Spin-Offs and Carve-Outs under Georgian Law
Separating a business segment in Georgia is carried out through the reorganization machinery of the Entrepreneurs Law: the division of an enterprise — by split or spin-off, by formation or acquisition — is precisely the statutory framework into which a spin-off (founding a new company by separation) and a carve-out (transfer to an existing company) fit. At the same time, foreign models of tax-neutral spin-off techniques are non-Georgian practice and cannot carry this page — the tax consequences are governed by a separate corpus, the Tax Code. The page is carried by the Georgian corporate mechanics of reorganization.
The Forms of Separation
Reorganization of an enterprise is allowed by transformation, by merger (accession or amalgamation) and by division (split or spin-off). Two configurations of division are distinguished: the company to be divided transfers its assets and liabilities in parts by force of law fully to two or more newly founded companies (split by formation) or to existing ones (split by acquisition); while a company from which a new company is separated may transfer a part of its assets and liabilities to one or more newly founded companies (spin-off by formation) or to existing ones (spin-off by acquisition). The first path is the classic spin-off, the second the carve-out: the segment moves into a new vehicle while the remaining business continues as the dividing company. No liquidation process begins: the registration of the reorganized company is cancelled and its assets and liabilities pass fully to the recipient. Partners may, besides shares, receive cash compensation where maintaining the share-exchange ratio is impossible — in a joint-stock company it must not exceed 10 percent of the nominal value of the shares to be issued.
The Division Plan
In a division by formation, the governing body of the divided company drafts the division plan; in a division by acquisition — the bodies of the divided and acquiring companies. The plan minimally contains the participants' identification data and legal form, the share-exchange ratio and the amount of cash compensation, the conditions of issuing shares, the date from which the right to participate in profit arises, the rights of holders of special rights, the benefits granted to managers, where necessary the composition of the new supervisory board and, most importantly, the exhaustive description and allocation of the assets and liabilities to be transferred. A draft of the acquiring company's charter amendments or of the new charter is attached to the plan. Comfort rules for defects are also in the law: an asset not assigned by the plan belongs to all acquirers proportionally to net assets, and an unassigned liability gives rise to joint liability — but not beyond the allocated net assets.