JSC Formation

Introduction: What is a Joint Stock Company (JSC)?

A Joint Stock Company (JSC) is a capital company whose charter capital is divided into shares. This form is designed for large businesses that wish to raise significant capital and involve a wide circle of investors. Unlike an LLC, a JSC has a more complex corporate structure, which includes a General Meeting of Shareholders, a Supervisory Board, and a Directorate. This form is mandatory for institutions such as banks and insurance companies, as well as for those planning an Initial Public Offering (IPO) on a stock exchange. A JSC ensures easy circulation of capital through the buying and selling of shares, making it attractive to passive investors.

What Does This Service Cover?

Formation of a Joint Stock Company requires a professional legal approach:

• Charter Drafting: Creating an individual charter that details share classes (ordinary, preferred), voting rights, and dividend distribution rules.
• Capital Structuring: Defining issued and authorized capital, setting the nominal value of shares, and organizing the valuation of non-cash contributions.
• Formation of Governing Bodies: Electing members of the Supervisory Board and defining their powers in accordance with the law.
• Registration: Submitting documents to the Public Registry and registering the JSC.
• Share Registry: Selecting an independent registrar (if the number of shareholders exceeds 50 or shares are public) and initiating the registry maintenance.

Common Real-World Scenarios

The JSC form is chosen for specific business goals:

• Banking and Insurance Activities: Legislation explicitly requires the Joint Stock Company form for these types of activities.
• Large Infrastructure Projects: Energy or construction projects where multiple investors need to be united with clear rights.
• Stock Market Listing: Companies planning to list shares on the London or Tbilisi Stock Exchange are required to be JSCs.
• Holding Structures: Large groups often use a JSC as a parent company to manage subsidiaries.

Georgian Legal Framework

The activities of a JSC are regulated by the Law of Georgia on Entrepreneurs (new 2021 edition), which introduced European standards regarding capital protection and governance. The law strictly regulates share issuance, dividend distribution, and capital reduction to protect creditor interests. If the JSC is a reporting enterprise (its shares are admitted to trading), it is subject to the Law on Securities Market and National Bank regulations on transparency. The Law on Accounting, Reporting and Auditing is also important, obliging JSCs (in most cases) to audit their financial statements.

Service Process

Establishing a JSC through Legal.ge involves:

1. Structure Planning: Developing the shareholders' agreement and corporate governance model.
2. Founders' Meeting: Preparing the minutes of the meeting where the charter is approved and management is appointed.
3. Capital Deposit: Opening a bank account to deposit the charter capital (if monetary).
4. State Registration: Going through registration procedures at the Public Service Hall.
5. Post-Registration: Forming the share registry and preparing initial reporting documents.

Why Use Legal.ge?

Establishing a Joint Stock Company is significantly more complex than registering an LLC. The new legislation introduced many nuances (e.g., nominal value, capital test), failure to consider which can lead to serious legal problems. On Legal.ge, you will find corporate law experts who will help you create a robust structure attractive to investors.