Auction Sale of Securities and Shares in Georgia | legal.ge

Auction Sale of Securities and Shares

How is the value of a company share determined before the auction?

The share is evaluated by an independent auditor or expert appraiser who thoroughly examines the company's financial condition, turnover, assets, and liabilities to determine its true market value.

Do other partners have a priority right when purchasing the share?

Yes, if the LLC's charter includes a pre-emptive purchase right, the other existing partners have the legal right to buy out the share at the expert-determined price before it goes to public auction.

Can a foreign citizen purchase shares at the auction?

Generally, Georgian legislation does not prohibit foreign citizens from purchasing company shares at auction, except in highly specific sectors where foreign investment restrictions are strictly imposed.

What happens if the share is not sold at the auction?

If the share is not sold at the first auction, a repeated auction is scheduled at a reduced starting price. If it remains unsold, the creditor can request the transfer of the share in kind in exchange for the debt.

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Introduction: Auction Sale of Securities and Shares

In the modern business environment, satisfying creditors' claims frequently necessitates the forced realization of highly specific and valuable assets, such as company shares and securities. The auction sale of securities and shares represents one of the most complex yet highly effective mechanisms of enforcement proceedings. When a debtor lacks sufficient liquid funds or standard movable/immovable property, the executioner targets their corporate assets—attaching stocks, bonds, or LLC shares—and subsequently sells them at a public auction. This intricate process demands a profound understanding of corporate law and the specific dynamics of financial markets to ensure that the property interests of both parties are maximally protected.

What the Service Covers

This specialized legal service covers the complete lifecycle of locating, seizing, evaluating, and realizing a debtor's corporate assets. Specifically, the service includes placing a formal lien on LLC shares in the Public Registry (Registry of Entrepreneurs and Non-Entrepreneurial Legal Entities), as well as blocking registered stocks and bonds at the central securities depository and various brokerage companies. The service mandates a comprehensive financial and economic evaluation conducted by independent auditors or financial experts to determine the true, fair market value of the company. Subsequently, the service covers the organization and execution of the public auction and the meticulous legal formalization of the transfer of shares/securities to the new owner.

Common Scenarios

Such complex auctions are frequently held during major business disputes, such as when one partner sues another, or when a company founder holds substantial personal financial obligations toward a bank or other major creditor. A common scenario might involve the forced sale of a successful startup founder's shares to cover personal debts, or auctioning off a minority or majority stake in a large joint-stock company. Another prevalent scenario is when shares were initially pledged as collateral (for instance, to secure a substantial business loan), and due to non-payment of the loan, the creditor legally demands the realization of the pledged asset through an auction.

Georgian Legal Framework

The process is strictly governed by several fundamental laws in Georgia. Primarily, the Law of Georgia on Enforcement Proceedings establishes the general rules for the realization of property, including corporate shares. Equally crucial is the Law of Georgia on Entrepreneurs, which intricately regulates the transfer of shares, the fundamental rights of partners, and issues of corporate governance. In the specific case of securities, the process is regulated by the Law of Georgia on the Securities Market alongside corresponding regulations issued by the National Bank. It is imperative to observe the pre-emptive purchase rights of other partners (if stipulated by the company's charter), a detail to which the legislation devotes special attention.

Step-by-Step Process

The procedure systematically begins with the executioner placing a seizure on the shares/securities at the registry or depository. In the next critical stage, a competent auditor or financial appraiser is appointed to thoroughly examine the company's financial statements, assets, and liabilities to accurately determine the market value of the share. Once the valuation is finalized, if the company's charter provides for a pre-emptive right of purchase, the other partners are officially offered the opportunity to buy the share at the appraised price. If they decline or fail to exercise this right within the established timeframe, the share is placed on a public electronic auction. The winning bidder pays the required amount, and based on the executioner's order, they are officially registered as the new owner/partner in the registering authority.

Why Use Legal.ge and Call to Action

The auction of securities and shares is an extremely specific and complicated process where even a minor error (such as an incorrect valuation or the disregard of other partners' statutory rights) can trigger years of litigation and the annulment of the auction results. In such critical moments, the involvement of highly qualified legal and financial experts is absolutely essential. Legal.ge provides you with a unique and powerful platform that brings together the finest lawyers specializing in corporate and enforcement law in Georgia. With our dedicated assistance, you can easily find a professional who will ensure flawless legal accompaniment of the process, fair valuation of assets, and robust protection of your investments. Connect with expert professionals on Legal.ge today and secure reliable legal support immediately.