.

2. In the cases provided for by law, reorganisation of a legal person through division of the legal person or separation of one or several legal persons from its composition shall be effected by a court judgment.

The court shall appoint an external administrator of the legal person and shall assign thereto the implementation of the reorganisation of the legal person. From the moment of appointment, the powers of management of a legal person shall pass to the external administrator. The external administrator shall act in the name of the legal person in the court, draw up a separating balance sheet and submit it to the court together with the statutes of the legal persons established as a result of reorganisation. Approval of these documents by the court shall be a ground for state registration of newly established legal persons.

3. A legal person shall, except for the case of reorganisation through amalgamation, be considered as reorganised from the moment of state registration of the newly established legal persons.

4. In case of reorganisation of a legal person through amalgamating with another legal person, they shall be considered as reorganised from the moment of state registration of the termination of the activities of the amalgamated legal person.

(Article 63 edited by HO-205 of 27 July 2001)

Article 64. Legal succession in case of reorganisation of legal persons

1. In case of merger of legal persons, the rights and obligations of each of them shall pass to the newly created legal person, in accordance with the deed of transfer.

2. In case of amalgamation of a legal person with another legal person, the rights and obligations of the amalgamated legal person shall pass to the latter, in accordance with the deed of transfer.

3. In case of division of a legal person, its rights and obligations shall pass to the newly created legal persons, in accordance with the separating balance sheet.

4. In case of separation of one or more legal persons from the composition of a legal person, the rights and obligations of the reorganised legal person shall pass to each of them, in accordance with the separating balance sheet.

5. In case of restructuring of one type of legal person into another type of legal person (change of organisational and legal form), the rights and obligations of the reorganised legal person shall pass to the newly created legal person, in accordance with the deed of transfer, whereas a deed of transfer needs not to be submitted for the state registration in the case prescribed by law. Reorganisation provisions shall also apply to foreign legal persons when they are being restructured as a legal person of the Republic of Armenia.

(Article 64 supplemented by HO-206-N of 17 November 2016, HO-85-N of 16 January 2018)

Article 65. Deed of transfer and separating balance sheet

1. The deed of transfer and the separating balance sheet shall contain provisions on the property of the reorganised legal person and on the legal succession of obligations concerning the creditors and debtors, including disputed obligations.

2. The deed of transfer and the separating balance sheet shall be approved by the founders (participants) of the legal person having taken the decision on reorganisation or by the body of the legal person authorised for that purpose by the statute, and together with the statutes shall be submitted for the registration of the newly created legal persons or for making amendments to the statutes of existing legal persons.

3. Failure to submit the deed of transfer or the separating balance sheet together with the statutes, as well as lack of provisions therein on the property and on legal succession of obligations of the reorganised legal person, or disproportional distribution of property and obligations shall serve as a ground for the rejection of state registrations conditioned by reorganisation.

(Article 65 amended, edited by HO-205 of 27 July 2001)

Article 66. Guarantees for the rights of creditors of a legal person in case of the reorganisation thereof

1. Founders (participants) of the legal person having taken the decision on reorganisation of the legal person or the body of the legal person authorised for that purpose by the statute, and the external administrator shall — in the cases provided for by Article 63(2) of this Code — be obliged to inform thereon in writing the creditors of the legal person being reorganised.

2. The creditor of a legal person being reorganised shall have the right to require additional guarantees for the fulfilment of obligations or termination of reorganisation or early performance of the obligation, where the debtor is the legal person being reorganised, and to require compensation for the damages.

3. Where the separating balance sheet does not allow determining the legal successor of the reorganised legal person, the newly created legal persons shall bear joint and several liability for the obligations of the reorganised legal person with respect to its creditors.

(Article 66 supplemented by HO-205 of 27 July 2001)

Article 67. Liquidation of a legal person

1. Activities of a legal person shall terminate upon its liquidation, without transfer of its rights and responsibilities through legal succession to other persons.

2. A legal person may be liquidated:

(1) upon the decision of its founders (participants) or the body of the legal person authorised for that purpose by the statute, including in connection with the expiry of the term or reaching the objective for which the legal person has been established;

(2) in case of declaration of the state registration of the legal person as invalid by the court — in connection with the violations of law committed in the course of its establishment;

(3) by a court judgment — in cases of performance of activities without a permit (licence) or activities prohibited by law, multiple or gross violations of law or other legal acts, regular performance of activities contradicting the statutory objectives by a non-governmental association or a fund, as well as in other cases provided for by law.

3. The claim for liquidation of a legal person on the grounds referred to in point 2 of this Article may be submitted to the court by a state or local self-government body which is vested by law to submit such a claim.

Responsibilities to liquidate the legal person may be imposed — by a court judgment — on the founders (participants) of a legal person or the body having the power to liquidate the legal person.

4. A legal person shall be liquidated also as a consequence of bankruptcy.

5. A legal person may be liquidated only as a consequence of bankruptcy where its property value is not sufficient to satisfy the claims of creditors.

6. Specific aspects of the grounds of and procedure for the liquidation of banks, insurance funds, administrators of insurance funds, insurance companies, and the Bureau established in compliance with the Law of the Republic of Armenia “On compulsory insurance against liability arising from the use of motor vehicles”, as well as the specific aspects of satisfaction of the claims of creditors in case of liquidation shall be prescribed by law.

(Article 67 amended by HO-205 of 27 July 2001, supplemented by HO-229-N of 15 November 2005, HO-178-N of 9 April 2007, amended by HO-69-N of 18 May 2010, supplemented by HO-253-N of 22 December 2010, amended by HO-100-N of 3 March 2021)

Article 68. Responsibilities of the person having taken the decision on liquidation of a legal person

1. Founders (participants) of the legal person having taken the decision on liquidation of the legal person or the body of the legal person authorised for that purpose by the statute shall be obliged to inform immediately thereon the body carrying out state registration of legal persons, which shall make a record in the state register of legal persons about the given legal person undergoing a liquidation process.

2. Founders (participants) of the legal person having taken the decision on liquidation of the legal person or the body of the legal person authorised for that purpose by the statute, shall appoint a liquidation commission (liquidator) and, pursuant to this Code, shall define the procedure for and terms of liquidation.

3. The powers of management of the affairs of the legal person shall pass to the liquidation commission from the moment of its appointment. The liquidation commission shall act in the court in the name of the legal person under liquidation.

Article 69. Procedure for liquidation of a legal person

1. The liquidation commission shall post an announcement on the official web-site of public notifications — http://www.azdarar.am — about its liquidation and the procedure for and the term of submission of claims of creditors. This term may not be less than two months starting from the moment of the publication on liquidation.

The liquidation commission shall take measures to identify creditors and collect receivables, as well as shall inform the creditors on the liquidation of the legal person.

2. After the expiry of the term for the submission of claims by the creditors, the liquidation commission shall draw up an interim liquidation balance sheet, which shall contain information about the composition of the property of the legal person under liquidation, the list of claims submitted by creditors, as well as information about the results of discussion of claims.

The interim liquidation balance sheet shall be approved by the founders (participants) of the legal person having taken the decision on liquidation or the body of the legal person authorised for that purpose by the statute.

3. Where funds of the legal person under liquidation are insufficient for the satisfaction of the claims of creditors, the liquidation commission shall sell the property of the legal person through public biddings, as prescribed by the law on public biddings.

4. The liquidation commission shall pay amounts to the creditors of the legal person under liquidation in accordance with the order of priority prescribed by Article 70 of this Code, pursuant to the interim liquidation balance sheet, starting from the date of its approval.

5. After the completion of settlements with the creditors, the liquidation commission shall draw up a liquidation balance sheet, which shall be approved by the founders (participants) of the legal person having taken the decision on liquidation or by the body of the legal person authorised for that purpose by the statute.

The liquidation commission shall submit the approved liquidation balance sheet to the body carrying out state registration of legal persons.

6. After satisfaction of the claims of creditors, the remaining property of the legal person shall be transferred to its founders (participants), unless otherwise provided for by law, other legal acts or by the statute of the legal person.

7. A legal person shall be considered as liquidated and its existence as terminated from the moment of state registration.

(Article 69 edited by HO-205 of 27 July 2001, amended by HO-130-N of 19 March 2012)

Article 70. Satisfaction of claims of creditors

1. In case of liquidation of a legal person, claims of its creditors shall be satisfied in the following order of priority:

Firstly, claims of creditors secured by a pledge of property of the legal person under liquidation shall be satisfied;

Secondly, claims of those citizens to whom the legal person under liquidation is liable for causing damage to their life or health, shall be satisfied through capitalisation of relevant regular payments;

Thirdly, severance benefits, salaries of employees working under employment contracts and remuneration on copyright contracts shall be paid;

Fourthly, the debt of mandatory payments to the State Budget — to the environmental protection capital shall be paid;

Fifthly, settlements shall be made with the remaining creditors, except for the creditors with subordinate credits;

Sixthly, settlements shall be made with the creditors with subordinate credits.

Claims of each order of priority shall be satisfied after completely satisfying the claims of the previous order of priority.

2. In case the liquidation commission rejects the satisfaction of claims of a creditor or avoids considering them, the creditor shall have the right to bring an action against the liquidation commission prior to the approval of the liquidation balance sheet of the legal person.

3. Claims of a creditor submitted after the expiry of the term established by the liquidation commission for submission of claims shall be satisfied from the property of the liquidated legal person remaining after the satisfaction of creditors’ claims submitted in time.

4. Claims of creditors rejected by the liquidation commission where the creditor has not brought an action to court, as well as the claims rejected by a court judgment shall be considered as satisfied.

(Article 70 edited, supplemented by HO-55-N of 28 February 2011, supplemented by HO-400-N of 16 July 2020)

Article 71. Bankruptcy of a legal person

A legal person may be declared bankrupt by a court judgment where it is unable to satisfy the claims of creditors.

Grounds of, procedure for declaring a legal person bankrupt by the court, as well as the specific aspects of satisfaction of the claims of creditors of a legal person declared bankrupt shall be prescribed by law.

(Article 71 amended by HO-163 of 3 April 2001, HO-54-N of 25 December 2006)

§ 2.COMMERCIAL ORGANISATIONS

1.GENERAL PROVISIONS ON ECONOMIC PARTNERSHIPS AND COMPANIES

Article 72. Basic provisions on economic partnerships and companies

1. Commercial organisations having statutory (share) capital divided into shares of their founders (participants) shall be considered as economic partnerships and companies. Property generated on the account of contributions of founders (participants), as well as the property produced and acquired in the course of the activities of an economic partnership or company shall belong to it by the right of ownership.

In the cases provided for by this Code, an economic partnership may be established by a single person.

2. Economic partnerships may be established in the form of a general partnership or a limited partnership (partnership in commendite).

3. Economic partnerships may be established in the form of a limited or additional liability company or of a joint-stock company.

4. Only individual entrepreneurs and/or commercial organisations may be participants in general partnerships and general partners in limited partnerships.

5. Citizens and legal persons may be participants in economic companies and contributors in limited partnerships.

6. State and local self-government bodies shall not have the right to be participants in economic partnerships and companies.

7. Economic partnerships and companies may be founders (participants) of other economic partnerships and companies, except for the cases provided for by this Code and other laws.

8. Contribution in the property of an economic partnership or a company may be money, securities, other property or property rights, as well as other rights having estimated monetary value.

9. Estimated monetary value of the contribution of a participant in an economic partnership shall be effected upon agreement between the founders (participants) of the company and shall be subject to estimation by an independent assessor in the cases and in the manner provided for by law.

(Article 72 amended by HO-205 of 27 July 2001)

Article 73. Rights and responsibilities of participants in an economic partnership or company

1. Participants in an economic partnership or company shall have the right to:

(1) participate in the management of the affairs of the partnership or company, except for the cases provided for by point 2 of Article 92 of this Code and the Law of the Republic of Armenia “On joint-stock companies”;

(2) receive information about the activities of the partnership or company and familiarise themselves with its accounting books and other documentation, as prescribed by the statute;

(3) take part in the distribution of profit;

(4) receive, in case of liquidation of the partnership or company, the part of property left after the settlements with creditors or the value thereof.

Participants in an economic partnership or company may also have other rights provided for by this Code, laws on economic companies, the statute of the partnership or company.

2. Participants in economic partnerships or companies shall be obliged:

(1) to provide contributions in the manner, amounts, means and terms provided for by the statute;

(2) not to disclose confidential information concerning the activities of the partnership or company.

Participants in economic partnerships or companies may also bear other responsibilities provided for by their statutes.

Article 74. Restructuring of economic partnerships and companies

1. Upon the decision of the general meeting of participants and as prescribed by this Code, economic partnerships and companies may restructure into other types of economic partnerships and companies.

2. In case of restructuring of a partnership into a company, each general partner that has become a participant (shareholder) of the company shall bear, for two years, subsidiary liability with all property thereof for the obligations that have passed to the company from the partnership. Alienation by the former partner of stocks (shares) belonging thereto shall not exempt the latter from such liability.

Article 75. Subsidiary economic company

1. An economic company shall be considered as subsidiary where another (principal) economic partnership or company — by virtue of dominant participation in its statutory capital or in accordance with a contract entered into between them — has the possibility of predetermining the decisions of such a company.

2. The subsidiary company shall not be liable for the debts of the principal partnership or company.

3. The principal partnership or company, which has the right to give mandatory instructions to the subsidiary company, shall bear joint and several liability with the subsidiary company for the performance of transactions entered into in accordance with its instructions. The principal partnership or company shall be considered as having the right to give mandatory instructions to the subsidiary company when this right is provided for in the contract entered into with the subsidiary company.

4. Participants (shareholders) of a subsidiary company shall have the right to require from the principal partnership or company to compensate for the damages caused to the subsidiary company by its fault. Damages shall be considered as caused by the fault of the principal partnership or company, where they have occurred as a consequence of execution by the subsidiary company of mandatory instructions of the principal partnership or company.

5. In case of bankruptcy of a subsidiary company by the fault of the principal partnership or company, the principal partnership or company shall bear subsidiary liability for its debts. Bankruptcy of a subsidiary company shall be considered as occurred by the fault of the principal partnership or company, where it has occurred as a consequence of execution by the subsidiary company of mandatory instructions of the principal partnership or company.

Article 76. Dependent economic company

1. An economic company shall be considered as dependent when the other (dominant, participant) partnership or company has more than twenty percent of the statutory capital of a limited liability company or of the voting shares of a joint-stock company.

2. An economic partnership or company, which has acquired more than twenty percent of the statutory capital of a limited liability company or of the voting shares of a joint-stock company, shall be obliged to publish information thereon immediately, as prescribed by the laws on economic companies.

Article 76.1. Code of Rules of corporate governance

1. Code of Rules of Corporate Governance shall be a legal act approved by the authorised body responsible for developing the policy of the Government of the Republic of Armenia in the field of investment promotion, which contains principles and guidelines aimed at enhancing the management efficiency of the economic company, protection of the rights of participants, raising the transparency and accountability of activities.

2. Accession by economic companies to the Code of Rules of Corporate Governance shall be voluntary, unless otherwise provided for by law.

3. The competence to render a decision on accession to the Code of Rules of Corporate Governance shall rest with the General Meeting of participants of economic companies, unless otherwise provided by law or statute.

(Article 76.1 supplemented by Ho-237-N of 22 May 2024)

2. GENERAL PARTNERSHIP

Article 77. Basic provisions on general partnerships

1. A partnership shall be considered as general where its participants (general partners), in accordance with the statute, are engaged in entrepreneurial activities in the name of the partnership and bear liability for its obligations with the property belonging to them.

2. A person may be a participant in only one general partnership.

3. The trade name of a general partnership shall contain the names of all of its participants and the words “general partnership” [liakatar enkeraktsutyun] or the name of one or more participants with the addition of the words “and partners” [yev enkerner] and “general partnership” [liakatar enkeraktsutyun].

Article 78. Statute of a general partnership

In addition to the information referred to in point 2 of Article 55 of this Code, the statute of a general partnership shall contain the terms and conditions on the size and composition of the share capital, on the amount of and procedure for change of the equity share of each participant in the share capital, on the composition of and procedure for their contributions, on the liability of participants for the violation of the obligations of providing contributions.

Article 79. Management of a general partnership

1. A general partnership shall be managed upon the general agreement of all participants. Cases of taking a decision by the majority of votes of the participants may be provided for by the statute of the general partnership.

2. Each participant in a general partnership shall have one vote, unless another procedure is provided for by the statue for the determination of the quantity of votes of its participants.

3. Each participant in a partnership — irrespective of the fact whether or not it is authorised to manage the affairs of the partnership — shall have the right to familiarise himself or herself with all the documents of the partnership. Renouncing of this right or limitation thereof, including by the consent of participants in the partnership, shall be null and void.

Article 80. Managing the affairs of a general partnership

1. Each participant in a general partnership shall have the right to act in the name of the partnership, unless the statute provides that all its participants shall manage the affairs jointly, or that managing of the affairs is assigned to individual participants.

2. In case of jointly managing the affairs of a partnership by its participants, the consent of all participants in a partnership shall be required for entering into and performing each transaction.

3. When the managing of the affairs of a partnership has been assigned by its participants to one or several of them, the remaining participants must have the letter of attorney of that participant (participants) for the purpose of entering into and performing transactions in the name of the partnership.

4. In relations with third persons, the partnership shall not have the right to invoke the provisions of the statute limiting the powers of participants in the partnership, except for the cases when the partnership proves that the third person, at the time of entering into a transaction, has known or should have obviously known that a participant in the partnership lacks the right to act in the name of the partnership.

5. Powers to manage the affairs of a partnership granted to one or several participants may be terminated by a court judgment upon the request of one or several participants in the partnership, in case of existence of serious grounds therefor, including in cases of gross violation by the authorised person (persons) of the obligations thereof or revealed incapacity thereof for reasonably managing the affairs. On the basis of a court judgment, appropriate amendments shall be made to the statute of the partnership.

Article 81. Obligations of a participant in a general partnership

1. A participant in a general partnership shall be obliged to participate in its activities in accordance with the conditions of the statute.

2. (point repealed by HO-39-N of 26 December 2008)

3. A participant in a general partnership shall not have the right to enter, without the consent of the remaining participants, in his name, to his interest or to the interest of third persons, into transactions similar to those that constitute the subject of activities of the partnership.

In case of violating this rule, a partnership shall have the right to require, at its discretion, from its participant to compensate for the damages caused to the partnership or to transfer to the partnership the whole benefit generated from such transactions.

(Article 81 amended by HO-39-N of 26 December 2008)

Article 82. Profit and loss distribution of a general partnership

1. Profit and losses of a general partnership shall be distributed among its participants in proportion to their equity shares in the share capital of the partnership, unless otherwise provided for by the statute or upon agreement of participants. An agreement on the isolation of a participant in the partnership from participation in the profit or loss distribution shall be null and void.

2. If, as a consequence of losses incurred by the partnership, the value of its net assets becomes less than the size of the share capital, the profit received by the partnership shall not be distributed among the participants until the value of net assets exceeds the size of share capital.

Article 83. Liability of participants in a general partnership for its obligations

1. Participants in a general partnership shall bear joint subsidiary liability with their property for the obligations of the partnership.

2. A participant in a general partnership, who is not a founder, shall bear liability equally with other participants for the obligations that have arisen before his or her entry into the partnership.

A participant that has withdrawn from the partnership shall bear liability for the obligations of the partnership having arisen before the moment of his or her withdrawing, equally with the remaining participants for two years from the day of approval of the report on the activities of the partnership for the year in which the participant has withdrawn from the partnership.

3. The agreement of participants in the partnership on limiting or eliminating the liability provided for by this Article shall be void.

Article 84. Change in the composition of participants in a general partnership

1. In cases of withdrawal from a general partnership or the death of one of the participants, declaration of one of them as missing, as having no or limited active legal capacity, or as bankrupt, commencement of reorganisation procedures with respect to one of the participants upon the decision of a court, liquidation of a legal person participating in the partnership, or of levying by a creditor of one of the participants of execution on part of the property corresponding to his or her equity share in the share capital, the partnership may continue its activities where it is provided for by the statute of the partnership or by agreement of the remaining participants.

2. Participants in a general partnership shall have the right to require, through judicial procedure, to remove any of the participants from the partnership by an unanimous decision of the remaining participants, in case of existence of serious grounds therefor, particularly in cases of gross violation by this participant of his or her obligations or showing inability for reasonably managing the affairs.

Article 85. Withdrawal of a participant from a general partnership

1. A participant in a general partnership shall have the right to withdraw therefrom by announcing its refusal to participate in the partnership.

Refusal to participate in a general partnership shall be announced at least six months prior to the withdrawal of the participant from the partnership.

2. The agreement of participants in the partnership to waive the right to withdraw from the partnership shall be null and void.

Article 86. Consequences of withdrawal of a participant from a general partnership

1. A participant who has withdrawn from a general partnership shall be paid the value of the part of property of the partnership corresponding to the equity share of this participant in the share capital, unless otherwise provided for by the statute. Upon agreement between the withdrawing participant and the remaining participants, payment of the property value may be replaced by transferring the property in kind.

Part of the property due to the withdrawing participant or its value shall be determined by the balance sheet which shall be compiled at the time of withdrawal, except for the case provided for by Article 88 of this Code.

2. In case of the death of a participant in a general partnership, his or her heir may enter the general partnership only with the consent of other participants, unless otherwise provided for by the statute of the partnership.

A legal person, which is the legal successor of a reorganised legal person that has participated in a general partnership, shall have the right to enter the partnership with the consent of its other participants, unless otherwise provided for by the statute of the partnership.

Settlements with an heir (legal successor) who has not entered the partnership shall be made in accordance with point 1 of this Article. The heir (legal successor) of the participant in a general partnership shall bear liability for the obligations of the partnership to third persons in such a manner in which, in accordance with point 2 of Article 83 of this Code, a participant who has withdrawn would have been liable, within the limits of the property transferred thereto from the participant having withdrawn from the partnership.

3. In case one of the participants has withdrawn from the partnership, the equity shares of the remaining participants in the share capital of the partnership shall correspondingly increase, unless otherwise provided for by the statute or upon agreement of the participants.

Article 87. Transfer of the equity share of a participant in the share capital of a general partnership

1. A participant in a general partnership shall have the right, with the consent of its remaining participants, to transfer its equity share in the share capital or a part thereof to another participant in the partnership or to a third person.

2. In case of transfer of an equity share (part thereof) to another person, the rights belonging to the participant who has transferred the equity share (part thereof) shall pass thereto in full or in the corresponding part. The person, to whom an equity share (part thereof) has been passed, shall bear liability for the obligations of the partnership, as prescribed by paragraph 1 of point 2 of Article 83 of this Code.

3. The transfer of the entire equity share to another person by a participant in the partnership shall terminate his or her participation in the partnership and shall entail the consequences provided for by point 2 of Article 83 of this Code.

Article 88. Levy of execution on the equity share of a participant in the share capital of a general partnership

1. Levy of execution on a participant’s equity share in the property of a general partnership for the debts not connected with the participation in the partnership (personal debts) shall be permitted only in case of insufficiency of his or her other property to cover the debts. Creditors of such a participant shall have the right to demand from the general partnership to separate a part of the property of the partnership corresponding to the equity share of the debtor in the share capital with the purpose of levying of execution on this property. The part of property of the partnership or its value subject to separation shall be determined according to a balance sheet drawn up at the time of submission of a claim for separation.

2. Levying of execution on the property corresponding to the equity share of a participant in the share capital of a general partnership shall terminate the participation thereof in the partnership and shall entail consequences provided for by the second point 2 of Article 83 of this Code.

3.

(Article shall, in terms of the amendment to the Law HO-187-N of 11 April 2024, enter into force from 1 July 2025)

Article 89. Liquidation of a general partnership

A general partnership shall be liquidated on the grounds referred to in Article 67 of this Code, as well as in the case where there remains only one participant in the partnership. Within six months from the moment of becoming the sole participant in the partnership, such a participant shall have the right to restructure the partnership into an economic company, as prescribed by this Code.

A general partnership shall also be liquidated in the cases referred to in point 1 of Article 84 of this Code, where the statute of the partnership or an agreement between the remaining participants does not provide that the partnership shall continue its activities.

3. LIMITED PARTNERSHIP

Article 90. Basic provisions on limited partnerships

1. A limited partnership (partnership in commendam) shall be considered the partnership in which, along with the participants conducting entrepreneurial activities in the name of the partnership and bearing liability for the obligations of the partnership with their property (general partners), there are one or several participant-contributors (limited partners), who bear the risk of losses connected with the activities of the partnership within the limits of amounts of contribution provided by them and do not take part in the entrepreneurial activities conducted by the partnership.

2. The legal status of general partners participating in a limited partnership and their liability for the obligations of the partnership shall be prescribed by the rules of this Code on participants in a general partnership.

3. A person may be a general partner only in one limited partnership.

A participant in a general partnership may not be a general partner in a limited partnership.

A general partner of a limited partnership may not be a participant in a general partnership.

4. The trade name of a limited partnership shall contain the names of all the general partners and the words “limited partnership” [vstahutyan vra himnvats enkeraktsutyun], or the name of at least one general partner with the addition of the words “and partners” [yev enkerner] and “limited partnership”[vstahutyan vra himnvats enkeraktsutyun].

5. Where the name of a contributor is included in the trade name of a limited partnership, this contributor shall become a general partner.

6. Rules of this Code on general partnerships shall be applied to limited partnerships where it does not contradict the rules of this Code on limited partnerships.

7. The characteristics of investment funds that are limited partnerships shall be prescribed by the Law of the Republic of Armenia “On investment funds”.

(Article 90 supplemented by HO-253-N of 22 December 2010)

Article 91. Statute of a limited partnership

The statute of a limited partnership should contain, in addition to the information referred to in Article 55(2) of this Code, terms on the size and composition of the share capital of the partnership; on the size of and procedure for change of equity shares of each of the general partners in the share capital; on the composition of and procedure for the contributions provided thereby; on their liability for the violation of the obligations for providing contributions; and on the size of contributions provided contributed by the contributors.

Article 92. Management of a limited partnership and managing its affairs

1. A limited partnership shall be managed by general partners. The procedure for the management and managing of affairs of such a partnership shall be defined by general partners, in accordance with the rules of this Code on a general partnership.

2. Contributors shall not have the right to participate in the management and managing of the affairs of a limited partnership, and to act in its name without a letter of attorney. They shall not have the right to dispute the actions of general partners connected with the management and managing of the affairs of the partnership.

Article 93. Rights and obligations of contributors in a limited partnership

1. A contributor in a limited partnership shall be obliged to provide a contribution in the share capital. The provision of contribution shall be certified by a certificate of participation issued to the contributor by the partnership.

