Share Transfer Procedures in Georgian Law
The procedure for transferring registered and dematerialized securities in Georgia is regulated by the Georgian Law on the Securities Market. It is this corpus that fixes the moment at which ownership passes, determines the form fork — registry or central depository — and shapes the registrar's duties on which the recording of a transfer is executed. It should be noted that the transfer of partnership interests in a limited liability company — pre-emptive rights and registration formalities — is governed by the current Law on Entrepreneurs, so this page is focused on transfers in securities form and states this boundary openly.
The Moment at Which Ownership Passes
In a transaction with registered securities, ownership is considered created, changed or terminated from the moment of registration of this fact in the securities registry, and where the securities are held with a nominal holder — from the moment of recording in the records of the nominal holder. This is the fundamental rule on the transfer of title to equity securities: signing the contract and paying are not enough — ownership passes only from the moment of the entry in the registry. For dematerialized securities, ownership questions are determined by the Law on the Possession of Dematerialized Securities. The National Bank of Georgia may clarify these procedures and set record-date requirements for public securities.
The Form Fork: Registry or Central Depository
Securities of the same class may be issued in Georgia in one of the following forms: registered form, through the securities registry; dematerialized form, in the central depository system; or another form defined by law. Registered securities of the same class may become dematerialized through recording in the central depository system. Which registry or system a transfer addresses is determined by the form of the security — when planning a transfer, this is the first question. A public security issued in Georgia must be in dematerialized form, in the central depository system, and the issuer must record public securities in the central depository system — therefore the transfer of a public issuer's shares is always effected by a depository entry.
The rules connected with the registrar also matter for the continuity of transfers: one issuer may have only one registrar of securities. If an issuer maintaining the registry through a registrar terminates the contract with it, it must ensure the entry into force of a contract with a new registrar or the central depository no later than the day of termination of the previous contract, and by the date of termination it must have performed all obligations under the previous contract.