A Strategic Alliance as a Legal Instrument
A strategic alliance between companies usually goes beyond a one-off trading relationship and requires a legally deliberate structure. In Georgia, such cooperation may rest on a production or commercial contract as well as on the corporate mechanisms provided by the Law on Entrepreneurial Societies — the establishment of a joint venture, equity participation, or an agreement coordinating voting and decisions between the parties. Where the alliance takes the form of a common entrepreneurial society, the founders reflect in the agreement, together with the charter, the firm name, the legal address, the identification data of the partners and the particulars of the persons authorised to represent the society, while the proportional participation is expressed in percentages and must sum to 100 percent. It is precisely this formal foundation that turns a shared commercial intention into a defined relationship protected even in the event of a dispute.
The Shareholders' Agreement between the Allies
The law directly recognises the shareholders' agreement: shareholders, or shareholders together with a third person, are entitled to conclude a contract under which its parties will be obliged to exercise, in a defined manner, the rights arising from the shares or other rights, and to perform the corresponding obligations. The company must be notified immediately of the conclusion of such an agreement. The agreement requires no special form, which gives the parties flexibility — although precision of content becomes especially important. Where a share covered by a shareholders' agreement is sold, the rights and obligations arising from the agreement do not pass to the purchaser, unless this was specially provided for both in the shareholders' agreement and in the contract of sale. Accordingly, for the stability of the alliance it is essential to determine in advance what happens if a party sells its stake.
The Force and the Limits of the Agreement
A shareholders' agreement is binding only on its parties — the society and third persons are not parties to it unless they join it themselves. A shareholder may not be denied the exercise of the rights arising from the share even where that shareholder violates the agreement, and a breach of the shareholders' agreement cannot become a ground for annulling the decisions of the organs of the company. This means that the private interests of the allies are protected by the general contractual remedies — damages, penalty or withdrawal from the contract — and not by the annulment of corporate decisions. A strategic alliance document should therefore be drafted with these potential conflicts in mind, providing clear consequences for non-performance and realistic mechanisms for resolving disagreements between the parties.
The Partners' Agreement in a Limited Liability Company
The parties to an alliance may also be the partners of a limited liability company, and for them the law preserves the institution of the partners' agreement: it is governed by the rules analogous to the shareholders' agreement, which means the parties can equally agree on voting, dividends, competitive restrictions and exit terms. At the same time, the decisions of the organs of the society continue to be taken under the procedure defined by the charter, and the agreement cannot replace the corporate charter — it is an additional legal foundation between the parties. For an alliance, the right choice may equally be the establishment of a separate joint venture in which the parties' shares, classes and governance structure are agreed from the outset, or a contractual combination of both instruments.
Frequently Asked Questions on Strategic Alliances
Does a shareholders' agreement pass to the purchaser of a share?
As a rule, no: the rights and obligations arising from the agreement do not pass to the purchaser unless this was specially provided for in the shareholders' agreement and in the contract of sale. Precise regulation here is a key condition of the alliance's stability.
Is the company bound to perform the agreement?
No. A shareholders' agreement binds only its parties, and its breach cannot serve as a ground for annulling the decisions of the company's organs. The remedies are determined by the general rules of contract law.
What form does a shareholders' agreement require?
No special form is required, although the company must be notified of the conclusion immediately. Precision of content and evidentiary value are decisive here.
Can an alliance be formalised through equity participation?
Yes — on the establishment of a common entrepreneurial society the proportional participation is expressed in percentages and must amount to 100 percent, which formally fixes the agreed balance between the parties.
How We Help on Legal.ge
The Legal.ge team will help translate a strategic alliance into a sound legal form: we will assess your cooperation model, select the appropriate structure — a contract, a joint venture or a shareholders' agreement — and prepare documents protecting the parties' interests both in cooperation and in conflict. Contact us and we will discuss your project — we will also assess whether your cooperation needs a separate joint venture entity or whether a contractual model suffices.