The Law on Entrepreneurs in Georgia establishes the legal framework for forming and managing companies, including limited liability companies (LLCs) and joint-stock companies (JSCs). It aligns corporate regulations with international best practices and European standards. The law provides clear guidance on company names, shareholder contributions, capital requirements, and corporate governance, making it essential knowledge for anyone planning to start a business in Georgia or attract investment.
Company Names and Legal Entities
Under the law, new legal entities must choose a unique company name. A name already in use by another company cannot be registered. This ensures transparency and avoids confusion among businesses and clients.
Types of Companies: LLCs and JSCs
Limited Liability Companies (LLCs)
LLCs enjoy flexible capital requirements and simplified procedures for attracting investors. Shareholders can contribute capital in multiple forms:
- Monetary contributions: Transfers to the company’s bank account.
- Non-monetary contributions: Transfer of tangible or intangible assets.
- Work or services: Shareholders may perform certain works or provide services as capital contributions.
LLCs can issue shares with nominal value, no-par value shares, or a combination of both. Companies may set subscribed capital at any amount, and capital must be maintained in the national currency, Georgian Lari (GEL).
Joint-Stock Companies (JSCs)
JSCs have stricter capital rules designed to attract investment and support the capital market. Key regulations include:
- Minimum subscribed capital requirements for incorporation.
- Monetary contributions are required; work or services cannot be used as capital contributions.
- Non-monetary contributions must be evaluated by an independent auditor, and reports are published on the official electronic registry portal.
- Shareholders are responsible for timely contributions; delays may trigger interest charges and potential share forfeiture.
Shareholder Contributions and Responsibilities
The law clearly defines shareholder obligations for both LLCs and JSCs. Contributions may be monetary or non-monetary, with non-monetary contributions requiring transfer of ownership rights.
If a shareholder fails to meet their contribution obligations, the company may:
- Charge interest on the outstanding amount.
- Initiate a share forfeiture process, allowing at least 30 days for the shareholder to complete the contribution.
- Reclaim the shares and any partial contributions if obligations remain unmet.
Management and Governance
Contracts between a company and its directors are not considered employment agreements. Directors must negotiate terms individually with the company and shareholders, and are not covered by labor protections. This approach provides clarity in management responsibilities while promoting flexibility in corporate governance.
Advantages of the New Legal Framework
The law is designed to support a growing market economy and the development of the capital market in Georgia. Key benefits include:
- Clear and transparent rules for company formation and operation.
- Flexible capital structures for LLCs to attract investment.
- Stricter, market-aligned rules for JSCs to protect shareholders and investors.
- Compliance with international best practices and European standards.
Overall, understanding these rules is essential for entrepreneurs, investors, and business professionals operating in Georgia. A robust legal framework simplifies company formation, supports investment, and fosters confidence in the Georgian business environment.