An Investment Management Agreement (IMA) is a cornerstone document that governs the relationship between an investor (client) and an asset management company or an individual manager. This document defines the rights, duties, investment mandate, and liability boundaries of the parties involved. In Georgia's growing capital market, a professionally drafted IMA is essential for protecting investor capital and legalizing the manager's activities. The agreement must clearly reflect the investment strategy, risk tolerance, and fee structure to prevent future disputes and build trust between the parties.
What Does an Investment Management Agreement Cover?
An effective IMA should be comprehensive and cover several key areas:
- Investment Mandate and Strategy: Clearly defined limits on where and under what conditions the manager can invest the capital.
- Fee Structure: Rules for calculating and paying management fees and performance-based incentives.
- Reporting and Transparency: The format and frequency of periodic performance reports provided to the client.
- Risk Management: Setting limits on specific assets or sectors to ensure proper diversification and risk control.
- Fiduciary Duties: The manager's legal obligation to act solely in the best interests of the investor.
- Termination Clauses: Procedures and timelines for returning assets upon the conclusion of the partnership.
Common Scenarios Requiring an IMA
1) Discretionary Portfolio Management, where a client entrusts funds to a professional; 2) Management of an investment fund by an asset management company; 3) Hiring of external managers by institutional investors, such as pension funds; 4) Corporate clients seeking professional management of surplus cash; 5) Cooperation with international investment platforms requiring compliance with Georgian law.
Georgian Legal Framework
Investment management agreements in Georgia are governed by the Civil Code of Georgia, which outlines the general principles of mandates and power of attorney. Specific regulations are found in the Law of Georgia on Investment Funds and the Law of Georgia on the Securities Market. Additionally, the rules of the National Bank of Georgia impose strict requirements on the ethics and professional conduct of asset managers. The Law of Georgia on Personal Data Protection is also critical, as managers handle sensitive client information.
Step-by-Step Process
The process begins with identifying the expectations and investment goals of both parties. A lawyer then drafts the IMA tailored to the specific investment strategy. The third stage involves negotiations to refine terms, particularly regarding fees and liabilities. After signing, the agreement's execution is monitored. If necessary, the contract is updated to reflect any changes in legislation or the client's investment objectives.
Why Find a Specialist on Legal.ge?
Mistakes in investment agreements can lead to significant financial losses. On Legal.ge, you will find lawyers specializing in banking and finance law who ensure your IMA is robust, risk-aware, and fully compliant with NBG requirements. Do not entrust your capital to documents with vague terms—choose a verified professional on Legal.ge to safeguard your investments.
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