2. A contributor of a limited partnership shall have the right:

(1) to receive the part of profit of the partnership due for his or her equity share in the share capital in the manner provided for by the statute;

(2) to get familiarised with the annual reports and balance sheets of the partnership;

(3) to withdraw from the partnership at the end of the fiscal year and receive his or her contribution in the manner provided for by the statute, unless otherwise provided for by the statute of a public investment fund that has an organisational and legal form of a limited partnership;

(4) to transfer his or her share in the share capital or part thereof to another contributor or to a third person.

Contributors shall enjoy a preferential right with respect to third persons for the purchase of an equity share (part of it), in accordance with the conditions and manner provided for by point 3 of Article 101 of this Code. Transfer by investor contributor of the entire equity share to another person shall terminate the participation thereof in the partnership.

Statute of a limited partnership may also provide for other rights of contributors.

(Article 93 supplemented by HO-253-N of 22 December 2010)

Article 94. Liquidation of a limited partnership

1. A limited partnership shall be liquidated in case of withdrawal of all contributors participating in it. However, general partners shall have the right to restructure, instead of liquidation, the limited partnership into a general partnership.

A limited partnership shall also be liquidated on the grounds for liquidation of a general partnership (Article 89). However, a limited partnership shall be maintained where at least one general partner and one contributor remain therein.

2. In case of liquidation of a limited partnership, including bankruptcy, the contributors shall have a preferential right with respect to general partners for receipt of their contributions from the property of the partnership remaining after satisfaction of the claims of creditors.

The property of the partnership remaining thereafter shall be distributed among general partners in proportion to their equity shares in the share capital of the partnership, unless another procedure is provided for by the statute or upon agreement of general partners.

4. LIMITED LIABILITY COMPANY

Article 95. Basic provisions on limited liability companies

1. A limited liability company shall be the company founded by one or several persons, the statutory capital whereof is divided into equity shares of amounts prescribed by the statute. Participants in a limited liability company shall not be liable for its obligations and shall bear the risk of losses connected with the activities of the company within the limits of the value of contributions provided thereby.

2. The trade name of a limited liability company shall contain a specific, common and/or other name of distinctive significance, as well as the words “limited liability company” [sahmanapak pataskhanatvutyamb enkerutiun].

3. The legal status of a limited liability company, as well as the rights and obligations of its participants shall be prescribed by this Code and the law on limited liability companies. Characteristics of banks that are limited liability companies shall be prescribed by the Law of the Republic of Armenia “On banks and banking”; characteristics of the managers of an investment fund shall be prescribed by the Law of the Republic of Armenia “On investment funds”; characteristics of investment companies shall be prescribed by the Law of the Republic of Armenia “On securities market”, and characteristics of insurers shall be prescribed by the Law of the Republic of Armenia “On insurance and insurance activities”.

(Article 95 supplemented by HO-229-N of 15 November 2005, HO-178-N of 09 April 2007, HO-253-N of 22 December 2010)

Article 96. Participants in a limited liability company

1. The number of participants in a limited liability company shall not exceed the limit prescribed by the law “On limited liability companies”. Otherwise, it shall be restructured into an open joint-stock company or a commercial cooperative within a period of one year. Where within the mentioned term the company is not restructured, or where the number of its participants is not reduced to the number prescribed by the Law of the Republic of Armenia “On limited liability companies”, the company shall be subject to liquidation.

2. (Part repealed by HO-161-N of 12 September 2019)

(Article 96 edited by HO-217-N of 21 December 2010, amended by HO-161-N of 12 September 2019)

Article 97. Statute of a limited liability company

The statute of a limited liability company should contain, in addition to the information referred to in point 2 of Article 55 of this Code, conditions on the size of the statutory capital of the company; on the equity shares of each of the participants; as well as other information provided for by the law “On limited liability companies”.

(Article 97 amended by HO-217-N of 21 December 2010)

Article 98. Statutory capital of a limited liability company

1. Statutory capital of a limited liability company shall consist of the value of contributions of its participants.

The statutory capital shall define the minimum amount of property of the company guarantying the interests of the creditors. The statutory capital of the company may not be less than the size prescribed by the law “On limited liability companies”.

2. (point repealed by HO-39-N of 26 December 2008)

3. It shall not be permitted to release a participant in a limited liability company from the obligation to provide a contribution to the statutory capital of the company, including through set-off of claims against the company.

4. When at the end of the second or each following fiscal year the value of net assets of a limited liability company is less than the statutory capital, the company shall be obliged to report the reduction of its statutory capital and to register its reduction in the prescribed manner. If the value of the mentioned assets of the company is negative or is less than the minimum amount of the statutory capital prescribed by law, the company shall be subject to liquidation.

5. Reduction of the statutory capital of a limited liability company shall be permitted after notifying all of its creditors. The latter shall have the right, in this case, to require early performance or termination of the respective obligations of the company and compensation for damages.

(Article 98 amended by HO-39-N of 26 December 2008, supplemented

by HO-217-N of 21 December 2010)

Article 99. Management of a limited liability company

1. The highest management body of a limited liability company is the general meeting of its participants.

An executive body (collegial and/or sole-member) shall be established in a limited liability company, which shall conduct the day-to-day management of its activities and shall report to the general meeting of its participants. Persons not participating in the company may also be elected to the sole-member management body of the company.

2. The competence of the management bodies of the company, as well as the procedure for rendering their decisions and acting in the name of the company shall be prescribed in accordance with this Code, the law on limited liability companies and the statue of the company.

3. The following shall be within the exclusive competence of the general meeting of participants in a limited liability company:

(1) amending the statute of the company and the size of the statutory capital thereof;

(2) forming the executive bodies of the company and early terminating of the powers thereof;

(3) approving the annual reports and accounting balance sheets of the company, distributing its profits and losses;

(4) taking a decision on the reorganisation or liquidation of the company;

(5) electing the audit commission (auditor) of the company.

In accordance with the law on limited liability companies, resolving other issues may also be reserved to the exclusive competence of the general meeting.

Issues reserved by law to the exclusive competence of the general meeting of participants in the company may not be transferred by it to the competence of the executive bodies of the company.

4. For the purpose of reviewing the trustworthiness of the annual financial report of a limited liability company, each year the company shall have the right to invite a professional auditor not connected by property interests with the company or its participants (external audit).

Audit review of the annual financial report of the company may also be conducted upon the request of any of its participants. In this case, the audit review shall be carried out at the expense of the participant who has requested such a review.

The procedure for carrying out audit reviews of activities of the company shall be prescribed by law and the statute of the company.

5. Publication of information on the results of managing the affairs of the company (public report) shall not be mandatory, except for the cases provided for by the law on limited liability companies.

Article 100. Reorganisation and liquidation of a limited liability company

1. A limited liability company may be voluntarily reorganised or liquidated upon the unanimous decision of its participants.

Other grounds for reorganisation and liquidation of the company, as well as the procedure for its reorganisation and liquidation shall be prescribed by this Code and other laws.

2. A limited liability company shall have the right to restructure into a joint-stock company and a commercial cooperative.

(Article 100 supplemented by HO-217-N of 21 December 2010)

Article 101. Transfer of equity share in the statutory capital of a limited liability company

1. A participant in a limited liability company shall have the right to sell or otherwise surrender its equity share in the statutory capital of the company or a part of it to one or several participants in the given company.

2. Alienation by a participant in the company of its equity share (part of it) to third persons shall be permitted, unless otherwise provided for by the statute of the company.

3. Participants in the company shall enjoy a preferential right of purchase of the equity share (part thereof) of a participant in proportion to their equity shares (except for the cases prescribed by the Law of the Republic of Armenia “On bankruptcy of banks, credit organisations, investment companies, investment fund managers and insurance companies”), unless another procedure for exercising this right is provided for by the statute of the company or upon agreement of its participants. Where participants in the company do not enjoy their preferential right within one month from the day of notice or within another term provided for by the statute of the company or upon agreement of its participants (except for the case prescribed by the Law of the Republic of Armenia “On bankruptcy of banks, credit organisations, investment companies, investment fund managers and insurance companies”), the equity share of the participant may be alienated to a third person.

4. When, in accordance with the statute of a limited liability company, alienation of the equity share of a participant (part of it) to third persons is impossible and the other participants in the company refuse to buy it, the company shall be obliged to acquire the equity share of the participant.

5. Where a participant’s equity share (part of it) has been acquired by the limited liability company, the company shall be obliged to sell it to other participants or third persons within the terms and pursuant to the procedure prescribed by the law “On limited liability companies” and the statute of the company, or to reduce its statutory capital in accordance with points 4 and 5 of Article 98 of this Code.

6. Equity shares in the statutory capital of a limited liability company shall pass to the heirs of citizens and to the legal successors of legal persons that are participants in the company, unless the statute of the company envisages that such transfer is permitted only with the consent of the remaining participants in the company. A refusal to give consent to the transfer of the equity share shall entail the responsibility of the company to pay the heirs (legal successors) of the participants its actual value or to give them compensation of its actual value in kind in the manner and on the conditions provided for by the law on limited liability companies and the statute of the company.

(Article 101 supplemented by HO-217-N of 21 December 2010)

Article 102. Levy of execution on the equity share of a participant in the property of the limited liability company

1. Levy of execution on the equity share of a participant in the property of a limited liability company for his or her personal debts shall be permitted only in case of insufficiency of other property for covering the debts of this participant. Creditors of such a participant shall have the right to demand from the limited liability company payment of value of the part of property of the company corresponding to the equity share of the debtor in the statutory capital or the separation of the equity share of this property for the purpose of levying of execution thereon. The part of the property of the company subject to separation or its value shall be determined according to the balance sheet drawn up at the moment of submission of claims of the creditors.

2. Levy of execution on the entire equity share of a participant in the property of a limited liability company shall terminate his or her participation in the company.

3.

(Article shall, in terms of the amendment to the Law HO-187-N of 11 April 2024, enter into force from 1 July 2025)

Article 103. Withdrawal of a participant in a limited liability company from the company

A participant in a limited liability company shall have the right to withdraw from the company any time, regardless of the consent of other participants.

Article 104. Settlements connected with the withdrawal of a participant from a limited liability company

1. A participant having withdrawn from a limited liability company shall be paid the value of property corresponding to his or her equity share in the statutory capital, unless otherwise provided for by the statute of the company.

Upon agreement between the withdrawing participant and the company, the value of property may be compensated in kind.

The part of property of the company payable to the withdrawing participant or its value shall be determined according to a balance sheet drawn up at the moment of his or her withdrawal.

2. If the right of use of property has been provided as a contribution in the statutory capital of a limited liability company, the respective property shall be returned to the participant withdrawing from the company. Reduction in value of such property as a result of the normal wear shall not be compensated.

3. Settlements with an heir of the participant in the company or legal successor of a legal person participating in the company that has not entered the company shall be made in accordance with the rules of this Article.

5. ADDITIONAL LIABILITY COMPANY

Article 105. Basic provisions on additional liability companies

1. An additional liability company is considered the company founded by one or several persons, the statutory capital whereof is divided into equity shares of amounts as prescribed by the statute. Participants in such a company shall bear joint subsidiary liability for its obligations with their property in the amount of multiplied value of their contributions determined identically for all of them. In case of bankruptcy of one of the participants, his or her liability for the obligations of the company shall be distributed among the other participants in proportion to their contributions, unless another procedure for distributing liability is provided for by the statute of the company.

2. The trade name of an additional liability company shall contain a specific, common and/or other name of distinctive significance, as well as the words “additional liability company” [lratsutsich pataskhanatvutyamb enkerutiun].

3. The rules of this Code on limited liability companies shall apply to additional liability companies, unless otherwise provided for by this Article.

6. JOINT-STOCK COMPANY

Article 106. Basic provisions on joint-stock companies

1. A joint-stock company shall be considered the company the statutory capital whereof is divided into certain number of shares.

2. Only joint-stock companies shall have the right to issue shares.

3. Participants in a joint-stock company (the shareholders) shall not bear liability for its obligations and shall bear the risk of losses connected with the activities of the company within the limits of the value of the shares belonging to them.

4. A joint-stock company may be founded by one person or may consist of one person in case of acquiring by one person of all the shares of the company. Information thereon should be contained in the statute of the company, be registered, and be published for general notice.

5. The trade name of a joint-stock company shall contain a specific, common and/or other name of distinctive significance, as well as shall include the words “open joint-stock company” [bats bajnetirakan enkerutiun] or “closed joint-stock company” [pak bajnetirakan enkerutiun].

6. The legal status of joint-stock companies and the rights and obligations of the shareholders shall be prescribed by this Code and by the Law of the Republic of Armenia “On joint-stock companies”. Characteristics of banks that are joint-stock companies shall be prescribed by the Law of the Republic of Armenia “On banks and banking”; characteristics of investment funds and investment fund managers shall be prescribed by the Law of the Republic of Armenia “On investment funds”; characteristics of investment companies shall be prescribed by the Law of the Republic of Armenia “On securities market”; characteristics of insurers shall be prescribed by the Law of the Republic of Armenia “On insurance and insurance activities”; and characteristics of credit bureaux considered as joint-stock companies shall be prescribed by the Law of the Republic of Armenia “On circulation of credit information and on the activities of credit bureaux”.

7. Specific aspects of establishment of joint-stock companies when privatising (denationalising) state enterprises shall be prescribed by laws and other legal acts on the privatisation (denationalisation) of these enterprises.

(Article 106 amended by HO-205 of 27 July 2001, supplemented by HO-229-N of 15 November 2005, HO-178-N of 9 April 2007, HO-192-N of 22 October 2008, HO-253-N of 22 December 2010)

Article 107. Open joint-stock companies

1. A joint-stock company, the participants whereof may alienate the shares belonging to them without the consent of the other shareholders, shall be considered an open joint-stock company. Such a joint-stock company shall have the right to conduct open subscription to the shares issued thereby and conduct the free sales thereof on the conditions prescribed by law and other legal acts.

2. (Part repealed by HO-258-N of 15 June 2022)

(Article 107 amended by HO-258-N of 15 June 2022)

Article 108. Closed joint-stock company

1. A joint-stock company, the shares whereof are distributed only among its founders or other previously determined persons, shall be considered a closed

joint-stock company. Such a company shall not have the right to conduct an open subscription to the shares issued thereby, nor to propose them for acquisition to an unlimited number of persons in other way.

2. The number of participants in a closed joint-stock company shall not exceed the number prescribed by the Law of the Republic of Armenia “On joint-stock companies”, otherwise it shall be subject to restructuring into an open joint-stock company within a period of one year, and upon expiration of this term — to liquidation through judicial procedure, if the number of participants is not reduced to the number prescribed by law.

3. (Part repealed by HO-258-N of 15 June 2022)

(Article 108 amended by HO-258-N of 15 June 2022)

Article 109. Transfer of shares of a closed joint-stock company

1. Shareholders of a closed joint-stock company shall have a preferential right to acquire shares being sold by other shareholders of the company.

If none of the shareholders uses his or her preferential right within the term provided for by the statute of the company, the joint-stock company shall have the right to acquire these shares at a price agreed with the owner. In case the joint-stock company refuses to acquire the shares or in case of failure to achieve an agreement on their price, the shares may be alienated to a third person.

2. In case of pledge of shares of a closed joint-stock company and the subsequent levy of execution on them by the pledgee, the rules of point 1 of this Article shall apply respectively.

3. Shares of a closed joint-stock company shall pass to the heirs of a shareholder citizen or to legal successors of a shareholder legal person, unless otherwise provided for by the statute of the company.

In case of refusal by the company to transfer the shares to the heirs of a citizen or to legal successors of a shareholder legal person, the rules of point 1 of this Article shall apply.

Article 110. Statute of a joint-stock company

In addition to the information referred to in point 2 of Article 55 of this Code, the statute of a joint-stock company shall contain conditions on the types of shares issued by the company, their nominal value and number; on the size of the statutory capital of the company; on the rights of shareholders; on the composition and competence of the management bodies of the company and on the procedure for taking decisions by them, including on the issues the decisions whereon are taken unanimously or by a qualified majority of votes. The statute of a joint-stock company shall also contain other information provided for by the Law of the Republic of Armenia “On joint-stock companies”.

Article 111. Statutory capital of a joint-stock company

1. Statutory capital of a joint-stock company shall consist of the par value of shares acquired by the shareholders.

2. Statutory capital of the company shall determine the minimum size of the property of the company guarantying the interests of its creditors. It may not be less than the size provided for by the Law of the Republic of Armenia “On joint-stock companies”.

3. Founders of a joint-stock company shall not be obliged to fully pay the statutory capital prior to the registration of the company, unless otherwise provided for by the law. When founding a joint-stock company, all of its shares shall be distributed among the founders.

4. It shall not be permitted to release a shareholder from the obligation to pay for the shares of the company, including through set-off of claims against the company, except for the cases provided for by the Law of the Republic of Armenia “On joint-stock companies”.

5. Where upon the end of the second and each subsequent fiscal year it becomes clear that the value of net assets of the company is less than the statutory capital, the company shall be obliged to declare and register, in the prescribed manner, the reduction of its statutory capital.

Where the value of the mentioned assets of the company is less than the minimum size of the statutory capital prescribed by law or other legal acts (point 2 of this Article) or comprises a negative value, the company shall be subject to liquidation, unless otherwise provided for by the Law of the Republic of Armenia “On joint-stock companies”.

6. The statute of the company may establish limitations on the number, total nominal value of shares or the maximum number of votes that belong to one shareholder.

(Article 111 edited by HO-39-N of 26 December 2008, supplemented, amended by HO-238-N of 26 May 2021)

Article 112. Increasing the statutory capital of a joint-stock company

1. A joint-stock company shall have the right to increase the statutory capital by increasing the nominal value of shares or by allocating additional shares. The decision on increasing the statutory capital shall be adopted by the general meeting of shareholders, board of directors or the executive body of the company, where such competence is granted thereto upon the statute or the decision of the general meeting of shareholders of the company.

2. In the cases provided for by the Law of the Republic of Armenia “On joint-stock companies”, the statute of the company may establish a preferential right of shareholders possessing simple (common) or other voting shares of the company to purchase shares additionally issued by the company.

(Article 112 amended by HO-205 of 27 July 2001, edited by HO-238-N of 26 May 2021)

Article 113. Reduction of the statutory capital of a joint-stock company

1. A joint-stock company shall have the right, by the decision of the general meeting of shareholders, to reduce the statutory capital by reducing the nominal value of shares or by purchasing a part of them, for the purposes of reducing their total number.

2. Reduction of the statutory capital of the company shall be permitted after informing all of its creditors, as prescribed by the law on joint-stock companies. In this case, the creditors of the company shall have the right to require early fulfilment or termination of obligations of the company and compensation for the damages caused to them.

3. Reduction of the statutory capital of a joint-stock company through purchase and redemption of a part of its shares shall be permitted, where such possibility is provided for by the statute of the company.

4. Reduction by the joint-stock company of the statutory capital below the minimum size prescribed by law (point 2 of Article 111) shall entail liquidation of the company.

Article 114. Limitations on the right of a joint-stock company to issue preferential shares and bonds and pay dividends

1. A joint-stock company shall have the right to issue preferential shares that guaranty their holders to receive dividends, as a rule, in fixed percentages of the nominal value of the shares, regardless of the results of economic activities of the joint-stock company, as well as to receive the part of the property remaining after liquidation of the joint-stock company by the preferential right in comparison to other shareholders, as well as other rights provided for by the conditions of the issuance of such shares.

Preferential shares shall not give their holders the right to participate in the management of the affairs of the joint-stock company, unless otherwise provided for by its statute.

The proportion of preferential shares shall not exceed twenty-five percent of the overall volume of the statutory capital of the joint-stock company.

2. Joint-stock companies may issue secured and unsecured bonds, irrespective of the size of the statutory capital.

3. A joint-stock company shall not have the right to declare and pay dividends, when the value of net assets of the joint-stock company is less than its statutory capital or would become less of its amount as a result of payment dividends.

(Article 114 edited by HO-324-N of 4 May 2018)

Article 115. Management of a joint-stock company

1. The highest body of management of a joint-stock company shall be the general meeting of shareholders.

The following shall fall under the competence of the general meeting of shareholders:

(1) amending the statute of the company and the size of the statutory capital thereof;

(2) election of members of the board of directors (observer board) and the audit commission (auditor) of the company and early termination of the powers thereof;

(3) formation of the executive bodies of the company and early termination of the powers thereof, unless the settlement of these issues is reserved by the statute of the company to the competence of the board of directors (observer board);

(4) approval of the annual reports, accounting balance sheets, accounts of profits and losses of the company and distribution of its profit and losses;

(5) taking a decision on the reorganisation or liquidation of the company.

Settlement of other issues may also be reserved to the competence of the general meeting of shareholders by the Law of the Republic of Armenia “On joint-stock companies”.

Issues reserved by law to the competence of the general meeting of shareholders may not be transferred to the competence of the board of directors (observer board) or executive bodies of the company, except for the cases prescribed by the Law of the Republic of Armenia “On joint-stock companies” and the statute.

2. A board of directors (observer board) shall be created in a company with more than fifty shareholders.

In case of creating a board of directors (observer board), its competence must be prescribed by the statute of the company in accordance with the Law of the Republic of Armenia “On joint-stock companies”.

3. An executive body of the company may be collegial (board, directorate) and/or individual (director, director general). The executive body shall manage the current activities of the company and shall report to the board of directors (observer board) and the general meeting of shareholders.

The competence of the executive body shall cover the settlement of all issues beyond the competence of other management bodies of the company, as prescribed by law or the statute of the company.

Upon the decision of the general meeting of shareholders, the powers of the executive body of the company may be assigned by contract to another commercial organisation or an individual entrepreneur (manager).

4. The competence of the management bodies of a company, as well as the procedure for taking their decisions and acting in the name of the company shall be prescribed in accordance with this Code, the Law of the Republic of Armenia “On joint-stock companies” and the statute of the company.

5. Audit of the activities of a joint-stock company must be conducted at any time where requested by the shareholders who hold at least ten per cent of the voting stocks of the company or of the number of votes provided thereby.

The procedure for conducting audit of activities of a joint-stock company shall be prescribed by law and the statute of the company.

(Article 115 amended, edited by HO-238-N of 26 May 2021, amended by HO-258-N of 15 June 2022)

Article 116. Reorganisation and liquidation of a joint-stock company

1. A joint-stock company may be reorganised or liquidated by the decision of the general meeting of shareholders.

Other grounds and the procedure for the reorganisation and liquidation of a joint-stock company shall be prescribed by this Code and other laws.

2. A joint-stock company shall have the right to restructure into a limited liability company or into a commercial cooperative.

(Article 116 supplemented by HO-205 of 27 July 2001)

§ 3. COOPERATIVES

Article 117. Basic provisions on cooperatives

1. A cooperative is the voluntary association based on the membership of citizens and legal persons and established for the purpose of satisfying material and other needs of participants through combining of property share contributions of its members.

2. In addition to the information referred to in point 2 of Article 55 of this Code, the statute of a cooperative should contain terms on the size of share contributions of the members of the cooperative, on the procedure for making share contributions and on the liability of the members of the cooperative for violating the obligations to make share contributions, the composition and competence of the management bodies of the cooperative and the procedure for taking their decisions, including on those issues the decisions whereon are taken unanimously or by a qualified majority of votes, on the procedure for compensation by the members of cooperatives for the damages incurred by the cooperative.

3. The name of a cooperative shall contain an indication of the basic objective of its activities, as well as include the word “cooperative” [kooperativ].

4. The specific aspects and legal status of individual types of cooperatives, in particular of consumer cooperatives and condominiums, as well as the rights and duties of their members shall be prescribed by this Code and other laws.

Article 118. Property of a cooperative

1. Property that is under the ownership of a cooperative shall be divided into the shares of its members, in accordance with the statute of the cooperative.

2. A member of the cooperative shall be obliged to make its share contribution in full prior to the registration of the cooperative, unless otherwise provided for by the statute of the cooperative.

3. The statute of a cooperative may envisage that a certain part of the property belonging to the cooperative shall be an indivisible fund used for the purposes defined by the statute.

A decision on the use of indivisible funds shall be unanimously taken by the members of the cooperative, unless otherwise provided for by the statute of the cooperative.

4. Members of a cooperative shall be obliged to cover the losses through additional allocations within two months after the approval of the annual balance. In case of failure to comply with this obligation, the cooperative may be liquidated through judicial procedure, upon the request of creditors.

The members of a cooperative shall bear joint and several subsidiary liability for its obligations within the limits of the unpaid part of the additional allocation of each of the members of the cooperative.

5. Property remaining after the liquidation of a cooperative shall be distributed among its members, in accordance with the statute of the cooperative.

Article 119. Management of a cooperative

1. The highest management body of a cooperative shall be the general meeting of its members.

An observer board may be established within a cooperative having more than fifty members, which shall exercise supervision over the activities of the executive bodies of the cooperative. Members of the observer board shall not have the right to act in the name of the cooperative.

Executive bodies of a cooperative shall be its board and/or the chairperson. They shall manage the current activities of the cooperative and shall report to the observer board and the general meeting of the members of the cooperative.

Only members of the cooperative may be members of the observer board and of the board, as well as chairperson of the cooperative. The member of the observer board or the executive body may not be a member of another similar cooperative. A member of a cooperative may not simultaneously be a member of the observer board and a member of a board or chairperson of the cooperative.

2. The competence of the management bodies of a cooperative and the procedure for rendering their decisions shall be defined by law and the statute of the cooperative.

3. The following shall be within the exclusive competence of the general meeting of the members of a cooperative:

(1) amending the statute of the cooperative;

(2) forming an observer board and terminating the powers of its members, as well as forming the executive bodies of the cooperative and terminating their powers, unless this right is granted to the observer board by the statute of the cooperative.

(3) admitting and removing members of the cooperative;

(4) approving the annual reports and the accounting balance sheets of the cooperative and distributing the losses;

(5) taking a decision on the reorganisation and liquidation of the cooperative.

Settlement of other issues may also be reserved to the exclusive competence of the general meeting of the cooperative by the laws on cooperatives and the statute of the cooperative.

Issues reserved to the exclusive competence of the general meeting or the observer board of the cooperative may not be transferred thereby to the competence of the executive bodies of the cooperative.

4. A member of the cooperative shall have one vote in the adoption of a decision in the general meeting.

Article 120. Termination of membership in a cooperative and transfer of a share

1. Members of a cooperative shall have the right to withdraw from the cooperative. In this case, the member should be paid the value of the share thereof or be given property corresponding to it, as well as other payments should be made as provided for by the statute of the cooperative.

