Georgia is an attractive country for foreign investors and one of the most sought investment options entrepreneurs have in this country is to open a holding company. This type of company offers a number of advantages when compared to a limited liability company, for example. The holding company will allow its founder to purchase equity ownership in other companies.
| Quick Facts | |
|---|---|
| Legal entities used | – Private limited liability company (LLC), – Joint stock company (JSC) |
| Incorporation method | Standard registration with the Trade Register in Georgia |
| Incorporation time | 1 – 2 weeks |
| Advantages | – quick incorporation procedure, – low maintenance costs
|
| Precautions | The company must have a legal address in Georgia. |
| Shareholding structure | At least one shareholder |
| Minimum Capital | No minimum share capital imposed |
| Taxation | 15% corporate tax rate |
| Control | Full foreign control is available |
| Accounting and Reporting | Tax returns to be filed annually, no audit required |
| Number of double taxation treaties | 57 |
Although the company will not produce any goods or services itself, it offers the possibility to operate with a number of companies and obtain financial advantages and profits. Our company formation agents in Georgia can give you detailed information about all the steps required for opening a holding company in Georgia and all the legal requirements this type of company needs to fulfill.
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Opening a holding company in Georgia
The representatives of a holding company in Georgia can target a number of business areas that are profitable and decide where to invest and focus their activities. The owners of this type of company can find a number of profitable small companies in Georgia and then purchase stocks in those companies. The amount of ownership in other companies will also determine the voting rights the holding company has.
Because they are able to control the activities of the owned companies to a high extent, holding companies can also be called parent companies. A holding company is registered like any other legal entity in Georgia and can hire employees. Our Georgian company formation agents can give you personalized advice regarding the most suitable type of company, according to your business plans.
Types of holding companies in Georgia
Based on their functions and corporate structure, holding companies in Georgia can be:
- Pure holding company – whose sole purpose is to own and control shares or interests in other companies. It does not engage in any operational activities, manufacturing, or selling of goods and services;
- Mixed holding company – opening this type of holding company in Georgia allows one to own and control other companies and can also engage in commercial activities;
- Immediate holding company – this type is directly owned by a parent company or another holding company of the same parent company. It must directly report to its immediate parent company;
- Intermediate holding company – this type of holding company in Georgia is owned by another holding company, part of the broader corporate group under the parent company.
Our specialists in company incorporation in Georgia can help you determine which type of holding company best suits your business needs.
What is the process of opening a holding company in Georgia?
For this company type, foreign and local investors will have to follow the same steps for company formation in Georgia that are prescribed for other company types. In this case, they will have to decide upon a trading name for the company – which must be selected in accordance with the standards imposed by the Georgian law, and to select a business form for the company. The holding company itself is not a legal entity, but merely a type of business created for a specific goal. It must be incorporated under one of the legal entities recognized in Georgia.
Here, investors have to opt for one of the corporate entities that are prescribed by the national law. When opening a company in Georgia as a holding company, investors can choose to register a limited liability company or a joint stock company, depending on the characteristics investors want their company to have. Also, the decision should be based in accordance with the rights and obligations investors will have.
However, in both cases, investors will enjoy limited liability against corporate debts and this can be a major advantage. In the case of other business forms, investors can become personally liable for the debts of the company (for instance, as it is the case of partnerships).
If these two steps are made, it means that the investors will have to register with the National Agency of Public Registry, a compulsory step in the process of opening a company in Georgia. The institution is legally required to maintain the data on all companies registered in this country. It is also the authority that will issue the incorporation certificates for local businesses. All companies registered with the institution will receive a registration number.
This will be used for other steps of the incorporation. The company will also need to register for taxation purposes with other institutions.
Choosing the objects of activity
During the first steps of company formation in Georgia, it will also be necessary to select the company’s objects of activity (which can be a single business field or multiple, but in all cases, they all have to be described).
The need to mention the company’s objects of activity is a legal requirement. This is not requested only in the relation with the Georgian authorities, but it has to be reflected in the company’s statutory documents as well. Our team of consultants in company registration in Georgia can help you select the objects of activity in accordance with your business operations plans.
