LLC Formation: the Legal Basis
The limited liability company is the most widespread enterprise form in Georgia. The law defines it as an enterprise whose capital is divided into shares, with the partners’ liability for the company’s obligations limited. The company answers to creditors with all its property and is not liable for the partners’ obligations.
This form may also be founded by one person: under Article 19, an LLC may be founded by a single person, and where all shares pass to one partner the company becomes a one-person enterprise, a fact reflected in the register.
Note the address as well: under the law, the entrepreneur’s legal address is its physical address on the territory of Georgia.
The Mandatory Content of the Founding Agreement
The founding agreement contains the charter and the data prescribed by law. For a company of any form, together with the charter it must contain the firm name, the legal address, the identification data of every partner — name, surname, residential address and personal number, or, for a legal person, its firm name, legal address and identification number — as well as the data of the person authorized to manage and represent, supervisory-board members where such a board exists, and, where applicable, a general trade representative and the manager of a partner’s share.
Where no charter has been developed by the founders, the standard charter is considered part of the founding agreement. For an LLC, the agreement must additionally state the number of shares issued for consideration and the partners’ proportional participation, expressed in percentages whose sum must equal 100 percent.
Additional possible elements include the maximum amount of authorized capital, the number of issued shares and the redistribution of shares upon placement, nominal values, and a special condition restricting the alienation of shares. In preparing the document, note also that the founding agreement may set a minimum contribution for shares of a particular class, and nominal values of different classes may differ — the very basis of dividing shares into classes.
Where a founder is a non-citizen or a foreign legal person, the founding document must contain equivalent identification data.
The amendment regime is calibrated too: changes to the firm name, the legal address, the supervisory-board data, a differing form of representation and the authorized and issued capital require the same majority as an amendment of the charter.
The Charter and Preconditions for Registration
The charter contains at minimum the legal form, the object of activity, any agreed restriction on ownership of shares and information on a partners’ agreement. Standard charters are approved by the Minister of Justice. For registration, the registering body receives the founding agreement and the consent of each person authorized to manage and represent the company, unless expressed in the founding agreement; legislation may set further preconditions.
Note also that amending or repealing the standard charter does not of itself force a company to change its own charter; that duty arises only where the change stems from an amendment of the law that imperatively requires compliance.
Placed Capital and Contributions
An LLC may have placed capital. Where it has only shares with nominal value, placed capital equals their sum; where it has both nominal and non-nominal shares, capital exceeds the sum of the nominal ones; where only non-nominal shares exist, capital may be set at any amount. Capital is expressed in the national currency; its initial amount is determined by the founding agreement, and changes are decided by the partners.
The contribution rules matter as well: a partner makes the agreed contribution in money or in kind, unless contributions in kind are prohibited by the charter. The general meeting may release a partner from this obligation, except where the contribution is necessary to satisfy creditors’ claims or a significant interest of the company’s functioning. A contribution is not mandatory immediately upon placement of the shares, and absent an agreed deadline it must be made within a reasonable period from the company’s demand. That reasonable period is measured concretely — by the company’s needs, the partner’s financial situation and the scope of the obligation to be performed — while the procedure for making a contribution is established by the charter or by a partners’ agreement.
One restriction deserves emphasis: where a release from the contribution obligation concerns a share with a nominal value, the release is allowed only with a corresponding reduction of the placed capital.
Frequently Asked Questions
Below are the most frequent questions about forming an LLC.
Is a minimum capital prescribed for an LLC?
The law sets no minimum amount for this form: the initial amount of placed capital is determined by the founding agreement, and where only non-nominal shares exist it may be set at any amount.
Can an LLC be founded by one person?
Yes. Where all shares pass to one person, the company becomes a one-person enterprise and the partner’s data are reflected in the register.
What must the founding agreement contain?
The charter and statutory data: the firm name, address, identification of partners, management persons and, for an LLC, the number of shares issued and the percentage participation — totalling 100 percent.
When is a contribution in kind possible?
Where it is not prohibited by the charter; release from a contribution is possible by decision of the general meeting, with creditors’ interests taken into account.
May a partner be released from a contribution owed on a nominal share?
Yes, but only with a corresponding reduction of the placed capital; where the contribution is necessary to satisfy creditors’ claims, no release is possible.
How We Help on Legal.ge
The lawyers of Legal.ge support every stage of forming an LLC: we draft the founding agreement and charter to match your structure, plan the shares, nominal values and restrictions, and carry the registration through. Contact us — a correctly drafted founding document spares future disputes.