Governance Policy: For Whom It Is Mandatory
For public issuers, the most concrete Georgian standard for developing a governance policy is given by the Georgian law on the securities market: an accountable enterprise is an issuer of public securities founded under the law on entrepreneurs. It is precisely this circle that the mandatory rules on the audit committee, governing duties and conflicts of interest cover. The issuer likewise secures equal treatment and the availability of information under the procedure set by the National Bank, so the policy text should be kept aligned with the bank's acts.
The comply-or-explain model of the British corporate-governance code is not Georgian law and cannot carry the page: an issuer’s governance policy must begin with the imperative requirements of Georgian law. Note that the National Bank may set differentiated or additional requirements, and certain categories of issuers may be exempted from individual requirements in light of the cost of compliance.
The Audit Committee
The supervisory board of an accountable enterprise creates an audit committee that controls the reliability of the issuer’s financial reporting, ensures the effectiveness of the internal-control system and the independence of internal audit, and manages the relationship with the auditor. The committee consists of supervisory-board members and at least 1 independent member, and is chaired by a board member who is an independent member as defined by law. Commercial banks and investment funds have a different regime for this requirement.
The Standard of Governing Duties
Members of the governing organ of an accountable enterprise perform their rights and duties in good faith, with the care of an ordinary, prudent person in a like office and conditions, and in the belief that their action is best for the enterprise and the holders of its securities.
Members who supported a decision followed by non-performance of these duties are jointly liable for the damage. A member may rely on the conclusions of an auditor, legal adviser or other professional where the matter falls within that profession’s competence — but reliance is not in good faith where the member had, or was obliged to have, information that would have invalidated the reliance. A holder of securities has the right to sue. In the case of a gross violation of legislation, the National Bank, through its representative, may attend the general meeting of shareholders (partners) as an observer in order to react accordingly.