What is the legal basis of an equity incentive plan?

The granting of shares or options to employees rests on articles 158, 164, 167 and 161 of the Law on Entrepreneurs — share classes, capital increase, the pre-emption carve-out and the rules on own shares.

Do shareholders have a pre-emptive right over shares granted to employees?

No, where the shares are issued for the remuneration of the members of the governing organ, representatives, employees or related persons, including for the satisfaction of options. If the shares are not used for that purpose, the right revives.

Within what period must a non-cash contribution be made?

Within 5 years of the decision to increase the capital.

What happens to own shares bought back in breach of the rules?

The company must alienate them within 1 year; failing that, the shares are cancelled and the placed capital is reduced.

Equity Incentive Plans & ESOPs in Tbilisi, Georgia

Equity Incentive Plans, such as Employee Stock Option Plans (ESOPs) and other share-based bonuses, are among the most important tools for modern business growth. They allow companies to attract and retain high-quality talent without increasing immediate cash payroll costs. With the development of the startup ecosystem and corporate culture in Georgia, these instruments are becoming increasingly relevant. However, their legal structuring is quite complex and requires consideration of the specifics of Georgian legislation. An incorrectly drafted plan can lead to unforeseen tax liabilities for both the company and the employee, or create disputes over share ownership. Specialists on Legal.ge help you create effective, tax-optimized, and legally sound incentive schemes.

What Does Equity Incentive Plans Service Cover?

Lawyers on our platform offer full service regarding the development and implementation of incentive plans:

Plan Structuring: Selecting a model tailored to the company's goals (e.g., direct share transfer, options, Phantom Stock, or Restricted Stock Units - RSU).
ESOP Documentation Preparation: Drafting option agreements, Plan Rules, and grant notices for employees.
Defining Vesting Conditions: Outlining time-based or performance-based (KPI) conditions, after which the employee receives the shares.
Tax Consultation: Analyzing when tax liability arises (at grant, exercise, or sale of shares) and how it can be optimized.
Corporate Approval: Preparing minutes of partners' meetings and resolutions necessary to allocate shares and approve the plan.

Real-World Scenarios When You Need This Service

Incentive plans are critical in the following cases:

Early-Stage Startups: When a company lacks sufficient cash to pay high salaries, options are the best way to attract experienced staff.
Management Motivation: Creating long-term interest for C-level executives (CEO, CTO, CFO) to focus on increasing company value.
Employee Retention: The "vesting" mechanism compels employees to stay with the company for a certain period (e.g., 4 years) to fully receive the promised shares.
Preparation for Exit: Investors view companies where the team owns shares positively, as it increases their engagement and accountability.

Equity Incentive Plans