Cross-Border Lending involves financing Georgian companies by International Financial Institutions (IFIs), foreign banks, or private investors. This is a primary source of funding for large businesses and infrastructure projects. However, such transactions are characterized by high legal complexity as they involve both Georgian law and the lender's jurisdiction (often English or New York law). Correctly addressing Withholding Tax, security registration, and regulatory requirements is critical. This service involves full legal support in executing international loan agreements to ensure the transaction's validity and enforceability in Georgia.
What Does the Cross-Border Lending Service Cover?
Our lawyers offer services for both lenders and borrowers:
- Loan Agreement Drafting: Preparing or adapting agreements based on LMA (Loan Market Association) standards to comply with Georgian legislation requirements.
- Tax Structuring: Analyzing Withholding Tax implications and applying Double Taxation Avoidance Treaties.
- Security Package: Drafting and registering mortgages, pledges, account freezes, and share pledges in the Public Registry.
- Legal Opinion Issuance: Preparing a formal opinion for the lender confirming the borrower's capacity to borrow and the agreement's enforceability in Georgia.
- Syndicated Loans: Legal support for loans issued with the participation of multiple international banks and defining the agent's role.
Common Scenarios and Practical Examples
Cross-border lending services are relevant in the following cases:
- Infrastructure Projects: Construction of a HPP or factory financed by the EBRD or ADB.
- Parent Company Loans: A foreign holding company finances its Georgian subsidiary (Intercompany Loan), requiring compliance with transfer pricing rules.
- Trade Finance: A Georgian importer receives financing from a foreign supplier's bank for export-import operations.
- Refinancing: Paying off existing expensive local debt with cheaper foreign resources.
Georgian Legal Framework
Cross-border lending is governed by the Civil Code of Georgia, the Tax Code, and the Law on International Private Law. Crucial are International Double Taxation Avoidance Treaties, which determine the tax regime for interest payments. The National Bank regulates currency operations, though taking a foreign loan generally does not require prior permission, with specific exceptions (e.g., for commercial banks). Security registration is handled by the National Agency of Public Registry.
Service Process: What to Expect
The process begins with agreeing on a Term Sheet. Lawyers then draft or review the Facility Agreement. Simultaneously, corporate documentation is organized, and security assets are verified. Before closing the transaction, a Legal Opinion is issued. After funds are disbursed, lawyers ensure security registration and mandatory declaration to tax authorities.
Why Choose Legal.ge?
Cross-border lending requires synthesizing English law with Georgian reality. Legal.ge features lawyers with international experience who have worked on multi-million dollar transactions. We help make complex international financing safe and profitable for your business.
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