The Core Rights of a Shareholder
The Law of Georgia on Entrepreneurs grants a shareholder a broad catalogue of rights within a joint-stock company. Under Article 172, a shareholder has the right to participate in the general meeting; to examine the issues provided for in the agenda of the general meeting; to examine, in the manner established by law and by the statute, the documents of the company and to receive copies of them in printed form or electronically, where the shareholder has declared in advance consent to receiving information by electronic means of communication, as well as to receive information from the company under Article 202; to receive a dividend; to freely dispose of the shares in their ownership; to demand, in cases provided by law, that the company buy back the shares in their ownership; to receive the residual property resulting from the liquidation of the company; and to exercise other powers provided for by this law, other legislative acts of Georgia, or, deriving from the law, by the statute.
The freedom to dispose of shares is separately entrenched: a shareholder has the right to freely dispose of the shares in their possession without the consent of the company or of other shareholders, unless otherwise provided by law or the statute. This norm underpins the liquidity of a shareholder's investment and determines its practical value: capital that cannot be exited at will is worth less, and the legislator has protected the shareholder against precisely that risk.
Convening a General Meeting at the Demand of Shareholders
Article 187 governs the convening of a general meeting at the demand of shareholders. Where necessary, the governing body of the company is obliged, on the basis of a written demand of a shareholder or a group of shareholders holding at least 5 percent of the capital, to publish a decision on convening a general meeting within 10 days of receipt of the demand. The written demand must indicate the necessity, purpose and reason for convening the meeting, as well as its agenda reflecting all issues requested by the shareholders; the governing body has the right to add further issues to the agenda.
If the demand for convening the meeting is not satisfied, the court may, on the application of the shareholders concerned, empower the applicant shareholders to convene the general meeting themselves and appoint its chairperson. The costs of convening, preparing and holding an extraordinary general meeting are borne by the company — a rule that frees minority activism from a financial barrier and shifts the burden onto the company whose governing body failed to respond.
The Right to Information at the General Meeting
Under Article 202, during the general meeting a participating shareholder has the right to ask questions to the governing body or persons of the company regarding the issues provided for in the agenda, and to demand any information necessary for the proper consideration and assessment of those issues. The governing body is obliged to answer the shareholder's questions and to provide the requested information in full. Refusal is permissible only in defined cases:
- the provision of the information may cause significant harm to the company;
- the provision of the information would disclose confidential information;
- the question has already been answered on the company's website in a question-and-answer format before or during the meeting.
If before the meeting the company voluntarily provided information to any shareholder by virtue of that shareholder's status, the same information must be provided to every other participating shareholder — even where it is not necessary for the consideration of the agenda items. A refusal to provide information may be appealed to the court within 15 days of the drafting of the minutes of the general meeting. If the court satisfies the shareholder's demand, the information is provided to the shareholder even outside the meeting, and the company must make the same information available to all other interested shareholders.
A Shareholder's Claim for the Benefit of the Company
Article 222 gives shareholders an effective judicial instrument for protecting the company's interests: one or more shareholders have the right to bring a claim in their own name and for the benefit of the joint-stock company in order to enforce a claim owned by the company — including against the company's officials, demanding compensation for damage caused to the company by their non-performance of duties, or the transfer to the company of benefits received in return for damage caused.
A shareholder is regarded as a proper plaintiff if 90 days have passed since the written demand addressed to the company requesting the filing of the claim — unless the company refuses to file within that period or compliance with the term could cause irreparable harm to the company — and if the court determines that satisfying the shareholder's demand does not contradict the paramount interest of the company. The company has the right, by agreement with the plaintiff shareholder, to intervene in the claim at any time; where the shareholder is recognized as a proper plaintiff, the company is obliged to reimburse the expenses incurred in connection with the claim to a reasonable extent.
Mandatory Buy-out of a Minority Shareholder's Shares
Article 225 regulates the squeeze-out of minority shareholders: if, as a result of acquiring shares, a shareholder owns not less than 95 percent of the votes in the joint-stock company, that shareholder — the buyer — has the right to buy out the shares of the other shareholders at a fair price. The decision on the mandatory sale of shares is taken by the court in accordance with the rules of the Civil Procedure Code of Georgia, and it is by that decision that the court determines the fair price of the buy-out and the record date.
Before applying to the court, the buyer publishes a statement on the mandatory sale of shares no later than 1 month in advance, and the statement must contain information on the reasons and conditions of the buy-out and its procedures. The registrar notifies all nominal holders no later than 5 days before the record date set by the court; from the record date until the completion of the buy-out procedures, operations connected with those shares cease. On the basis of confirming documents — including confirmation of the full deposit of the redemption amount — the registrar re-registers the shares in the buyer's name, while the buyer places the full redemption amount on an account opened for the remaining shareholders. The registrar's costs are reimbursed by the buyer.
Frequently Asked Questions
What stake allows a shareholder to demand the convening of a meeting?
A written demand of a shareholder or group of shareholders holding at least 5 percent of the capital; the governing body must publish its decision on convening the general meeting within 10 days of receiving the demand.
When may the company refuse to provide information?
Where the information could cause significant harm to the company, its provision would disclose confidential information, or the answer has already been given on the website in a question-and-answer format. The refusal may be appealed to the court within 15 days of the drafting of the minutes.
What is a shareholder's claim for the benefit of the company?
A claim brought by a shareholder in their own name but for the company's benefit to enforce a claim owned by the company. It requires that 90 days have passed since a written demand to the company, unless the company refuses earlier or waiting could cause irreparable harm.
When does the mandatory buy-out of a minority shareholder occur?
When a shareholder owns not less than 95 percent of the votes as a result of acquiring shares — such a buyer may buy out the remaining shareholders' shares at a fair price by decision of the court.
How We Help on Legal.ge
Protecting shareholder rights depends on precise knowledge of the Law on Entrepreneurs: the 5 percent threshold and the 10-day term for convening a meeting, the limits of the right to information and the 15-day appeal period, the 90-day precondition of a derivative claim, and the squeeze-out procedure built on the 95 percent threshold. Each of these elements loses its value if the terms and formalities are breached, and a right exercised late is often a right lost.
The lawyers working on Legal.ge will help you assess shareholder rights, prepare a demand to convene a general meeting, navigate the procedures for requesting information and challenging refusals, prepare a derivative claim for the company's benefit, and defend a minority position in a buy-out process. Contact us for a consultation and protect your investment with every means the law provides.