LegalGELegalGE
...

Partnership Agreement Drafting

Can a partnership agreement override the company charter?

In general, the charter serves as the constitutional document towards third parties. However, partners are contractually bound by their agreement, and breaches can lead to damages.

What is a "Shotgun Clause"?

It's a dispute resolution mechanism where one partner offers to buy out the other at a specific price, and the other must either accept or buy the offeror out at the same price.

Is vesting enforceable in Georgia?

Yes, vesting schedules can be structured through contractual obligations and conditional share transfers under the Law on Entrepreneurs.

How much does it cost to draft?

Costs vary by complexity. A simple agreement is affordable, while complex structures with multiple share classes cost more. Check Legal.ge for quotes.

Reading Time

4 min

Published

...

A Partnership Agreement (often referred to as a Founders' Agreement or Shareholders' Agreement) is a vital document for any business with more than one owner. When registering a company in Georgia, the standard charter does not always regulate every nuance of the relationship between partners, especially in crisis situations. A Partnership Agreement is the "prenuptial agreement" of business — it pre-defines the rules of the game, responsibilities, and dispute resolution mechanisms while relations are still harmonious. Statistically, conflict between partners is one of the main reasons for startup failure. A skillfully drafted agreement reduces this risk, ensures business continuity, and protects the interests of each partner from unforeseen circumstances.

What Does Partnership Agreement Drafting Cover?

Specialists on Legal.ge offer partnership agreement preparation that fully covers the specifics of your business. The service includes:

  • Share Distribution and Vesting: Not just who owns how much, but when and under what conditions partners receive full rights to shares (Vesting), which is critical if a founder leaves early.
  • Management and Decision Making: Which decisions require unanimous consent and which require a simple majority. Rules for appointing and dismissing directors.
  • Financial Obligations and Dividends: When and how profits are distributed, and whether partners have an obligation to contribute additional capital if needed.
  • Exit Strategy: What happens if one partner wants to leave the business? Right of First Refusal and share valuation methodology.
  • Deadlock Resolution: Mechanisms for resolving situations where partner votes are split 50/50 and decision-making is impossible.

Real-World Scenarios When You Need This Service

The absence of a Partnership Agreement can create serious problems. Here is where it is essential:

  • Starting a Business with a Friend: The most common scenario. Friendship is no guarantee in business. The agreement separates personal and professional relationships.
  • Investor Entry: When a new partner enters the company with money, they want guarantees and control mechanisms. The agreement regulates the balance between old and new partners.
  • Non-Performance by a Partner: What happens if one founder no longer works actively but retains 50% of the shares? The agreement allows for share adjustment or buyback in such cases.
  • Death or Incapacity of a Partner: The agreement defines whether shares pass to heirs or if the remaining partners have the right to buy them back to avoid unwanted individuals entering the business.

Georgian Legal Framework and Regulations

Partnership issues in Georgia are primarily regulated by the Law of Georgia on Entrepreneurs and the Civil Code of Georgia. The Law on Entrepreneurs sets general corporate governance standards but leaves significant room for partner agreement (so-called dispositive norms). It is important to note that a Partnership Agreement (Shareholders' Agreement) is an obligational legal document effective between partners, unlike the Charter, which is registered in the Public Registry. The Law on Entrepreneurs, with recent amendments, grants partners greater flexibility, for example, regarding disproportionate voting rights and dividend distribution rules. A professional lawyer will help you correctly utilize these opportunities.

Service Process

Drafting a Partnership Agreement on Legal.ge involves:

  1. Partner Interviews: The lawyer meets with all partners to understand their visions, expectations, and potential concerns.
  2. Scenario Modeling: Specialists discuss "what if..." scenarios (e.g., a partner leaving, business sale) and agree on a response plan.
  3. Drafting the Agreement: A document is prepared reflecting the agreements reached and complying with legal requirements.
  4. Signing and Execution: Execution of the document and, if necessary, incorporating relevant changes into the company charter at the Public Registry.

Why Choose Legal.ge?

A Partnership Agreement is a complex document requiring both legal knowledge and a deep understanding of business dynamics. The specialists represented on Legal.ge are experienced corporate lawyers who have worked with numerous startups and large companies. They will help you build a solid foundation for your business and avoid future conflicts. Find your trusted advisor on Legal.ge today.

Updated: ...

Specialists for this service

Loading...