Corporate lawyer in Georgia - a company that survives a fight between its partners
Since 2022 Georgia has had an entirely new Law on Entrepreneurs - the 1994 law under which most of the country's businesses were founded was replaced by a codified act on the European model. The new law introduced the director's duties of care and loyalty, the business judgment rule, minority protection mechanisms, a standard charter and a unified register of shares. Many companies still have not reflected this change in their documents - and that is exactly the new source of corporate disputes.
A corporate lawyer's work is 90% prevention: one properly drafted shareholders' agreement removes ten years of litigation. The remaining 10% is what happens when there was no agreement - deadlock, expulsion of a partner, damage caused by a director, insolvency. This page covers both: which document decides each issue, what rules the new law introduced, how the lawyer's role changes from incorporation to exit, and what is different for a foreign investor - who, in Georgia, faces almost no legal barrier and one very real practical one.
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Call: 568 330 3186 corporate issues and the document that decides each
In a corporate dispute the court reads the charter and the shareholders' agreement before it reads the law - the law leaves many matters to the parties' choice. Whoever made that choice in advance starts the dispute already ahead.
Charter or shareholders' agreement
Decisive: where each rule is written. The charter is registered and public; the shareholders' agreement is confidential and binds only its signatories. Profit distribution, veto rights, exit terms, non-compete - these belong in the agreement. If the two documents contradict each other, the charter governs towards third parties and the agreement between the partners - and many disputes turn on that difference.
Share transfers
Decisive: whether the transaction followed the procedure set by the charter - other partners' pre-emption right, consent, the price formula. An LLC share passes on registration in the Public Registry, and until then the buyer is not a partner. A pledge of shares, an option and a conditional sale are three instruments drafted very differently.
Director's liability
Decisive: the business judgment rule. A director is not liable for a loss-making decision taken on an informed basis and in good faith. They are liable when they concealed a conflict of interest, took a corporate opportunity for themselves or exceeded their authority. The company may claim damages, and partners may sue on the company's behalf if the company itself does not.
Minority protection
Decisive: using the information right. A partner with any size of share may demand financial documents, call a meeting and challenge decisions. Withholding dividends "for reinvestment" while the majority takes money out through salaries and contracts can be challenged. The reverse mechanism also exists: a 95% holder has the right to squeeze out the remaining shares at a fair price.
Deadlock and exit
Decisive: whether the documents contain a deadlock mechanism. A 50/50 company whose partners cannot agree is not governed by the law - it stops. Mechanisms: "Russian roulette" and "Texas shoot-out" (one names a price, the other chooses to buy or sell), mandatory mediation, liquidation as a last resort. Without them the only route is court - expulsion of a partner on serious grounds, or liquidation of the company.
Buying and selling a company
Decisive: legal due diligence and the warranties clause - what you are really buying: the assets, the company with its debts, or the company without them. Seller's warranties, holding part of the price in escrow, pricing in the risks found and, for large deals, notification to the Competition Agency are standard blocks that rarely appear in "home-made" contracts.
8 rules from the 2021 law that already apply to your company
The new law applies to every company, including those founded under an old charter. The transition period allowed for bringing documents into line has expired - and non-compliance now creates real risks.
- Legal forms
- LLC, joint-stock company, individual entrepreneur, general and limited partnership, cooperative. The law sets no minimum capital for an LLC - one lari is enough, although banks and partners read the size of the capital as a sign of seriousness.
- The standard charter
- If the founders do not file their own charter, the company operates under the standard charter approved by law. It is fast, but the standard charter settles everything by default - no veto, no pre-emption, no exit terms. Enough for a sole partner; rarely enough for two.
- Directors' duties
- The duty of care (informed decisions) and the duty of loyalty (disclosing conflicts of interest, not appropriating corporate opportunities). On breach the director is liable to the company with their personal assets. The company may insure this liability - a new practice that good directors now ask for themselves.
- Representation
- The company is represented by the director registered in the registry. With several directors the charter sets joint or several representation - that entry is also in the registry and binding on third parties. A contract signed by one director where two are required is contestable for the company.
- The register of shares
- An LLC's partners and their shares are registered in the Public Registry and that entry is determinative: whoever is in the registry is the partner. A joint-stock company keeps its shareholder register with a registrar or itself. Transferring a share "by hand" with a receipt, without the registry, creates no partnership.
- Challenging decisions
- A partners' meeting decision that breaches the law or the charter is challenged in court within a short period - missing it "legalises" the decision. A breach of the convening procedure (notice period, agenda, notification) is often sufficient ground even if the decision was substantively correct.
- Capital maintenance and dividends
- A dividend may not be distributed if the company would afterwards be unable to meet its obligations. The director who allowed such a distribution, and the partner who knew, are liable to return the money. Creditors use this rule actively in insolvency cases.
- The limit of limited liability
- A partner is not liable for the company's debts - except where they abused the corporate form: mixed company assets with personal ones, stripped the company to the creditors' detriment, managed it as a sham. This "piercing of the corporate veil" is rare in Georgian practice, but it exists, and it applies in particular to single-member LLCs.
The 4 stages of a company and what the corporate lawyer does at each
A corporate lawyer does different work for the same company at different stages. One thing is constant: what was not written at an early stage is written expensively at a late one, or not at all.
