Georgia

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DOING BUSINESS

 


Local business incentives - Legal forms of companies - Registration and licensing procedures - Legal framework - Foreign exchange control - Regulations concerning equity investment - FDI inflows - Expertise of the political risk

Local business incentives

Georgia has undergone through major structural reforms to create a business-friendly environment. Foreign investment receives equal treatment. There are no restrictions on investment in domestic companies (even acquiring a company), stocks, bonds, or any other property. The law does not require participation of local investors in an investment project.
Both domestic and foreign investors can use a one-stop-window system to obtain a business license in 24 hours. Foreign firms are allowed to participate freely in privatizations.
Residents and non-residents may hold foreign exchange accounts. Capital transactions are not restricted but must be registered. There are no restrictions imposed on the repatriation of profit.
The Georgian National Investment Agency (GNIA) is the government agency to promote and facilitate foreign direct investment in Georgia. However, judicial inefficiency and corruption are still some of the major impediments to foreign investors.

 

Legal forms of companies

Form Number of partners/shareholders Minimum and/or maximum capital Liability Registration fee Release of financial documents
Sole Proprietorship 1 person N/A Liability is unlimited. Free Yes
Special (Commandite) Partnership Minimum of 2 shareholders N/A Liability of 'commandities' is limited and of others (personally liable partners) is unlimited. GEL 80 Yes
Joint Liability Partnership Minimum of 2 shareholders GEL 200 (minimum) Liability of the partners is unlimited. GEL 60 Yes
Limited Liability Company Minimum of 1 shareholder, Maximum of 50 shareholders GEL 200 (minimum) The liability of the shareholders is limited to the total value of their ownership interests in the company. GEL 160 Yes
Joint Stock Company Minimum of 1 persons GEL 15,000 (minimum) Liability is limited to the amount contributed. GEL 360 Yes

Registration and licensing procedures
From 1st September 2005 onwards, enterprises are registered by local tax authorities( i.e. district tax inspectorates), in the district where the business is located. Registration takes the form of entry in the Entrepreneurial Register, whose records are public: anyone may access the data held in the Register and obtain the abstracts from there. The unified Entrepreneurial Register is maintained by the Tax Department of the Ministry of Finance of Georgia. To register a company the following information and documents must be presented to the tax inspectorate:
1. Application with identification of personal information on the founding principal officers and directors, sphere of the enterprise's activity, charter capital, founders' shares in the charter capital;
2. Articles of incorporation,
3. Proof of charter capital,
4. Sample signatures of the main representatives,
5. Legal address certificate.
Under its business reforms programme, Georgia has dramatically simplified licensing and permitting requirements after the adoption of the Law on Licenses and Permits in 2005. The number of license and permit types was cut and a whole lot of purposeless licenses and permits abolished. The total number of licenses and permits existing in the country was reduced by 84%, thus eliminating a total of 756 licenses and in the process streamling the business procedures. Only 86 licenses and 50 permits now exist. The Law clearly specifies types of licenses and permits and prohibits the introduction of any new license without amending the Law (by sub-laws). There are licenses on activity and on application. The Law also provides for the issuance of permits. It stipulates that the state can regulate through licenses or permits only that activity which can jeopardize a person/s life or health, and a state or social interest.
To minimize technical obstacles in receiving a license, the Law on Licenses and Permits in 2005 provides the following characteristics:
1) Licenses and permits may be required only for reasons of
a. Safety and health protection.
b. Security of living conditions and cultural environment of individuals.
c. Protection of state and public interests.
2) Reduced statutory time limits for government action: 30 days for issuing licenses and 20 days for issuing permits.
3) "Silence is consent" - a permit or license is automatically granted if no government action is taken within statutory time limits.

Legal framework
The minimum capital required to start a new business is now GEL 200.
According to the current legislation, a representative/branch office of a foreign company is not considered to be a legal entity in Georgia. However, the registration procedure is similar to other types of companies.

Foreign exchange control
Georgia has a relatively liberal currency exchange regime. Local or foreign individuals or entities are free to buy and sell foreign currency without limitation. Money transfer from resident or non-resident individual's bank accounts in not subject to any limitation. Only resident individuals are obliged to provide the bank with appropriate documentation (e.g. contact) under which the transfer is to be done. No limitation is considered for foreign bank borrowings by the Georgian legistation.

Regulations concerning equity investment
There are no restrictions on acquiring of a company by a foreign national or a foreign company in Georgia. Because of the changes to the Tax Code and Law on Entrepreneurs in 2005 and 2006, aquisition of a company is has been made simple and efficient.
The property, investments and the rights of investors are protected and guaranteed by law in Georgia. Property rights are guaranteed by article 21 of the Georgian Constitution.The law defines simple and well defined mechanisms to make investments, to acquire (or transfer) properties and companies in the country.
According to the constitution of Georgia international treaties have direct legal force in Georgia, which ensures a liberal legislative environment for conducting business and making investments in the country.  


Foreign Direct Investment inflows in Georgia

FDI inflows 2003 2004 2005 World rank (*)
2005
FDI inflows (USD million) 340 499 450 14/141
Source : UNCTAD - World Investment Report
Note : (*) World Rank = UNCTAD Inward FDI Performance Index. It is a measure of the extend to which a host country receives inward FDI relative to its economic size. It is calculated as a ratio of the country's share in global FDI inflows to its share in global GDP.

 

Last modified in mai-07
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