The value of the share shall be paid or other property shall be given to the withdrawing member after the end of the fiscal year and upon the approval of the accounting balance sheet of the cooperative, unless otherwise provided for by the statute of the cooperative.

2. Members of a cooperative may be removed from the cooperative by the decision of the general meeting, in case of failure to perform or improper performance of the duty assigned thereto by the statute of the cooperative, as well as in other cases provided for by law or the statute of the cooperative.

The removed member of the cooperative, in accordance with point 1 of this Article, shall have the right to receive the share and other payments provided for by the statute of the cooperative.

3. A member of the cooperative shall have the right to transfer his or her share or a part thereof to another member of the cooperative, unless otherwise provided for by the law and the statute of the cooperative.

The transfer of a share (a part thereof) to a citizen who is not a member of the cooperative shall be permitted only upon the consent of the cooperative. In this case, other members of the cooperative shall enjoy a preferential right of purchase of such a share (a part thereof). Where members of the cooperative do not use this preferential right during the term provided for by the statute of the cooperative, the share may be alienated to a third person.

4. In case of death of a member of the cooperative, his or her heirs may become members of the cooperative, unless otherwise provided for by the statute of the cooperative. Otherwise, the cooperative shall pay the heirs the value of the share of the deceased member of the cooperative.

5. Levy of execution on a share of a member of the cooperative for his or her personal debts shall be permitted only in case of insufficiency of his or her other property to cover those debts. Indivisible funds of the cooperative may not be levied in execution for the debts of a member of the cooperative.

Article 121. Reorganisation and liquidation of cooperatives

A cooperative may be voluntarily reorganised or liquidated by the decision of the general meeting of its members.

Other grounds and the procedure for the reorganisation and liquidation of a cooperative shall be defined by this Code and other laws.

§ 4. NON-COMMERCIAL ORGANISATIONS

1. NON-GOVERNMENTAL ASSOCIATIONS

Article 122. Basic provisions on non-governmental associations

1. Non-governmental associations shall be considered as voluntary associations of citizens and (or) legal persons who have joined, as prescribed by law, on the basis of the commonality of their interests to satisfy spiritual or other non-material needs.

2. The property transferred to the non-governmental association by its founders (participants) shall be the ownership of the non-governmental association. A non-governmental association shall use this property for the purposes defined by its statute.

3. Participants in non-governmental associations shall not retain the rights to property transferred to these organisations as ownership, including to membership fees. They shall not be liable for the obligations of non-governmental associations, and the mentioned organisations shall not be liable for the obligations of their participants.

4. In case of liquidation of a non-governmental association, after satisfying the claims of creditors, as well as in the case where the non-governmental association bears no liabilities against the creditors at the time of approving the interim liquidation balance, the property shall be directed to the aims provided for in the statute of the non-governmental association, whereas in case it is impossible, the funds shall be transferred to the State Budget, and other property shall be transferred to the ownership of the Republic of Armenia, represented by the Government, except for the cases prescribed by law.

5. Specific aspects of individual types of non-governmental associations and their legal status shall be defined by this Code and other laws.

(Article 122 supplemented by HO-32-N of 16 December 2016, edited by HO-61-N of 23 March 2022)

2. FUNDS

Article 123. Basic provisions on funds

1. A fund shall be considered as an organisation established on the basis of voluntary property contributions of citizens and/or legal persons without a membership, which pursue social, charitable, cultural, educational or other socially-useful purposes.

2. The property transferred to the fund by its founders (founder) shall be the ownership of the fund. A fund shall use this property for the purposes defined by its statute.

3. A fund shall be obliged to publish annual reports on the use of its property.

4. Founders shall not be liable for the obligations of the fund established by them, and the fund shall not be liable for the obligations of its founders.

5. The procedure for the management of a fund and for the formation of its bodies shall be defined by the statute approved by the founders.

6. In addition to the information referred to in Article 55(2) of this Code, the statute of a fund shall contain the name of the fund, including the word “fund” [himnadram], information on the objective of the fund, indication on the bodies of the fund, including the board of trustees exercising supervision over the activities of the fund, on the procedure for appointing and dismissing the official persons of the fund, on the procedure for disposition of the property of the fund in case of its liquidation.

7. Specific aspects and legal status of individual types of funds, in particular of charitable organisations shall be defined by this Code and other laws.

Article 124. Amending the statute of a fund and the liquidation thereof

1. The bodies of the fund may amend the statute of the fund, where the statute provides for a possibility of amending it by such a procedure.

Where the preservation of the statute as unaltered entails such consequences that would have been impossible to foresee when establishing the fund, and the possibility of amending the statute is not provided for therein, or the statute is not amended by the authorised persons, the right of making amendments shall be exercised by the court, upon the request of the bodies of the fund or the body authorised by the statute of the fund to exercise supervision over its activities.

2. A decision on the liquidation of the fund may be taken only by the court, upon the request of interested persons.

A fund may be liquidated:

(1) where the property of the fund is insufficient for carrying out its activities and the possibility for receiving the required property is unrealistic;

(2) where it is impossible to attain the objectives of the fund, and to make necessary changes in those objectives;

(3) in case of deviation by the fund from the objectives provided for by its statute;

(4) in other cases provided for by law.

3. In case of liquidation of the fund, after satisfying the claims of creditors, as well as in the case where the fund bears no liabilities against the creditors at the time of approving the interim liquidation balance, the property shall be directed to the objectives provided for by the statute of the fund, whereas in case it is impossible, the funds shall be transferred to the State Budget, and other property shall be transferred to the ownership of the Republic of Armenia, represented by the Government, except for the cases prescribed by law.

(Article 124 supplemented by HO-143-N of 24 November 2004, edited by HO-61-N of 23 March 2022)

3. UNIONS OF LEGAL PERSONS

Article 125. Basic provisions on unions of legal persons

(Article repealed by HO-32-N of 16 December 2016)

Article 126. Statute of a union

(Article repealed by HO-32-N of 16 December 2016)

Article 127. Rights and duties of participants in a union

(Article repealed by HO-32-N of 16 December 2016)

CHAPTER 6

PARTICIPATION OF THE REPUBLIC OF ARMENIA AND THE COMMUNITIES IN THE RELATIONS REGULATED BY CIVIL LEGISLATION AND OTHER LEGAL ACTS

Article 128. The Republic of Armenia and the communities as subjects of civil law

1. The Republic of Armenia and the communities shall act, in the relations regulated by civil legislation and other legal acts, on equal principles with other participants of these relations, namely citizens and legal persons.

2. The norms defining the participation of legal persons in the relations regulated by civil legislation and other legal acts shall be applied to the subjects of civil law referred to in point 1 of this Article, unless otherwise follows from the law or the characteristics of the given subjects.

Article 129. Procedure for the participation of the Republic of Armenia and the communities in the relations regulated by civil legislation and other legal acts

1. State bodies may acquire and exercise — in the name of the Republic of Armenia, through their actions — property and personal non-property rights and duties, as well as act in the court within the limits of their competence.

2. Local self-government bodies may — in the name of the communities, within the limits of their competence, through their actions — acquire and exercise rights and duties referred to in point 1 of this Article.

3. In cases and in the manner provided for by the laws, decrees of the President of the Republic of Armenia, decisions of the Government of the Republic of Armenia and legal acts of the communities, legal persons and citizens may act upon their special assignment and in their name.

Article 130. Liability for the obligations of the Republic of Armenia or the community

1. The Republic of Armenia or the community shall be liable for its obligations with the property belonging thereto by the right of ownership.

2. Levy of execution on land and other natural resources under the ownership of the State or of the community shall be permitted in the cases provided for by law.

Article 131. Specific aspects of the liability of the Republic of Armenia in the relations regulated by civil legislation and other legal acts with the participation of foreign legal persons, citizens and states

Specific aspects of the liability of the Republic of Armenia in the relations regulated by civil legislation and other legal acts with the participation of foreign legal persons, citizens and states shall be defined by law.

THIRD SECTION

OBJECTS OF CIVIL RIGHTS

CHAPTER 7

GENERAL PROVISIONS

Article 132. Types of objects of civil rights

The following shall be the objects of civil rights:

(1) property, including monetary means, cryptoassets, securities and property rights;

(2) works and services;

(3) information;

(4) results of intellectual activities, including exclusive rights with respect thereto (intellectual property);

(5) intangible assets.

(Article 132 supplemented by HO-394-N of 24 October 2024)

Article 133. Circulability of objects of civil rights

1. Objects of civil rights may be freely alienated or passed from one person to another, by the procedure of universal legal succession (succession, reorganisation of a legal person) or in other way, unless they are removed from circulation or their circulation is limited.

2. Types of objects of civil rights that are prohibited to be in circulation (objects removed from circulation) shall be directly referred to in the law.

3. Types of civil rights that may belong only to certain participants in the circulation or be put into circulation upon special permission or be possessed, used or disposed of for certain purposes only (objects of limited circulation) shall be determined as prescribed by law.

(Article 133 supplemented by HO-69-N of 21 June 2014)

Article 134. Immovable and movable property

1. Immovable property shall be considered as land parcels, subsoil parcels, separate water objects, forests, perennial plantings, underground and above-ground buildings, premises and other property fixed to land, namely objects that are impossible to separate from land without damage to that property or land parcel or without change, termination of their purpose or impossibility of their further use by designated purpose.

2. Movable property shall be the property not considered as immovable.

(Article 134 edited by HO-188-N of 4 October 2005)

Article 135. State registration of the rights to property

1. The right of ownership and other property rights to immovable property, restrictions on these rights, the arising, transfer and termination thereof shall be subject to state registration.

The right of ownership, the right of use, mortgage, servitudes, as well as, in the cases provided for by this Code and other laws, other rights to immovable property shall be subject to registration.

2. Rights to movable property shall be subject to state registration only in the cases provided for by law.

3. The procedure for state registration of the rights to property and the grounds for rejection of the registration thereof shall be defined by the law.

(Article 135 amended by HO-40-N of 8 April 2010)

Article 135.1. Preliminary note on the property rights to property

1. With the view of securing the claim for registration of a property right subject to state registration, the registering body shall make a preliminary note on the property right to the property in question based on the notification received from the public notary certifying the transaction.

2. The preliminary note shall cease to have any effect upon the future registration of the property right provided by that note.

3. The person with regard to whose property the preliminary note has been made may request that the preliminary note be removed if the right secured by the preliminary note has terminated or if the time limit prescribed by law for applying for registration of rights arising from the transaction in question has been missed.

(Article 135.1 supplemented by HO-87-N of 19 June 2015)

Article 136. Divisible and indivisible property

1. Property may be divisible and indivisible.

Property shall be considered as indivisible when it may not be divided without change in its purpose or is not subject to division by virtue of law.

2. The procedure for separation of a share in the right of ownership to indivisible property shall be defined by the rules of Article 197 of this Code.

Article 137. Complex property

1. Where elements of heterogeneous property constitute an integrated whole with an implication of its use for a common purpose, these shall be considered as one property (complex property).

2. The effect of a transaction entered into with respect to a complex property shall extend to all its constituent parts, unless otherwise provided for by a contract.

Article 138. Principal property and appurtenance

The property (appurtenance) designated for serving another (principal) property and connected thereto by a common purpose shall follow the fate of the principal property, unless otherwise provided for by a contract.

Article 139. Individually identified property and the property identified by generic features

1. Property distinguished from other property by its peculiar features shall be considered as individually identified property. Individually identified property shall be irreplaceable.

2. The property having features peculiar to other property of the same type and determined by number, weight and size shall be the property identified by generic features. Property identified by generic features shall be replaceable.

Article 140. Intellectual property

In cases and in the manner provided for by this Code and other laws, the exclusive right of a citizen or a legal person shall be recognised with respect to the objectively expressed results of intellectual activities and with respect to identification means equated thereto of a legal person, product, works being performed or services being provided (trade name, trademark, service mark, etc.) (Intellectual property).

Article 141. Information constituting official, commercial or bank secret

1. Information is an official, commercial or bank secret when it has an actual or potential commercial value by virtue of it being unknown to third persons, there is no free access thereto on legal basis, and the holder of the information takes measures for the protection of its confidentiality.

2. Information that may not be official, commercial or bank secret shall be defined by law.

3. Information constituting official, commercial or bank secret shall be protected by the means provided for by this Code and other laws.

4. The persons having illegally obtained information that constitutes official, commercial or bank secret shall be obliged to compensate for the damages caused. Such obligation shall be imposed also on parties to a contract having disclosed and/or used official, commercial or bank secret in violation of a civil law or employment contract.

(Article 141 supplemented by HO-29 of 7 February 2000)

Article 142. Money (Currency)

1. The monetary unit in the Republic of Armenia is the dram of the Republic of Armenia.

2. The dram of the Republic of Armenia shall be the legal means of payment obligatory for acceptance at nominal value in the whole territory of the Republic of Armenia.

3. Payments in the territory of the Republic of Armenia shall be made by cash and non-cash settlements. Restrictions on making cash settlements may be prescribed by law.

4. The cases, procedure for and conditions of use of foreign currency in the territory of the Republic of Armenia shall be defined by law.

(Article 142 edited by HO-13-N of 18 January 2022)

(Law HO-13-N of 18 January 2022 contains a transitional provision)

Article 143. Currency valuables

Types of property considered as currency valuables and the procedure for concluding transactions through them shall be defined by the law on currency regulation and currency supervision and by other legal acts adopted in accordance therewith. Types of property considered as precious metals and the procedure for concluding transactions through them shall be defined by the law on precious metals and by other legal acts adopted in accordance therewith.

In the Republic of Armenia, the right of ownership to currency valuables is protected on general bases.

(Article 143 supplemented by HO-153-N of 24 November 2004)

Article 143.1. Crypto-asset

1. A crypto-asset shall be an asset based on encryption (cryptography), which has value or certifies a title and which may be transferred and stored exclusively in an electronic form, by using decentralized registry technology.

2. Within the meaning of this Article, a decentralized registry shall be an electronic registry wherein transactions with crypto-assets and data thereon are registered, and which is synchronized and, in parallel with being saved, is available on the network of decentralized registry technology, by using a consensus mechanism.

3. Within the meaning of this Article, the consensus mechanism shall be a set of rules and processes, on the basis of which an agreement is reached on the conditions of validation and registration of transactions in the decentralized registry by the decentralized registry technology network.

4. Within the meaning of Article, the network of the decentralized registry technology shall be a set of equipments or processes, through each of which all transactions registered in the decentralized registry and the data thereon are stored in whole or in part.

5. Alienation of a crypto-asset in violation of the law, including disregarding the requirements of a judicial or administrative act establishing such prohibition, shall be null and void.

(Article 143.1 supplemented by HO-394-N of 24 October 2024)

Article 144. Fruits, products and income

Output obtained as a result of use of the property (fruits, products, income) belong to the person using this property on lawful basis, unless otherwise provided for by law, other legal acts or a contract on the use of this property.

Article 145. Animals

General rules on property shall apply to animals, unless otherwise provided for by law or other legal acts.

CHAPTER 8

SECURITIES

§ 1.BASIC PROVISIONS

Article 146. Security

1. A security is a document, with the observation of the prescribed form and the mandatory requisites, certifying property rights, the exercise or transfer of which is possible only upon its presentation.

Upon transfer of a security, all the rights certified thereby shall be transferred.

2. In cases and in the manner provided for by law, proofs of fixing in a special register (ordinary or computerised) of the rights certified by a security shall be sufficient for the exercise or transfer of these rights.

Article 147. Requirements pertaining to securities

1. Types of rights certified by securities, mandatory requisites for securities, requirements pertaining to the form of securities and other necessary requirements shall be determined by the laws on securities or the procedure defined thereby.

2. The absence of mandatory requisites of a security or its incompliance with the form established for a security shall render it null and void.

Article 148. Subjects of rights certified by a security

1. Rights certified by a security may belong to:

(1) the bearer of the security (bearer security);

(2) the person indicated in the security (registered security);

(3) the person indicated in the security that may exercise these rights by himself or herself or may by his or her instruction (order) designate another authorised person (order security).

2. The law may exclude the possibility of issuance of certain types of securities (bearer, registered or order securities).

Article 149. Transfer of rights under security

1. For transferring the rights certified under a bearer security to another person, the transfer of the security to that person shall be sufficient.

2. The rights certified by a registered security may be transferred in the manner prescribed for surrender (cession) of claims, except for registered securities issued for social purposes and for registered government (treasury) securities the conditions of issuance of which will provide that the rights certified by the securities in question are not subject to transfer. In case of registered government (treasury) securities the conditions of issuance of which will provide that the rights certified by the securities in question shall not be subject to transfer, the rights certified by those securities may be transferred only in cases of universal legal succession, confiscation and levy of execution. The rights certified by registered securities issued for social purposes may be transferred only by succession, as well as in other cases provided for by the law providing for the issuance of the security of the type concerned. A person transferring a right under a security, in accordance with Article 405 of this Code, shall bear liability for the invalidity of the respective claim, but shall not be liable for the failure to perform it.

3. The rights under an order security shall be transferred through making an endorsement on this security. A person transferring rights under an order security (endorser) shall bear liability not only for the existence of the right but also for the exercise thereof.

4. An endorsement made on a security transfers all the rights certified by the security to the new holder of the security (endorsee) to whom or by whose order the rights are transferred. An endorsement may be in the form of a blank (without an indication of the person to whom performance should be made) or order (with an indication of the person to whom or by whose order the performance whereof should be made).

5. The endorsement may be limited only to the assignation to exercise the rights certified by the security without transferring these rights to the endorsee (assignment endorsement). In this case, the endorser shall act as a representative.

(Article 149 edited, supplemented by HO-224-N of 11 November 2005, supplemented by HO-69-N of 21 June 2014)

Article 150. Fulfilment of the obligations certified by a security

1. The person having issued a security and all the persons having endorsed it shall bear joint liability before the legal possessor thereof. When one or more persons obliged by a security satisfy the claim of the legal possessor of the security, he or she (they) shall acquire the right of regress with respect to the remaining persons obliged by the security.

2. It shall be prohibited to renounce the fulfilment of the obligations certified by a security by invoking the lack of the ground for the obligation or the invalidity thereof.

3. Possessor of the security, having identified securities fraud or forgery, shall have the right to submit a claim to the person having transferred the security to him or her, on the proper fulfilment of the obligation certified by the security and on the compensation of damages.

Article 151. Reinstatement of security

The rights certified under a lost bearer and order security shall be reinstated by court, as prescribed by the Civil Procedure Code of the Republic of Armenia.

(Article 151 amended by HO-205 of 27 July 2001)

Article 152. Uncertified securities

1. The person having obtained a special permission (licence), in the cases provided for by law or as prescribed by law, may fix the rights certified by a registered or order security, including in the manner other than the documented (with the help of computer technologies, etc). The rules defined for securities shall apply to this manner of fixing the rights, unless otherwise follows from the specific aspects of such fixing.

The person having fixed a right in the manner other than the documented shall be obliged, upon the request of the rightholder, to give a document attesting the fixed right to the latter.

The procedure for official fixing of the rights certified by fixing and of the right holders, for documented confirmation of records and for operations performed by uncertified securities, shall be defined by law or as prescribed by law.

2. The operations by uncertified securities may be performed only by applying to the person performing the recording of rights. Transfer, reservation and restriction of rights shall be officially fixed by the person who bears liability for the maintenance of official records, for ensuring their confidentiality, for providing accurate data on these records, for making official records on the operations performed.

§ 2.TYPES OF SECURITIES

Article 153. General provisions

1. Securities shall include: bond, cheque, promissory note, bill of exchange (payment note), share, bill of landing, bank record (bank book, bank certificate), double warehouse receipt, simple warehouse receipt, investment fund unit and other documents that are classified as securities according to laws on securities.

2. Bonds, shares and investment fund units are investment securities.

3. Cheques, promissory notes and bills of exchange are payment securities.

4. Bills of lading, double warehouse receipts and simple warehouse receipts are title securities.

5. The types of securities issued for social purposes shall be defined by law.

(Article 153 supplemented and edited by HO-69-N of 21 June 2014

Article 154. Bond

1. A bond shall be considered as the security certifying the right of its holder to receive from the issuer of the bond within the term specified therein the nominal value of the bond or any other property equivalent. A bond also gives its holder the right to receive interest on the nominal value of the bond or other property rights.

2. Bonds may be bearer or registered.

Article 155. Cheque

A cheque shall be considered as the security containing an unconditional written instruction of the cheque drawer to the bank to pay the holder of the cheque the amount indicated therein.

Article 156. Promissory note

A promissory note shall be considered as the security certifying the unconditional obligation of the maker of the promissory note (a simple bill of exchange) or other payer indicated in the promissory note (a transfer bill of exchange) to pay upon the expiration of the term provided for in the promissory note a certain amount to the holder of the promissory note (promissory note holder).

Article 157. Share

1. A share shall be considered as the security certifying the right of its possessor (shareholder) to receive part of the profit of a joint-stock company in the form of dividends, to participate in the management of affairs of the joint-stock company, and to receive a part of the property remaining after its liquidation.

2. Shares may be bearer or registered, fully circulable or limited circulable, simple or preferential.

Article 158. Bill of lading

1. A bill of lading shall be considered as the document on the disposition of goods certifying the right of its holder to dispose of the load indicated in the bill of lading and to receive it after the transportation.

2. A bill of lading may be bearer, order or registered.

Article 159. Bank certificate

1. A bank certificate (bank book, bank certificate) shall be considered as the security certifying the amount of a deposit and the right of the depositor to receive, upon the expiration of the defined term, the amount of the deposit and the interests thereon at the bank or in any branch of this bank having issued the certificate.

2. A bank certificate may be bearer or registered.

Article 160. Double warehouse receipt

1. A double warehouse receipt shall be considered as the order security certifying the acceptance of goods by a warehouse for storage.

2. A double warehouse receipt consists of two parts: a warehouse receipt and a pledge certificate (warrant), which separately are securities.

Article 161. Simple warehouse receipt

A simple warehouse receipt shall be considered as the bearer security certifying the acceptance of goods by the warehouse for storage.

Article 161.1. Securities issued for social purposes

1. A registered security certifying the right of its owner (a citizen) to receive pension or, in cases provided for by the pension legislation, the right to receive other sums pursuant to the procedure and conditions prescribed by law shall be deemed to be a security issued for social purposes (security issued by pension funds).

2. A security issued for social purposes may be possessed, used and disposed of exclusively for the purpose of receiving pension or other sums of social security as prescribed by law, except for cases defined by law.

(Article 161.1 supplemented by HO-69-N of 21 June 2014)

CHAPTER 9

INTANGIBLE ASSETS

Article 162. Concept of intangible assets

1. Life and health, dignity, personal inviolability, honour and good name, business reputation, inviolability of private life, privacy of personal and family life, the right of freedom of movement, of choice of the place of residence and location, right to one’s name, right of authorship and other personal non-property rights and intangible assets belonging to a citizen from birth or by virtue of law are inalienable and non-transferable. In cases and in the manner provided for by law, personal non-property rights and other intangible assets belonging to a deceased person may be exercised and protected by other persons, including heirs of the rightholder.

2. Intangible assets shall be protected in accordance with this Code and other laws in cases and in the manner provided for thereby, as well as in those cases and within those limits in which the use of the ways of protection of civil rights (Article 14) follows from the essence of the violated intangible right and the nature of the consequences of this violation.

Article 162.1. Concept of and compensation for intangible damage

1. Within the meaning of this Code, intangible damage is physical or mental suffering caused as a result of a decision, action or omission encroaching on tangible or intangible assets belonging to a person from birth or by virtue of law or violating his or her personal property or non-property rights.

2. A person or, in case of his or her death or in case he or she lacks active legal capacity, his or her spouse, parent, adoptive parent, child, adoptee, guardian, curator shall have the right to claim, through judicial procedure, compensation for intangible damage, where the preliminary investigation body, prosecutor or court has confirmed that the following fundamental rights of that person guaranteed by the Constitution of the Republic of Armenia and the Convention for the Protection of Human Rights and Fundamental Freedoms have been violated as a result of a decision, action or omission of a state or local self-government body or official:

(1) right to life;

(2) right to freedom from torture and inhuman or degrading treatment or punishment;

(3) right to personal liberty and inviolability;

(4) right to fair trial;

(5) right to respect for private and family life, inviolability of residence;

(6) right to freedom of thought, conscience and religion, freedom of expression;

(7) right to freedom of assembly and association;

(8) right to effective remedy;

(9) right of ownership.

3. Where a convict has been acquitted under conditions provided for by Article 3 of the Protocol No. 7 to the Convention for the Protection of Human Rights and Fundamental Freedoms, he or she shall have the right to claim, through judicial procedure, compensation for intangible damage (i.e., within the meaning of this Code, compensation for wrongful conviction) caused to him or her.

4. Damage caused to one’s honour, dignity or business reputation shall be compensated in accordance with Article 1087.1 of this Code, whereas intangible damage caused as a result of violation of fundamental rights and wrongful conviction shall be compensated in accordance with the procedure and conditions prescribed by Article 1087.2.

5. Intangible damage caused as a result of unlawful administrative actions shall be compensated as prescribed by the Law of the Republic of Armenia "On fundamentals of administrative action and administrative proceedings".

(Article 162.1 supplemented by HO-21-N of 19 May 2014, supplemented, edited and amended by HO-184-N of 21 December 2015, amended by HO-180-N of 9 June 2022)

FOURTH SECTION

RIGHT OF OWNERSHIP AND OTHER PROPERTY RIGHTS

CHAPTER 10

GENERAL PROVISIONS

Article 163. Concept and content of the right of ownership

1. The right of ownership is the right of a subject, recognised and protected by law and other legal acts, to possess, use, and dispose of property belonging to it at its discretion.

The right of possession is the legally ensured possibility to actually possess the property.

The right of use is the legally ensured possibility to extract the natural useful qualities from the property and to receive benefit therefrom. The benefit may be in the form of income, fruits, growth, increase in birth rate and in other forms.

The right of disposition is the legally ensured possibility of determining the fate of property.

2. The owner shall have the right to undertake at its discretion any actions with regard to the property belonging to it, not contradicting the law and not violating the rights and interests of other persons protected by law, as well as shall have the right to alienate its property to other persons as ownership, transfer to them the rights of use, possession and disposition of the property, to pledge the property or to dispose of it in another way.

3. The owner may transfer its property to the trust management of another person. The transfer of property to trust management shall not entail the transfer of the right of ownership. The trust manager shall be obliged to manage the property in the interests of the owner or of a third person indicated by the owner.

Article 164. Burden of maintaining the property

The owner shall bear the burden of maintaining the property belonging thereto, unless otherwise provided for by law or contract.

