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Crypto Company Acquisitions

Why is Due Diligence crucial when buying a crypto company?

Crypto companies carry unique risks: past involvement in money laundering, "tainted" coins in wallets, or software vulnerabilities. Standard corporate due diligence is not enough. We perform technical and forensic analysis of the blockchain history and legal checks to ensure you aren't buying a company that will be sanctioned or hacked the next day.

Can I transfer the VASP license to a new owner?

VASP registration is tied to the legal entity, not the individual. Therefore, by acquiring the company shares, you effectively acquire the registration status. However, the National Bank of Georgia requires notification and vetting of the new beneficial owners and directors. If the new owners don't meet the "fit and proper" criteria, the registration can be revoked.

How do we handle liabilities for past user transactions?

In the Share Purchase Agreement (SPA), we include specific indemnity clauses where the seller remains liable for any claims arising from activities prior to the closing date. This protects the buyer from lawsuits or regulatory fines related to the previous management's actions, such as blocking user funds or AML breaches.

Does the acquisition include the software code?

Not automatically. It's vital to verify that the intellectual property (IP) rights to the trading platform or blockchain code actually belong to the company and not to individual developers. We audit IP assignment agreements to ensure the company owns its tech stack fully before you buy it.

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In recent years, Georgia has become a regional hub for digital technologies and the blockchain industry. The implementation of Virtual Asset Service Provider (VASP) regulations by the National Bank of Georgia has established new standards in the market. Crypto Company Acquisitions (M&A) represent a complex legal process requiring not only deep knowledge of corporate law but also specific expertise in digital assets, cybersecurity, and regulatory compliance. For investors looking to acquire an already licensed or operating crypto business, conducting a comprehensive legal audit (Due Diligence) is critical to avoid hidden liabilities and technical risks.

What Does the Crypto Company Acquisition Service Cover?

Crypto M&A transactions involve multi-layered legal and technical procedures. Specialists ensure the security of the deal through the following areas:

  • Legal Due Diligence: Checking the company's corporate history, origin of assets, intellectual property rights, and existence of litigation.
  • VASP Status Verification: If the company is registered with the National Bank as a Virtual Asset Service Provider, its compliance with regulations and risks of registration violations are verified.
  • Asset Valuation and Transfer: Developing protocols for transferring access to crypto wallets, private keys, and legally confirming digital asset balances.
  • Share Purchase Agreement (SPA) Drafting: Creating a detailed contract that addresses risks specific to the crypto industry, warranties, and liability distribution.
  • AML/KYC Compliance Audit: Checking the company's client base and transaction history for compliance with anti-money laundering laws before acquisition.
  • Regulator Notification: Providing information to the National Bank about changes in shareholders and obtaining necessary approvals in the case of VASPs.

Common Real-World Scenarios

Crypto company acquisition services are particularly relevant in the following cases:

  • When a foreign investor plans to buy a Georgian VASP-registered company to start operating in the market quickly without going through the initial licensing procedure.
  • When buying or selling a crypto mining farm, which requires transferring not only hardware but also electricity supply contracts and lease agreements.
  • When an international fintech company acquires a local startup that possesses unique software or blockchain technology.
  • When shares are redistributed among partners in a company owning a crypto exchange or exchange point.
  • When a company undergoes reorganization or liquidation, and its digital assets are realized through auction or direct sale.

Georgian Legislation and Regulations

These types of transactions are regulated by several key legislative acts. The Law of Georgia on Entrepreneurs defines the rules for share alienation, holding partners' meetings, and registering changes in the registry. Specific regulations come from the Law of Georgia on Facilitating the Prevention of Money Laundering and the Financing of Terrorism, which obliges VASPs to have transparent governance and beneficial owners. Additionally, Orders of the President of the National Bank of Georgia regulate the registration, revocation, and supervision of Virtual Asset Service Providers, which is critical when buying a VASP, as a change of ownership requires a new "Fit & Proper" assessment of administrators. The Civil Code of Georgia governs contractual relationships, including asset purchases and transfer of liabilities.

Service Process

The process of acquiring a crypto company with a lawyer involves the following stages:

  1. Preliminary Negotiation (LOI): Signing a Letter of Intent and Non-Disclosure Agreement (NDA) between parties.
  2. Legal and Financial Audit: Detailed study of the company's documentation, licenses, assets, and liabilities by lawyers.
  3. Deal Structuring: Determining payment methods (fiat or crypto), tranches, and guarantees.
  4. Contract Execution: Drafting and notarizing the Share Purchase Agreement or registering it with the Public Registry.
  5. Registration and Notification: Reflecting changes in the Public Registry and informing the National Bank (if applicable).
  6. Post-Transaction Integration: Actual transfer of assets and handover of management rights.

Why Legal.ge?

Legal.ge gives you access to leading law firms in Georgia with narrow specialization in crypto law and M&A transactions. Through our platform, you can find experts who know the National Bank's specific requirements for VASPs and have experience in complex technological deals. Specialists listed on Legal.ge will help you protect your investment and ensure a smooth business transfer.

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