What a Partnership Agreement Is and Why It Matters
A partnership agreement is the legal foundation on which partners record the rules of their joint entrepreneurial activity: shares, voting, decision-making and representation. In Georgian law this relationship is governed by the Law on Entrepreneurial Societies, primarily its Articles 5, 94, 149 and 177. Our service covers the drafting of founding agreements, partner agreements and shareholder agreements, their reconciliation with your existing documents and the preparation of any necessary amendments. A well-drafted agreement reduces the risk of disputes and protects each party.
Mandatory Content of a Founding Agreement Under the Law
Article 5 of the Law defines the data that the founding agreement of any legal form of entrepreneurial society must contain together with the charter: the firm name, the legal address, the identifying details of every partner or founder, information about the person authorised to manage and represent the society and, where applicable, the data and term of office of supervisory board members, the identification or registration data of a general commercial representative and of a manager of a partner's share. A form of representation differing from joint representation must be described.
For each legal form the law adds specific requirements. The founding agreement of a limited partnership must state which partner is the limited partner and the amount of that partner's contribution. For a limited liability society the agreement must set out the number of shares issued in exchange for consideration, the partners' proportional participation in the capital expressed in percentages whose sum must equal one hundred percent, the authorised capital where it exists, the number of issued shares, nominal values and any special condition restricting the disposal of shares.
The founding agreement of a joint stock society must additionally contain the capital placed at the moment of registration, the authorised capital, the nominal values and number of shares placed at formation, the paid up part of the placed capital, data on shares issued for a non cash contribution including the type of contribution and the name of the obliged person, the existing or foreseeable costs connected with formation and with obtaining a licence or permit, and the economic benefit received by persons involved in those actions. For a cooperative, the nominal value of a share must be indicated. Changes to certain categories of data require a decision adopted by the majority needed for an amendment of the charter.
The Legal Regime of Partner and Shareholder Agreements
Alongside the founding agreement stands the partner agreement, which governs relations between partners on matters not reflected in the public registry. Under Article 149 of the Law, the norms on shareholder agreements apply to the partner agreement of a limited liability society, while shareholder agreements are directly regulated by Article 177.
Under that article, shareholders, or shareholders together with a third party, may conclude a contract under which the parties undertake to exercise rights arising from shares or other rights in a defined manner and to perform corresponding obligations. The society must be notified immediately about its conclusion. No special form is required, although a reliable written format is indispensable in practice.
The reach of such agreements matters greatly. A shareholder agreement binds only its own parties and cannot serve as a ground for invalidating decisions of the organs of the society. When a share subject to such an agreement is disposed of, the rights and obligations arising from it do not pass to the acquirer unless this was specially provided for in the agreement and in the disposal contract. For startups, the relevant clauses must be regulated before a new investor enters.
How Our Service Works
We begin by studying your activity, the composition of the partners and the legal form of your society, and determine which mandatory data your agreement requires and which matters belong in a separate partner agreement. We then prepare a draft containing both the statutory data and the terms agreed between the parties.
At the next stage we review the draft with each party and reconcile the terms so that the document does not contradict the law or the existing charter. The final version is prepared for signature and, where necessary, we advise on registration. Our aim is an agreement that is clear and, in the event of a dispute, a reliable instrument of proof.
Frequently Asked Questions
How many partners must a joint liability society have?
Under Article 94 of the Law, at least two. Such partners carry out entrepreneurial activity jointly under a single firm name and are directly and unlimitedly liable to creditors for the obligations of the society as joint debtors.
Does an obligation under a shareholder agreement pass to the acquirer of a share?
No. Under Article 177, rights and obligations arising from a shareholder agreement do not pass to the acquirer unless this was specially provided for in the agreement and in the disposal contract. The consequences of a share transfer should therefore be regulated in advance.
Must a shareholder agreement be notarised?
The law does not require a special form. In practice, however, a carefully drafted written document is essential so that the rights and obligations created between the parties can be proved if a dispute arises.
May the parties define the terms of their agreement freely?
Yes, provided the terms do not contradict the law or the charter of the society. A shareholder agreement binds only its parties, and its breach cannot become a ground for invalidating decisions of the organs of the society.
How We Help on Legal.ge
The Legal.ge team has spent years working on corporate documentation and knows which terms matter in practice. We will draft a partnership agreement matched to your legal form, record shares, representation and decision making rules, and protect the interests of each party. Contact us — we will assess your situation and prepare an agreement consistent with the law.