The Legal Framework of Business Disputes and Their Participants
Business disputes are conflicts arising from entrepreneurial activity, concerning both internal relationships of a society — between partners, shareholders and management organs — and its relations with creditors and third parties. Article 2 of the Georgian Law on Entrepreneurs defines the concept of the entrepreneur: an entrepreneur is a natural or legal person who has an enterprise, and an enterprise is an organised system for carrying out entrepreneurial activity. Entrepreneurial activity is lawful, non-repeated, independent and organised activity carried out with the aim of obtaining profit. Understanding this framework matters: the participant's status determines who may defend, against whom and by which remedies.
Entrepreneurial Status and the Boundaries of Liability
Entrepreneurial activity may be carried out as an individual entrepreneur or an enterprise society; general and limited partnerships, limited liability companies, joint stock companies and cooperatives are enterprise societies. An enterprise society is a legal person, while an individual entrepreneur is not: in business relations that person exercises rights and performs duties as a natural person and answers personally, with all of his or her property, for obligations arising from entrepreneurial activity before the creditor, unless the parties have agreed otherwise. Accordingly, the first step in shaping a dispute strategy is establishing the real boundaries of liability, which directly affects the scope of the claim and the prospects of enforcement.
Challenging Corporate Decisions and the Deadlines
The object of a business dispute is often a decision of the general meeting, the supervisory board or the managing organ. Under the law, such a decision is contestable if it violates the requirements of Georgian legislation or of the statute; however, it may not be declared void where the violation is immaterial. The right to challenge belongs to a partner who attended the meeting and voted against the decision, to a partner unjustifiably denied admission, where the meeting was convened in breach of the rules, or where the issue was not on the agenda; the managing organ, its members and supervisory board members may also challenge a decision that imposes an obligation on them or restricts their right. The claim must be brought within one month from the moment the person learned or should have learned of the decision, but no later than six months from its adoption, and for a gross violation no later than one year. Restoration of a missed deadline is not allowed, so a timely reaction is decisive.