Nov 09, 2023

Reincorporation

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Companies incorporated under the laws of Georgia shall be re-registered in accordance with the Law of Enterpreneuers. This process is typically referred to as “reincorporation”. This transaction, if allowed, normally requires to issue a new edition of the Statutory documents and fulfill additional specified requirements.
Rokhvadze & Partners interpretes changes of the corporate law as a result of the dynamic economic growth. Since the amendments have been adopted we may say that the new law more explicitly oversimplifie the governance of the Company by the Directors, Shareholders and Investors. The new statutory provisions regulate the relationship between corporations and creditors through a horizontal mechanism. This regulatory approach is based on the maintenance by the company.
We hereby respond to commonly asked questions about the reincorporation of companies. Please be aware that the answers given below are not recommendations but obligations that must be complied with by active entities.
Is a reincorporation of the company voluntary?
Reincorporation is not voluntary. Companies should make a resolution and file the application with the business registry by December 31, 2023, to maintain their good standing.
What are the consequences if a company does not reincorporate?
Should a company fail to reincorporate, the business registry has measures in place that could lead to the company's exclusion from the Open Register.
What are the risks for a company in the event of non-reincorporation?
If a company fails to comply with the reincorporation process, it risks losing its active status in the Business Registry. This loss can significantly complicate matters when banks or international partners request documentation confirming the company's good standing. Moreover, the new legislation obligates companies to maintain current documentation and to be actively registered under the new requirements. After 2024, the governance of a company that has not confirmed its activity will be complicated by conflicts between old and new regulations. The law does not provide for a retrospective approach to resolving such issues.
What if the Company is going to proceed for the liquidation?
If a company intends to undergo liquidation, the Director or an authorized Representative (attorney) must submit the application for dissolution via the electronic service on the my.gov.ge website. Once the application is submitted on the my.gov.ge website, the company must follow the prescribed liquidation procedure outlined by Law on Enterpreneur.
What steps are necessary to do for the reincorporation?
For the reincorporation process, the following legal steps are required:
● Register an up-to-date telephone number on the my.gov.ge portal for the purpose of registration and verification of beneficiaries;● Detail the number and class of shares, indicating ownership proportions in terms of percentage and number of shares;● Revise the company's charter to substitute the labor contract with the director for a service agreement.
For more detailed information and guidance on the reincorporation process, please contact us directly. We are available to provide personalized assistance to ensure that your company meets all legal requirements efficiently and effectively.