The Concept and Boundaries of a Public Offer
Issuing bonds in Georgia most often takes place in the public offer regime regulated by the Law of Georgia on Securities Market. A public offer of securities is a proposal to not fewer than 100 persons, or to a number of persons not specified in advance, for the direct or indirect sale of securities in the issuer's name (Article 3, part 1). A proposal concerning the securities of an unlisted enterprise, raised in the name of a person who is not the issuer, is also treated as a public offer — the regime follows the substance of the offer, not the identity of the offeror.
The law also draws the boundary on the other side: the offer and sale of securities only to experienced investors is not regarded as a public offer, which is the pole of private placement. The issuer must conclude a securities offering agreement with a brokerage company or a licensed financial institution for the placement, while a holder of the issuer's securities has the right to propose to the issuer that its securities be included in the public offer (Article 3, parts 2 and 3).
The Issuance Prospectus and Its Contents
A public offer may be carried out only upon publication of a prospectus prepared and approved in compliance with the law and with the rules established by the National Bank of Georgia (Article 4, part 1). For approval, the issuer submits to the National Bank an application and 3 copies of the preliminary prospectus signed by the chairperson of the supervisory board and the person authorized to represent the issuer.
The preliminary prospectus contains information about the issuer — its name, address and date of foundation, the quantity and class of securities already placed, the controlling holders and the members of the governing body — together with a description of the activity of the last 2 years and its principal risks, auditor-verified financial statements for the last 2 fiscal years, and the details of the securities to be issued: their class and approximate quantity, the subscription procedure, the method of calculating interest for a debt security, its maturity and redemption conditions, and the expected use of the proceeds (Article 4, part 2). The National Bank may set simplified or additional requirements depending on the type of securities, of issuer and of maturity, and an accountable enterprise that has filed all reports for the last 2 years may be spared the submission of a full prospectus.
The Approval Procedure at the National Bank
Within 15 days of the submission of the application the National Bank reviews it: it either verifies compliance and requests additional information, or approves the prospectus, or refuses in writing; and where no information is provided to the issuer within the 15 days, the prospectus is deemed approved (Article 4, part 7). The current financial information indicated in the final prospectus must not be older than 18 months, and the descriptions in the text must correspond to the most recent date possible.
The legal meaning of approval is defined precisely: it confirms that the submitted information corresponds to the law and to the National Bank's rules as to form, but it does not confirm the accuracy of the declared information and is not a recommendation — a disclaimer to that effect must appear clearly on the front page of every prospectus (Article 4, part 11). On the basis of the final prospectus the National Bank registers the securities and assigns them a national identification number.
Liability for Defects of the Prospectus
For the incorrect presentation or the omission of a material event in the final prospectus, liability may be imposed on the issuer, the authorized representative and the chairperson of the supervisory board solidarily, as well as on the brokerage company acting for the issuer and on the auditor or expert who consented to be named as the author of a part of the prospectus (Article 4, part 12). The issuer is liable to purchasers for the damage caused by such defects, and a contract limiting this liability is void unless it is indicated on the cover.
Where a material change occurs during the offer period, the issuer submits an amendment explaining every change, publishes a notice and, upon cancellation of the offer, unwinds all sale contracts without any discount; subscribers have the right to reject the securities upon an amendment, and the issuer must refund the price within 10 days of the rejection (Article 5). This is the statutory architecture that makes a bond issue transparent — and that makes disciplined drafting of the prospectus the issuer's best protection.
Frequently Asked Questions
When is a bond issue a public offer?
When the proposal in the issuer's name addresses at least 100 persons or a number not specified in advance (Article 3). An offer only to experienced investors is not a public offer.
How quickly does the National Bank review the application?
Within 15 days of submission the bank approves the prospectus, requests clarification or refuses; if no information is conveyed to the issuer, the prospectus is deemed approved (Article 4).
What must the preliminary prospectus contain?
Identification of the issuer and its controllers, a description of the last 2 years of activity with risks, audited statements, and the terms of the securities — class, quantity, interest, maturity, redemption and the use of proceeds.
Does approval guarantee the accuracy of the information?
No. Approval concerns form, not substance, and is not a recommendation; liability for defects rests on the signatories and the other persons covered by Article 4.
How We Help on Legal.ge
The Legal.ge team assists issuers at every stage of a bond issuance: choosing the offer regime, drafting the preliminary and final prospectus, communicating with the National Bank, negotiating the placement agreement and structuring investor documentation. We assess the risks of prospectus defects and build a structure that minimizes liability. Contact us to discuss your issuance plan.