Fund formation is a fundamental legal process that includes selecting the appropriate fund structure, preparing constitutional documentation, and obtaining the necessary licenses or authorizations. Georgia offers an attractive environment for fund formation, particularly following the implementation of new legislation aligned with European standards. The correct formation of a fund determines its future success, ensures the protection of investor rights, and optimizes tax positions. This service is designed for investors, asset managers, and business groups seeking to mobilize capital for specific projects or general investment purposes.
What Does Fund Formation Cover?
The process of creating an investment fund involves several critical components that require high-level legal expertise:
- Selection of Legal Form: Establishing the fund as a Joint Stock Company (JSC), Limited Liability Company (LLC), or as an investment partnership.
- Drafting Constitutional Documents: Preparing the fund's charter, investment policy, and prospectus, which define the operational rules.
- Licensing and Registration: Liaising with the National Bank of Georgia (NBG) during the authorization or registration process.
- Structuring: Determining the fund type (open-ended, closed-ended, or interval) and tailoring it to specific asset classes.
- Internal Control Mechanisms: Developing risk management and compliance policies according to NBG standards.
- Service Agreements: Drafting contracts with the asset management company, specialized depositary, and other service providers.
Common Scenarios Requiring Fund Formation
1) Creating a Private Equity fund to finance specific sectors such as energy or agriculture; 2) Establishing a Real Estate Investment Fund (REIF) for development projects; 3) Forming a Venture Capital fund for investing in startups; 4) Consolidation of assets by Family Offices under a single investment platform; 5) International funds setting up a branch or a subsidiary fund in Georgia for regional operations.
Georgian Legal Framework
The primary regulatory act is the Law of Georgia on Investment Funds, which incorporates principles from European directives (UCITS and AIFMD). The Law of Georgia on Entrepreneurs is also crucial as it governs the corporate management of the fund as a legal entity. Tax aspects are regulated by the Tax Code of Georgia, which offers preferential tax treatment to funds under certain conditions. The process is supervised by the National Bank of Georgia, whose regulations define minimum capital requirements and the qualifications of managers.
Step-by-Step Process
The process begins with concept development and defining investment objectives. Next, the legal structure is selected, and the documentation package is prepared. The third stage involves submitting the application to the National Bank and communicating with the regulator to address any queries. After receiving authorization, the fund is registered in the Public Registry and bank accounts are opened. In the final stage, agreements with partners are signed, and the fund is ready to accept investments.
Why Find a Specialist on Legal.ge?
Fund formation requires both legal and financial expertise. Specialists registered on Legal.ge have years of experience in structuring investment vehicles. They will help you navigate bureaucratic barriers with the National Bank, choose the optimal tax model, and create a transparent management system. Use the Legal.ge platform to connect with top professionals and successfully establish your investment fund in Georgia.
Updated: ...