The Legal Nature of a Share in a Startup
Structuring a startup's capital begins with the concept of the share. Article 29 of the Georgian Law on Entrepreneurs defines it: a share is a right implying a person's participation in the capital of an entrepreneurial society, with which rights and obligations are connected. A share is an object of ownership — which means that the portfolio of shares created by the founders is recorded like other objects of ownership and is subject to the general rules of disposal, albeit with corporate peculiarities.
The disposal of shares is regulated by Article 30: a partner has the right freely to dispose of their own share in the entrepreneurial society, unless restrictions are established by legislation, the statute or an agreement of the partners; a prohibition on the transfer of a share is impermissible. If a share is in the co-ownership of several persons, they are considered co-partners; where co-partners or heirs cannot agree by a majority of votes on the management of the share, the court appoints a manager of the share. The founders' agreement is precisely the instrument by which the boundaries and priorities of free disposal are set in advance.
Classes of Shares in a Limited Liability Company
Dividing a startup's capital often requires introducing different classes. Article 135 regulates the classes of shares of a limited liability company: the statute may allow the existence of different classes of shares; shares producing identical rights and obligations form one class, and the nominal value of all shares of one class must be the same. The rights and obligations connected with shares of different classes are regulated by the statute.
The protective rule is particularly important: a decision concerning a change of a right connected with any class of shares additionally requires the consent of holders of at least 3/4 of the total number of votes connected with the placed shares of the respective class, unless otherwise provided by the relevant part of the statute adopted by the partners unanimously. Structural changes caused by an investor's entry or the exercise of options thus run into the class-protection mechanism, and this must be taken into account in advance.