JSC DemirBank creates a reserve fund of capital

JSC DemirBank creates a Reserve Fund (RF) of the bank’s capital and directs the main part of retained earnings in the amount of AZN 11 million (about $ 14 million) there. This was decided last Saturday, at the next general meeting of the shareholders of the structure.

With the equity capital (EC) of 21 million manat, the retained earnings of the bank at the end of 2013 reached 16 million manat. The net profit in 2013 exceeded 5 million manat, of which the dividend payment was more than 1 million manat. The yield on ordinary shares amounted to 4.75% and the yield on preferred ones was 15%.

The minority shareholders offered to increase the EC by the funds allocated for the creation of the Reserve Fund. The shareholders believe that the size of the share capital is low as compared with the bank's assets.

The Chairman of the Supervisory Board of JSC DemirBank Rahman Hajiyev said that in this case it is necessary to pay 10% tax from the base, as well as in the payment of dividends, and this means extra costs. This position is supported by the bank's chairman.

The minority shareholders of the bank are at a loss: intentionally or not knowing the situation, the bank's management is misleading the shareholders. The fact is that the decision of the Constitutional Court of Azerbaijan on December 7, 2011 said that net profit aimed at increasing the authorized capital is not taxed. Previously, the tax administration equated these funds to dividends and seized the corresponding 10% tax.

It is noteworthy that one of the two experts involved in the decision by the Constitutional Court of the Republic of Azerbaijan was a representative of DemirBank, as stated in the document of the highest judicial authority.

Note that another solution of the General Meeting of Shareholders agreed to a syndicated loan in the amount of AZN 50 million from Western financial institutions. In addition, amendments were made to the Charter and to the Supervisory Board of the bank.

DemirBank was established in 1989. The bank's shareholders are more than 850 businesses and individuals. The major shareholders are the European Bank for Reconstruction and Development (25% +1 share) and Netherlands Development Finance Company (FMO, 10%).

DemirBank with assets of 403.1 million manat by April 1, 2014 was among the top ten private banks of Azerbaijan. The aggregate bank capital is 61.4 million manat. -0 –