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Partnership Agreements

Is a Shareholders' Agreement legally binding in Georgia?

Yes, under the Law on Entrepreneurs, partners' agreements are legally binding contracts and can even override certain default provisions of the charter internally.

Can we keep the agreement private?

Yes, unlike the Company Charter which must be uploaded to the Public Registry, a Partnership Agreement is a private contract and stays confidential.

What happens if a 50/50 partnership gets stuck in a disagreement?

Without a "Deadlock" clause (like a tie-breaker vote or buyout mechanism) in your agreement, the business may become paralyzed, potentially leading to court-ordered dissolution.

Can I force my partner to sell their shares?

Only if you have pre-agreed "Call Option" or "Drag-along" clauses in your agreement triggered by specific events (e.g., breach of contract or an acquisition offer).

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Partnership Agreements (also known as Partners' Agreements or Shareholders' Agreements in the context of LLCs/JSCs) represent the cornerstone of a business's legal foundation. When starting a business in Georgia, entrepreneurs often limit themselves to a standard Charter registered in the Public Registry. However, a standard Charter rarely accounts for the specific details of the relationship between partners, which can become a source of serious conflict in the future. A Partnership Agreement is a confidential document that details the rights and obligations of partners, profit distribution rules, exit strategies, and dispute resolution mechanisms. Legal.ge offers access to qualified corporate lawyers who will help you prepare an agreement that protects your investment and ensures stable business development.

What does the Partnership Agreement service cover?

Drafting a partnership agreement requires deep analysis of the business specifics and the individual interests of the partners. Specialists on Legal.ge offer comprehensive services:

  • Management and Voting Rules: Defining decision-making procedures (e.g., which issues require unanimity vs. simple majority), going beyond minimum statutory requirements.
  • Financial Relations: Dividend distribution policy, reinvestment obligations, and rules for contributing additional capital (Capital Calls).
  • Share Transfer Restrictions: Detailed regulation of Rights of First Refusal, Tag-along rights, and Drag-along rights.
  • Deadlock Resolution: Developing mechanisms for situations where partners cannot agree (e.g., "Russian Roulette" or "Texas Shootout" clauses).
  • Exit Strategy: Rules for share valuation and buyout in case of a partner's death, incapacity, or voluntary withdrawal.
  • Confidentiality and Non-Compete: Conditions prohibiting partners from running parallel businesses or using the company's trade secrets.

Common scenarios and needs

A Partnership Agreement is essential in the following situations:

  • Founding a Startup: When friends start a business and want to define who contributes what (money vs. labor) and how shares will be distributed (Vesting).
  • Investor Entry: When a new financial partner enters the company and wants control mechanisms and a guaranteed exit strategy.
  • Family Business: When family members are involved in the business, and a clear separation of personal and professional relationships is needed.
  • Joint Venture: When two independent companies create a new legal entity for a specific project, requiring precise allocation of responsibilities.

Georgian Legal Framework

Partnership agreements in Georgia are regulated by several key acts:

  • Law of Georgia on Entrepreneurs: This is the primary law defining partners' rights. The new law (2022) significantly increased the role of the partners' agreement and its precedence over dispositive norms.
  • Civil Code of Georgia: Regulates contractual relations, performance of obligations, and compensation for damages.
  • Law on Competition: Important when defining Non-compete clauses to ensure they do not restrict the market unlawfully.

Service Process Step-by-Step

Collaboration with a specialist via the Legal.ge platform involves:

  1. Audit and Consultation: Analyzing partners' visions, the business model, and potential risks.
  2. Structuring: Establishing the main principles of the agreement (Term Sheet).
  3. Drafting: Preparing the text of the agreement using legal terminology and ensuring compliance with Georgian law.
  4. Negotiation: Reconciling terms between parties and finding compromise solutions.
  5. Execution: Signing the agreement and, if necessary, notarizing it or reflecting relevant changes in the Public Registry (if affecting the Charter).

Why Legal.ge?

A Partnership Agreement is not a template document. An incorrectly drafted agreement can lead to strained relations between partners and business collapse. Legal.ge allows you to find lawyers with practical experience in corporate law who know how to balance diverse interests. Our specialists will help you create a solid legal foundation for your business's success.

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