The Freedom to Transfer a Share and Its Limits
The sale of a startup in Georgia is determined, first of all, by the rules on the transfer of a share in a limited liability company. Under Article 141 of the Law of Georgia on Entrepreneurs, a partner may transfer — alienate or encumber — his share without the consent of the company and the partners. This is the basic rule that gives the seller maximum flexibility: the alienation of a startup share does not directly require the consent of the other partners.
Freedom has its boundary. Under the second part of the same article, a decision that limits, prohibits or makes the transfer of a share dependent on the consent of the partners or the company is adopted only with the consent of all the partners to whom the restriction or prohibition applies. A restriction written into the charter is thus lawful, but its introduction or amendment stands only with the unanimous consent of the respective partners. For the seller this means: before the transaction the charter must be examined and the lawfulness of each restriction assessed.
The Form of the Transaction, Notice and Entry into Force
An agreement on the transfer of a share must be concluded in writing, and the partner is obliged to notify the company of it immediately upon conclusion. These two requirements are not formalities: breach of the written form casts doubt on the operation of the agreement, while failure to notify deprives the company of a basis for knowing of the transaction and breeds subsequent conflicts.
The most important rule for civil circulation is the moment of entry into force: the transfer of a share enters into force at the moment the registering body registers the share in the name of the new partner. The norms established by legislation on the bona fide purchaser are applied as well — the protection of the good-faith acquirer operates here too. For unfulfilled obligations connected with the alienated share at the moment of alienation, the alienating partner and the acquiring partner answer jointly and severally before the company, unless the charter provides otherwise — a norm that adds additional financial risk for the seller, which should be reflected in the price of the deal at an early stage.