Article 165. Risk of accidental loss of or accidental damage to property

The owner shall bear the risk of accidental loss of or accidental harm to the property, unless otherwise provided for by law or by contract.

Article 166. Subjects of the right of ownership

1. Property may be under the ownership of citizens, legal persons, as well as the Republic of Armenia or the communities.

2. The specific aspects of acquiring, terminating the right of ownership to property, the possession, use and disposition of it, depending on whether the property is under the ownership of a citizen or a legal person, under the ownership of the Republic of Armenia or the communities, may be established only by laws.

3. Types of property that may only be under the ownership of the State or the communities shall be defined by laws.

4. Rights of all owners shall be protected equally.

Article 167. Right of ownership of citizens and legal persons

1. Any property may be under the ownership of citizens and legal persons, except for individual types of property that, in accordance with the law, may not belong to citizens or legal persons.

2. The quantity and value of property under the ownership of citizens and legal persons shall not be limited, except for the cases when such limitations, in accordance with the purposes provided for by Article 3(2) of this Code, are established by law.

3. Commercial and non-commercial organisations are the owners of the property transferred to them as contributions or fees from their founders (participants, members) as well as of the property acquired by these legal persons on other grounds.

Article 168. Right of state ownership

1. The property belonging to the Republic of Armenia by the right of ownership is a state ownership.

2. The land and natural resources not belonging to citizens, legal persons or communities are state ownership.

3. Funds of the State Budget are the ownership of the Republic of Armenia.

4. The bodies and persons referred to in Article 129 of this Code shall exercise the rights of the owner in the name of the Republic of Armenia.

Article 169. Right of ownership of the communities

1. Property belonging by the right of ownership to communities shall be the ownership of the communities.

2. Funds of the community budget shall be the ownership of the community.

3. The bodies and persons referred to in Article 129 of this Code shall exercise the rights of the owner in the name of the community.

(Article 169 amended by HO-14-N of 26 December 2008, HO-169-N of 19 October 2016)

Article 170. Property rights of persons not considered as owners

1. Persons not considered as owners may have the following property rights:

(1) right to land development;

(2) right of use of property;

(3) right of servitude, including personal servitude;

(4) right of pledge;

(5) right to purchase immovable property under construction.

2. The passing of the right of ownership to property to another person shall not be a ground for the termination of the property rights to this property of the persons not considered as owners, except for the cases established by law.

3. Property rights of the person not considered as owner shall be protected as prescribed by Article 278 of this Code from violations by any person, including the owner.

(Article 170 edited by HO-188-N of 4 October 2005, supplemented by HO-87-N of 19 June 2015, edited by HO-70-N of 1 March 2017, amended by HO-136-N of 25 May 2022)

Article 171. Privatisation of state property (denationalisation)

The State may transfer the property under its ownership to the ownership of citizens and legal persons, as prescribed by the laws on the privatisation (denationalisation) of state property.

CHAPTER 11

ACQUISITION OF THE RIGHT OF OWNERSHIP

Article 172. Grounds for acquisition of the right of ownership

1. The right of ownership to new property, made or created by a person for himself or herself, subject to the requirements of law and other legal acts, shall be acquired by this person.

The right of ownership to fruits, products and income received as a result of the use of property shall be acquired on the grounds provided for in Article 144 of this Code.

2. The right of ownership to the property that has an owner may be acquired by another person on the ground of a contract of purchase and sales, barter, gift or other transaction on alienation of property.

3. In case of the death of a citizen, the right of ownership to property belonging to him or her shall pass by succession to other persons by will or law.

4. In case of reorganisation of a legal person, the right of ownership to property belonging to it shall pass to the legal person (legal persons) that is the legal successor of the reorganised legal person.

5. In cases and in the manner provided for by this Code, a person may acquire the right of ownership to the property that does not have an owner, as well as to the property the owner of which is unknown, or the owner whereof has renounced it or has lost the right of ownership thereto on other grounds provided for by law.

6. A member of housing, summer house, garage or other cooperative, as well as other persons, having the right to share accumulation, who have fully made their share contribution for an apartment, summer house, garage, or other construction provided to them by the cooperative, shall acquire the right of ownership to this property.

Article 173. Arising of the right of ownership to newly created immovable property

The right of ownership to a newly created immovable property shall arise from the moment of its state registration.

Article 174. Reprocessing

1. The right of ownership to the new movable property made by a person through reprocessing of materials not belonging to him or her shall be acquired by the owner of those materials, unless otherwise provided for by the contract. Where the value of the reprocessing substantially exceeds the value of the materials, the right of ownership to the new property shall be acquired by the person who, acting in good faith, has reprocessed the property for himself or herself.

2. The owner of materials, who has acquired the right of ownership to the property made therefrom, shall be obliged to compensate for the value of reprocessing to the person having performed it and, in the case of acquiring the right of ownership to new property by this person, shall be obliged to compensate the owner of the materials for their value, unless otherwise provided for by the contract.

3. The owner of materials, who has lost them as a result of bad faith actions of the person who has reprocessed them, shall have the right to require the transfer of the new property to his or her ownership and compensation for the damages caused thereto.

Article 175. Privatisation of the property accessible to the public for collection

In cases when, in accordance with the law, upon general permission of the owner or in accordance with local customs, it is permitted to collect berries or other property accessible to the public, to fish or hunt animals in the forests, bodies of water or in other territories, the right of ownership to the respective property shall be acquired by the person having collected or hunted it.

Article 176. Moment of arising of ownership right of a person acquiring property under a contract

1. The right of ownership of the person acquiring property under a contract shall arise from the moment of transfer of the property, unless otherwise provided for by law or the contract.

2. Where the right to property is subject to state registration, the right of ownership for the acquirer shall arise from the moment of its registration.

3. A person shall acquire ownership rights to a crypto-asset:

(1) from the moment of registration in the decentralized registry, in accordance with its rules, at the address of the person receiving the crypto-asset, if the person receiving the crypto-asset or the person indicated thereby lawfully owns the means providing access to the crypto-asset;(2) according to the law, from the moment of registration with the custodian of the crypto-asset in the name of the person receiving the crypto-asset.

(Article 176 supplemented by HO-394-N of 24 October 2024)

Article 177. Transfer of property

1. Transfer of property shall be considered as the handing over of property to the acquirer, as well as to a carrier for the purpose of dispatching it to the acquirer or to a communications organisation for forwarding to the acquirer the property alienated without the obligation of handing over.

Property shall be considered as transferred to the acquirer from the moment when the property actually comes into possession of its acquirer or of the person indicated thereby.

2. When at the moment of signing a contract on alienation of property, it is already in possession of the acquirer, the property shall be considered as transferred thereto from that moment.

3. Handing over a bill of lading on the property or any other document on disposition of goods shall be equivalent to the transfer of property.

Article 178. Ownerless property

1. The property which has no owner or the owner of which is unknown or has renounced the right of ownership thereto shall be considered as ownerless.

2. The right of ownership to ownerless movable property may be acquired according to the rules of Articles 179-186 of this Code.

3. The right of ownership to ownerless immovable property may be acquired by virtue of acquisitive prescription (Article 187). This norm shall not apply to the immovable property considered as unauthorised construction.

4. Grounds and procedure for recognition of the right of ownership to ownerless property shall be established by the Civil Procedure Code of the Republic of Armenia.

(Article 178 supplemented by HO-188-N of 4 October 2005)

Article 179. Movable property renounced by the owner

1. Movable property that is abandoned or otherwise left by the owner (derelict property) for the purpose of renunciation of the right of ownership thereto, may be appropriated by other persons, as prescribed by point 2 of this Article.

2. Where there is a derelict property with the value of obviously less than fifty-fold of the minimum salary or derelict metal scraps, defected products, dumps generated in the course of extraction of minerals, industrial and other waste, in the land parcel, body of water or other object that is owned, possessed or used by a person, the latter shall have the right to appropriate that property by starting to use it or performing other actions of appropriating the property.

Other derelict property shall pass into ownership of the person possessing it, when the court declares the property ownerless upon the application of that person.

Article 180. Found property

1. The finder of a lost property shall be obliged to immediately inform thereon the person who has lost the property or the owner of the property or any other person known to him or her entitled to receive that property, and return it. When the property is found in a building or transportation means, it shall be handed over to the owner or possessor of that building or transportation means. In this case, the person, to whom found property is handed over, shall acquire the rights and bear the obligations of the person who has found the property.

2. When the person who has the right to require returning the property or his or her place of stay are unknown, the person who has found the property shall be obliged to report about the found property to the police or local self-government body.

3. The person who has found the property shall have the right to keep it or deposit it with the police, local self-government body or with a person indicated by them.

Perishable property or the property — the expenses for the maintenance of which disproportionately exceed its value — may be realised by the finder of the property, by obtaining written evidence certifying the amount of proceeds. The amount received from the sales of the found property shall be returned to the person entitled to receive it.

4. The finder of the property, within the limits of the value of the property, shall be liable for the loss or harm thereof only in case of existence of fault.

Article 181. Acquisition of the right of ownership to the found property

1. The finder of the property shall acquire the right of ownership to the property when the person entitled to receive the found property is not identified or has not declared about his or her right to the property to the person who has found it, the police or local self-government body within a period of six months following the moment of reporting to the police or local self-government body about the found property (point 2 of Article 180).

2. When the finder of the property refuses to appropriate the found property, it shall become the ownership of the community.

Article 182. Compensation for the expenses related to the found property and reward to the finder of property

1. The person, who has found a property and returned it to the person entitled to receive it, shall have the right to receive from that person, and when the property passes to the ownership of the community — from the relevant local self-government body, compensation for the expenses needed for the maintenance, transfer or realisation of the property, including compensation for the expenses for identifying the person entitled to receive the property.

2. The finder of the property shall have the right to require, from the person authorised to receive it, a reward for the found property in the amount of up to twenty percent of the value of the property. When the found property is of value solely for the person entitled to receive it, the amount of reward thereof shall be determined by the agreement with that person, and in case of failing to reach such agreement — by court. Where the person entitled to require the return of the found property has publicly promised a reward, it shall be paid under the conditions of a promised reward.

The finder of the property shall have the right to keep the found property, unless he or she is rewarded.

3. The right to reward shall not arise, when the finder of the property has not reported about the found property or has attempted to conceal it.

Article 183. Animals left without attendance

1. A person, who has found and/or keeps livestock that is left without attendance or strayed, or other animals left without attendance, shall be obliged to return them to the owner, and when the owner of animals or his or her place of stay is unknown, shall be obliged, within a period of three days, to report to the police or local self-government body about the animals found, which should undertake measures for identifying the owner.

2. In the course of search for the owner of animals, the person keeping them may leave the animals to himself or herself and use them or transfer them to another person for keeping and use.

Upon the request of the person keeping the animals left without attendance, the police or local self-government body shall find a person having the necessary conditions for keeping them and shall transfer the animals to him or her.

3. The person keeping the animals left without attendance, and the person to whom they were transferred for keeping and using, shall be obliged to keep them properly and shall be liable for loss of or harm to the animals within the limits of their value, in case of existence of fault.

Article 184. Acquisition of the right of ownership to animals left without attendance

1. When the owner of animals left without attendance is not identified or has not declared about his or her right to those animals within a period of six months following the announcement about keeping the animals left without attendance, the person, who has kept and used the animals, shall acquire the right of ownership thereto.

In case that person refuses to acquire the animals kept by him or her as ownership, they shall become the ownership of the community and shall be used as prescribed by the local self-government body.

2. Where the former owner of the animals appears after the right of ownership to the animals is transferred to another person, the former owner, in the existence of circumstances attesting the affection of those animals towards him or her, shall have the right to require the return thereof to him or her under the conditions established by the agreement with the new owner, and, where no such agreement is available — under the conditions established by court.

Article 185. Compensation for the expenses for keeping animals left without attendance and remuneration for them

In case the animals left without attendance are returned to the owner, the person, who has kept the animals, shall have the right to require from the owner compensation for the expenses needed for keeping thereof, setting off the benefits received from the use of the animals.

The person keeping animals left without attendance shall have the right to remuneration in accordance with point 2 of Article 182 of this Code.

Article 186. Treasure trove

1. Treasure trove — that is money or other valuable objects buried in the ground or in other property or otherwise concealed, the owner of which may not discover them or has lost the right of ownership thereto by virtue of law — shall, in equal shares, pass into the ownership of the owner of the property (land parcel, construction, etc.) where the treasure trove has been hidden and of the person having discovered it, unless otherwise provided for by their agreement.

2. In case a treasure trove is discovered by a person excavating or searching for valuables without the consent of the owner of the land parcel or other property where the treasure is discovered, it shall be transferred to the owner of the land parcel or property.

3. Treasure trove containing historical and cultural monuments shall be transferred to the ownership of the State. Moreover, the owner of the land parcel or other property where the treasure trove has been hidden and the person having discovered the treasure trove shall together have the right to receive remuneration in the amount of fifty percent of the value of the treasure trove. The remuneration between those persons shall be distributed in equal shares, unless otherwise provided for by their agreement.

In case such treasure trove is discovered by a person excavating or searching for valuables without the consent of the owner of the land parcel or other property where the treasure trove has been hidden, the remuneration shall be given to the owner of the property in full.

4. The rules of this Article shall not apply to those persons in the employment and official duties of which excavation and search for treasure troves are included.

Article 187. Acquisitive prescription

1. A citizen or a legal person which is not the owner of immovable property, but possesses it in good faith, openly and consecutively as own property within ten years, shall acquire the right of ownership to that property (acquisitive prescription).

2. A person invoking the acquisitive prescription may join to the term of his or her possession the time period during which that property has been possessed by a person whose legal successor he or she is.

3. Prior to the acquisition of the right of ownership to property by virtue of acquisitive prescription, the person possessing the property as ownership shall have the right to protect it from third persons who are not owners of the property and do not have the right of possession to it on other ground provided for by law or contract.

4. The right of ownership to immovable property for the person having acquired it by virtue of acquisitive prescription shall arise from the moment of state registration of that right.

Article 188. Unauthorised construction

1. Unauthorised construction shall be considered as a building, construction or other premise built or reconstructed or placed on a land parcel not allocated for that purpose as prescribed by law or other legal acts, or without permission or with material breach of the conditions provided for by the permission, or of the norms and rules of urban development.

1.1. An unauthorised construction may not be declared as lawful and shall be subject to demolition (dismantling). The procedure and time limits for demolition (dismantling) of such construction shall be prescribed upon the decision of the Government of the Republic of Armenia.

2. Owner of the land parcel, including the acquirer of the land parcel with an unauthorised construction, shall bear the risks related to the use and demolition (dismantling) of the unauthorised construction located thereon.

3. Owner of a land parcel shall have the right to demolish an unauthorised construction located on his or her land parcel without applying to court. The decision on demolition (dismantling) of an unauthorised construction located on state or community-owned land parcel shall be rendered by the competent bodies prescribed by law.

Upon the claim of the State, community or other interested person, whose rights and interests protected by law were violated, the unauthorised construction located on another person’s land parcel shall be subject to demolition (dismantling), and the land parcel shall be subject to restoration to the former state at the expenses of the owner of the land parcel.

The person, who has made an unauthorised construction on a land parcel of another person, shall be obliged to compensate for the damage caused to the owner of the land parcel, including expenses for the demolition (dismantling) of the unauthorised construction and restoration to the former state of the land parcel.

4. (Part repealed by HO-397-N of 16 December 2021)

5. (Part repealed by HO-397-N of 16 December 2021)

6. Specific aspects of registration of the right of ownership to immovable property with the existence of unauthorised constructions shall be regulated by the law on state registration of rights to property and by other legal acts adopted on the basis thereof.

7. (Part repealed by HO-238-N of 15 December 2005)

(Article 188 amended, supplemented by HO-511-N of 26 December 2002, edited by HO-188-N of 4 October 2005, amended, edited, supplemented by HO-238-N of 15 December 2005, amended by HO-14-N of 26 December 2008, supplemented, amended, edited by HO-397-N of 16 December 2021)

(Law HO-397-N of 16 December 2021 contains a transitional provision)

CHAPTER 12

COMMON OWNERSHIP

Article 189. Concept of common ownership and the grounds for arising thereof

1. A property in the ownership of two or more persons shall belong to them by the right of common ownership.

2. Property may belong to common ownership by determining the share of each of the owners in the right of ownership (shared ownership) or without determining those shares (joint ownership).

3. Common ownership with respect to property shall be considered as shared, unless joint ownership with respect to it is defined by law.

4. Common ownership shall arise when the property, which may not be divided without change in its purpose (indivisible property) or is not subject to division by law, becomes the ownership of two or more persons.

Common ownership to divisible property shall arise in the cases provided for by law or contract.

5. Upon the agreement of the participants of joint ownership, and in case of lacking such agreement — by court judgment, shared ownership of those persons may be established over common property.

6. The specific aspects of the relations pertaining to common shared ownership of the participants of the fund with regard to the assets of the contractual fund shall be defined by this Code and other laws.

(Article 189 supplemented by HO-69-N of 18 May 2010)

Article 190. Determination of shares in the right of common shared ownership

1. Shares shall be considered as equal when the shares of participants of the shared ownership may not be determined on the ground of law or are not established by the agreement of all participants.

2. The procedure for determining and changing the shares of participants may be established upon the agreement of all the participants of the shared ownership, in accordance with their contribution to formation and growth of the common property.

3. Participant in the shared ownership, who has made improvements indivisible from that property at his or her own expenses subject to the established procedure for the use of common property, may require increasing of his or her share in the right of common ownership corresponding thereto.

4. Improvements divisible from the common property shall pass to the ownership of the participant who has made them, unless otherwise provided for by the agreement of the participants of the shared ownership.

Article 191. Possession and use of property in shared ownership

1. The property under shared ownership shall be possessed and used by the agreement of all the participants thereof, and where such agreement is not available — as prescribed by court.

2. Participant of a shared ownership shall have the right to demand a part, proportional to his or her share in the common property, to be provided for his or her possession and use, and, where it is impossible, to demand compensation for damages from other participants possessing and using the property.

3. Peculiarities of possession and use of property deemed as common shared ownership of a multi-apartment building shall be prescribed by the Law “On management of a multi-apartment building”.

(Article 191 supplemented by HO-298-N of 1 July 2021)

Article 192. Disposal of property under shared ownership

1. The property under shared ownership shall be disposed by the agreement of all the participants thereof.

2. Participant of a shared ownership shall have the right to sell, donate, bequeath, pledge his or her share or otherwise dispose of it, in compliance with the rules provided for by Article 195 of this Code, in case of non-gratuitous alienation thereof.

(Article 192 supplemented by HO-298-N of 1 July 2021)

Article 193. Fruits, products and income received from use of property under shared ownership

Fruits, products and income received from the use of property under shared ownership shall be included in the composition of common property and shall be distributed among participants of shared ownership in proportion to their shares, unless otherwise provided for by their agreement.

Article 194. Expenses for maintenance of the property under shared ownership

1. Each participant of shared ownership shall be obliged to participate in payment of taxes, duties and other fees charged from the common property in proportion to his or her share, as well as of other expenses for maintenance of the property.

2. Unnecessary expenses borne by one of the owners, without the consent of the others, shall not be reimbursed by other owners. Disputes arising in this connection shall be settled through judicial procedure.

Article 195. Preferential right of purchase

1. When selling a share in the right of common ownership to third persons, the other participants of shared ownership shall have preferential right of purchase, by the selling price and under other equal conditions, except for the case of the sales through public bidding.

(paragraph repealed by HO-13-N of 16 December 2005)

2. The seller of a share shall be obliged to notify in writing the other participants of shared ownership about his or her intention to sell his or her share to a third person, with indication of the price and other sales conditions. When other participants of shared ownership refuse to purchase the share being sold or fail to acquire the share in the right of ownership to immovable property within a period of one month, and in the right of ownership to movable property — within a period of ten days upon receipt of notification, the seller shall have the right to sell his or her share to any person.

3. In case of sales of a share in violation of the preferential right of purchase, any participant of shared ownership shall have the right, within a period of three months, to require, through judicial procedure, to transfer to him or her the rights and duties of the purchaser.

4. The preferential right of purchase of a share may not be surrendered.

5. The rules of this Article shall also apply to alienation of a share under barter contract.

(Article 195 amended by HO-13-N of 16 December 2005)

Article 196. Moment of transfer of a share in the right of common ownership to acquirer under a contract

1. A share in the right of common ownership shall be transferred to the acquirer under a contract from the moment of concluding the contract, unless otherwise provided for by the agreement of parties.

2. The moment of transfer of a share in the right of common ownership under a contract, the rights arising wherefrom are subject to state registration, shall be determined in accordance with point 2 of Article 176 of this Code.

Article 197. Dividing the property under shared ownership and partition of a share therefrom

1. The property under shared ownership may be divided between the participants thereof by their agreement.

2. A participant of the shared ownership shall have the right to require the partition of his or her share from the common property.

3. In case of lack of an agreement between the participants of the shared ownership on the ways and conditions of division of common property or of partition of the share of one of them, the participant of the shared ownership shall have the right to demand partition of his or her share from the common property in kind through judicial procedure.

When partition of a share in kind is not allowed by law or is not possible without causing disproportional damage to the property under common ownership, the partitioning owner may demand from the other participants of shared ownership to pay the value of his or her share.

4. In accordance with this Article, disproportion of the property being partitioned in kind of participant in the shared ownership to his or her share in the right of shared ownership shall be eliminated by paying him or her corresponding sum of money or other compensation.

Instead of partition in kind of a share of the participant of the shared ownership, other owners may pay compensation to him or her upon his or her consent. Where the share of the owner is insignificant, may not be actually partitioned and that owner does not have an essential interest in the use of common property, the court may, in case of lack of the consent of that owner, allow the other participants of shared ownership to pay compensation.

5. The owner shall lose the right to the share in common property from the moment of receiving compensation in accordance with this Article.

6. In case of obvious inexpedience of division of common property or the partition of a share from it by the rules defined in points 3-5 of this Article, the court shall have the right to deliver a court judgment on the sales of the property through public biddings with subsequent distribution of the amount received among participants of common ownership, in proportion to their shares.

Article 198. Possession, use and disposition of property in joint ownership

1. Participants of the joint ownership shall possess and use the common property jointly, unless otherwise provided for by their agreement.

2. The property in joint ownership shall be disposed by the agreement of all the participants, regardless of which participant enters into the transaction for disposition of property.

3. Each of the participants of joint ownership shall have the right to enter into transactions for disposition of common property, unless otherwise provided for by their agreement. Transaction for disposition of common ownership entered into by one of the participants of the joint ownership may be declared invalid upon the request of other participants in case of the lack of necessary powers of the participant entering into transaction, where it is proved that the other party to the transaction has known or should have obviously known about it.

Article 199. Division of property under joint ownership and partitioning a share therefrom

1. Common property shall be divided among participants of the joint ownership or the share of one of them shall be partitioned after preliminary determination of the share of each participant in the right to common property.

2. When dividing the common property and partitioning a share therefrom, the shares of the participants of joint ownership shall be considered as equal, unless otherwise provided for by law or by the agreement of the participants.

3. The grounds and procedure for division of common property and the partition of a share therefrom shall be established by the rules of Article 197 of this Code.

Article 200. Levy of execution on a share in common property

1. In case of insufficiency of other property of a participant of the shared or joint ownership, his or her creditor shall have the right to submit a claim for partition of a share of the debtor, for the purpose of levying of execution thereupon.

2. Where partition in kind of a share is impossible, or other participants of shared or joint ownership object against it, the creditor shall have the right to demand from other participants of common ownership to purchase the share of the debtor at the market value in order to cover the debt. Where the other participants of common ownership refuse to acquire the share of the debtor, the creditor shall have the right to require levy of execution on the share of the debtor in the right of common ownership, in accordance with Article 197 of this Code.

3.

(Article 200 edited by HO-13-N of 16 December 2005)

(Article shall, in terms of the amendment to the Law HO-187-N of 11 April 2024, enter into force from 1 July 2025)

Article 201. Common ownership of spouses

1. The property acquired by spouses in the course of marriage is their joint ownership, unless otherwise provided for by law or by the contract between them.

2. The property of each spouse belonging thereto before marriage, as well as the property received by one of the spouses as a gift or succession in the course of marriage shall be his or her ownership.

3. Personal use property (clothing, footwear, etc.), except for jewellery and luxury items, shall be considered as the ownership of the spouse who has used that property, even when it has been acquired at the expenses of common funds of spouses in the course of marriage.

4. The property of each spouse may be recognised as their joint ownership where it is established that contributions at the expense of common property or personal property of the other spouse have been made in the course of marriage, which have significantly increased the value of that property (capital repair, reconstruction, re-equipment, etc.), unless otherwise provided for by a contract concluded between the spouses.

5. The property under the ownership of one of the spouses may be levied in execution for his or her obligations, as well as on his or her share in common property of the spouses.

(Article 201 edited by HO-253-N of 22 December 2010)

CHAPTER 13

RIGHT OF OWNERSHIP AND OTHER PROPERTY RIGHTS TO LAND

Article 202. Land parcel as an object of right of ownership

1. Territorial boundaries of a land parcel shall be determined, as prescribed by law, by the state authorised body, on the ground of the documents issued to the owner.

2. The right of ownership to land parcel shall extend to terrestrial and underground territory within the boundaries thereof, except for the cases provided for by law.

3. Owner of the land parcel shall have the right to use everything situated on and under the surface of his or her land parcel, unless otherwise provided for by law and unless it violates the rights of other persons.

4. The land parcels — the use of which for the purposes other than the designated and operational purposes thereof is prohibited or restricted — shall be determined by law.

5. Owner of a land parcel may, in compliance with the norms and rules of urban development, as well as subject to the requirements with respect to the purpose of the land parcel, construct buildings and premises thereon, to reconstruct or demolish them, unless otherwise provided for by law.

6. Owner of a land parcel shall acquire the right of ownership to buildings, premises and other immovable property constructed on the land parcel belonging to him or her.

7. Consequences of unauthorised construction by the owner on a land parcel belonging to him or her shall be determined in accordance with Article 188 of this Code.

8. Land parcels, which are state or community ownership, may be transferred to other persons for the purpose of development only by the right of ownership, except for the cases of provision to foreign states and international organisations for diplomatic and representative purposes, as well as for the land parcels, which are state and community ownership, defined by the Land Code of the Republic of Armenia, the transfer of which by the right of ownership is prohibited.

(Article 202 edited by HO-188-N of 4 October 2005, supplemented by HO-28-N of 27 February 2012)

Article 203. Prohibition to enter a land parcel, building, premise and a territory of other immovable property and to install property therein

(Title edited by HO-386-N of 16 July 2020)

1. Each person shall have the right to prevent others from entering the land parcel, building, premise and the territory of other immovable property under his or her legal possession.

