When an Offer Becomes Public: The 100-Recipient Threshold
The central legal question in a private placement is where the line sits — cross it, and the offer becomes public and the whole public-offer regime activates. Under the Georgian Law on the Securities Market, a public offer of securities is a proposal to no fewer than 100 persons, or to a previously unspecified number of persons, for the direct or indirect sale of securities on behalf of the issuer. Such a proposal counts as a public offer even for the securities of an unlisted enterprise, and even where it is made in the name of a person who is not the issuer.
The same article contains the decisive exception for private placements: an offer and sale of securities only to experienced investors is not treated as a public offer. The entire selective-placement structure rests on this norm — where the circle is closed to experienced investors, the offer does not qualify as public, and the number of recipients ceases to be the criterion. Proper documentation of the experienced-investor circle is therefore the foundation of a safe placement.
The Prospectus: Requirements That Attach to a Public Offer
Where an offer does qualify as public, the prospectus requirements activate: a public offer may be conducted only by the issuer, after publication of an emission prospectus prepared and approved in compliance with the law and the rules of the National Bank of Georgia. To have the prospectus approved, the issuer applies to the National Bank and submits an application together with 3 copies of the preliminary prospectus.
The preliminary prospectus contains information about the issuer — name, address, date of foundation, the number and class of securities already placed, the members of the governing body and possible conflicts of interest; a description of the issuer's activity over the last 2 years together with the principal related risks; auditor-confirmed financial statements for the last 2 financial years; and information about the securities to be issued — their class, indicative quantity, the details of the subscription procedure, the interest calculation method for debt securities and the intended use of the proceeds. Avoiding exactly these requirements is the practical effect of structuring the offer around experienced investors.
The infrastructure of the placement is regulated too: the issuer must conclude an offering contract on the placement of securities with a brokerage company or a financial institution holding the appropriate licence. This rule governs the institutional side of a placement and must be considered in private placements as well.
Reporting: What Remains After the Placement Closes
A completed placement still leaves supervisory obligations behind. Within 1 month of the completion of a public offer of securities, the issuer submits to the National Bank of Georgia a report on the emission and placement, containing information on the exact quantity and price of the securities offered and sold; where the emission is not fully placed, the report covers the securities actually placed. The National Bank reviews the report within 14 calendar days of receipt and may demand clarification of the information or changes to it.
Two further details of the public-offer regime often prove decisive in practice. First: any person may conduct a public offer if they submit to the National Bank of Georgia the relevant information defined by law, signed by them, and provide basic information about themselves; in such a case the National Bank may establish a different procedure for the public offer. Second: a holder of securities of an issuer conducting a public offer under the procedure established by law may propose to the issuer that the holder's own securities be included in the public offer. Both details determine who enters the transaction and how, and must be factored in when planning a private placement.
The right sequence for planning a private placement is this: first the recipient list is compiled, with materials confirming each recipient's status as an experienced investor; then the offer text and its distribution channels are fixed, so the document reaches only the defined circle; finally the placement organizer is determined and the offering contract is concluded with a brokerage company or a licensed financial institution. These steps serve precisely the control of the boundary that separates a public offer from a private one, and the documentary trail of each step is decisive at an inspection.
Frequently Asked Questions
How many recipients make an offer public?
A proposal to no fewer than 100 persons, or to a previously unspecified circle, is a public offer. An offer closed to experienced investors does not acquire that qualification.
Does a private placement need a prospectus?
A placement made only to experienced investors is not a public offer, so the public-offer prospectus requirements do not extend to it. Crossing the threshold makes a prospectus mandatory.
What goes into the prospectus?
Issuer information, 2 years of activity and risks, auditor-confirmed statements, and details of the securities; the application is accompanied by 3 copies of the preliminary prospectus.
When is the placement report due?
Within 1 month of the close of the public offer, to the National Bank, with exact quantities and prices; the Bank reviews it within 14 calendar days.
How We Help on Legal.ge
Lawyers on Legal.ge build the legal structure of a private capital placement: they assess the recipient circle against the experienced-investor criteria, prepare written offers and placement documentation, check the thresholds and prepare the required reporting. Contact us to fit your transaction into a lawful frame.