Why Share Valuation Disputes Arise
When an entrepreneurial society is transformed — by merger, amalgamation, division or change of form — a partner who voted against the transformation at the general meeting is entitled by law to have the share bought out. A dispute arises when the partner does not agree with the buyout price offered for the share: in that case the determination of the fair price is taken over by the court, on the basis of an independent valuation. Georgian legislation regulates this procedure in detail — through terms, the content of the application and the criteria by which the court determines the price. For both sides, managing the timeline is decisive: the right to apply exists only for a short statutory term, and a defect at any stage leads to rejection of the application.
Applying to Court — the 30-Day Term and the Content of the Application
A partner who does not agree with the offered buyout price may, within 30 days of receiving the notice about the buyout price, apply to court with an application demanding determination of the fair price. The statute regulates eight mandatory elements of the application: the name of the court; the names of the applicant and of the entrepreneurial society, their personal numbers, addresses, actual places of residence, e-mail addresses and contact telephone numbers or other data; the substantiation of the existence of the preconditions for applying to court; data on the person to be appointed as independent expert; an indication that the term has been observed; the demand; references to the attached evidence; and the signature of an authorized person. The application must be accompanied by evidence confirming the factual circumstances and the receipt for the state fee.
The Admissibility Check and the Appointment of the Expert
Within 3 days of receiving the application, the court checks its admissibility. Where the requirements are breached, a ruling refusing to accept the application is issued, against which a private complaint may be filed. Otherwise the court notifies the society of the partner’s demand and, within 7 days of receipt of the application, appoints an independent expert or a brokerage company. The expert or brokerage company prepares a buyout report indicating the documented circumstances, the method used to determine the fair price and the price determined on that basis; its costs are reimbursed by the buyer. In selecting the expert, the court may consider the parties’ views, the parties may propose candidates, and they may seek the recusal of the expert on the grounds established by law.
The Examination and the Valuation Criteria
The determination of the fair buyout price is examined without an oral hearing, though the court may schedule a session with the participation of the partner and the society; their failure to appear cannot prevent the matter being decided on the written materials presented. In determining the price, the court issues a ruling and must take into account the value of the share, the expected income of the society, and the assets — including reserves, business reputation, experience, prospects and business connections — and the liabilities. The expert’s report thus unites two elements — the factual basis and the methodology — and that is precisely why its verification is the central part of the parties’ argumentation: an error in the report, whether factual or methodological, may become the subject of a complaint. The same criteria apply to decisions on the mandatory sale of shares: the decision fixes the fair buyout price and the accounting date, corresponding to the end of the working day, and the value of the shares on the securities market is additionally assessed. If the court does not find conformity of the mandatory-sale procedure with the law’s requirements, it refuses to satisfy the application by a ruling.
The Appeal Regime
The ruling on the buyout price is challenged by a private complaint, while a decision on the mandatory sale of shares may be appealed only in the appellate mode — no later than 14 days from its issuance. The decision must indicate the procedure and the term of its appeal. The term for examining the case in the appellate mode is one month. It is also important that an appeal does not suspend the execution of the decision.
Frequently Asked Questions
Below we answer the questions most frequently asked on this topic.
Within how many days may one apply to court on the buyout price?
Within 30 days of receiving the notice of the buyout price. Observing the term is a condition of admissibility.
What must accompany the application?
Evidence confirming the factual circumstances and the receipt for the state fee; where the requirements are breached, the court refuses to accept the application by a ruling.
Who values the share — the court or an expert?
The court appoints an independent expert or brokerage company, which prepares a buyout report with a method and justification; the final ruling is issued by the court under the statutory criteria.
Is there an oral hearing?
As a rule, no — the matter is examined without an oral hearing, on the written materials, though the court may schedule a session.
Does an appeal suspend execution of the decision?
No. An appeal against a mandatory-sale decision does not suspend its execution.
How We Help on Legal.ge
A share valuation dispute demands strict observance of terms, correct drafting of the application and critical analysis of the independent valuation. On Legal.ge you can consult an advocate experienced in corporate law who will protect your interests both in a buyout-price dispute and in the mandatory sale of shares. Submit a request on the site and get qualified assistance.