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Company Act in Georgia

Company Act in Georgia

The companies’ actions in Georgia are usually regulated by the Civil Code of Georgia (1997), the Law On Entrepreneurs (1994) and the Law On Assistance and Guarantees for Foreign Investments (1996). If you need information on these rules of law, our team of specialists in company registration in Georgia can offer assistance on the main regulations that you should know when setting up a local company. 

Businessmen who want to open a company in Georgia will find the most important regulations in the Law on Enterprises, which regulates the manner in which one can register a business here and the manner in which any legal entity may develop its business activity, as well as the obligations commercial entities have in the relation with the local institutions. The notaries, legal and accounting professions or activities related to the medicine, architecture, art and science are not considered entrepreneurial activities and are not regulated by this law.

What are the main company types in Georgia?  

There are some several forms of business recognized by the law in Georgia, as follows: sole proprietorships, joint stock companies, limited liability companies or cooperatives. All these forms are considered legal entities, but it must be noted that the sole proprietorship (or the sole trader) is not considered a separate business form, as there isn’t any distinction between the owner and the business itself. 

Also, the partnership activities are regulated by the Law on Entrepreneurs. There are two forms of partnerships: general or limited. The only forms of business that may have more than 50 partners are the stock companies and the cooperatives. You can receive in-depth information on how to register these company types from our team of consultants in company formation in Georgia

Where must companies in Georgia be registered?

Once the investors have started the procedure for company registration in Georgia, it will also be necessary to register the company with the Public Registry, a requirement applicable to all company types. For all the actions performed before the registration, the founders are directly responsible. A company may begin any commercial activities only after registration.

One of the most important regulations is that, if refunding is necessary in the limited liabilities companies opened in Georgia, stock companies and cooperatives, the founders must record the changes with the Public Registry. This fact is possible only by reducing the authorized capital.

Another rule stipulated by the law is that half of the company’s capital must be deposited when the founders are signing the company’s charter. If a member is not paying his or her share in the specific period of time, he or she must receive a notification where is specified the time limit when the debt can be paid. 

If this time limit is not respected, the member may be excluded from the company. The remaining partners must cover the missing part, after the member is excluded. If the capital contribution is made in kind, it must be changed into the appropriate cash value.

When registering a Georgian company, investors must also make sure that the trading name of the legal entity is unique at a national level. In case of a partnership, the name must contain at least one name of a general partner, this being a basic requirement. 

What are the legal obligations when registering a Georgian business form?

According to the Law on Entrepreneurs, Article 5, any person who wants to register a legal entity is legally required to provide a set of information on the future company and the registration authority should receive compulsory data, such as: the company name, the business form under which the company is registered, as well as its address. 

With regards to the persons who will have the quality of shareholders of the company, personal information has to be presented, such as their name and their residential address. Investors must prepare information on the management body of the company and the internal structure of the company, with the responsibilities of each party. 

In the case of legal entities registered as limited liability companies or companies which are formed based on shares, the investors have to prepare details on the shareholding structure of the company as well. Our team of consultants in company registration in Georgia can offer an in-depth presentation on other documents that should be submitted upon the incorporation of a legal entity. 

If the investor wants to start a business through a sole trader, it is necessary to know that there are fewer documents to be completed and fewer information the local institutions will request from the businessman. For instance, one should present information with regards to the person’s identity and the place of business, an application form and an e-mail address. 

It is also important to know that this entity can be registered by foreigners as well, but additional steps will have to be completed in this sense and you can request the help of our team of specialists, who can assist you in the process of opening a company in Georgia as an individual entrepreneur. Our team is ready to provide full legal advice on any aspect that is regulated by the Company Act, so do not hesitate to address to our specialists.  

The management of a Georgian company

The obligation to carry management tasks within a company is the responsibility of the company’s director – this is applicable when the legal entity is represented by entities registered as limited liability companies, joint stock companies or cooperatives. The company’s chart may stipulate that the company may be ruled by two directors instead of one or by a board of directors.

The managers of the company are responsible for keeping the company’s books and the recording of these books at the end of every financial year. A financial year cannot exceed the period of twelve months. There are several documents that must be kept by the managers for more than ten years.

Such documents can refer to the accounting documents, the business mails, organizational documents, accounting books, balance sheets or inventory sheets. Within the first three months of every financial year, the managers must fill the balance sheet and the annual account of the previous economic year and also the activity report.

Liquidation of a company in Georgia

The legislation on commercial companies in Georgia also prescribes the manner in which the liquidation of the company can be carried out. There are a set of reasons for which a local business can be liquidated and you must know that our team of specialists in company formation in Georgia can help you in this process. 

Georgian company can be liquidated due to the following reasons: the end of the company’s availability, a court decision based on a request from a creditor, if the laws are broken by the company or if a decision is taken during a general meeting by the company’s members.

Also, a company may be liquidated very easy if it didn’t issue any shares or didn’t perform any commercial activity. If the company did raise any shares and performed commercial activities, a liquidator is appointed to make all the necessary arrangements in order to liquidate the company established in Georgia.

What are the obligations of the company’s founders in Georgia?

