Amendments to the Entrepreneurs Law

 Georgia's accession to the European Union requires comprehensive changes to ensure full compliance with EU standards. One of the key aspects of this process is legislative harmonization, which involves aligning the existing legal framework with European standards.

Amendments Effective from January 1, 2022

In this context, a new "Entrepreneurs Law" came into effect on January 1, 2022, introducing 21 significant changes. In this blog, we will focus on one specific amendment related to the foundational agreement required for company registration.

Foundational Agreement - A New Term in Entrepreneurial Legislation

The term "foundational agreement" is a new concept and is defined as a written document consisting of the company's charter and registration details. This agreement must be signed by all partners of the company, while the charter serves as the enterprise's constitution.

What Should Be Included in the Foundational Agreement?

According to the law, the foundational agreement must contain the following information:

• Company name (in Georgian and English);

• Legal form;

• Legal address;

• Electronic address;

• Registered capital.

Important Changes Regarding the Legal Address

Previously, companies could have a registered legal address that differed from their actual physical location. Under the new law, the legal address must correspond to the company's actual physical location.

Share Distribution and Capital Allocation Under the New Regulations

Changes have also been made to how LLCs manage their shares. Under the new law, an LLC may have both nominal value shares and non-nominal value shares.

• Nominal value shares - These shares have a minimum designated value, below which they cannot be transferred to third parties.

• Non-nominal value shares - In this case, the amount of registered capital can be determined in any amount.

If a company has only nominal value shares, the amount of registered capital must equal the sum of all nominal value shares. If the company has both nominal and non-nominal value shares, the amount of registered capital must exceed the total nominal value shares. If a company only has non-nominal value shares, then in the case of an LLC, the registered capital amount can be set at any level. However, this does not mean that an LLC must have registered capital if it decides to issue nominal value shares; it remains optional.

Conclusion

As part of Georgia’s alignment with EU standards, the enactment of the new "Entrepreneurs Law" is a significant step forward. It ensures clearer regulations for company registration and management, ultimately fostering transparency and stability in the country's economic system. For both new and existing businesses, it is crucial to adapt to these new requirements promptly to maintain compliance and successfully operate in the Georgian and international markets.