A company in Georgia for a foreigner - what is easy and where the real barrier is
Founding a company in Georgia is almost as simple for a foreigner as for a citizen: 100% foreign ownership is permitted, the director may be a non-resident, no residence permit is needed, registration takes one business day and can be completed from abroad under a power of attorney. There is practically no legal barrier. The real barrier is the bank account: banks apply enhanced due diligence to foreign founders - a description of the business, source of funds, the beneficial owner - and refuse without explanation. The corporate lawyer's work here is preparing the document package so that it answers the bank's questions before they are asked.
There are two structural choices: a branch, which is part of the foreign company and operates on its liability, or a subsidiary LLC, which is a separate legal person and shields the parent. Most choose the second. A further option is the special statuses - Virtual Zone Person for IT companies, International Company status, the Free Industrial Zones in Kutaisi, Poti and Tbilisi - each with its own qualification conditions; the tax consequences are calculated by a tax lawyer, and are covered on that page.
A frequent mistake: registering the company in the name of a "nominee" Georgian director or partner to make the bank easier. Concealing the beneficial owner is a separate legal problem, and in practice the nominee becomes the real owner of the company in the registry, with their good faith as the only guarantee. That is not a structure - it is a risk.
Rehabilitation, bankruptcy and the director's personal risk - when the company can no longer pay
The 2021 Law on Rehabilitation and Collective Satisfaction of Creditors divided insolvency into two routes: rehabilitation, when the business can be saved and creditors agree on a plan, and bankruptcy, when the assets must be sold and creditors satisfied in order of priority. Both processes are run by the court and an insolvency practitioner, with the creditors' meeting taking the decisions. For the company the difference is fundamental: in rehabilitation management often stays; in bankruptcy it does not.
For a director the main risk is delay: once the company can no longer meet obligations as they fall due, the director is obliged to file for insolvency. If instead they "stretch" it for months - taking on new debts, paying selected creditors, moving assets - they are personally liable for the loss creditors suffer in that period. The corporate lawyer's advice at that moment is the same every time: file first, then work on the rescue plan - not the other way round. For a foreign parent company, the Georgian subsidiary's insolvency also raises the question of whether the parent's conduct can be reached.
Questions about corporate lawyers in Georgia
I am a foreigner and do not live in Georgia. Can I be the sole partner and director of an LLC?
Yes, both at once. Residence or presence in Georgia is not required and registration is done under a power of attorney. Two practical points: the bank may require a personal visit to open the account, and the director's duties - signatures, filings - are performed remotely with an electronic signature and a power of attorney.
We have a 50/50 company and can no longer agree with my partner. What now?
Documents first: if the shareholders' agreement contains a deadlock mechanism, it is triggered. If not - negotiation of a buy-out at an independent valuation, where one side names the price and the other chooses between buying and selling; the law does not require this, but it is the only fair formula. Failing that - court, where the result may be liquidation. In parallel, make sure the company's accounts and operational control are not unilaterally in one side's hands.
The director signed a contract without asking the partners. Is it valid?
Towards the third party - as a rule, yes: the director's authority to represent the company is visible from the registry and the counterparty does not check internal restrictions. Inside the company - the director is liable for the loss if the charter or a partners' resolution required consent for that transaction. The exception is where the counterparty knew of the restriction - then the transaction is contestable for the company.
A partner does not take part in the company but will not sell. Can they be expelled?
Only by court decision and on serious grounds - for example, causing loss to the company, competing activity, systematically failing to attend meetings so that the company is blocked. Mere passivity is not enough. On expulsion the share is compensated at a fair price. That is why shareholders' agreements often provide in advance that whoever stops working gradually loses their share - vesting.
I hold a minority share and no dividend has been paid for years. What leverage do I have?
The information right - financial statements, contracts, salaries; the right to call a meeting; challenging the decision not to distribute if there is profit and the majority is taking it through other channels (salary, consulting, rent). This is the classic "hidden dividend" scheme, which the courts recognise. As a last resort - a demand to be bought out at a fair price.
I am buying a business - is it better to buy the company or its assets?
Buying the assets (equipment, licences, assignment of contracts) protects you from debts but requires re-signing contracts and licences and is sometimes impossible. Buying the company keeps everything, but together with the debts and unknown risks - hence legal due diligence, seller's warranties and part of the price in escrow. The answer is often a hybrid and is calculated together with the tax consequences.
I no longer need the company. Can I just abandon it?
You can, but it is not worth it: the company stays active in the registry, tax obligations accumulate, the director remains responsible. Voluntary liquidation - a partners' resolution, notification of creditors, a tax audit, distribution of assets, removal from the registry - takes months but draws a line under every obligation. For a foreign owner this also matters for future company formations elsewhere.
Our charter predates the 2021 law. Do we need to change anything?
The transition period for compliance has expired, and provisions of an old charter that contradict the new law no longer apply - their place is taken by the default rules of the law or the standard charter, which may not suit your interests. A corporate audit is one day's work and often reveals that the partners are living under different rules than they think.
Corporate lawyer by city
Most corporate work is done remotely, but the free zones of Batumi, Kutaisi and Poti, regional manufacturing and the ports create local specifics.
Adjacent practice areas
The tax consequences of a structure belong to tax law, staff matters to employment law, the brand and software to intellectual property, and contract disputes with counterparties to civil law.
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