2. No one shall have the right to enter a land parcel, building, premise or the territory of other immovable property without the grounds established by law or permission of legal possessor or to install any movable property in that territory without the permission of legal possessor (hereinafter referred to as “the intrusion”).

The following shall also be considered as intrusion:

(1) failure to comply with the demand of the legal possessor to leave the land parcel, building or premise or the territory of other immovable property or to remove the installed movable property by a person who has entered the land parcel, building or premise or the territory of other immovable property or has installed a movable property thereon upon the permission of the legal possessor;

(2) failure to comply with the demand of the legal possessor to leave the land parcel, building or premise or the territory of other immovable property or to remove the installed movable property by a person who has entered the land parcel, building or premise or the territory of other immovable property or has installed a movable property thereon on the grounds established by law, following the termination of those grounds or after performance of the relevant actions provided for by law.

3. It shall not be deemed to be intrusion where the land parcel is not fenced or walled in, or there is no written or voice message or image sign prohibiting the entrance into the land parcel, and the entry into the land parcel will not cause damage to the land parcel.

4. In case of state or community-owned land parcels, in compliance with part 2 of this Article, no intrusion shall exist until relevant competent body submits, as prescribed by the Government of the Republic of Armenia, a request to leave the land parcel.

5. Each person shall have the right to freely access the land parcels which are open to everyone and are the ownership of the State or community, without any permission, and avail themselves of natural objects situated therein, observing the norms established by law and other legal acts.

6. Legal possessor shall have the right to undertake reasonable measures of defence in order to prevent or eliminate the intrusion, including the use of force proportionate to the consequence of intrusion, when non-forcible measures may not prevent or eliminate the intrusion. Legal possessor shall have the right to remove the movable property of another person illegally situated in his or her land parcel, building or premise or the territory of immovable property. Damage caused to the person, who has made an intrusion, as a result of measures undertaken for the purpose of prevention or elimination of the intrusion under the conditions provided for by this part, shall not be subject to compensation.

7. Legal possessor of a land parcel, building or premise or the territory of other immovable property shall have the right to authorise the police to carry out actions on behalf of him or her aimed at prevention or elimination of intrusion. Procedure for and conditions of authorising the police by a legal possessor shall be established by the Government of the Republic of Armenia.

8. The procedure for submitting a request to leave the state or community-owned land parcel, remove another person’s movable property unlawfully located on the land parcel, in the building or premise or territory of other movable property shall be prescribed upon the decision of the Government of the Republic of Armenia.

(Article 203 edited by HO-187-N of 27 November 2006, HO-386-N of 16 July 2020)

Article 204. Construction of buildings, premises on a land parcel by the owner thereof

Owner of a land parcel may, in compliance with norms and rules of urban development and construction, as well as subject to the requirements with respect to the purpose of the land parcel (Article 202(4)), construct buildings and premises thereon, reconstruct or demolish them, permit other persons to carry out construction on his or her land parcel.

(Article 204 edited by HO-188-N of 4 October 2005)

Article 204.1. Right to development of a land parcel

1. A person may, under contract, acquire a development right on a land parcel belonging to another person — to construct buildings and premises, to reconstruct or demolish them, observing in the prescribed manner the norms and rules of urban development, as well as requirements of the purpose of the land parcel, and possess and use that property during the period of validity of the development rights.

2. The person having the development right may dispose of this right — transfer to another person, freely alienate, pledge it, as well as to perform other transactions concerning the development right.

The development right may be transferred to another person through legal succession.

3. Indivisible improvements made by the person carrying out development shall not be compensated after expiration of the term of development, unless otherwise provided for by law or contract.

4. Buildings and premises constructed or created by the development right on a land parcel belonging to another person by the right of ownership shall be the ownership of the owner of the land parcel, unless otherwise provided for by law.

5. The development right shall, unless a shorter term is provided for by law, be provided for the term established by the contract and may not exceed 99 years.

6. Contracts on acquisition of the development right, the alienation thereof, mortgage and other contracts shall be subject to notary certification.

7. The development right shall be subject to state registration as prescribed by the law on state registration of the rights to property.

(Article 204.1 supplemented by HO-188-N of 4 October 2005)

Article 205. Grounds for acquisition of the right to use a land parcel

1. Owner may provide the land parcel belonging to him or her to other persons for use, including for lease.

2. The right to use a land parcel under the ownership of the state or a community shall be given to citizens and legal persons on the ground of the decision of state or local self government bodies having the power to give land parcels in use, as prescribed by law.

3. In the case provided for by point 1 of Article 207 of this Code, owner of the building, premise or other immovable property may also acquire the right to use the land parcel.

4. In case of reorganisation of a legal person, the right to use a land parcel belonging to it shall pass to the legal successor.

Article 206. Right to possess and use a land parcel

1. Person who is not considered as the owner of the land parcel may possess and use the land parcel as prescribed by law or a contract concluded with the owner.

2. The person having the right to use a land parcel may lease it or transfer for gratuitous use upon the consent of the owner of the land parcel.

Article 207. Right of the owner of immovable property to use the land parcel

1. Owner of the immovable property situated on a land parcel belonging to another person shall have the right to use the part of the land parcel on which the immovable property is affixed.

2. When the right of ownership to immovable property situated on another’s land parcel passes to another person, the latter shall acquire the right to use the respective part of the land parcel under the same conditions and in the same volume as the former owner of the immovable property.

Transfer of the right of ownership to a land parcel to another person shall not be a ground for changing or terminating the right of the owner of the immovable property situated on that land parcel to use the land parcel.

3. Owner of the immovable property situated on another’s land parcel shall have the right to possess, use and dispose of his or her property, including demolition of respective buildings and premises, unless it contradicts the conditions, established by law or contract, for the use of the given land parcel.

Article 208. Consequences of termination of the right to use a land parcel

Upon termination of the right to use a land parcel, the right of ownership to buildings, premises and other immovable property constructed by the land user on that land shall pass to the owner of the land parcel, unless otherwise provided for by the contract between the owner of the land parcel and land user.

Article 209. Transfer of the right to a land parcel upon alienation of a building or a premise situated thereon

1. When transferring the right of ownership to a building or premise situated on the land parcel belonging to the owner, the part of the land parcel occupied by the building or premise shall also be alienated, as well as those rights to the land parcel, which are necessary for the use and maintenance of the building and premise.

2. It shall be prohibited to alienate those buildings or premises which are situated on such land parcels that are under the ownership of the State and community, the transfer of which by the right of ownership is prohibited by law. Such buildings or premises may be provided by the right to use or development.

Buildings and premises defined by this part may be privatised only in case the designated purpose of the land parcel has been changed as prescribed by law.

3. In case of alienation of a separate area in a sub-divided building, premise, the right of common shared ownership to the land parcel under the building shall pass to the acquirer. In this case, the rules provided for in Article 195 and points 2-6 of Article 197 of this Code shall not apply to participants of common shared ownership.

(Article 209 edited by HO-188-N of 4 October 2005)

Article 210. Rights to limited use of another’s property (servitudes)

(Title edited by HO-70-N of 1 March 2017)

1. Rights to limited use of another’s property shall be as follows:

(1) property servitude;

(2) limited personal servitude;

(3) full personal servitude (usufruct);

(4) right to use a residential area.

(Article 210 edited, supplemented by HO-159 of 20 March 2001, edited by HO-70-N of 1 March 2017)

Article 211. Property servitude

(Title edited by HO-70-N of 1 March 2017)

1. A land parcel or other immovable property (servient property) may be burdened in favour of the owner of another land parcel or immovable property (dominant property) so that the owner of the dominant property is capable to have limited use of the servient property (positive servitude) or prohibit the owner of the servient property to use this property in a certain manner (negative servitude).

2. Property servitude may be established upon the request of the owner of the dominant property or the person having the right to development.

3. In case of burdening the immovable property with property servitude, the owner of the immovable property shall not be deprived of the rights to possess, use and dispose of this immovable property, which he or she may exercise without violating the restrictions provided for by the servitude.

4. Property servitude may not serve as an individual object of purchase and sales, pledge, lease or any other transaction, except for the agreement reached between parties on establishing property servitude provided for by Article 213 of this Code.

5. Property servitude may be voluntary or compulsory.

(Article 211 supplemented by HO-159 of 20 March 2001, edited by HO-70-N of 1 March 2017)

Article 212. Nature of property servitude

(Title edited by HO-70-N of 1 March 2017)

1. The owner of the dominant property shall not have the right to make changes in the servient property, except for the changes necessary for exercising property servitude. Any change necessary for exercising property servitude shall be made by the owner of the dominant property, and the expenses made shall not be calculated in the property servitude payment.

2. Servitude shall be preserved when transferring the right to the immovable property to another person.

(Article 212 supplemented by HO-159 of 20 March 2001, HO-391-N of 26 June 2002, edited by HO-70-N of 1 March 2017)

Article 213. Voluntary property servitude

(Title edited by HO-70-N of 1 March 2017)

1. Voluntary property servitude shall be established by a written consent of the person requiring servitude and the owner of the servient property.

2. The subject-matter, term of effectiveness and the conditions of the property servitude shall be indicated in the contract on establishing voluntary servitude. A non-gratuitous contract establishing servitude must also indicate the amount of, procedure and time limits for compensation. The plan of the immovable property burdened with the servitude shall be attached to the contract with indication of the location of the servitude.

3. The contract on establishing voluntary property servitude shall be subject to notarial certification.

(Article 213 supplemented by HO-159 of 20 March 2001, edited by HO-70-N of 1 March 2017)

Article 214. Compulsory property servitude

(Title edited by HO-70-N of 1 March 2017)

1. Compulsory property servitude may be established for the purpose of passing and traffic through the adjacent or another land parcel, installation and operation of electric transmission lines, communications and pipelines, water supply and amelioration, carrying out repair, construction works or meeting other needs of the owner of the dominant immovable property, which may not be ensured without establishing a servitude or which are related to significant disproportionate expenses.

2. In the case prescribed by part 1 of this Article, compulsory servitude shall be established by court upon the claim of the person requiring servitude in case of failure to reach an agreement on voluntary property servitude.

3. Court judgment on establishing compulsory property servitude must contain all conditions referred to in part 2 of Article 213 of this Code.

4. Compulsory property servitude for public needs may be established by law.

5. Free of charge, permanent servitude shall be established on respective land parcels for public needs, regardless of the subject of the right of ownership, for the purpose of safekeeping and maintenance of main line engineering infrastructures (electric transmission and communication lines, gas pipes, water supply, water removal and heating systems), aerial and underground cable lines and pipelines, columns and other structures related to the safe operation thereof.

6. Compulsory property servitude may not be established, where the whole land parcel burdened with the servitude loses the economic or functional significance for the owner, which existed before establishing servitude.

(Article 214 supplemented by HO-159 of 20 March 2001, edited by HO-70-N of 1 March 2017)

Article 215. State registration of property servitude

(Title edited by HO-70-N of 1 March 2017)

1. Property servitude shall be subject to state registration as prescribed by the law on state registration of the rights to property.

(Article 215 edited by HO-70-N of 1 March 2017)

Article 216. Payment for property servitude

(Title edited by HO-70-N of 1 March 2017)

1. Owner of the servient property shall have the right to require payment for the servitude of immovable property from the person in favour of whom the property servitude was established, unless otherwise provided for by law or contract.

2. The amount of voluntary property servitude payment shall be determined upon the consent of the parties, and in case of compulsory property servitude it shall be determined by court judgment or shall be prescribed by law.

3. The amount of property servitude payment may be changed upon the consent of parties. In case of absence of consent, the amount of property servitude payment may be reconsidered not earlier than once three years, upon court judgment.

(Article 216 edited by HO-70-N of 1 March 2017)

Article 217. Termination of property servitude

(Title edited by HO-70-N of 1 March 2017)

1. Property servitude may be terminated upon request of the owner of the servient or dominant property, where the grounds for establishing it have been eliminated.

2. In the case where the immovable property may not be used with its intended purpose as a result of being burdened with property servitude or the owner of the dominant property has failed to make the regular payment for the servitude more than twice after the expiry of the time limit for payment prescribed by the contract, the owner of the servient property shall have the right to require the termination of the servitude through judicial procedure.

3. In case the owners of the dominant and servient property coincide, the property servitude shall terminate.

4. Where changes were made by the owner of the dominant property in the servient property during the effect of the property servitude, the owner of the dominant property shall be obliged to bring the servient property to its initial state, at his or her expense, before termination of the servitude. Exception from this rule may be established upon the consent of parties.

(Article 217 edited by HO-70-N of 1 March 2017)

Article 217.1. Limited personal servitude

1. Upon consent of the parties, the immovable property may be burdened so as the person, in favour of whom property was burdened, has the right to use this immovable property only for specific purposes or he or she may be granted another competence which may serve as a ground for establishing servitude (limited personal servitude).

2. The rules of this Code, covering voluntary property servitude, shall be applied to limited personal servitude, unless otherwise provided for by this Article.

3. Limited personal servitude may be granted for an unlimited term or for certain time period. Limited personal servitude granted to a legal person may not exceed 10 years.

4. Limited personal servitude may not be transferred to another person.

5. A contract on establishing limited personal servitude shall be subject to notarial certification.

(Article 217.1 supplemented by HO-70-N of 1 March 2017)

Article 217.2. Usufruct

1. Upon consent of the parties, based on a contract, immovable or movable property may be burdened so as the person, in favour of whom the property was burdened, has the right to possess and use this property and the proceeds of its use (fruits, products, income) in the same manner as the owner of the property would be entitled to do (usufruct).

2. The proceeds of use of the property by the person obtaining usufruct shall fall under the ownership of the person obtaining usufruct.

3. Usufruct shall be established gratuitously, unless otherwise agreed by the parties.

4. The rules of this Code, covering voluntary property servitude, shall be applied to usufruct, unless otherwise provided for by Articles 217.2-217.7 of this Code.

5. A contract on establishing usufruct against immovable property shall be subject to notarial certification.

6. Usufruct against immovable property shall be subject to state registration as prescribed by law. Usufruct against movable property shall be subject to state registration in the cases and in the manner prescribed by parts 2 and 3 of Article 135 of this Code.

7. State or community-owned property may be burdened with usufruct in the cases provided for by law.

8. When establishing usufruct against a land parcel, usufruct shall be established also against the premise occupying the land parcel, unless otherwise agreed by the parties.

(Article 217.2 supplemented by HO-70-N of 1 March 2017)

Article 217.3. Persons obtaining usufruct

1. Usufruct may be established in favour of a natural or legal person.

2. Usufruct may be granted to one or more persons. Where usufruct was granted to more than one person, in case of death or liquidation of either of them usufruct shall be maintained against the other person (s).

(Article 217.3 supplemented by HO-70-N of 1 March 2017)

Article 217.4. Prohibition on possession and use, by the owner, of the property burdened with usufruct

1. The owner of property burdened with usufruct may not possess and use, jointly with the person having obtained usufruct, the property during the entire period of its being burdened with usufruct.

(Article 217.4 supplemented by HO-70-N of 1 March 2017)

Article 217.5. Time limit for establishing usufruct

1. Usufruct for a certain time period or lifelong usufruct may be established for a natural person, until the death of the natural person having obtained usufruct.

2. Usufruct for a legal person may be established for a certain time period or until the liquidation of the legal person, which however may not exceed 10 years.

(Article 217.5 supplemented by HO-70-N of 1 March 2017)

Article 217.6. Rights and responsibilities of a person obtaining usufruct

1. When alienating, non-gratuitously, property burdened with usufruct, the person having obtained usufruct shall have a preferential right to acquire the property at the sales price and under other equal conditions, except for the case of alienation of property through public bidding. In the case provided for in this part, the rules provided for by Article 195 of this Code shall apply.

2. The person obtaining usufruct shall be obliged to take care of the property aimed at its maintenance with its intended purpose, whereas in the cases provided for by law or contract— also to insure it.

3. The person obtaining usufruct shall be obliged to bear, during the effect of usufruct, the public and private burden related to the property — taxes, duties and other payments, unless otherwise agreed by the parties.

(Article 217.6 supplemented by HO-70-N of 1 March 2017)

Article 217.7. Termination of usufruct

1. The grounds for termination of usufruct shall be as follows:

(1) the time limit provided for by the contract on granting usufruct has expired;

(2) the maximum time limit provided for by law for granting usufruct to a legal person has expired;

(3) the natural person (s) having obtained usufruct has (have) died, except for the case provided for by part 2 of Article 217.3 of this Code;

(4) the legal person having obtained usufruct has been liquidated, except for the case provided for by part 2 of Article 217.3 of this Code;

(5) parties have reached mutual agreement;

(6) the person having obtained usufruct and the owner of the property coincide;

(7) upon request of the owner, by the decision of court, where the person having obtained usufruct has violated the requirements for granting usufruct, provided for by law or contract.

2. In case of termination of the usufruct, the person obtaining the usufruct shall be obliged to return the property to the owner. The rules provided for by Article 625 of this Code shall apply to the return of property.

3. Usufruct subject to state registration shall terminate from the moment of state registration of termination of the usufruct.

(Article 217.7 supplemented by HO-70-N of 1 March 2017)

Article 218. Alienation of property for ensuring overriding public interests

(Title edited by HO-408-N of 24 October 2018)

1. Alienation of property for ensuring overriding public interests shall be carried out in exceptional cases and in the manner prescribed by law, only with prior and equivalent compensation.

(Article 218 edited by HO-187-N of 27 November 2006, HO-408-N of 24 October 2018)

(The provision of the Article, declared as contradicting the Constitution upon Decision SDVo-630 of 18 April 2006, was brought into compliance with the Constitution upon the amendment to Article 2 of the Law HO-187-N of 27 November 2006)

Article 219. Compensation value for the land parcel taken for state or community needs

(Article repealed by HO-187-N of 27 November 2006)

Article 220. Taking of a land parcel by court judgment for state or community needs

(Article repealed by HO-187-N of 27 November 2006)

Article 221. Rights of the owner of a land parcel subject to taking for state or community needs

(Article repealed by HO-187-N of 27 November 2006)

CHAPTER 14

RIGHT OF OWNERSHIP AND OTHER PROPERTY RIGHTS TO RESIDENTIAL PREMISES

Article 222. Specific aspects of the right of ownership to an apartment and non-residential areas in multi-apartment buildings, as well as to non-residential areas in sub-divided building

1. Apartment shall be an area (premise) that is envisaged for residence and is registered or numbered with an individual code with the authorised body carrying out state registration of rights.

2. Non-residential premise shall be an area (premise) that is not envisaged for residence in a building or premise and is registered or numbered with a special code with the authorised body carrying out state registration of rights.

3. Multi-apartment building shall be a building, the apartments and/or non-residential area of which belong to more than one owner by the right of ownership, and the land parcel allotted for construction and maintenance of which or common property of the building may not be partitioned among the owners of the apartments or of non-residential areas.

Sub-divided building shall be the building, the non-residential premises of which belong to more than one owner by the right of ownership, and the land parcel allotted for construction and maintenance of which or common property of the building is not partitioned among the owners of non-residential areas.

4. Apartment shall be used only in compliance with its operational purpose.

5. Changing of operational purpose of apartment into industrial, public or other operational purpose shall be carried out as prescribed by law or other legal acts.

(Article 222 supplemented, edited by HO-188-N of 4 October 2005, edited by HO-238-N of 15 December 2005)

Article 223. Specific aspects of the right of ownership to an apartment and non-residential areas in multi-apartment buildings

(Article repealed by HO-238-N of 15 December 2005)

Article 224. Common property of owners of apartments and/or non-residential areas of multi-apartment or sub-divided buildings

1. Load-bearing premises for the building, inter-floor coverings of the building (ceilings, floors), basement, attic, technical floors, roof, as well as entrances, staircases, stairs, elevators, elevator and other wells, mechanical, electrical,

sanitary-technical and other equipments and areas serving more than one premise and intended for full and unified maintenance of the multi-apartment building, land parcels — which are not owned by other persons — necessary for safekeeping and maintenance of the building, shall belong to owners of premises of multi-apartment building by the right of common shared ownership.

Share of the owner of each apartment or non-residential area in the land parcel of common shared ownership of the multi–apartment or sub-divided building shall be determined by the ratio of the surface area of apartment or non-residential area belonging to the given owner to the surfaces of all apartments and non-residential areas of that building and shall be expressed in fraction.

Share of owners of each apartment or non-residential area in property of common shared ownership of the multi-apartment or sub-divided building shall be equal to his or her share in the land parcel in common shared ownership and shall be expressed in fraction.

Shares of the owner of the apartment or non-residential areas in the land parcel that is considered as common shared ownership shall be established and registered along with registration of the land parcel designed for construction and maintenance of the building and may be changed only by consent of all owners of the building in case of adding or lessening an apartment or non-residential area in the building or of changing the sizes of existing apartments or non-residential areas. The consent of the owner on adding or lessening the apartment or non-residential area in multi-apartment or sub-divided building or sizes of existing apartments or non-residential areas or on changing the sizes of existing apartments or non-residential areas shall also be considered as consent on adding or lessening the size of the land parcel and common property belonging to the given owner.

Apartment or non-residential area in multi-apartment or sub-divided building under construction or sizes of existing apartments or non-residential areas shall not be changed, in case of changes in the sizes of apartments or non-residential areas due to non-essential construction deviations during construction works.

2. Owner of the apartment and/or non-residential area in a multi-apartment or sub-divided building shall not have the right to alienate, pledge, give for use the apartment or non-residential area apart from the land parcel or property which is in common ownership or to carry out other actions of transferring the right of ownership to the apartment and/or non-residential area separately to another person.

3. The rules provided for by Article 195 and points 2-6 of Article 197 of this Code shall not apply to the owners of apartments and/or non-residential areas in multi-apartment buildings.

4. In case of changes in the sizes of apartments or non-residential areas due to non-essential construction deviations in the course of construction works in a multi-apartment or sub-divided building, the sizes of share of owners of apartments or non-residential areas over the property under common shared ownership of the building shall not change.

5. Separate units (apartments, non-residential areas) in multi-apartment or sub-divided buildings under construction, along with the corresponding share in the land parcel and areas of common use, shall become an object of civil practices from the moment of state registration of the completed building.

6. The procedure for registration of the right of ownership to land parcels, apartments and areas of common use in completed multi-apartment or sub-divided buildings shall be established by the law on state registration of rights to property.

7. (Part repealed by HO-136-N of 25 May 2022)

8. An apartment, non-residential area in a constructed multi-apartment or sub-divided building, including the shared part of their relevant land parcel and areas of common use shall be deemed as transferred to a person having the right to purchase immovable property from the building under construction by the right of ownership from the moment of state registration of the deed of transfer of immovable property by the right of ownership.

(Article 224 edited, supplemented by HO-336 of 7 May 2002, edited by HO-188-N of 4 October 2005, amended, supplemented, edited by HO-238-N of 15 December 2005, HO-87-N of 19 June 2015, edited, amended by HO-136-N of 25 May 2022)

Article 224.1 Right to purchase immovable property from a multi-apartment or sub-divided building under construction or dwelling

1. Following the state registration of the right of the developer over immovable property from a multi-apartment or sub-divided building or dwelling as prescribed by the Law “On state registration of rights over property”, the immovable property from a multi-apartment or sub-divided building or dwelling may be burdened with the right to purchase immovable property under construction.

2. The contract on the right to purchase immovable property from a multi-apartment or sub-divided building under construction or dwelling shall be subject to notarial certification, whereas the right to purchase arising therefrom shall be subject to state registration.

3. The right to purchase immovable property from a multi-apartment or sub-divided building under construction or dwelling shall also extend to relevant share held in the land parcel and areas of common use.

4. Following the state registration of the right of ownership over immovable property from a multi-apartment or sub-divided building or dwelling, the developer shall, within the time limit prescribed by the contract but not later than within a period of six months, submit to the person having the right to purchase immovable property from a multi-apartment or sub-divided building under construction or dwelling the deed of transfer of the immovable property from the multi-apartment or sub-divided building or dwelling by the right of ownership and the settlement document, or in cases prescribed by law — the tax invoice.

5. The deed of transfer of the right of ownership over an immovable property from a constructed multi-apartment or sub-divided building or dwelling shall indicate:

(1) data complying with Article 566 of this Code, relating to the immovable property to be transferred by the contract on the right to purchase immovable property in the multi-apartment or sub-divided building under construction or dwelling;

(2) the price of the immovable property to be transferred by the contract on the right to purchase immovable property in the multi-apartment or sub-divided building under construction or dwelling, completed advance payments and, where applicable, conditions on payment of the unpaid part of the price;

(3) information on the time limit for commissioning the immovable property from a multi-apartment or sub-divided building or dwelling at the expense of the developer.

6. A deed of transfer of the multi-apartment or sub-divided building, immovable property from the building or dwelling by the right of ownership shall be subject to notarial certification, and the right arising therefrom shall be subject to state registration, and shall be deemed to be transferred to the person having the right to purchase immovable property from the moment of state registration of the deed of transfer by the right of ownership.

7. The provisions prescribed by Article 209 of this Code shall extend to the deed of transfer of immovable property by the right of ownership.

8. The peculiarities of burdening a future apartment or non-residential area in multi-apartment or subdivided buildings under construction or dwelling with the right to purchase immovable property under construction shall be prescribed by Article 36 of the Law of the Republic of Armenia “On state registration of rights over property”.

(Article 224.1 supplemented by HO-136-N of 25 May 2022)

Article 225. Right to use residential areas

1. The right of a person to use residential areas shall be the right to reside in the residential areas which is the ownership of another person. The right of a person to use residential areas shall be the right inseparably connected to the person, which may not be alienated, be independent subject of pledge, lease or gratuitous use, as well as may not be transferred to another person by succession or through legal succession.

Members of the family (spouse, minor children) of the person enjoying the right to use residential areas may reside with him or her without consent of the owner.

2. Arising of the right to use residential areas, the conditions of the exercising and termination thereof shall be established by a notary certified written contract with the owner. The right to use residential areas shall arise as prescribed by the law on state registration of the rights to property, from the moment of registration of that right.

3. In case of absence of an agreement on termination of the registered right to gratuitous use of residential areas, the concerned right may be terminated upon request of the owner through judicial procedure, with a compensation provided by the owner.

4. Amount of compensation for one month shall be defined based on the amount of lease payment applicable to the given residential areas at the moment of termination of the right, calculated in the following way: for each person who has registered the right to residence, the surface area derived from dividing the size of the residential surface area by the total number of persons enjoying the right to gratuitous use of the residential areas and the owners, but not less than five square metres and not more than nine square metres.

Compensation shall be calculated for a period of three years and shall be provided at once, unless otherwise provided for by the agreement of the parties.