The selection is done following the Classification of Economic Activities. Georgia follows the same Classification system that is available in the European Union (EU). According to the information available from the National Statistics Office of Georgia, the country follows the NACE Rev 2 2016 model. With regards to the activities of holding companies, the following apply:
- the activities of holding companies can be found under the NACE Class 64.20;
- the Class 64.20 refers only to holding companies which own or hold shares in other companies, and which do not administer the said companies;
- this category is included in the NACE system under the Section K – Financial and Insurance Activities, in the 64 grouping, the Class being 64.20, and the Subclass being 6420;
- another activity that can be done by holding companies is the management of other companies, and this can be found under the Class 70.10;
- the NACE Rev 2 2016 model introduced the Groups 64.2 and 70.1 and it replaced Annex D Point (h) Point 3.
Registering for taxation
Please mind that after these formalities are completed, it is necessary to register for tax purposes, as mentioned above. Holding companies in Georgia have to register for the payment of the value added tax (VAT) and for this, the company has to obtain a VAT number.
Our consultants in company formation in Georgia can help you obtain a VAT number. We can provide you with in-depth consultancy services regarding the VAT obligations you have once the company begins its operations in this country. If the company will hire employees, it is legally required to register for social security.
Another obligation deriving from this is to draft and sign employment contracts with the company’s employees, in accordance with the applicable law. Here, all contracts have to include information regarding the type of contract that is signed, the number of hours the employee has to work for the company, the salary he or she will receive and other rights and obligations (such as the description of the job and the tasks the employee has to complete).
Other information about Georgian holding companies
Georgian holding companies can own tangible or intangible assets. The last category includes land, properties or copyrights. Holding companies are usually incorporated by experienced entrepreneurs who want to manage the activities of other companies with the purpose of making profit. Holding companies are not to be mistaken for trust companies.
The latter are companies that manage assets and are appointed specifically for this task. Our company incorporation agents in Georgia can tell you more about the differences between these types of companies and the relationship between the company ownership and voting rights.
Financing a holding company in Georgia
Entrepreneurs have various ways to finance when setting up a holding company in Georgia. For a pure holding company, the primary methods of obtaining funds include selling equity interests and loan borrowing. The holding company can raise money by offering shares or ownership stakes in itself or its subsidiaries to investors, or by taking out loans from financial institutions. Additionally, the pure holding company earns revenue from its subsidiaries as dividends, distributions, and interest payments.
A mixed holding company earns revenue from its subsidiaries and its own direct business operations.
Our team can offer more advice to entrepreneurs interested in setting up a business in Georgia.
Advantages of a holding company in Georgia
Opening a holding company in Georgia has numerous advantages. One advantage is that, if any of the subsidiaries owned by the holding company in Georgia encounter financial difficulties and go bankrupt, the holding company itself is protected from being responsible for covering those subsidiary’s debts. The holding company might lose capital value and net worth, but the subsidiary’s creditors can’t force the holding company to pay off the subsidiary’s debts.
Another advantage of opening a holding company in Georgia is asset protection. One subsidiary might own the company’s brand names and trademarks. Another subsidiary might own the company’s buildings and real estate. If one subsidiary faces problems, it won’t directly affect the others.
Additionally, holding companies can help their subsidiaries by providing resources and support, which can reduce their operational costs.
Lastly, opening a company in Georgia is a straightforward and easy process. Our team can help you through the entire process.
Statistics about Georgian companies
If you are interested in company formation in Georgia, our team has gathered some interesting statistics about their economics and performance in the last years:
- Companies had a production value estimated at GEL 71.8 billion in 2022;
- The investments in fixed assets were evaluated at GEL 5.5 billion in 2021;
- The purchase of goods and services in the business sectors was evaluated at GEL 101.4 billion in 2022.
In addition to our company incorporation services, we can also recommend our partner accountants in Georgia for assistance in tax-related matters.
If you are interested in investing in Georgia and opening a holding company, please contact our company formation agents in Tbilisi.