Due Diligence under Georgian Law
Due diligence on an issuer of public securities does not begin on a blank page: the Securities Market Law creates an entire layer of public information — periodic reporting, step disclosure of ownership, the control of interested transactions and the system of dematerialized accounts — and this layer is precisely the material the examination consumes. For private targets no disclosure statute exists: diligence rests on registry extracts and contractual information covenants — the page distinguishes which regime attaches to which target. Note also that the appraisal-suit vocabulary of foreign court practice has no exact Georgian equivalent — the Georgian answer is the public information layer plus contractual guarantees.
Periodic Reporting as the Substrate of Diligence
An issuer must prepare, submit to the National Bank and publish an annual report; an issuer of public debt or public equity securities also a semi-annual one. The annual report contains auditor-confirmed financial statements, a management report and a declaration of responsible persons; submission and publication occur no later than 15 May, and the semi-annual report — as of 30 June and no later than 30 August. These duties create the core diligence material: the completeness of reporting, confirmed figures and disclosure deadlines are the examination's footing. Where the financial year differs, the annual report is submitted no later than 4 months after its end and the semi-annual within 2 months of the period's end; the reports must remain publicly available for at least 10 years, giving the examination historical depth.
The rule of accessibility of the reports also serves diligence: the issuer must make the reports publicly available for at least 10 years, while the half-year report is drawn up for the first 6 months of the business year — as of 30 June. This means that the acquirer’s examination covers not merely the last period but a whole decade: trends, omitted periods and corrections are visible in the documents.
The Ownership Radar — Step Disclosure
A holder of public equity securities must notify the National Bank and the issuer when its share reaches, exceeds or falls below the thresholds: 5%, 10%, 15%, 20%, 25%, 30%, 50%, 75%. For diligence this is a radar: through these notifications one sees who stands behind the concentration of control, and hidden ownership chains are disclosed exhaustively. The interested-transaction regime illuminates the place where the examination's riskiest interests hide: transactions of governing persons and holders of more than 20% fall under a special regime — a transaction exceeding 10% of assets is examined by an auditor, one above 50% is approved only by the general meeting, and information on the approved transaction is published within 5 days.
The disclosure duty is also procedurally regulated: for the computation of the threshold amounts the information must be aggregated, and the notice is sent to the National Bank and the issuer within the established period. The control of interested transactions gives the radar a further layer: a transaction concluded with the participation of a member of the management body or an owner of 20 percent or more of the total votes, whose value reaches or exceeds 10 percent of the value of the assets, requires the preliminary consent of the supervisory board and a public announcement; a transaction concluded in breach may be challenged within 18 months of its conclusion — even by a shareholder owning 5 percent or more of the votes. Such details form the quantitative layer of diligence.
The Accounting System — Verifying Title to Shares
A public security issued in Georgia must be in dematerialized form, in the central depository system, and the issuer must record it there. Questions of holding dematerialized securities are regulated by a separate law, and the National Bank sets additional rules. For diligence this means that verifying the shareholder register of a public issuer is an objective process built on depository records — the ambiguity of paper form is excluded. — the record's completeness is an instrument, not a formality — the examination's conclusion is as reliable as the public layer is complete, and Georgian law demands precisely that completeness from the issuer — and a breach of that demand ends for the issuer in sanctions and challenges to the reporting, which in turn burdens the buyer with post-closing disputes — and precisely for that reason the examination stage sits in the deal calendar before closing
For how long are the reports available?
For at least 10 years — the issuer keeps the reports publicly available, and the pre-acquisition analysis covers the study of a decade.
Frequently Asked Questions
Below we summarise the questions that arise most often in practice on this topic.
Where does diligence on a public issuer begin?
With periodic reporting — the annual and semi-annual reports are the basic substrate; published by 15 May and 30 August.
How is hidden ownership detected?
Through step disclosure — notifications at thresholds from 5% to 75% open the chain of control.
Where are interested transactions found?
In transactions connected with governing persons and holders of more than 20% — their approval and publication trail is public.
How is the shareholder register verified?
In the central depository's dematerialized accounts — on objective records.
How We Help on Legal.ge
Our team will help you select the target type, analyse the public information layer, investigate the trail of interested transactions and prepare the package of information guarantees for a private target. Contact us on Legal.ge — we will build your transaction's examination on the exact footings of Georgian law.