(Article 225 edited by HO-188-N of 4 October 2005)

CHAPTER 14.1

(Chapter supplemented by HO-264-N of 17 December 2014)

SECURED RIGHTS

Article 225.1. Concept and subject of the secured right

1. A secured right is a right held by a creditor to a property or property right or claim right, by virtue of law or a contract, as a measure securing the discharge of liabilities.

2. Relationships connected with immovable property, transportation means, bank accounts, deposits, as well as security pledge, shall be regulated by Chapter 15 of this Code.

3. Any property, including any property right — except for property removed from circulation, claims inherently and inseparably connected with the creditor, including claims for alimony, compensation of damage caused to life or health, registered government (treasury) securities the conditions of issuance of which will provide that the securities in question may not be pledged, and those rights the surrender of which to another person is proscribed by law — may constitute a collateral.

4. A secured right shall also extend to property that directly or indirectly emerges from the use, possession or disposal of the collateral, including the fruits, products and income derived as a result thereof, as well as the insurance compensation for the collateral, except for cases prescribed by law and the relevant contract.

5. A secured right shall arise and be effective from the moment the liabilities arise until the liabilities have been duly discharged.

6. A contract on a secured right shall provide either a general or a specific description of the collateral.

6.1. When establishing the general description of the object of a secured right, a note shall be made in the contract on the entire property or separate types of property or group of property units united by any feature, which shall constitute the object of the secured right. The general description of the object of a secured right must comply with the description of the property included in the composition of the object of a secured right and must provide the opportunity to reasonably identify the property at the moment of levying execution thereon.

6.2. In addition to the general description of the object of a secured right, the total value of the object of the secured right at the moment of concluding the contract must be also indicated in the contract with general description of the object of the secured right, unless otherwise provided for by the contract.

The composition of the object of a secured right may be changed during the validity period of the contract, including the property included in the composition of the object of a secured right may be alienated on the condition that the total value of the object of the secured right prescribed by the contract does not reduce, unless otherwise agreed, in writing, by the parties.

6.3. In the case where the general description of the object of a secured right is established, the property included in the composition of the object of the secured right shall cease to be an object of the secured right upon being alienated, and the property classified under the group of property units or types of property indicated in the contract shall become an object of the secured right within the scope of the total value of the object of the secured right, unless otherwise provided for by law or contract.

6.4. A general description of the object of a secured right may not be established in contracts concluded for securing the fulfilment of obligations arising from contracts not related to entrepreneurial activities (concluded with consumers).

7. Execution on the collateral without recourse to court shall be levied as prescribed by Article 249 of this Code where:

(1) it is provided for by the contract, or

(2) there is a written agreement concluded between the secured person (creditor) and the debtor and, where the consent or permission of a third person was required for the conclusion of the relevant contract, also the written consent of the third person to the realisation of the pledged property without a court’s civil judgment.

8. Execution on the collateral shall be levied through judicial procedure in accordance with the requirements of Article 249.1 of this Code.

(Article 225.1 supplemented by HO-264-N of 17 December 2014, edited by HO-190-N of 27 October 2016, supplemented, amended by HO-141-N of 6 March 2020)

Article 225.2. Preference for secured rights

1. The preferential right to receive satisfaction from the value of the collateral shall be determined in accordance with the order of priority with which the secured right was registered in the unified register, unless otherwise provided for by this Code or a contract signed between the secured persons (creditors).

2. The registration of a secured right to a movable property shall entail a preferential right over any non-registered secured right to the same movable property, unless otherwise provided for by this Code or a contract signed between the secured persons (creditors).

3. In cases where the description of a movable property to be acquired in the future or of a movable property constituting a collateral for a secured right is general, the person who funds the acquisition of the movable property shall have a preferential right to the movable property.

4. A secured right registered at the time of alienation by a debtor of a movable property in circulation constituting a collateral for a secured right shall extend to the assets derived from the alienation of the collateral, unless otherwise provided for by an agreement concluded between the parties.

5. In case a person who has obtained a preferential right through registration surrenders a secured right, the preferential right shall continue to be in effect for the person who obtains the secured right.

(Article 225.2 supplemented by HO-264-N of 17 December 2014)

CHAPTER 14.2

(Chapter supplemented by HO-156-N of 25 October 2017)

(Law HO-156-N of 25 October 2017 contains a final part and

transitional provisions)

NEIGHBOURING LAW

Article 225.3. Relations arisen between neighbours

1. The rules of this Chapter shall regulate relations pertaining to mutual impact of neighbouring land parcels or other immovable property, water use, drawing a dividing line and other relations arising between neighbours.

2. The land parcel or any other immovable property which has an impact, in any manner, on another land parcel or any other immovable property shall be deemed as neighbouring land parcel.

3. Owners, as well as legal possessors of immovable property deemed as neighbouring property shall, in addition to the rights and obligations provided for by law, have the obligation to show mutual respect.

Article 225.4. Permissible impact

1. Owner or legal possessor of immovable property deemed as neighbouring property may not prohibit the impact of gas, steam, smell, soot, smoke, noise, heat or other impact from the neighbouring area, unless it hinders the use of his or her immovable property, or it is conditioned by the normal use of the property in the form inherent to the given area, or such impact is insignificant.

2. Where the impact exceeds the amount prescribed by standards and the normal use of the property inherent to the given area and may not be reasonably eliminated, and the owner has to tolerate it, he or she may request monetary compensation from the owner of the neighbouring area.

3. The amount, time limits and procedure for compensation shall be agreed by the parties. Where no agreement is reached, the amount, time limits and procedure for compensation shall be determined by the court, by also taking into account the property status of the person providing compensation.

Article 225.5. Water use

1. Water flows passing through land parcels of neighbours may not be deviated or changed by the owner or legal possessor of one land parcel so that the right of normal use of these flows of the owner or legal possessor of the neighbouring land parcel is undermined, unless otherwise mutually agreed by the neighbours.

Article 225.6. Drainage of immovable property deemed as neighbouring property

1. Owner or legal possessor of immovable property deemed as neighbouring property must undertake measures so that water, ice or snow do not fall on the neighbouring land parcel from the roof of the property or from auxiliary constructions deemed as neighbouring property.

Article 225.7. Passage of roots and branches from neighbouring land parcel to another land parcel. Fruits fallen from tree

1. Owner or legal possessor of a land parcel may cut and оwn branches and roots of a tree or bush having crossed over his or her land parcel from a neighbouring land parcel in the case where the owner or legal possessor of the land parcel has priorly and duly notified the owner of the neighbouring land parcel and has requested to remove them from his or her land parcel, but no measures were undertaken within reasonable time limit. Notification referred to in this part shall be deemed as proper where it was sent by registered letter with acknowledgement of receipt or handing over in person. Where notification is impossible, including where the actual place of residence of the neighbour is unknown, the owner or legal possessor of the land parcel may immediately undertake the performance of the action provided for by this part.

2. Fruits of trees or bushes having fallen on the neighbouring land parcel shall be deemed as the fruits of that land parcel, unless otherwise mutually agreed by the neighbours.

Article 225.8. Fence or railing of land parcel

1. The owner of a land parcel shall have the right to fence, rail the land parcel owned thereby or delimit it by another dividing line (hereinafter in this Chapter referred to as “the dividing line”) or restore already existing, though worn out or damaged, dividing line.

2. Neighbours shall determine the costs related to drawing the dividing line upon mutual consent. Costs incurred without the consent of the other neighbour shall not be reimbursed.

Article 225.9. Disputable border

1. Unless otherwise provided for by title deeds and where as a result of the dispute it is impossible to determine the precise border, the actual possession by the neighbours shall be deemed to be decisive for drawing the dividing line. Where actual possession is impossible to be determined either, an equal part of the disputable area shall be joined to each land parcel as prescribed by legislation.

Article 225.10. Common use of bordering premises

1. Owner or legal possessor of a neighbouring land parcel may use the vertical surface of the dividing line adjacent to his or her land parcel, owned by the other neighbour under the right of ownership, so that the right to use, including to demolish the dividing line of the owner or legal possessor of that dividing line is not undermined.

2. Any dividing line dividing two land parcels or other immovable property may fall under common shared ownership of the neighbours upon consent of the owners or court judgment, unless otherwise provided for by title deeds, or where it was not built through means by either of the neighbours, or it becomes clear from any external feature that it is not owned by either of the neighbours.

3. The dividing line indicated in part 2 of this Article shall be deemed as the appurtenance of the principal immovable property (property unit) which may be alienated or burdened only along with the principal property. The rules of Article 195 of the Civil Code of the Republic of Armenia, including the procedure for sales of the share in the common shared ownership through public bidding shall not extend to legal relations pertaining to the shared ownership prescribed by this Article.

4. Where the neighbours have the right to common shared ownership prescribed by part 2 of this Article, each of them shall be obliged to:

(a) use the dividing line so that the common use of the other is not hindered;

(b) equally participate in the maintenance costs of the dividing line.

5. The dividing line deemed as common shared ownership, indicated in part 2 of this Article, may be demolished or altered upon mutual consent of the neighbours.

CHAPTER 15

RIGHT OF PLEDGE

§ 1. GENERAL PROVISIONS ON PLEDGE

Article 226. Concept of the right of pledge

1. The right of pledge (hereinafter referred to as “the pledge”) shall be the property right of the pledgee to the property of the pledgor, which is at the same time a measure to secure the fulfilment of pecuniary or other obligations of the debtor towards the pledgee.

2. The pledge shall be a supplementary (accessory) obligation to secure the fulfilment of the principal obligation of the pledgor (debtor) towards the pledgee (creditor).

3. The creditor (pledgee) towards whom there are obligations secured by pledged immovable property, transportation means, bank accounts, deposits or securities shall have a preferential right to receive satisfaction from the value of the pledged property ahead of the other creditors of the owner of the property (pledgor) in case the debtor fails to fulfil that obligation. The pledgee, who has registered the right arising from the contract of pledge of immovable property, transportation means, bank accounts, deposits, as well as securities, in the register of pledge kept by the authorised body earlier than the others shall have the preferential right to receive satisfaction from the value of the pledged property ahead of the other pledgees who have registered their rights arising from the contracts of pledge of the relevant property later or have failed to do so.

4. The pledgee shall have the right, under the principle envisaged by point 3 of this Article, to receive satisfaction from the insurance indemnity for loss or harm of the pledged property, regardless of the fact for whose benefit it is insured, unless such loss or harm is caused by such reasons for which the pledgee is liable.

5. General rules on pledge contained in this Paragraph shall apply to mortgage, unless other rules are envisaged in the Paragraph of this chapter concerning mortgage.

(Article 226 supplemented by HO-78-N of 11 May 2004, edited by HO-264-N of 17 December 2014, HO-190-N of 27 October 2016)

Article 227. Grounds for arising of pledge

1. Pledge shall arise by virtue of a contract. Pledge shall also arise on the ground of law, when the circumstances indicated therein occur. Property, that is considered as pledged for the purpose of securing the fulfilment of an obligation, shall be provided for by law.

2. The rules of this Code on the pledge arisen by virtue of contract shall respectively apply to the pledge arisen on the ground of law, unless otherwise provided for by law.

Article 228. Pledgor

1. Pledgor of property may be only the owner thereof.

2. Both a debtor and a third person may be a pledgor.

3. Pledgor of a right may be a person to whom the pledged right belongs.

Article 229. Pledgee

Pledgee shall be a person who has a property right to the property of a pledgor (right of pledge) on the grounds defined by law or contract, for the purpose of securing the fulfilment of a pecuniary or other obligation towards him or her.

Article 230. Collateral

1. Any property, including property right (claim), except for the property removed from circulation, claims inherently and inseparably connected with the debtor, including claims for compensation of alimony, damage caused to life or health, those registered government (treasury) securities the conditions of issuance of which will provide that the securities in question may not be pledged, and those rights the surrender of which to another person is proscribed by law, may be a collateral.

2. Pledge of the property, which may not be divided without change in its purpose (indivisible property), may not be pledged part by part.

3. Pledge of the right of lease without the consent of the owner of property shall not be permitted.

4. Pledge of individual types of property, particularly the property belonging to citizens, levy of execution on which is not permitted, may be proscribed or limited by law.

(Article 230 supplemented by HO-224-N of 11 November 2005)

Article 231. Pledge of property under common ownership

1. Property under common joint ownership may be pledged only upon the written consent of all owners.

2. Participant in common shared ownership may pledge his or her share in the right to common property without the consent of the other owners.

When selling that share in case of levy of execution thereon, at the request of a pledgee, the rules of preferential right of purchase defined by Article 195 of this Code shall apply.

Article 232. Property to which the rights of pledgee extend

1. Rights of a pledgee (right of pledge) to a collateral property shall also extend to the appurtenances thereof, unless otherwise provided for by contract.

The right of pledge shall be extended to fruits, products and income received as a result of use of a pledged property in the cases provided for by contract.

2. Pledge of property and property rights to be acquired in the future by a pledgor may be provided for by the contract of pledge, and, when the pledge arises on the ground of law it may be provided for by law.

Article 233. Volume of the claim secured by a pledge

Pledge shall secure the claim of the pledgee in the volume it has at the moment of actual satisfaction, unless otherwise provided for by contract or law. That claim shall particularly include interests, default penalty, compensation for the damages caused due to the default of the period of performance, as well as of the expenses incurred by the pledgee for custody and safekeeping of the pledged property, levying execution thereupon and for the realisation thereof, including compensation of taxes related to the sales of the collateral, which the pledgee shall be obliged to pay as the tax agent of the pledgor.

(Article 233 amended by HO-233-N of 23 June 2011)

Article 234. Contract of pledge and the form thereof

1. The contract of pledge shall be concluded in writing.

1.1. When issuing securities secured by a pledge based on a prospectus, the prospectus shall also serve as an offer to sign a contract of pledge.

2. Names of the parties and places of residence (registered offices), collateral, essence, amount of the obligation secured by the pledge and the period of performance thereof shall be indicated in the contract of pledge. In case of issuance of securities secured by a pledge based on a prospectus, the contract of pledge shall, instead of the name and place of residence (registered office) of the pledgee, indicate that the pledgee is the owner of (nominee holding) the security indicated in the register kept by the person keeping records on rights to securities.

3. In the cases provided for by this Code, the contract of pledge shall be subject to notary certification, and the right of pledge shall be subject to state registration.

4. Failure to observe the rules of this Article shall lead to invalidity of the contract of pledge. Such a contract shall be null and void.

(Article 234 supplemented by HO-110-N of 17 June 2016)

Article 235. Arising of the right of pledge

1. The right of pledge shall arise from the moment of concluding the contract of pledge and, where the right of pledge is subject to state registration it shall arise from the moment of its registration. The right of pledge to non-paper securities shall arise from the moment of making a relevant record with the person making records on rights.

2. When collateral is to be held by a pledgee, in accordance with the law or contract, the right of pledge shall arise from the moment of transferring the collateral to him or her, and when it is transferred prior to conclusion of the contract it shall arise from the moment of the conclusion thereof.

(Article 235 supplemented by HO-79-N of 23 May 2006)

Article 236. Subsequent pledge

1. Pledged property may become a collateral for another pledge (subsequent pledge). The agreement restricting the right of a pledgor to turn the pledged property into a collateral for another pledge (subsequent pledge) shall be null and void.

2. Subsequent pledge of non-paper securities shall be permitted, unless it is prohibited by the conditions of issuance of those securities and/or in declaration of registration of securities.

3. In case of subsequent pledge, claims of the new pledgee shall be satisfied following the satisfaction of claims of the previous pledgee from the value of the collateral, unless otherwise provided for by law and the contract concluded between the new and all previous pledgees.

4. Unless otherwise provided for by the contract concluded between the new and all previous pledgees, in case of failure to fulfil or improper fulfilment, by the debtor, of the obligations towards the new pledgee, the new pledgee shall, prior to starting a process of levy of execution on the collateral and within two working days after being informed of said failure or improper fulfilment, be obliged to notify the previous pledgee of the failure to fulfil or improper fulfilment, by the debtor, of the obligations towards the new pledgee. Upon receiving the notification, the previous pledgee shall have the right to:

(1) not take any action connected with the collateral, or

(2) initiate a process of levy of execution on the collateral, in which case the new pledgee shall no longer be competent to initiate a process of levy of execution, or

(3) purchase the property constituting the collateral, or

(4) purchase from the new pledgee the obligation secured by the pledge, as prescribed by Chapter 25 of the Civil Code of the Republic of Armenia, and terminate the process of levy of execution, or

(5) propose that the new pledgee fulfil in full the debtor’s obligation towards the previous pledgee, or

(6) give consent to alienation of the collateral to a third person following the levy of execution by the new pledgee, in which case the previous pledge shall retain the right of pledge of to the property.

The previous pledgee shall, within 10 working days from the moment of receiving the notification provided for by this Article, inform the new pledgee on taking a decision on the exercise of his or her rights provided for by this Article.

In case of failure to fulfil or improper fulfilment, by the debtor, of the obligations towards the new pledgee, the new pledgee shall be obliged to be guided by the decision taken by the previous pledgee regarding the exercise of the rights provided for by points 2, 3, 4 and 6 of part 4 of this Article.

Unless otherwise provided for by the contract concluded between the new and all previous pledgees, where there are several previous pledgees and in case of failure to fulfil or improper fulfilment, by the debtor, of the obligations towards the new pledgee, the new pledgee shall, before initiating a process of levy of execution on the collateral, be obliged to inform, as prescribed by this Article, all previous pledgees preceding the new pledgee and be guided by the decision taken by the previous pledgees on the exercise of the rights provided for by points 2, 3, 4 and 6 of part 4 of this Article, according to the order in which the previous pledges precede each other.

(Article 236 supplemented by HO-78-N of 11 November 2004, supplemented, amended by HO-110-N of 17 June 2016)

Article 237. Custody and safekeeping of the pledged property

1. Pledgor or pledgee, depending on which of them holds the pledged property, unless otherwise provided for by law or contract, shall be obliged to:

(1) insure the pledged property against the risks of loss and injury for its full value, and when its full value exceeds the amount of the claim secured by the pledge — for an amount not less than that of the claim;

(2) undertake measures necessary for safekeeping of the pledged property, including for the protection thereof from encroachments and claims of third persons;

(3) immediately inform the other party about emergence of a threat of loss of or injury to the pledged property.

2. Pledgee and pledgor shall have the right to check, through documents and factually, the presence, quantity, condition and storage conditions of the pledged property held by the other party.

3. In case of gross violation of the obligations referred to in point 1 of this Article by a pledgee, that creates a threat of loss or harm to the pledged property, the pledgor shall have the right to require early termination of the pledge.

Article 238. Use and disposition of collateral

1. Pledgor shall have the right to use the collateral in accordance with its purpose, including receiving of fruits and income from it, unless otherwise provided for by contract.

2. Pledgor shall have the right to alienate the collateral, to grant it on lease or for gratuitous use, or otherwise dispose of it, unless otherwise provided for by law or by contract.

An agreement on limiting the right of a pledgor to bequeath the pledged property shall be null and void.

When the collateral is granted on lease, for gratuitous use, or is burdened with another property right (except for compulsory servitude), in case of realisation of the collateral, those rights shall terminate in the manner and on the grounds prescribed by this Code.

All property rights established prior to the pledge of property shall be preserved, unless otherwise provided for by law.

3. The pledgor shall have the right to provide the land parcel for development rights only upon the consent of the pledgee.

The pledgor and the pledgee may stipulate by a contract of pledge of movable property the right to cross the state border by a vehicle pledged by the pledgor or the person authorised thereby, or the limitation of this right.

4. The pledgee shall have the right to use the collateral transferred to him or her only in the cases provided for by contract, submitting a report on the use thereof upon the request of the pledgor. A duty to acquire fruits and income from the subject of mortgage may be imposed on a pledgee under contract, in order to redeem the principal obligation or to the benefit of the pledgor.

(Article 238 edited by HO-188-N of 4 October 2005, supplemented by HO-220-N of 26 May 2021)

Article 239. Consequences of destruction, loss of or harm to a pledged property

1. Pledgor shall bear the risk of accidental destruction, loss of or harm to a pledged property, unless otherwise provided for by the contract of pledge.

2. Pledgee shall be liable for complete or partial destruction, loss of or harm to the collateral transferred to him or her, unless the latter proves that he or she may be exempt from liability in accordance with Article 417 of this Code.

3. Pledgee shall be liable for loss of the collateral in the amount of its actual value, and for the harm thereto in the amount by which that value has been reduced, regardless of the amount the collateral has been assessed when being transferred to the pledgee.

4. When as a result of harm, the collateral transferred to the pledgee changes to the extent that it may not be used for its direct purpose, the pledgor shall have the right to renounce it and to require compensation for the loss thereof.

The obligation of the pledgee to compensate to the pledgor other damages caused by loss of or harm to the collateral may be provided for by contract.

The pledgor who is the debtor of the obligation secured by pledge shall have the right to set off the compensation for the damages caused by loss of or harm to the collateral for the purpose of redeeming the obligation secured by pledge.

Article 240. Replacement and restoration of the collateral

1. Replacement of the collateral shall be permitted upon the consent of the pledgee, unless otherwise provided for by law or contract.

2. When the collateral is destructed or damaged or the right of ownership thereto is terminated on the grounds prescribed by law, the pledgor shall be obliged, within a reasonable term, to restore the collateral or replace it with other property of equal value, unless otherwise provided for by contract.

Article 241. Protection of the rights of pledgee to the collateral

1. Pledgee, who holds or should have held the pledged property, shall have the right to reclaim it from another’s illegal possession, including from that of a pledgor (Articles 274, 275 and 278).

2. Where the right to use the collateral transferred to a pledgee is reserved to him or her under terms of the contract, he or she may require from other persons, including the pledgor, to eliminate all the violations of his or her right, although they are not related to deprivation of possession (Articles 277 and 278).

Article 242. Preservation of the right of pledge upon passing of the right of ownership to the pledged property to another person

1. The right of pledge shall remain in force, in case of alienation of the pledged property with or without compensation or passing of the right of ownership of a pledgor to that property to another person through universal legal succession.

Legal successor of a pledgor shall take the place of the pledgor and shall bear all the duties thereof, unless otherwise provided for by the agreement with the pledgee.

2. When the collateral property has passed to several persons through legal succession, each legal successor (acquirers of the property) shall, in proportion to the share passed to him or her from the mentioned property, bear the consequences resulting from non-fulfilment of the obligation secured by a pledge. When the collateral is indivisible or, on other grounds, remains in common ownership of legal successors, they shall become joint pledgors.

Article 243. Consequences of compulsory taking and seizure of the pledged property

1. In the cases where the right of ownership of a pledgor to the collateral property has terminated on the grounds and in the manner prescribed by law, by reason of alienation, requisition or nationalisation for the purpose of ensuring overriding public interests, and another property and/or relevant compensation has been given to the pledgor, the right of pledge shall extend to the property given instead, or the pledgee shall acquire a preferential right to satisfy his or her claim from the compensation amount due to the pledgor.

2. Where the collateral property is seized from a pledgor as prescribed by law through levy of execution or is confiscated, a pledgee shall have a preferential right to satisfy his or her claim from the value of that property.

3. Where the collateral property is seized from a pledgor as prescribed by law on the ground that the owner of that property is actually another person, the pledge with respect to that property shall terminate.

4. In the cases provided for by this Article, a pledgee shall have the right to require early fulfilment of the obligation secured by pledge.

(Article 243 amended by HO-187-N of 27 November 2006, HO-408-N of 24 October 2018, HO-180-N of 9 June 2022)

Article 243.1. Restrictions applicable to pledged property for the fulfilment of other obligations of a pledgor towards third persons

1. Neither any attachment, freeze, custody, levy of execution, seizure of pledged property nor any other restriction on property for the fulfilment of other obligations of a pledgor towards third persons (hereinafter also referred to as "Restriction") may hinder (prohibit) a pledgee having a preferential right to receive primary satisfaction from the collateral from exercising all the rights reserved thereto by this Code, including the right to levy execution on and to realise the collateral, except for the cases provided for by the Criminal Procedure Code of the Republic of Armenia, the relationships connected with which shall be regulated by that Code.

2. Where the pledgee, exercising the right provided for by part 1 of this Article, levies execution on the collateral and realises the collateral, all the Restrictions applied to the collateral shall terminate by virtue of law at the time of the realisation of the collateral, and the property shall pass to the new owner without Restrictions. The Restrictions shall be reinstated (restored) with regard to the monetary funds remaining as provided for by part 3 of this Article after the satisfaction of the claims of the pledgee.

At the time of realisation of the collateral, the pledgee shall apply to the body registering (recording) the Restrictions to remove from registration (records) the Restrictions terminated by virtue of law. The application of the pledgee shall serve as a ground for the body registering (recording) the Restrictions to remove the Restriction in question from registration (records).

3. In accordance with this Article, the amount remaining after the realisation of the collateral and satisfaction of obligations secured by the pledge shall be transferred to the bank account of the pledgor after reduction of the costs provided for by part 1 of Article 251 of this Code. Where the pledgor does not have a bank account or where the pledgor’s bank account details are unknown to the pledgee, the pledgee shall, by virtue of law, be obliged to open and maintain a bank account for the pledgor and transfer the relevant funds to the opened bank account. The pledgee shall inform of it the other creditors known to the pledgee and the body having applied the Restriction. Moreover, no other funds than those provided for by this part may be transferred to the bank account, and the account shall be closed after the amount provided for by this part has been debited.

4. The Restriction applied prior to the realisation of the collateral shall be reinstated (restored) by virtue of law with regard to the funds provided for by part 3 of this Article from the moment of transfer of those funds to the bank or deposit account.

5. In case of impossibility to fulfil the obligations prescribed by part 3 of this Article, the provisions of Article 366 of this Code shall apply in accordance with the requirements of this Article.

6. Where a property constitutes a collateral for a subsequent pledge, the new pledgee shall, in accordance with part 1 of this Article and exclusively as prescribed by Article 236 of this Code, be entitled to levy execution on and realise the collateral.

(Article 243.1 supplemented by HO-110-N of 17 June 2016)

(Article shall, in terms of the amendment to the Law HO-187-N of 11April 2024, enter into force from 1 July 2025)

Article 244. Surrender of rights arising from contract of pledge

1. Pledgee shall have the right to transfer his or her rights following from the contract of pledge to another person, observing the rules of transferring the rights of creditor through surrender of the claim (Articles 397-405).

2. Surrender by a pledgee of his or her rights, following from the contract of pledge, to another person shall be valid when the right of claim against the debtor in the principal obligation secured by the pledge is surrendered to the same person.

