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.
The Registrar's Duties
The operational layer of a transfer is the registrar. The registrar of securities has no right to refuse to perform an entrusted duty if the issuer has performed the conditions of the contractual relationship and the submitted documents comply with the requirements; such refusal may be appealed to the National Bank of Georgia. The registrar must have a relationship with the issuer defined by a written agreement, which ensures the issuer's timely supply with the current list of registered holders of each issue — for annual and extraordinary meetings, for dividend distributions, for interest payments and repayment of the principal of a loan. Within reconciliation, the registrar must ensure that the quantity of registered securities of one issue equals the sum on the accounts opened with the registrar, and this reconciliation is carried out with the periodicity determined by the National Bank. In the case of nominal holding, the quantity and description of securities on accounts must correspond to the records of the nominal holder.
The holder's rights are also secured: upon the request of a holder registered in the registry, the registrar must provide an extract from his account for a specific date and information on the circulation effected on the account for a specific period. The extract must clearly indicate that it is not a security and is only a record that the person is the registered holder at the specified date. The registrar's employees and officers are prohibited from disseminating non-public information received at work to anyone except the National Bank, or from using it in trading, and must immediately notify the registrar in writing of any change in the submitted information.
Frequently Asked Questions
Below we summarise the questions that arise most often in practice on this topic.
When does ownership of shares pass?
In a transaction with registered securities — from the moment of registration in the registry, and for securities held with a nominal holder — from the moment of recording in the nominal holder's records.
In which forms may securities be issued?
Registered form through the securities registry, dematerialized form in the central depository system, or another form defined by law — a public security is issued only in dematerialized form.
Can the registrar refuse to record a transfer?
Only if the issuer has not performed the contractual conditions or the documents do not comply with the requirements; such refusal may be appealed to the National Bank.
What does a holder receive from the registrar?
Upon request — an extract for a specific date and information on the circulation effected on the account for a specific period.
How We Help on Legal.ge
A share transfer does not end with the contract: the moment of transfer, the proper registry and the entry procedure must be planned precisely. Our team will help structure the transfer transaction, determine the form and accounting system, prepare documents for the registrar or depository, and control the passage of ownership. Contact us on Legal.ge — we will avoid the risks and conduct the transfer of your shares flawlessly, in the procedure established by law.