The Statutory Backbone of Minority Shareholder Protection
For issuers of public securities, minority shareholder protection in Georgia is codified in the Georgian Law on the Securities Market. The law gives minorities four enforceable rights: step disclosure of control concentration, the mandatory buyout offer, the special regime of interested transactions, and the information floor of periodic reporting. In unlisted companies, other minority remedies are governed by the current Law on Entrepreneurs, so this page is deliberately scoped to accountable issuers.
Step Disclosure of Ownership
A holder of public equity securities must submit a notification to the National Bank of Georgia and to the issuer if its share of voting securities reaches, exceeds or falls below the following thresholds: 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%. This duty rests on the existing holder and, on falling below a threshold, the former holder; it also extends to each member of a group acting in agreement and to a holder of acquisition rights over the issuer's equity securities. A holder is a person holding securities in his own name for his own or another's interests, including a depositary receipt holder.
For a minority, the disclosure system works as a radar: through these notifications it becomes visible who stands behind each threshold. The issuer must make the received information public within the period set by the National Bank, and in case of violation the Bank may suspend the person's voting rights for a certain period.
The Controlling Party's Mandatory Buyout
If a person or a group acting in agreement acquires securities as a result of which it controls more than half of the total votes of the accountable enterprise, it must, no later than 45 days from the occurrence of that fact, make a tender offer to buy out all remaining securities or, within the same period, reduce the votes under its control below half. This is the minority's exit right: at the moment control is taken, an offer must be made to every remaining holder. The requirement does not apply where more than half was lawfully acquired through an earlier tender offer to all remaining holders, or where the buyer holds the securities for others — then the duty falls on the person directly or indirectly controlling more than half.
The offered buyout price must be determined by an auditor or a brokerage company and, for each class of securities, must not be less than the highest price the acquiring person paid for that class of securities of the enterprise within the last 6 months. The valuation is supported by documented circumstances, and the valuer is liable with all its property for negligent or deliberately incorrect valuation. Until the offer is completed, the buyer may not exercise more than half of the votes at a general meeting.
Control of Interested Transactions
The second protective ring is the conflict-of-interest regime. A transaction falls under special rules if the interested person is a governing-body member or a shareholder holding 20% or more of the votes. The interested person must immediately notify the supervisory board (and the general meeting where it approves) in writing and is prohibited from voting. A transaction worth 10% or more of the enterprise's assets is examined by an auditor/certified accountant and approved by the supervisory board or general meeting; one exceeding 50% of the assets is approved only by the general meeting, and the enterprise immediately notifies the National Bank and publishes the information within 5 days.
The consequences: the interested person and the violating governing-body members must compensate the damage and return the personal benefit, and within 18 months a governing-body member or a shareholder holding 5% or more may apply to the court to invalidate the transaction.
Periodic Reporting as the Information Floor
Every protective mechanism rests on information. An issuer of public securities must prepare, submit to the National Bank and publish an annual report, and an issuer of public debt or public equity securities must also prepare a semi-annual report. The annual report contains auditor-confirmed financial statements, a management report and a declaration of the responsible persons; it is submitted and published no later than 15 May, or 4 months after the end of a differing financial year. The semi-annual report covers the first 6 months as of 30 June and is submitted and published by 30 August, or within 2 months after a differing period. The reports must remain publicly available for at least 10 years.
Frequently Asked Questions
Below we summarise the questions that arise most often in practice on this topic.
At which thresholds is ownership disclosed?
At 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75% — upon reaching, exceeding and falling below; the notification goes to the National Bank and the issuer and is published by the issuer.
When is a tender offer mandatory?
When the buyer controls more than half of the total votes — within 45 days of that fact the buyer must offer to buy out all remaining securities or reduce the controlled votes below half.
How is the buyout price determined?
By an auditor or brokerage company; for each class the price must not be less than the highest price the buyer paid in that class within the last 6 months.
Who can challenge an interested transaction?
Within 18 months of its conclusion — a governing-body member, a shareholder or group holding 5% or more of the votes.
How We Help on Legal.ge
A minority shareholder's position requires precise knowledge of which right activates at which step. Our team will help you analyse disclosure data, assess the mandatory buyout procedure and verify the buyout price valuation, identify interested transactions and prepare litigation positions, and study the issuer's reporting. Contact us on Legal.ge — we will assess your situation and plan an effective path to protect your shares.