Article 245. Transfer of a debt with an obligation secured by pledge

The pledge shall terminate when transferring the debt with the obligation secured by pledge, unless the pledgor gives the creditor consent to bear the liability instead of a new debtor.

Article 246. Early fulfilment of the obligation secured by pledge and levy of execution on the pledged property

1. Pledgee shall have the right to require early fulfilment of the obligation secured by pledge, if:

(1) the collateral left with a pledgor has come out of his or her possession in violation of the conditions of the contract;

(2) pledgor has violated the rules of replacement of the collateral (Article 240);

(3) the collateral has been lost in such circumstances for which the pledgee is not responsible, and pledgor has failed to avail himself or herself of the right provided for by point 2 of Article 240 of this Code.

2. Pledgee shall have the right to demand early fulfilment of the obligation secured by pledge, and in case of failure to satisfy that demand to levy execution on the collateral, if:

(1) it is provided for by law;

(2) the pledgor has failed to fulfil the obligations provided for by points 1 and 2 of Article 237 of this Code;

(3) the pledgor has violated the rules of use and disposition of the pledged property (points 1 and 2 of Article 238).

(Article 246 edited by HO-110-N of 17 June 2016)

Article 247. Termination of pledge

1. The pledge shall terminate:

(1) upon termination of the obligation secured by pledge;

(2) upon request of pledgor, on the grounds provided for by point 3 of Article 237 of this Code;

(3) in case of destruction of the pledged property or termination of the pledged right, unless the pledgor has availed himself or herself of the right provided for by point 2 of Article 240 of this Code;

(4) in case of realisation (sales) of the pledged property, as prescribed by law, unless otherwise provided for by law.

2. Pledgee holding the pledged property shall be obliged to immediately return it to a pledgor upon termination of the pledge as a result of fulfilment of the obligation secured by pledge or upon request of the pledgor (point 3 of Article 237).

(Article 247 amended by HO-188-N of 4 October 2005, HO-238-N of 15 December 2005, amended, supplemented by HO-297-N of 12 December 2019)

Article 248. Grounds for levy of execution on pledged property

The pledged property may be levied in execution for satisfaction of claims of a pledgee (creditor) in such circumstances of non-fulfilment or improper fulfilment of the obligation secured by pledge by the debtor, for which the latter bears liability.

Article 249. Procedure for levying execution on the pledged property without applying to court

1. For the purpose of satisfying his or her claim, a pledgee shall have the right to levy execution on the collateral and realise it without applying to court, including transferring the pledged property to the ownership of the pledgee or a third person mentioned by the pledgee for the corresponding amount of the principal obligation, if:

(1) it is provided for by the contract of pledge, or

(2) there is a written agreement concluded between the pledgee and the pledgor, and, when a consent or permission of a third person has been required for conclusion of the contract of pledge — also the written consent of the latter, without the court judgment on realisation of the pledged property.

1.1. In case when the property constitutes a collateral for a subsequent pledge, the new pledgee shall, in addition to the conditions provided for by point 1 of this Article and exclusively as prescribed by Article 236 of this Code, be entitled to levy execution on and realise the collateral.

2. In case of non-fulfilment or improper fulfilment of an obligation secured by a pledge, the pledgee shall notify the pledgor and the debtor (where the pledgor and the debtor are different entities) in writing and in a proper manner on the execution levied on the collateral without recourse to court (notification of execution). The pledgor (debtor) shall have the right to challenge, through judicial procedure, the lawfulness of the execution levied on the collateral, in accordance with this Article; in this case the court may suspend the process of levy of execution on the collateral. Where the court has rendered a decision on granting the security claimed for compensation for possible damages sustained by the pledgee following the decision on suspension of the process of levy of execution of the collateral, the security granted for compensating, by the pledgor (debtor), the possible damages sustained by the pledgee must be equivalent to the value of the possible damages sustained by the pledgee, however it must not exceed the value of the collateral. In case when the right of pledge is subject to registration (including state registration), the pledgee shall — before starting a process of levy of execution on the pledge, as well as in case of termination or completion of the process of levy of execution on the pledge — be obliged to properly notify of it also the registration body.

After the notification of execution has been properly served to the pledgor and the debtor (where the pledgor and the debtor are different entities) and, where applicable, also to the registration body, the pledgee shall have the right to take the collateral into his or her possession (where it is a movable property), as well as to take reasonable measures for preserving, providing maintenance for and ensuring the safety of the collateral.

The pledgee shall, by virtue of this Code, have the right — subject to Article 195 of this Code — to realise the collateral through direct sales or public biddings on behalf of the pledgor, two months after serving the notification of execution to the debtor and pledgor (where the pledgor and the debtor are different entities) and, where applicable, also to the registration body, unless the pledgor and the pledgee have agreed on another procedure for realising the collateral. The pledgee may realise the collateral until the expiry of the two months provided for by this paragraph, where the debtor and pledgor (where the pledgor and debtor are different entities) have given written consent, as prescribed by Chapter 20.1 of this Code, on the levy of execution of the collateral following the receipt of the notice on levy of execution. The consent given on levy of execution of the collateral shall be null and void until the receipt of the notification on levy of execution. The pledgee shall be obliged to realise the collateral at a reasonable price existing at the market at the given moment.

3. Proper notification or notification of execution prescribed by this Article shall be deemed to be properly served to the pledgor or the debtor where the notification has been made as prescribed by Chapter 20.1 of this Code.

4. The specific aspects of the levy of execution on a pledge in case of financial transactions shall be prescribed by Article 252.1.

5. In the cases defined by the Law of the Republic of Armenia “On notaries”, where claims are submitted with a request of levy of execution on the collateral that constitutes movable property described in the application on issuing an order on the claim for levy of execution of an amount, the levy of execution shall extend to the collateral by virtue of the order issued by the notary public.

(Article 249 edited by HO-521-N of 31 March 2003, by HO-188-N of 4 October 2005, supplemented, amended by HO-110-N of 17 June 2016, supplemented by HO-190-N of 27 October 2016, HO-319-N of 14 December 2017, edited by HO-214-N of 13 November 2019, supplemented by HO-228-N of 26 June 2023).

(the provision of the Article, declared as contradicting the Constitution upon the Decision SDVo-1294 of 19 July 2016, was brought into compliance with the Constitution upon the amendment of Article 1 of the Law HO-214-N of 13 November 2019)

Article 249.1. Levy of execution on the collateral through judicial procedure

1. In case of absence of the agreement referred to in point 1 of Article 249 of this Code, the claims of the pledgee (creditor) shall be satisfied by a court judgment, at the expense of the pledged property.

2. The collateral may be levied in execution only by a court judgment, when the collateral is recognised by law or other legal act as a property of significant historical, artistic or cultural value for the society.

When the collateral is a property of significant historical, artistic or cultural value for the society, satisfaction of the claims of a pledgee at the expense of realising the pledged property without applying to court, as well as the permission or consent on transferring the pledged property to the ownership of a pledgee or a third person mentioned by the pledgee for the corresponding amount of the principal obligation shall be null and void.

(Article 249.1 supplemented by HO-188-N of 4 October 2005)

Article 250. Realising (selling) the pledged property

1. Pledged property shall be realised (sold) through public biddings, as prescribed by the law on public biddings.

Another procedure for realising (selling) the pledged property may be established by a notary certified contract of pledge or by a notary certified agreement concluded between a pledgee and a pledgor (except for the case provided for by Article 252.1 of this Code).

2. In the course of realising (selling) the pledged property as prescribed by law, when the auction is declared invalid due to failure to bid more than the initial price of the pledged property by any participant during the auction, a pledgee shall, within a period of seven days, have the right to demand the transfer of the pledged property to him or her for the obligation secured by pledge and actual expenses of realisation (sales) by paying the expenses of realisation (sales) of the pledged property. When the price of the pledged property formed at the given moment is higher than the sum of the claim secured by pledge and expenses of realisation (sales) of the pledged property, a pledgee shall be obliged to compensate the difference to a pledgor; otherwise a pledgee shall have the right to receive the deficient amount from another property of a debtor, unless otherwise provided for by contract.

3. The rules of paragraph 2 of point 1 and point 2 of this Article shall not apply to realisation (sales) of the property pledged by the Compulsory Enforcement Service.

(Article 250 supplemented by HO-164 of 3 April 2001, edited by HO-521-N of 31 March 2003, supplemented by HO-13-N of 16 December 2005, HO-190-N 27 October 2016)

Article 251. Distribution of the amount received from realisation of pledged property

1. A pledgee’s claims secured by the pledge shall be satisfied from the amount derived from the realisation of the pledged immovable property, transportation means, bank account, deposit, as well as security, or from the value of the relevant property passed to the ownership of the pledgee or to the person indicated by the pledgee, after deduction of the amounts needed for covering the expenses related to the levy of execution on and realisation of the property in question, and the rest of the amount shall be transferred to the pledgor within a period of ten days as prescribed by point 3 of Article 243.1 of this Code, unless another procedure for transferring this amount is provided for by the contract on pledge. Claims of a pledgee, that are not secured by pledge, shall be satisfied from the amount (value) envisaged by this point in the general procedure established by this Code and other laws.

2. When the amount received from realisation of the pledged property, or the value of the property passed to the ownership of a pledgee or to the person he or she indicates, is not sufficient for satisfying the claims of the pledgee, he or she shall have the right to obtain the deficient amount from another property of the debtor, unless otherwise provided for by contract. Moreover, the pledgee does not enjoy the preferential right to that property based on the pledge.

3. Where the pledged property belonging to a citizen has passed to the ownership of a pledgee bank (credit organisation), the pledged property shall, within the meaning of this Article, be considered as realised:

(1) on the day of further alienation of that property by the bank (credit organisation) at the price of alienation, if that alienation has taken place within one year after taking ownership over the property, inter alia, where the property has been alienated at a price that has been considered not reasonably lower than the market price on the day of alienation, the property shall be considered as realised at the marked price of that property on the day of alienation, except for the cases when within one year after taking ownership over that property it has been alienated to the previous owner of that property (whose property has been levied in execution) or to his or her successor, or

(2) on the last day of the one-year period following the taking of ownership over the property at the market price of that property on that day, if the property has not been alienated within that one-year period, and the bank (credit organisation) shall be obliged to, at its own expense, ensure the determination of the market price of the property by an independent appraiser.

4. Where within a civil, criminal, bankruptcy or administrative case to which a pledgor citizen (former owner of the property levied in execution) or his or her successor is a party, attachment shall be imposed over the given property that has been passed to the ownership of the bank (credit organisation), the running of the one-year term envisaged by point 3 of this Article shall be suspended for the entire period of being under attachment.

5. Bank (credit organisation) and the citizen may agree to consider the pledged property provided for by point 3 of this Article to be realised, within the meaning of this Article, on the day when it passes to the ownership of the bank (credit organisation) at its market price as of that day determined by an independent appraiser. The agreement envisaged by this point shall be signed in simple writing.

6. From the day the pledgee takes ownership over the collateral as prescribed by this Chapter, no interest or default penalty shall be applied to the discharged part of the obligation secured by the pledge.

7. Within a period of one week following the transfer of pledged property, owned by a citizen, to the ownership of the pledgee bank (credit organisation) or the person indicated thereby, the pledgee shall duly notify the pledgor and debtor on the date of assuming the ownership over the collateral and the price thereof, on the amount of discharge of the liability secured by pledge, where the pledgor is not a debtor, and in case the liability is not discharged in full— on the remainder of the debt.

8. Within a period of one week following the realisation of the collateral, the pledgee shall duly notify the pledgor and debtor on the date of realisation of the collateral and the price thereof, the amount of discharge of the liability secured by pledge, where the pledgor is not a debtor, as well as where available — on the amount of the sum subject to return to the pledgor, whereas in case the liability is not discharged in full — on the remainder of the debt.

9. In case of infringement of the requirements prescribed by points 7 and 8 of this Article, a default penalty and interests envisaged by Article 411 of this Code shall not be calculated against the remainder of the debt until the elimination of the infringement.

(Article 251 edited by HO-233-N of 23 June 2011, by HO-264-N of 17 December 2014, supplemented by HO-110-N of 17 June 2016, edited by HO-190-N of 27 October 2016, amended, supplemented by HO-319-N of 14 December 2017, amended by HO-121-N of 22 March 2023)

(Law HO-121-N of 22 March 2023 contains a transitional provision)

Article 252. Termination of levy of execution on and realisation of pledged property

1. Debtor or pledgor, who is a third person, shall have the right to terminate the levy of execution on and realisation of the collateral at any time before the sales thereof, by fulfilling the obligation secured by pledge or the part thereof the fulfilment of which has been made in default.

The agreement limiting that right shall be null and void.

2. The person, demanding termination of levy of execution on or realisation of pledged property, shall be obliged to compensate to the pledgee the expenses incurred in connection with levy of execution on and realisation of that property.

Article 252.1. Specific aspects of a pledge in case of financial transactions

1. Unless otherwise provided for by this Article, provisions provided for by this Chapter shall apply to relationships pertaining to pledges securing obligations arising from financial transactions.

2. Within the meaning of this Article, the following shall be deemed financial transactions:

(1) derivative financial instruments provided for by the Law of the Republic of Armenia “On securities market”;

(2) transactions concluded within the framework of master agreements complying with the requirements defined by the Central Bank of the Republic of Armenia.

3. If an obligation arising from derivative financial instruments or transactions concluded within the framework of master agreements provided for by part 2 of this Article is secured by a pledge, the pledgor is a legal person, individual entrepreneur or contractual investment fund, and the collateral is a security or monetary means specific to financial transactions, then the pledgee shall in case of non-fulfilment or improper fulfilment of said obligation secured by the pledge send a notification of execution to the pledgor (debtor).

Unless the parties have agreed in a contract on a longer time limit, immediately after sending a notification of execution to the debtor (pledgor), the pledgee shall have the right to, by virtue of this Code, realise the collateral on behalf of the pledgor or take ownership over the collateral pursuant to the contract of pledge.

4. If an obligation arising from derivative financial instruments or transactions concluded within the framework of master agreements provided for by part 2 of this Article is secured by a pledge, the pledgor is a legal person, individual entrepreneur or contractual investment fund, and the collateral is a security or monetary means specific to financial transactions, then:

(1) another procedure for realisation (sale) of the pledged property may be prescribed also by a simple written contract of pledge concluded in a simple written form or an agreement concluded between the pledgee and the pledgor in a simple written form.

(2) according to a contract of pledge concluded in a simple written form or an agreement concluded between the pledgee and the pledgor in a simple written form, the pledgee may be vested with a right to terminate the pledge at any time during the period of validity of the pledge and to acquire ownership of the pledged property for the purpose of using it as a way to secure its obligations (rehypothecation). Starting from the moment when the pledgee exercises the mentioned right, the pledgor shall have the right to have the collateral returned by the pledgee or to claim from the pledgee an amount equal to the value of the collateral; unless otherwise provided for by the relevant contract of pledge or agreement, the pledgor may exercise said right on the day of discharging its obligation.

(Article 252.1 supplemented by HO-190-N of 27 October 2016)

Article 253. Types of pledge

Types of pledge shall be:

(1) security deposit;

(2) pledge of property handed over to a pawnshop;

(3) pledge of rights;

(4) pledge of monetary means;

(5) hard pledge;

(6) pledge of goods in circulation;

(7) mortgage.

Article 254. Security deposit

A pledge where the collateral passes to the possession of the pledgee shall be deemed to be a security deposit.

Article 255. Pledge of property handed over to a pawnshop

1. Acceptance of movable property of personal use of citizens as a pledge for securing short-term credits shall be carried out as entrepreneurial activities by specialised organisations — pawnshops — having permission (licence) therefor.

2. The contract of pledge of the property kept in pawnshop shall be formulated by issuance of a pledge ticket by pawnshop.

3. The pledged property shall be handed over to a pawnshop.

4. Pawnshop shall be obliged to insure, at its expense, the property accepted as pledge to the benefit of a pledgor in the full amount of its value, in accordance with the market value of property of the given type and quality at the moment of accepting the pledge.

5. Pawnshop shall not have the right to use and dispose of the pledged property.

6. Pawnshop shall bear liability for loss of and harm to the pledged property.

7. In case of failure to return the amount of the credit secured by pledge within the specified term, the pawnshop shall have the right to realise (sell) that property through public biddings. Thereafter, the claims of a pawnshop to a pledgor (debtor) shall be redeemed, even when the amount received from realisation of the pledged property is insufficient for the full satisfaction thereof.

8. The rules of giving credit by pawnshops to the citizens through pledge of the property belonging to them shall be established by law.

9. Conditions of the contract of pledge of property in pawnshop, which restrict the rights of a pledgor in comparison with the rights reserved to him or her by this Code and other laws, shall be null and void.

Article 256. Pledge of right

1. In case of pledge of right, the collateral shall be the right subject to alienation, including the right of participation in the statutory (share) capital of an economic partnership or a company or in equity capital of a commercial cooperative, the right of claim and other rights subject to alienation.

Legal relations pertaining to the pledge of the right to subsoil use shall be regulated by the Subsoil Code of the Republic of Armenia.

2. The right given for a term may be collateral only until the expiry of the term of its effectiveness.

3. Pledge of the right subject to state registration shall be valid from the moment of its state registration.

4. In case of pledge of a right certified by a definitive security, the security shall be handed over to the pledgee or deposited with a bank or notary public, unless otherwise provided for by the relevant contract.

(Article 256 edited by HO-188-N of 04 October 2005, amended by HO-110-N of 17 June 2016, supplemented by HO-400-N of 16 July 2020)

Article 257. Pledge of monetary means

Monetary means that are collateral shall be kept in deposit account of a bank or notary public. Interests accrued to that amount shall belong to a pledgor, unless otherwise provided for by contract.

In case of redemption of pledged securities, the monetary means generated as a result of redemption shall become collateral.

(Article 257 supplemented by HO-79-N of 23 May 2006)

Article 258. Hard pledge

Hard pledge shall be considered the pledge the collateral of which is left with a pledgor under the lock of pledgee or with marks attesting the pledge, as well as the collateral left with a pledgor or the right of pledge to which is registered as prescribed by law.

(Article 258 supplemented by HO-188-N of 4 October 2005, amended by HO-238-N of 15 December 2005)

Article 259. Pledge of goods in circulation

1. Pledge of goods in circulation shall be considered the pledge of goods left with a pledgor by reservation to a pledgor of the right to change the composition and natural form of the pledged property (stock of goods, raw materials, materials, intermediate products, manufactured goods, etc.), provided that the total value thereof is not less than that indicated in the contract of the pledge.

Reduction of the value of pledged goods in circulation shall be permitted in proportion to the fulfilled part of the obligation secured by pledge, unless otherwise provided for by contract.

2. The goods in circulation alienated by a pledgor shall terminate being collateral, upon passing to the ownership of the acquirer, and the goods acquired by a pledgor indicated in the contract of pledge shall become collateral after the right of ownership thereto arises for a pledgor.

3. Pledgor of goods in circulation shall be obliged to keep a book of entries for pledges in which records are made on the conditions of pledge of goods as of the day of last operation and on all the operations changing the composition or natural form of pledged goods, including the processing thereof, unless other conditions of supervision over the activities of a pledgor are provided for by contract.

4. In case of violation by a pledgor of the conditions of pledge of goods in circulation, a pledgee shall have the right to suspend the operations carried out with the pledged goods by placing his or her marks thereon, until the violation is eliminated.

§ 2. MORTGAGE

1.GENERAL PROVISIONS ON MORTGAGE

Article 260. Concept of mortgage

A pledge of immovable property, as well as a pledge of a right to land development or a right to purchase immovable property in a multi-apartment or sub-divided building under construction or dwelling shall be deemed to be mortgage.

(Article 260 edited by HO-188-N of 4 October 2005, supplemented by HO-87-N of 19 June 2015, HO-136-N of 25 May 2022)

Article 261. Contract of mortgage

Under the contract of mortgage, one party — the pledgee — who is a creditor under credit contract or by other obligation (principal obligation) secured by mortgage, shall have the preferential right to satisfy his or her pecuniary claims from the value of the pledged property under that obligation ahead of other creditors of a pledgor.

Article 262. Content of the contract of mortgage

1. Names and places of residence (registered office) of parties, subject of mortgage, essence, amount and the term of fulfilment of the obligation secured by mortgage should be indicated in the contract of mortgage. In case of issuance of mortgage-backed securities based on a prospectus, the contract of mortgage shall, instead of the name and place of residence (registered office) of the pledgee, indicate that the pledgee is the owner of (nominee holding) the security indicated in the register kept by the person keeping records on rights to securities.

2. The subject of mortgage shall be determined by its name, indication of place of location and the description sufficient for identification of that subject.

When the subject of mortgage is the right belonging to the pledgor, the ground for arising of this right, as well as the immovable property to which the right concerns and the state body having registered the right, should be described in the contract.

3. The obligation secured by mortgage, its amount, grounds for arising and term of fulfilment thereof should be indicated in the contract of mortgage.

When the obligation is based on a contract, the parties to the contract, the year, the month, the day, and the place of its conclusion should be indicated. When the amount of the obligation secured by mortgage is to be determined in future, the procedure for determining it and other necessary conditions should be indicated in the contract of mortgage.

4. When the obligation secured by mortgage is to be fulfilled part by part, the terms or frequency of relevant payments, the amounts thereof or conditions necessary for determining those amounts shall be indicated in the contract of mortgage.

5. When providing credit for acquiring a land parcel, security of an obligation may be provided for by the contract of mortgage through pledge of the land parcel being newly acquired.

(Article 262 edited by HO-188-N of 4 October 2005, supplemented by HO-110-N of 17 June 2016)

Article 263. Form of contract of mortgage

1. The contract of pledge may be both bilateral and multilateral.

2. The parties may conclude a contract of mortgage containing elements of several contracts. The rules on those contracts, elements of which are contained in the contract of mortgage, shall apply to the relations of parties of such contract by relevant parts, unless otherwise follows from the agreement of parties or essence of the contract of mortgage.

3. The contract of mortgage shall be concluded in writing, with the signature of pledgor and pledgee, as well as of debtor, when a pledgor is not a debtor, and when an agreed expression of will of three and more parties is needed for the conclusion of such contract — with the signatures of other parties, by drawing up one single document. In case of issuance of mortgage-backed securities based on a prospectus, the contract of mortgage may be concluded through an exchange of instruments.

4. The contract of mortgage shall be notary certified. In case of issuance of mortgage-backed securities based on a prospectus, the contract of mortgage shall constitute an integral part — including a separate annex (contract of mortgage) — of the prospectus and shall be notary certified.

(Article 263 edited by HO-188-N of 4 October 2005, supplemented by HO-110-N of 17 June 2016)

Article 264. State registration of right of mortgage

1. The right of pledge under the contract of mortgage shall be subject to registration.

1.1. In case of issuance of mortgage-backed securities based on a prospectus, the (first) state registration of the rights of pledge under the contract of mortgage shall be carried out on the basis of the contract of mortgage constituting an integral part — including a separate annex — of the prospectus. Upon issuance of mortgage-backed securities based on a prospectus, the (further) state registration of the rights of pledge under the contract of mortgage shall be carried out on the basis of a relevant excerpt from the register kept by the person keeping records on rights to securities. Moreover, in each case of changes concerning owners of mortgage-backed securities issued based on a prospectus, the rights of the new pledgee shall be deemed to have passed state registration from the moment the right of ownership to securities has been recorded in the register kept by the person keeping records on rights to securities.

2. The procedure for state registration of the contract of mortgage shall be prescribed by the law on state registration of rights to property.

(Article 264 edited by HO-188-N of 4 October 2005, supplemented by HO-110-N of 17 June 2016)

2.MORTGAGE OF LAND PARCELS

Article 265. Limitations of mortgage of land parcels

1. Only land parcels belonging to citizens and legal persons by the right of ownership may be pledged under a contract of mortgage. In case of mortgage of a land parcel, the right of pledge shall, by virtue of law, also extend to the buildings and premises of a pledgor that are situated on that land parcel or are under construction.

2. In case of common ownership of a land parcel, a mortgage may be established on the land parcel owned by a citizen or legal person, which:

(1) is separated in kind from the land parcel in the common ownership as a separate property, and the rights thereto are registered as prescribed by the law on state registration of rights to property; or

(2) falls under common shared ownership, in case of which the mortgage extends to the share separated in-kind in the right of ownership over the land parcel owned by the pledgor under the right of ownership and registered as prescribed by the Law “On state registration of rights over property”.

(Article 265 edited by HO-188-N of 4 October 2005, HO-136-N of 25 May 2022)

Article 266. Mortgage of the land parcel on which buildings or premises of pledgor are located

(Article repealed by HO-188-N of 4 October 2005)

Article 267. Construction of buildings and premises by pledgor on the pledged land parcel

Pledgor shall have the right, without consent of a pledgee, to construct, in the prescribed manner, buildings and premises on the land parcel pledged by the contract of mortgage, unless otherwise provided for by the contract of mortgage. The right of pledge shall also extend to those buildings and premises, by virtue of law.

(Article 267 edited by HO-188-N of 4 October 2005)

Article 267.1 Mortgage of the development right

In case of mortgage of the development right, a pledgor shall have the right to exercise his or her development right.

(Article 267.1 supplemented by HO-188-N of 4 October 2005)

Article 268. Mortgage of the land parcel burdened with rights of third persons

1. When mortgage is established to the land parcel which is burdened with the development right of another person, the person enjoying development rights shall preserve his or her development rights and obligations, as prescribed by law or contract, in the same volume and for the same term.

2. In case of levy of execution on the land parcel or the realisation thereof — in addition to the rights and duties that the pledgor has had with respect to the person carrying out development — shall pass to the acquirer.

3. Where mortgage has been established over a land parcel buildings and premises under construction whereon are burdened with the right to purchase immovable property in a multi-apartment or sub-divided building under construction or dwelling, persons having a right to purchase immovable property under construction or dwelling shall preserve their rights to the extent and within the time limits referred to in the relevant contract.

4. In case of levy of execution on or realisation of a land parcel, as well as buildings and premises under construction thereon, any encumbrances connected with the rights of persons having a right to purchase immovable property in relevant multi-apartment or sub-divided building under construction or dwelling shall also pass to the acquirer along with the rights passing to thereto with the transfer of the land parcel, as well as of the buildings and premises.

(Article 268 edited by HO-188-N of 4 October 2005, supplemented by HO-87-N of 19 June 2015, supplemented, amended by HO-136-N of 25 May 2022)

3. MORTGAGE OF RESIDENTIAL HOUSES (APARTMENTS), BUILDINGS AND PREMISES

Article 269. General provisions on mortgage of residential houses (apartments), buildings and premises

1. Mortgage of multi-apartment and private residential houses and apartments belonging to the ownership of the State or community shall not be permitted.

