Token offering and securities law
The issuance of digital tokens in Georgia is not regulated by a separate special statute. This does not mean the absence of regulation: if the token to be issued bears the features of a security, the Georgian Law on the Securities Market applies to it in full. Article 2 of that law defines a security and a material fact and event — a fact or event which, within the bounds of good faith, an investor or potential investor considers significant when taking decisions connected with the purchase and sale of securities. The qualification of a token is precisely an analysis built on these definitions: if the token expresses an investment interest and its holder provides funds in the hope of profit, the securities regime extends to it.
Accordingly, the first question of token offering compliance is not "how do we issue" but "what is our token". The result of the qualification determines the entire further path — from the prospectus requirements to the offering procedure.
Public offering and the emission prospectus
Under the first paragraph of Article 4, a public offering is carried out only upon the publication of an emission prospectus prepared and approved by the issuer in compliance with the requirements of the law and of the rules established by the National Bank of Georgia. For the approval of the prospectus the issuer applies to the National Bank and submits an application and 3 copies of the preliminary prospectus signed by the persons authorised to represent the management.
The content of the preliminary prospectus is defined in detail by law: information about the issuer — name, address, date of foundation, the number and class of placed securities, the names of the members of the management body, information on possible conflicts of interest; a description of the activity of the last 2 years and the main related risks — where the issuer has operated for less than 2 years, the information is presented from its foundation; the auditor-confirmed individual and, where they exist, consolidated financial statements for the last 2 financial years; and information about the securities to be issued — class, indicative number and the details of the subscription procedure.
The offering procedure and changes
Under Article 5, the final prospectus is provided to investors before the start of the sale, upon its start or during the sale process. Where during the offering period any material event changes — including the number of securities or the final deadline of the offer — the issuer is obliged to submit an amendment of the application to the National Bank, disseminate a notice and cancel the offer in its existing form, rescinding the contracts without any discount.
Where an amendment is introduced into the prospectus, subscribers have the right to renounce the securities purchased, and the issuer is obliged to refund their price without delay, within 10 days of the renunciation. Subscribers who do not renounce are subject to the new terms of the offer.
The prohibition of publicity before approval
Article 6 contains two clear prohibitions. First: it is prohibited to distribute the emission prospectus before its approval by the National Bank. Second: before approval it is prohibited for the issuer, or a brokerage company or licensed financial institution acting in its name, to make an offer to sell the security or to obtain consent to its purchase from another person.
In the world of tokens this norm is particularly significant: advertising tokens on social networks or on a website without an approved prospectus — a preliminary offer — falls precisely within the scope of this prohibition if the token is a security.
How to build the compliance path
The practical sequence is as follows. First: the qualification of the token — an analysis of its rights, profit expectations and investment character based on the law's definitions. Second: if the token is a security — preparing the issuer, the order of financial statements and audit, and compiling the preliminary prospectus. Third: studying the rules established by the National Bank and submitting the application. Fourth: running the offering campaign within the boundaries of Articles 5 and 6.
The non-uniformity of qualification deserves separate note: one project may contain tokens of different purposes — one a means of payment, another expressing a governance right, a third granting a share in profit. Each is assessed separately, and a conclusion about one type does not extend to the whole issue. This is why planning the structure of the issue and documenting the qualification must happen together — before the technical implementation begins. The Legal.ge team will help you on the compliance path of a token offering: from the qualification analysis, through preparing documentation, to accompanying the offering procedure.