The Law of Georgia on Entrepreneurs in Georgia establishes a clear and modern framework for companies, shareholders, directors, creditors, and other stakeholders. It draws inspiration from European Union directives and aims to bring Georgian corporate law closer to international standards.
Modern Rules for Business Operations
The Law introduces a more transparent approach to company operations. An electronic portal now allows businesses to publish mandatory information, including details about reorganization. It also sets stricter rules on company names: a new company cannot register a name already in use.
Another important clarification concerns directors. Contracts between a company and its director are not employment agreements. Directors are not covered by labor law protections and must negotiate their contractual terms directly with shareholders.
Formation and Capital Contributions
A company’s capital is formed through contributions from shareholders. Contributions may be monetary or non-monetary (in kind), such as the transfer of tangible or intangible assets.
In an LLC, shareholders may also provide services or work to fulfill their obligations. For a JSC, however, the Law explicitly excludes services and works as valid forms of contribution. Only monetary or asset-based contributions are permitted.
A monetary contribution is complete once funds are transferred to the company’s bank account. A non-monetary contribution is fulfilled when ownership of the asset is transferred. In the case of a JSC, such contributions must be valued by an independent auditor, and the report must be published on the official Public Registry portal.
Flexibility for LLCs
The Law gives LLCs wide flexibility to raise and structure capital. An LLC may issue different classes of shares, either with a nominal value or as no-par value shares. It may choose to form subscribed capital in any amount, provided the total is not less than the combined value of its subscribed shares.
All LLC capital must be maintained in GEL, the Georgian national currency.
Capital Rules for JSCs
JSCs face stricter requirements. They must maintain a minimum subscribed capital of GEL 100,000, with at least 25% contributed at incorporation. Unlike LLCs, JSCs may determine their capital in any currency.
Non-monetary contributions must always be independently assessed. By excluding services or works as valid contributions, the Law ensures that JSC capital remains reliable and transparent, reflecting real assets or funds.
Ensuring Timely Contributions
The Law sets out safeguards against delays in shareholder contributions. If a shareholder fails to pay on time, they must pay double the annual interest rate set by the National Bank of Georgia.
If the payment remains outstanding, the company’s management may initiate a share forfeiture process. The shareholder has at least 30 days to fulfill their obligation. If they fail to do so, they lose their shares and any partial contributions already made.
Strengthening Georgia’s Corporate Landscape
The Law on Entrepreneurs strengthens Georgia’s corporate governance and market economy. By introducing clear rules, aligning with European standards, and protecting investors, it creates a more attractive environment for both domestic and foreign businesses.
This modern framework ensures a balance between flexibility for companies and accountability for shareholders, paving the way for Georgia’s economic growth.