2. Hotels, hostels, rest houses, summer houses, garden cottages and other buildings and premises not envisaged for permanent residence may be subject of mortgage on general basis.

Article 270. Mortgage of apartments or non-residential areas in multi-apartment or sub-divided buildings or that of dwellings

(Title edited by HO-136-N of 25 May 2022)

1. In case of mortgage of an apartment or non-residential area in multi-apartment or sub-divided building or dwelling, the corresponding share in the right of shared ownership to the land parcel and common property of the building shall be deemed as pledged along with the apartment or non-residential area or dwelling, by virtue of law.

2. In case of mortgage of an apartment or non-residential area in multi-apartment or sub-divided building under construction or dwelling, the right of mortgage of the apartment or the non-residential area or the dwelling shall extend to the corresponding share held in the land parcel under the right of common shared ownership, until the certificate of occupancy of the building is formulated.

3. The right of mortgage shall extend to the apartment or non-residential area or dwelling acquired by the right of ownership and the corresponding land parcel and share in the right of common shared ownership, from the moment of formulation of the act of completion of construction of the buildings, premises indicated in part 2 of this Article, and state registration.

4. (point repealed by HO-238-N of 15 December 2005)

(Article 270 edited by HO-188-N of 4 October 2005, amended by HO-238-N of 15 December 2005, edited, supplemented, amended by HO-136-N of 25 May 2022)

Article 271. Mortgage of residential houses, buildings and premises under construction

1. When granting credit for construction, reconstruction, repair, renovation of a residential house, building or premise, security of the obligation by the land parcel, uncompleted construction and materials and equipments acquired for construction belonging to the pledgor may be provided for by the contract of mortgage.

2. When granting credit for construction, reconstruction of a building or premise on land parcels under the right of use, security of the obligation by the development rights and materials and equipments — acquired for construction belonging to the person carrying out development — may be provided for by the contract of mortgage.

(Article 271 edited by HO-188-N of 4 October 2005)

Article 272. Levy of execution on pledged residential house or apartment

1. Levy of execution on pledged residential house or an apartment and the realisation thereof shall not be a ground for eviction of persons having the right to use the residential premise, except for the cases provided for by points 2 and 4 of this Article.

2. After the levy of execution on pledged residential house or apartment and the realisation of that property, pledgor and the persons having the right to use the residential premise shall be obliged to vacate the occupied residential premise, upon request of the owner of house (apartment), not later than within a month.

3. The persons residing in the pledged house or apartment under the conditions of the contract of lease of residential premise before conclusion of the contract of mortgage shall not be subject to eviction, when realising the pledged residential house or apartment, unless otherwise provided for by contract.

4. The persons residing in the pledged house or apartment under the conditions of the contract of lease of residential premise concluded after conclusion of the contract of mortgage shall be subject to eviction within the term provided for by point 2 of this Article when realising the pledged residential house or apartment unless otherwise provided for by contract.

(Article 272 edited by HO-188-N of 4 October 2005)

CHAPTER 16

PROTECTION OF THE RIGHT OF OWNERSHIP AND OTHER PROPERTY RIGHTS

Article 273. Recognition of the right of ownership

The owner shall have the right to require recognition of his or her right of ownership.

Article 274. Right to reclaim one’s property from another's illegal possession

The owner shall have the right to reclaim his or her property from another's illegal possession.

Article 275. Right to reclaim one’s property from good-faith acquirer

1. When the property has been acquired by compensation from a person who had no right to alienate the property, and the acquirer has not known and could have not known (good-faith acquirer) about that, the owner shall have the right to reclaim the property concerned from the acquirer only in case the property has been lost by the owner or the person to whose possession that property has been transferred by the owner, or it has been unlawfully taken from one or the other, or has otherwise come out of their possession independent of their will.

2. When the property has been acquired without compensation from a person who had no right to alienate it, the owner shall have the right to reclaim that property in any case.

3. Monetary means, as well as bearer securities may not be reclaimed from good-faith acquirer.

4. The owner shall have the right to reclaim the searched goods and/or transportation means — under the headings 8702, 8703, 8704, 8705 of the Foreign Economic Activity Commodity Nomenclature — with reprinted or deleted numbers of the engine or identification numbers or with other signs of unlawful taking from the good-faith acquirer within a period of one year after informing the state body authorised by the Government of the Republic of Armenia, which is competent to duly notify the owner as prescribed by the legislation.

(Article 275 supplemented by HO-179-N of 16 September 2009)

Article 276. Settlements when returning property from illegal possession

1. When reclaiming property from another's illegal possession, the owner shall have the right to require from the person who has known or should have known that his or her possession is illegal (bad-faith possessor) to return or compensate also all those income that the person has received or could have received during the whole period of illegal possession of the property, and to require from good-faith possessor to return or compensate all those income that he or she has received or could have received starting from the moment when he or she has learnt or should have learnt that his or her possession is illegal or has been served a notification on returning the property upon claim of the owner.

2. Both good-faith and bad faith possessors in their turn shall have the right to require from the owner the necessary expenses on the property incurred by them starting from the moment when the income received from the property reach the owner.

3. Good-faith possessor shall have the right to retain the improvements made by him or her when they may be separated without causing damage to the property. When it is impossible to separate the improvements, the good-faith possessor shall have the right to require compensation for the expenses incurred by him or her for improving the property, but not more than the amount of value added of the property.

Article 277. Protection of rights of owner from violations not related to deprivation of possession

Owner shall have the right to require elimination of every violation of his or her rights even when those violations have not been accompanied with deprivation of possession.

Article 278. Protection of rights of the possessor not considered as owner

The rights provided for by Articles 274-277 of this Code shall also belong to the person who is not an owner, but possesses the property on the ground provided for by law or contract. That person shall have the right to protection of his or her possession also against the owner.

CHAPTER 17

TERMINATION OF RIGHT OF OWNERSHIP AND OTHER PROPERTY RIGHTS

Article 279. Grounds for termination of the right of ownership and other property rights

1. The right of ownership shall terminate in case of alienation of the property by its owner, renunciation of the right of ownership, destruction of property and in other cases of losing the right of ownership to the property provided for by law.

2. Compulsory taking or seizure of the property of an owner shall not be permitted, except for the cases when, on the grounds provided for by law:

(1) execution is levied upon the property for obligations (Article 281);

(2) the property, that may not belong to the given person by virtue of law, is alienated (Article 282);

(3) the ownership is alienated for the purpose of ensuring overriding public interests (Article 218);

(4) mismanaged cultural values are taken (Article 284);

(5) requisition is carried out (Article 285);

(6) confiscation is carried out (Article 288);

(7) the legal person is reorganised or liquidated by court judgment (Articles 63 and 67);

(8) the property is alienated in the cases provided for by point 4 of Article 197, Articles 208 and 220 of this Code;

(9) civil forfeiture of illegal assets is enforced.

3. The property belonging to the ownership of the State shall be alienated to citizens and legal persons as prescribed by the laws on privatisation (denationalisation).

4. Nationalisation of the property belonging to the ownership of citizens and legal persons shall be carried out on the basis of law, with compensation of the value of that property and other damages, as prescribed by Article 286 of this Code.

5. Property rights shall terminate in the cases provided for by Articles 217, 217.7 and 247 of this Code, as well as in other cases provided for by law or contract.

(Article 279 edited by HO-187-N of 27 November 2006, amended by HO-70-N of 1 March 2017, edited by HO-408-N of 24 October 2018, supplemented by HO-248-N of 16 April 2020)

Article 280. Renunciation of the right of ownership

1. A citizen or a legal person may renounce the right of ownership to the property belonging to him or her by declaring in writing about that or by performing such actions which obviously attest his or her isolation from the possession, use and disposal of the property, without intent to preserve any right to that property, and in the case provided for by part 4 of Article 275 of this Code — without reclaiming the property. Where the owner of the goods and/or transportation means provided for by part 4 of Article 275 of the Code is unknown, the expiration of the period of one year after the import thereof shall be considered as a basis for recognising the fact of renunciation of the right of ownership.

2. Renunciation of the right of ownership shall not be a ground for termination of the rights and obligations of the owner to the property, until another person acquires the right of ownership to that property.

(Article 280 supplemented by HO-179-N of 16 September 2009)

Article 281. Levy of execution on property for obligations of owner

1. The property belonging to the owner may be seized for his or her obligations through levy of execution thereon on the basis of court judgment, unless other procedure for the levy of execution is provided for by law.

2. The right of the owner to the property upon which execution has been levied shall terminate at the moment when the right of ownership arises for the person to whom the property concerned passes.

Article 282. Termination of the right of ownership of a person to the property that may not belong to him or her

1. When, on the grounds permitted by law, the property passes as ownership to a person who could not own it at the moment of arising of the right of ownership by virtue of law, the owner should alienate that property within a period of one year from the moment when the right of ownership thereto arises, unless another term is provided for by law.

1.1. Where property having passed to a person under the right of ownership upon grounds eligible by virtue of law may not be owned thereby by virtue of law upon the ground of emergence of a factual circumstance having arisen following the establishment of the right of ownership over it, the owner must alienate this property within one year following the emergence of this circumstance, unless another time limit is provided for by law.

2. In cases the owner fails to alienate the property within the term referred to in point 1 or 1.1 of this Article, such property, taking into account its nature and purpose, upon court judgment delivered on the basis of application of the state or local self-government body, shall be compulsorily sold and the received amount shall be transferred to the former owner or shall turn into the state or community ownership, and the value of the property shall be compensated to the former owner. In this case, the expenses for alienation of the property shall be deducted.

3. When a citizen or a legal person, on the grounds permitted by law, has property for the acquisition of which a special permission is needed, and the request of the owner to receive such permission is rejected, that property shall be alienated in the manner established for the property that may not belong to the owner concerned.

(Article 282 amended, supplemented, edited by HO-74-N of 16 January 2018)

Article 283. Alienation of immovable property in connection with taking of the land parcel on which it is located

(Article repealed by HO-187-N of 27 November 2006)

Article 284. Taking of mismanaged cultural values

1. In cases when the owner of cultural values which are particularly valuable and protected by the State in accordance with law, mismanages them, which threatens the loss of the purpose thereof, such values may be taken from the owner by court judgment through compensation of its price by the State.

2. When taking cultural values, the value thereof shall be compensated to the owner upon agreement of parties, and in case of dispute — in the amount defined by court.

Article 285. Requisition

1. In cases of natural disasters, technological accidents, epidemics and other circumstances of emergency nature, the property may be taken from the owner, in the conditions and as prescribed by law, upon decision of the state bodies, to the benefit of the society, on the condition of paying its value (requisition).

2. The owner may challenge in the court the amount of the value of compensation of the compulsorily taken property.

3. The person, whose property has been compulsorily taken, shall have the right to require returning to him or her the preserved property when the circumstances in connection to which the requisition has been carried out are eliminated.

Article 286. Consequences of termination of the right of ownership by virtue of law

In case a law terminating the right of ownership is adopted by the Republic of Armenia, the damages caused to the owner as a result thereof, including the value of the property, shall be compensated by the State. Disputes on compensation of damages shall be settled by court.

Article 287. Appraisal of property upon termination of the right of ownership

Property shall be appraised at the market value thereof upon termination of the right of ownership.

Article 288. Confiscation

(Title edited by HO-180-N of 9 June 2022)

1. In the cases provided for by law, property may be taken from the owner without compensation by a criminal judgment as property directly or indirectly generated or derived in the result of a crime, income and other benefit derived from the use of this property, a tool and means used or envisaged for use for committing a crime, and an object of crime. In the cases provided for by law, property may be taken from the owner without compensation also on the basis of the court judgment.

(Article 288 edited by HO-180-N of 9 June 2022, supplemented by HO-119-N of 22 March 2023)

Article 288.1. Civil forfeiture of illegal assets

1. Illegal assets shall be forfeited by a court judgment, as prescribed by the Law of the Republic of Armenia “On civil forfeiture of illegal assets”.

(Article 288.1 supplemented by HO-248-N of 16 April 2020)

FIFTH SECTION

TRANSACTIONS. REPRESENTATION. TERMS. NOTIFICATIONS. STATUTE OF LIMITATIONS

(Title supplemented by HO-110-N of 17 June 2016)

CHAPTER 18

TRANSACTIONS

§ 1.CONCEPT, TYPES AND FORMS OF TRANSACTIONS

Article 289. Concept of transaction

Transactions shall be the actions of citizens and legal persons directed at the establishment, amendment or termination of civil rights and obligations.

Article 290. Types of transactions

1. Transactions may be bilateral or multilateral (contract), as well as unilateral.

2. The expression of concerted will by two parties (bilateral transaction) or by three or more parties (multilateral transaction) shall be required for entering into a contract.

3. Expression of will by one party shall be necessary and sufficient for entering into a unilateral transaction in compliance with the law, other legal acts or agreement of the parties.

Article 291. Obligations under a unilateral transaction

Unilateral transaction shall create obligations for the person having entered into the transaction. It may create obligations for other persons solely in cases provided for by law or the agreement with these persons.

Article 292. Legal regulation of unilateral transactions

General provisions on obligations and contracts shall be applied respectively to unilateral transactions unless these contradict with the law, the unilateral nature and essence of the transaction.

Article 293. Transactions entered into under condition

1. Transaction shall be deemed to be entered into under a condition precedent, where the parties have made the arising of rights and obligations conditional on a circumstance, the occurrence or non-occurrence whereof is indefinite.

2. Transaction shall be deemed to be entered into on resolutory condition, where the parties have made the termination of the rights and obligations conditional on a circumstance, the occurrence or non-occurrence whereof is indefinite.

3. Where the party, for whom the fulfilment of the condition is not advantageous, has impeded in bad faith the fulfilment of the condition, the condition concerned shall be recognised as fulfilled.

4. Where the party, for whom the fulfilment of the condition is advantageous, has contributed in bad faith to the fulfilment of the condition, the condition concerned shall be recognised as not fulfilled.

Article 294. Forms of transactions

1. Transactions shall be entered into in a verbal or written (simple or notarial) form.

2. A transaction, which may be entered into verbally, shall be deemed to be entered into also in the case when the will for entering into the transaction is evident from the conduct of the person.

3. In cases provided for by law or by agreement of parties, silence shall be deemed an expression of will to enter into a transaction.

Article 295. Verbal transaction

1. A transaction, for which written (simple or notarial) form is not prescribed by law or by agreement of parties, may be entered into verbally.

2. All transactions that are made at the time of entering into may be entered into verbally, with the exception of transactions, for which notarial form is prescribed, as well as those transactions for which the failure to observe the simple form shall entail invalidity thereof, unless otherwise defined by the agreement of parties.

3. Transactions aimed at the execution of a written contract may be entered into verbally upon the agreement of parties, unless it contradicts law, other legal acts and the contract.

Article 296. Written transaction

1. Written transaction must be entered into through drawing up a document reflecting the content of the transaction and signed by the person or persons entering into the transaction or persons duly authorised thereby.

Bilateral (multilateral) transactions may be concluded in the manners provided for by point 4 of Article 450 of this Code.

2. Additional requirements may be prescribed by law, other legal acts and by agreement of parties, to which the form of transaction must comply (conclusion on a certain type of blank, etc.), and consequences may be stipulated for the failure to meet those requirements. Where no such consequences are envisaged, the consequences for the failure to observe the simple written form of a transaction shall apply (point 1 of Article 298).

3. In making transactions the use of facsimile reproductions of signatures, through mechanical and other means of copy, electronic digital signature or other similar copy of one’s signature shall be allowed in cases and under the procedure prescribed by law, other legal acts or agreement of parties.

4. Where a citizen, due to a physical defect, disease or illiteracy, is unable to sign with his or her own hand, the transaction upon his or her request may be signed by another citizen. The signature of the latter must be certified by a notary public or other official having the right to perform notarial actions, with an indication of those reasons by virtue whereof the party entering into the transaction has been unable to sign it.

(Article 296 amended by HO-398-N of 24 October 2018, HO-184-N of 24 May 2023)

Article 297. Transactions concluded in a simple written form

1. With the exception of transactions requiring notary certification, the following must be concluded in a simple written form:

(1) transactions of legal persons among each other and with citizens;

(2) transactions among citizens in an amount exceeding the twenty-fold of the defined minimum salary, and in cases prescribed by law — transactions irrespective of the amount.

2. Simple written form shall not be required for those transactions, which according to Article 295 of this Code may be concluded verbally.

Article 298. Consequences for the failure to observe the simple written form of a transaction

1. Failure to observe the simple written form of transaction shall, in case of disputes, forfeit the parties of the right to invoke witness testimony in confirmation of the transaction and the terms and conditions thereof, but shall not forfeit the right to submit written and other evidence.

2. Failure to observe the simple written form of transaction in cases directly referred to in the law or the agreement of parties shall entail the invalidity thereof.

3. Failure to observe the simple written form of foreign economic transaction shall entail the invalidity thereof.

Article 299. Transactions certified by a notary public

1. Notary certification of transactions shall be made by a notary public or by an official having the right to perform notarial actions, with a certificate of endorsement, on the document complying with the requirements of Article 296 of this Code.

2. The procedure for the notary certification of a transaction shall be defined by the law on notaries.

3. Notary certification of transactions shall be mandatory:

1) in the cases referred to in this Code;

2) upon the request of any of the parties, even if that form is not required by law for the given type of transactions.

4. The requirement for notary certification prescribed by sub-point 1 of point 3 of this Article shall not apply to the contracts provided for by Articles 204.1, 213, 225, 263, 562, 572, 610, 654, 662, 682, 686 or 959 of this Code, as well as to contracts of bulk transfer of loans secured by immovable property, contracts on consolidation and separation of immovable property, where all the conditions set forth therein are written in accordance with the standard contract conditions approved by the Government of the Republic of Armenia, other conditions are not included therein, and the authenticity of signatures of the parties of those contracts has been verified as prescribed by the Law “On state registration of rights to property”.

Conformity of the contracts provided for in this point with the standard contract conditions approved by the Government of the Republic of Armenia shall be approved as prescribed by the law on state registration of rights to property.

(Article 299 supplemented by HO-248-N of 23 June 2011, supplemented by

HO-110-N of 17 June 2016, amended by HO-70-N of 1 March 2017, HO-316-N of 18 June 2020, HO-384-N of 22 November 2023)

Article 300. Consequences for failure to observe the notarial form of transaction

1. The failure to observe the notarial form of transaction shall entail the invalidity thereof. Such transaction shall be null and void.

2. When one of parties has fully or partially performed a transaction requiring notary certification, whereas the other party evades from the notary certification of transaction, the court shall be entitled to declare the transaction as valid upon the request of the party having performed the transaction. In that case further notary certification of transaction shall not be required.

3. The party unreasonably evading from notary certification of a transaction must compensate the other party for the damages relating to the delay of entering into the transaction.

Article 301. State registration of rights arising from transactions

1. Rights arising from transactions made on immovable property shall be subject to state registration.

2. Rights arising from transactions made on movable property shall be subject to state registration in cases provided for in this Code and other legal acts.

3. The procedure for state registration and the grounds for renouncing registration shall be defined by law.

(Article 301 amended by HO-40-N of 8 April 2010)

Article 302. Consequences of failure to observe the requirements of state registration of rights arising from transactions

1. Failure to observe the requirement of state registration of rights arising from transactions shall result in the invalidity thereof. Such transaction shall be null and void.

2. When the transaction has been entered into properly, and one of the parties refuses to register the rights arising from the transaction, the court shall have the right to render, upon the request of the other party, a judgment on the registration of those rights. In that case the rights arising from the transaction shall be registered based on the court judgment.

3. The party unreasonably evading from state registration of rights arising from transaction must compensate the other party for the damages relating to the delay of registration.

§ 2. INVALIDITY OF TRANSACTIONS

Article 303. Disputable and void transactions

1. A transaction shall be invalid by virtue of recognition thereof as such by the court on the grounds defined by this Code (disputable transaction) or irrespective of such recognition (null and void transaction).

2. A claim for recognising a disputable transaction as invalid may be filed by persons referred to in this Code.

3. Any interested person may file a claim on application of the consequences of the invalidity of a null and void transaction. The court shall have the right to apply such consequences on its own initiative.

Article 304. General provisions on consequences of invalidity of a transaction

1. An invalid transaction shall not entail legal consequences, except for the consequences relating to the invalidity of the transaction. Such a transaction shall be invalid as from the moment of making it.

2. In case of invalidity of a transaction each of the parties shall be obliged to return the other party all that has been received under the transaction and in case of impossibility to return in kind what has been received (including when whatever has been received is expressed in making use of property, performed work or delivered service) to compensate its value in money, unless other consequences of invalidity of transaction are provided for by law.

3. When the content of a disputable transaction implies that it may terminate only in the future, the court shall terminate its effectiveness in the future by declaring the transaction as invalid.

Article 305. Invalidity of a transaction not complying with the requirements of the law or other legal acts

A transaction not complying with the requirements of the law or other legal acts shall be invalid, unless the law defines that such a transaction is null and void or does not envisage other consequences of violation.

Article 306. Invalidity of fraudulent and sham transactions

1. А fraudulent transaction — that is a transaction entered into ostensibly, without an intention to bring about relevant legal consequences — shall be null and void.

2. A sham transaction — that is a transaction entered into with the purpose of disguising another transaction — shall be null and void. Given the essence of that transaction, the rules relating to the transaction, which the parties have in reality had in mind while making the sham transaction, shall apply to this transaction.

Article 307. Invalidity of a transaction entered into by a citizen recognised as having no active legal capacity

1. A transaction entered into by a citizen recognised as having no active legal capacity as a consequence of mental disorder shall be null and void.

Each of the parties to such a transaction shall be obliged to return to the other party in kind all that has been received, and in case of impossibility to return in kind — to compensate its value in money.

In addition, the party having active legal capacity shall be obliged to compensate the other party for the actual damage incurred thereby, if he has known or should have known about the lack of active legal capacity of the other party.

2. Based on the interests of a citizen declared as having no active legal capacity as a consequence of mental disorder, a transaction entered into thereby may be recognised as valid by the court upon the claim of the guardian, if it has been entered into to the benefit of that citizen.

Article 308. Invalidity of transaction entered into by a citizen recognised as having limited active legal capacity

1. A transaction on disposal of property entered into, without the consent of the curator, by a citizen recognised as having limited active legal capacity, may be recognised as invalid by the court upon the claim of the curator.

When such a transaction has been recognised as invalid, the rules provided for in the second and third paragraphs of Article 307(1) of this Code shall correspondingly apply.

2. The rules of this Article shall not cover small household transactions, which a citizen with limited active legal capacity may independently enter into in accordance with Article 32 of this Code.

Article 309. Invalidity of a transaction entered into by a minor not having attained the age of fourteen

1. A transaction entered into by a minor (junior) not having attained the age of fourteen shall be null and void. Rules of the second and third paragraphs of Article 307(1) of this Code shall apply with respect to that transaction.

2. Based on the interests of a junior, the transaction entered into thereby may be declared as valid by the claim of the parents, adopters or the guardian thereof, if it has been entered into to the benefit of the junior.

3. Rules of this Article shall not cover small household and other transactions entered into by juniors, which they have the right to independently enter into in accordance with Article 29 of this Code.

Article 310. Invalidity of a transaction entered into by a minor aged fourteen to eighteen

1. A transaction entered into by a minor aged fourteen to eighteen years without the consent of the latter’s parents, adopters or curator, in cases where such a consent is required in accordance with point 1 of Article 30 of this Code, may be declared as invalid by the court upon the claim of the parents, adopter or the curator.

When such a transaction has been recognised as invalid, rules provided for by the second and third paragraphs of point 1 of Article 307 of this Code shall respectively apply.

2. Rules of this Article shall not extend to the transactions by minors having acquired full active legal capacity in compliance with the rules of Article 24 of this Code.

Article 311. Invalidity of a transaction entered into by a citizen unable to understand the meaning of or control own actions

1. A transaction entered into by a citizen with active legal capacity — who at the moment of entering into the transaction has been in such a state that he or she was unable to understand the meaning of his or her actions or control them — may be recognized as invalid through the court upon the claim of that citizen or those persons, the rights and interests whereof protected by law have been violated as a consequence of entering into that transaction.

2. A transaction, entered into by a citizen subsequently recognized as having no active legal capacity, may be recognized as invalid by the court upon the claim of his or her guardian, if it has been proven that the citizen at the moment of entering into the transaction was unable to understand the meaning of his or her actions or control them.

3. Where a transaction has been recognized as invalid based on this Article, the rules provided for in the second and third paragraphs of point 1 of Article 307 of this Code shall respectively apply.

Article 312. Invalidity of a transaction entered into under the influence of error in substantia

1. Transaction entered into under the influence of error in substantia may be declared invalid upon the claim of the party who has acted under the influence of misrepresentation.

Misrepresentation relating to the nature or such attributes of the subject-matter of the transaction shall have essential significance where it considerably reduces the possibilities to use it for its designated purpose.

Misrepresentation with respect to the motives of the transaction shall not be of essential significance.

2. Where a transaction has been declared as invalid as one entered into under the influence of error in substantia, the rules of provided for by Article 304 of this Code shall apply.

Moreover, the party by the claim of which the transaction has been declared as invalid shall have the right to claim compensation from the other party for the actual damage caused thereto if it proves that the misrepresentation has emerged at the fault of the other party. Where it has not been proved, the party, by the claim whereof the transaction has been declared invalid, shall be obliged to compensate the actual damage caused to the other party upon the claim of the latter, even if the misrepresentation has arisen in circumstances beyond the control of the misrepresented party.

Article 313. Invalidity of a transaction entered into under the influence of fraud, violence, threat, at the malicious collusion of the representative of one party with the other party or due to grave circumstances

1. A transaction made under the influence of fraud, violence, threat, at the malicious collusion of the representative of one party with the other party, as well as a transaction that a person has been compelled to enter into, due to grave circumstances, in ultimately disadvantageous conditions for him or her, from which the other party has benefited (enslaving transaction), may be declared as invalid by the court upon the claim of the injured person.

2. Where a transaction has been declared invalid on one of the grounds referred to in point 1 of this Article, the other party shall return to the injured person all that has been received under the transaction, and in case of impossibility to return in kind what has been received, shall compensate its value in money. The property of the injured person received under the transaction from the other party, as well as everything payable thereto from the other party shall be levied in execution for the benefit of the Republic of Armenia. In case of impossibility to hand over to the State the property in kind, its value shall be levied in money. Besides, the other party shall reimburse to the injured person the actual damage inflicted thereto.

Article 314. Invalidity of a transaction entered into by a legal person beyond the scope of its legal capacity