The Legal Nature and Importance of Partnership Agreements
A partnership agreement is the foundation of any entrepreneurial relationship: it records the rights, obligations, shares and governance arrangements between the partners of an enterprise society. Under the Georgian Law on Entrepreneurs, establishing an enterprise society requires a founding agreement, and the same law sets out in detail the data which that document, together with the statute, must contain. The founding agreement and the statute jointly form the legal framework of the society, so every detail deserves attention before signature: a well-drafted agreement prevents many future disputes by answering in advance who participates in the common undertaking and on what terms.
Form of the Agreement and Certification of Signatures
The law regulates the form of the founding document strictly: the agreement is concluded in writing and is signed by all founding partners of the society. The signature is certified by a notary, yet notarial certification is not required where the signature has been certified by the National Agency of the Public Registry, by another administrative organ or person authorised by the registering organ, or has been executed in accordance with the Georgian Law on Electronic Document and Electronic Trusted Services. A power of representation, by contrast, always requires either notarial certification or an electronic execution compliant with that same law.
Mandatory Contents of the Founding Agreement
For a society of any legal form, the founding agreement, together with the statute, must contain the firm name of the society, its legal address and the identification data of every partner: for a natural person, the first name, surname, address of residence and personal number; for a legal person, the firm name, legal address and identification number. The agreement must further reflect data on the person authorised to manage and represent the society; where a supervisory board exists, the identification data of its members and the term of their authority; and, where a general trade representative or a manager of a partner's share exists, their identification or registration data. A form of representation differing from the statutory joint representation must be described in the agreement. If the founders do not adopt a statute of their own, the standard statute is deemed to form part of the founding agreement. For a partner without Georgian citizenship or a foreign legal person, the document must contain the equivalent data used for identification at notarial acts in Georgia; an entrepreneur's legal address is the physical address in Georgia.
Additional Requirements by Type of Company
The founding agreement of a limited partnership must additionally state which partner is the limited partner and the amount of the contribution. For a limited liability company, it must indicate the number of shares issued in exchange for consideration, the partners' proportional participation in the capital, expressed in percentages whose sum must amount to one hundred, the authorised capital, the number of issued shares, nominal values and any special condition restricting the alienation of shares. For a joint stock company, it further includes the placed capital at registration and its paid-up part, nominal values of shares, data on shares issued for a non-monetary contribution, with the type of contribution and the obligated person, foundation and licence or permit costs, and the economic benefit received or to be received by the persons involved. The founding agreement of a cooperative must additionally contain the nominal value of the membership share, and changes to the data specified by law require the majority needed for an amendment of the statute.
Liability Models and Partner Agreements
Choosing the form of the society is decisive, because it determines the liability model. A general partnership is an enterprise society whose partners jointly conduct entrepreneurial activity under a unified firm name and answer directly and without limitation for the obligations of the society towards creditors, as solidary debtors; such a society must have at least two partners. In a limited liability company the capital is divided into shares, the liability of the partners is limited, the company answers before its creditor with all of its property, but it does not answer for the obligations of its partners. The partners may also conclude a separate partners' agreement: the rules on shareholder agreements extend to it, while a joint stock company itself may participate in a shareholders' agreement unless this contradicts Georgian legislation or its statute.
Frequently Asked Questions
Is notarial certification always required?
No. Notarial certification is not obligatory where the signature has been certified by the National Agency of the Public Registry or another authorised organ or person, or executed under the Law on Electronic Document and Electronic Trusted Services. For a power of representation, the notarial or electronic form is required unconditionally.
What happens if the founders do not adopt a statute?
If the founders have not elaborated a statute, the standard statute is deemed part of the founding agreement. The society can still be founded, although the data required by the Law on Entrepreneurs must still be reflected in the agreement.
Can the alienation of shares be restricted?
Yes. The founding agreement of a limited liability company or of a joint stock company may contain a special condition restricting the alienation of shares. Where such a restriction exists, it must be described in the founding document.
How many partners does a general partnership need?
A general partnership must have at least two partners. Remember that such partners answer for the obligations of the society towards creditors directly and with their entire property, as solidary debtors.
How We Help on Legal.ge
The team of Legal.ge will help you draft and review partnership agreements: we analyse your business needs, select the appropriate legal form, prepare drafts of the founding agreement and statute in full compliance with the Law on Entrepreneurs, and advise you on execution and certification. Contact us so that your common undertaking rests on a reliable legal foundation from the first step.