The Procedural Machinery of Shareholder Dispute Resolution
The machinery for resolving shareholder conflicts in Georgia is procedural: arbitrability, the collective claim, interim relief and the enforcement of arbitral awards — these four pillars are defined by the Civil Procedure Code. The substantive rights of shareholders and the internal hierarchy of corporate organs are governed by the current Law on Entrepreneurs and are not precisely defined on this page. At the same time, the institutions of the Delaware courts — the appraisal claim for the appraised value of a share or the derivative suit — have no exact Georgian procedural analogue; the Georgian answer is the choice of forum (court or arbitration) and the corresponding interim measures.
Referral of the Dispute to Arbitration
A private-property dispute based on the equality of persons, which the parties can settle between themselves, may by agreement be referred to arbitration. A shareholder dispute classically falls into this category: the parties are equal private persons and the subject of the dispute is proprietary in nature. Therefore, writing an arbitration clause into the company charter or a shareholders' agreement is a fully-fledged, working solution in Georgian law: the parties themselves choose the forum that will hear their dispute, and arbitrators decide the case instead of a judge. Removal of an arbitration clause for court consideration is possible only in cases provided by law.
Joinder — the Basis of the Collective Claim
A claim may be filed jointly by several plaintiffs or against several defendants if the subject of the claim is a common right, the claims arise from the same grounds, or the claims are homogeneous regardless of whether their grounds and subject are homogeneous. In the practice of shareholder disputes this means that several members of a minority whose rights rest on the same circumstances may jointly bring a claim — both against the company and against the controlling shareholder. At the same time, each plaintiff or defendant participates in the process toward the other party independently: joinder does not erase the individual position of each party or the procedural differences between them.
Claim Security — Freezing Assets While the Dispute Runs
A plaintiff may apply to the court with an application for claim security, indicating circumstances under which the non-application of a measure would impede or make impossible the enforcement of the decision, the exercise of the violated or disputed right, or would cause irreparable and direct damage, or damage that cannot be compensated by imposing damages on the defendant. The application must also justify which measure the plaintiff considers necessary. Among security measures are seizure of property, securities or money belonging to the defendant; prohibition of the defendant's performing certain actions; a prohibition on third parties transferring property to the defendant or performing obligations toward it; and suspension of a disputed act of a state or municipal body. The court may apply other measures as well if necessary for securing the claim, and where necessary several types of measures may be allowed simultaneously.
In the shareholder context this means that where there is a risk of asset stripping or a forced redistribution of control, the plaintiff requests seizure and freezes the situation while the dispute runs. A special rule applies to a commercial bank in the resolution regime: on the basis of a directive of the National Bank security measures are not applied, and applied measures are suspended for the period specified in the directive, which must not exceed 90 days; the judge issues a ruling within 1 day of the directive, and if the resolution regime ends earlier, the National Bank notifies the court, which cancels the suspension.
Recognition and Enforcement of the Arbitral Award
If the parties have chosen the arbitration route, the end of the dispute is the enforcement of the arbitral award. A decision on the recognition and enforcement of an arbitral award is issued after the interested party files the relevant motion. In practice this means that an arbitral award is not automatically self-executing: the prevailing party applies to the court for its recognition and enforcement, and only by the court's decision does it become a basis for enforcement. When drafting an arbitration clause in a shareholders' agreement, this stage should be factored in — both in terms of time and the costs of the motion.
Frequently Asked Questions
Below we summarise the questions that arise most often in practice on this topic.
Can a shareholder dispute be referred to arbitration?
Yes — a private-property dispute between equals, which the parties can settle, may by agreement be referred to arbitration; for this purpose an arbitration clause is written into the charter or the shareholders' agreement.
Can several shareholders bring a joint claim?
Yes — where there is a common right, claims arising from the same grounds, or homogeneous claims; each party participates toward the other party independently.
Which security measures are available?
Seizure of property, securities or money, prohibition of actions, a ban on transfers by third parties, suspension of a disputed act, and other measures the court deems necessary, including several simultaneously.
How is an arbitral award enforced?
Upon the interested party's motion — the decision on recognition and enforcement is issued by the court after the motion is filed.
How We Help on Legal.ge
A shareholder dispute requires the procedural instruments to be selected before the dispute begins. Our team will help you draft the arbitration clause and choose the forum, assess the grounds for joinder and prepare a collective claim, draft the application for claim security and carry out the enforcement of an arbitral award. Contact us on Legal.ge — we will assess your conflict and choose the most effective route to resolve it.