The Legal Framework of Charitable Foundation Formation in Georgia
No separate foundation statute exists in Georgia — a Georgian charitable foundation is a non-commercial legal person defined by the Civil Code, to which a distinct charitable status under tax legislation may be added. The formation plan therefore rests on four norms: the choice of form (Article 24), the content of the founding documentation (Article 29), the purpose test for disposing of property (Article 36), and the exit rules (Article 38). Expectations imported from trust or foundation-law models have no place here: there is no trustee office, no separate regulator and no statutory fee schedule outside these Civil Code norms.
The Choice of Form — Article 24
Article 24 defines the concept and kinds of legal persons: a legal person is an organized formation created to achieve a defined purpose, owning its own property, answering independently with that property, acquiring rights and obligations in its own name and capable of appearing in court. A legal person may be based on membership or independent of the members' status — and this distinction is the core of the foundation choice: the foundation type does not presuppose membership; it is governed by the purpose written down by the founders and by property working in the service of that purpose. The Code regulates directly: a legal person whose purpose is non-commercial activity must be registered under the procedure established by this Code — and that is the route for a charitable foundation as well.
The Content of the Charter — Article 29
The foundation's charter must contain more than the data any registration requires: it must indicate the purpose of the organization's activity — for a foundation, a precise list of charitable or other public-benefit purposes; the membership rules, where the form is membership-based; the organ empowered to decide on reorganization or liquidation, with the decision-making procedure; and the manner of creating the governing organ and the term of its authority. One practical rule governs foundation formation: the purposes and the principles of property management should be written so that every future transaction and every project fits within these formulations — the charter is the first reference material for both the foundation's governance and the courts. Together with registration the registering organ creates the foundation's electronic address on the unified portal, and a notice sent to a registered telephone or e-mail is deemed delivered — a detail touching the foundation's everyday administration, the neglect of which surfaces later in procedural disputes.
The Disposal Test — Article 36
Every disposal of the foundation's property passes the purpose test: disposal is possible where it serves the organization's activity, its organizational development, facilitates the achievement of its purposes or serves charitable purposes. This norm is what distinguishes a foundation from a business company: property here is not a source of profit distribution but an instrument of the purpose, and every disposition must be embedded in that instrumental logic. The practical conclusion is simple: for every significant transaction the foundation should hold an internal act — a decision or a conclusion — confirming in writing the connection between the disposal and the purpose.
The Exit Rules — Article 38
Article 38 governs the final stage of the foundation's life. A change of legal form is impermissible, save where by the change the entity transforms into a public-law legal person. Division, merger and liquidation proceed under the rules established for entrepreneurial entities. The person entitled to receive the property remaining after liquidation is determined by the founders or members; disposal is possible where it facilitates the achievement of the purposes, serves charitable purposes, or the property is transferred to another non-commercial legal person. It is strictly prohibited to distribute the remaining property among the founders, members or persons holding governing or representative authority. Where no entitled person has been determined, the court transfers the property to one or more non-commercial legal persons with the same or similar purposes; where none exists or can be identified, a decision on transferring the property to the state may be taken. The court's power of distribution arises 6 months after the registration of the commencement of liquidation.
Frequently Asked Questions
Does a separate foundation law exist?
No. A foundation is a non-commercial legal person of the Civil Code; the charitable tax status is a separate question.
Can the foundation's property be distributed to founders?
No. Distribution of the property remaining after liquidation among founders, members or officers is prohibited.
To whom is the property transferred on liquidation?
To the person determined by the founders; absent such determination — the court transfers it to another non-commercial person with similar purposes.
When may the form be changed?
Only by transformation into a public-law legal person.
How We Help on Legal.ge
Charitable foundation formation begins with every clause of the charter: purposes, organs, property management and exit. On Legal.ge you can engage a non-commercial-law specialist who will prepare the complete documentation and design the foundation's legal architecture. Submit a request on the site and get qualified assistance.