The issuance of securities to the public in Georgia is subject to a comprehensive regulatory framework designed to ensure transparency, investor protection, and market integrity. A central element of this framework is the requirement to prepare and publish a prospectus, which provides potential investors with the information necessary to make informed investment decisions.
The principal legislation governing prospectus requirements is the Law of Georgia on Capital Markets (the “Capital Markets Law”), supplemented by regulations of the National Bank of Georgia (the “NBG”). This article outlines the key legal requirements relating to prospectuses, including when a prospectus is required, its content, approval procedures, and legal implications.
Legal Framework and Regulatory Authority
The Capital Markets Law establishes the legal basis for public offerings of securities and the admission of securities to trading on regulated markets in Georgia. The law assigns supervisory and regulatory authority to the National Bank of Georgia, which is responsible for (i) reviewing and approving prospectuses; (ii) ensuring compliance with disclosure requirements; (iii) monitoring market participants and protecting investor interests.
The prospectus regime is built on the principle of full and fair disclosure, ensuring that investors have access to all material information regarding the issuer and the securities offered.
When Is a Prospectus Required?
As a general rule, a prospectus must be prepared and approved before: (i) Public offering of securities in Georgia; or (ii) Admission of securities to trading on a regulated market.
A public offering typically involves any communication to the public, in any form, presenting sufficient information about the terms of the offer and the securities to enable an investor to decide whether to purchase or subscribe to those securities.
Certain exemptions may apply under the Capital Markets Law. These may include:
- Offers addressed exclusively to qualified investors;
- Offers to a limited number of investors;
- Offers involving securities with a high minimum denomination;
- Other exemptions are defined by law or NBG regulations.
Where an exemption applies, the obligation to publish a prospectus may be waived, although alternative disclosure requirements may still be imposed.
Prospectus Approval Requirement
A prospectus must be submitted to and approved by the NBG before it is published or the offering is launched.
The approval process involves a review of whether the prospectus:
- Contains all required information;
- Is complete, consistent, and comprehensible;
- Does not contain misleading statements or omissions of material facts.
Approval by the NBG does not constitute an endorsement of the securities or the financial soundness of the issuer. Rather, it confirms compliance with statutory disclosure requirements.
Content of the Prospectus
The Capital Markets Law requires that a prospectus contain all information necessary to enable investors to make an informed assessment of: (i) the assets, liabilities, financial position, and prospects of the issuer; (ii) the rights attached to the securities; (iii) the risks associated with the investment. The information must be presented in a clear, accurate, and non-misleading manner, ensuring accessibility to both professional and retail investors.
The information must be presented in a clear, accurate, and non–misleading manner, ensuring accessibility to both professional and retail investors.
Publication and Validity
Once approved, the prospectus must be published in accordance with the requirements established by the Capital Markets Law and NBG regulations. A prospectus is generally valid for a specified period, during which it may be used for multiple offerings of the same securities, provided that it remains up to date.
Supplement to the Prospectus
If a material new factor, mistake, or inaccuracy arises after the approval of the prospectus and before the closing of the offer or admission to trading, the issuer is required to publish a supplement to the prospectus.
Investors who have already agreed to purchase or subscribe to securities before the publication of the supplement typically have the right to withdraw their acceptance within a specified period.
Liability for Prospectus Content
The Capital Markets Law establishes a liability regime for the information contained in a prospectus. Persons responsible for the prospectus—typically including the issuer, its management, and potentially other involved parties—may be held liable for false or misleading statements, or omission of material information required to be disclosed.
Practical Considerations for Issuers
Issuers planning a public offering or listing in Georgia should take into account several practical considerations:
- Early preparation of financial statements and disclosures;
- Engagement of legal and financial advisors;
- Coordination with the NBG during the review process.
- Implementation of internal controls to ensure disclosure accuracy.
The prospectus regime under Georgian capital markets law serves as a cornerstone of investor protection and market transparency. By requiring comprehensive and accurate disclosure before public offerings and listings, the law promotes informed investment decisions and confidence in the financial markets.
For issuers, strict compliance with prospectus requirements is essential not only for regulatory approval but also for building credibility with investors and ensuring the successful execution of capital market transactions in Georgia.