All company founders have to comply with a wide range of managerial obligations, but also legal obligations in the event in which the company will be closed down or it will have various debts. The range of liabilities, obligations and rights vary depending on the company type that investors opted for when they started the process of company formation in Georgia

Article 3 of the Law on Entrepreneurs provides the legal framework regarding the obligations of the company’s founders. For instance, if we refer to a company that operates as sole trader, then one has to know that the company’s founder is considered fully liable with his or her own personal assets in the event in which he or she will have certain obligations towards any creditors of the company. 

In the case in which investors want to open a company in Georgia as a limited partnership, it is necessary to find out that the investors, who, in this case are known as partners, will have different liabilities towards their company and towards any creditors of the company, depending on the position they have in the company (for this type of partnership, there are two types of partners, namely the general partner and the limited partner). 

Here, investors have to be aware that the limited partnership has to be registered by a general partner and a limited partner, and with regards to liability and obligations, the general partner can become personally liable for any debts, unlike the limited partners, who will not become personally liable; they, however, will be liable to the extent of their own capital participation in the company. 

It is also important to know that in a partnership, the partners are required to sign a partnership agreement in which matters concerning their liability will be established, and then, the document will be registered with the local institutions. You can request more details on this subject from our team of consultants in company formation in Georgia, who can present extensive information on the obligations of the company’s founders for each company type prescribed by the national law. 

What are the obligations for updating company changes in Georgia?

The Company Act in Georgia also deals with matters related to changes that can appear in the structure of a company. The law requires all company founders to provide updates on their company with regards to certain changes that can refer to the company name, address, shareholding structure and basically, any other modification from the data registered during the process of company registration in Georgia

Article 5 of the Act stipulates clear procedures and obligations and it clearly mentions that company representatives have the right and the obligation to request the modifications of various company data that is of interest of the Public Registry. The law stipulates that any modifications can be made only by authorized persons, such as the company’s founders or other company representatives who were appointed to act on behalf of the company. 

Such information can refer to any of the following: any change that appears from the initial document that was filed with the Entrepreneurial Registry, the bankruptcy of the company, the liquidation of the company, reorganization of a legal entity, the appointment of a guardian, the insolvency procedure and others. 

Re-domicile a company in Georgia 

The process of re-domicile a company in Georgia defines the procedure through which a company operating in a foreign jurisdiction is moved to another country – in this case, Georgia, without the need of interrupting the company’s activity. If you need to start this process, you can request legal representation from our specialists in company registration in Georgia

According to the Company Law in Georgia, this process can be completed by selecting any of the legal entities that are prescribed by the national law. The same right is available for a company that is registered in Georgia and which is interested in re-domiciliation in a foreign jurisdiction. 

This process can be completed provided that certain conditions are met, such as: the company has the right to move to a specific country, as the legislation in that said country recognizes the process of re-domiciliation under its national law, the company is not involved in an insolvency case at the moment when the re-domiciliation decision is taken and the company does not have any tax liability in Georgia; please address to our team if you are interested in starting this procedure.  

What is the current situation of the business environment in Georgia?

Foreign investors who are wishing to open a company in Georgia must know that this country provides an extremely attractive business environment, given that in the last decade the local government created numerous policies to increase the local economy and expand its relations with third parties. According to the data presented by the National Statistics Office of Georgia, the local business market is characterized by the following:

  • • starting with 2014, the local economy increased, and this was observed in the number of persons employed – in 2014, there were 592,100 employees, while in 2019, the number of employees increased at 756,900 persons;
  • • the average monthly salary of a worker also increased from GEL 800.5 in 2014 to GEL 1161.7 in 2019; 
  • • the value of the purchases of goods or services for resale in the business sector also increased at a steady rate since 2011, when it had a value of GEL 18.6 billion, to GEL 41.2 billion in 2019;
  • • the production value also expanded – in 2013, it stood at a value of GEL 23.6 billion and in 2019, it increased at 47.5 billion;
  • • the turnover reported by the business sector expanded rapidly in the last years, as for instance, in 2010, it was of only GEL 24.4 billion, and in 2018, it increased at GEL 86.6 billion (and in 2019, it reached GEL 109 billion). 

For more details about setting up a company in Georgia or liquidating it, you may contact our agents in company formation. They can also put you in touch with their local partners if you want to open a company in another country or even move there.

Investors who want to open a company in Georgiaare invited to address to our team for advice on any step regarding the incorporation process. The procedure can be completed in only 1 day (the standard registration) and the costs are very low. 

You are expected to pay a registration fee of only GEL 131 and you do not need to provide many documents, which makes the incorporation procedure rather simple.  

Besides the simple registration requirements, it is recommended to open a business in Georgia as it benefits from a free industrial zone, which has many tax exemptions, and also due to the country’s customs regime for import-export activities. 

The tax system is very favorable, with low corporate taxes and a variety of legal entities to set up (6 main company types). 

Regardless of the company type that you will register here, you must comply with different reporting requirements. All companies must maintain accounting documents and this can only be done with the assistance of accountants in Georgia

Therefore, you must hire an accountant for bookkeeping activities or, depending on the size of the company, to outsource the accounting department.