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Corporate Loan Agreements

What constitutes a "Major Transaction" under Georgian law?

Typically, a transaction involving assets exceeding 50% of the company's book value requires shareholder approval, though corporate charters often set lower thresholds.

Can foreign lenders secure loans with Georgian assets?

Yes, foreign lenders can register mortgages and pledges in Georgia just like local banks. Using a local Security Agent is common for administrative ease.

What is a Negative Pledge?

It is a clause preventing the borrower from pledging its assets to other lenders in the future, ensuring the senior lender's priority.

Is withholding tax applicable on interest payments abroad?

Yes, generally 5%, unless a Double Taxation Treaty with the lender's country reduces this rate to 0%.

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Corporate Loan Agreements are the primary instrument for financing large businesses, characterized by high complexity and an individual approach. Unlike standard small business loans, corporate agreements (often based on LMA standards) involve complex terms, syndication, multi-level security, and strict financial covenants. An incorrectly drafted agreement can lead to the freezing of company assets, loss of management control, or default due to technical reasons. Legal.ge gives you access to highly qualified corporate lawyers who have experience managing multi-million transactions and can ensure maximum protection of your business interests when dealing with international and local banks.

What does Corporate Loan legal service cover?

The service includes comprehensive legal support at all stages of the transaction:

  • Structuring and Term Sheet: Selecting the optimal financing structure (syndicated loan, club deal, mezzanine financing) and agreeing on key terms.
  • Representations & Warranties: Detailed drafting of clauses where the company confirms its legal and financial status to avoid accusations of misrepresentation.
  • Financial and Non-Financial Covenants: Negotiating restrictions (dividend distribution, mergers, incurring additional debt) so the company retains operational flexibility.
  • Cross-border Elements: Adapting the agreement to Georgian legislation if the creditor is a foreign financial institution (IFC, EBRD).
  • Legal Opinion: Preparing an independent legal opinion on the validity and enforceability of the transaction.

Common scenarios and needs

Corporate loans are used for large-scale business tasks:

  • Project Finance: Financing energy (HPPs, solar plants) or infrastructure projects where repayment depends on future cash flows.
  • Refinancing: Paying off existing, expensive debt with new, cheaper resources or extending the term.
  • Syndicated Loans: When one bank cannot meet the demand, and several banks unite to issue a large loan.
  • Intercompany Financing: Issuing loans within a group and providing corporate guarantees.

Georgian Legal Framework

Corporate lending is regulated by:

  • Civil Code of Georgia: General part of contract law and credit relations.
  • Law of Georgia on Entrepreneurs: Defines rules for conflict of interest and director liability when entering into major transactions.
  • Law on Private International Law: Important when the contract is subject to foreign law (e.g., English law) but enforcement takes place in Georgia.
  • Tax Code: Issues of interest deductibility and withholding tax.

Service Process Step-by-Step

Working with experts on Legal.ge involves:

  1. Negotiation: Reconciling commercial and legal terms with the bank.
  2. Drafting: Preparing and commenting on extensive loan agreements (often 50+ pages).
  3. Corporate Approvals: Preparing minutes of partners'/shareholders' meetings to approve the transaction.
  4. CPs Satisfaction: Documentary confirmation of prerequisites to receive funds.
  5. Closing: Finalizing the transaction.

Why Legal.ge?

A corporate loan is not a standard product — it is a "tailor-made suit" that must fit your business structure exactly. A mistake here means millions of Lari in losses. Legal.ge offers access to top corporate lawyers who understand complex financial instruments and can protect your company from the dominant position of banks.

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Specialists for this service

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