I. About the Service
As a business grows, its legal and corporate structure becomes increasingly complex. The number of shareholders may increase, responsibilities may be divided among several directors, certain transactions may require prior approval, employees may be granted signing authority or access to corporate documents, and the company’s day-to-day operations may increasingly depend on how clearly powers and responsibilities are allocated. In such circumstances, company legal structuring becomes a systematic mechanism for improving corporate governance and reducing legal risk.
Company legal structuring begins with an assessment of the company’s existing corporate framework. The legal review may cover the company’s charter, incorporation agreement, information registered with the Public Registry, shareholder resolutions, directors’ powers, existing powers of attorney, key internal policies and other documents governing the company’s management and representation.
TB Legal’s services may include both the creation of a corporate governance model for a newly established company and a comprehensive review of the structure of an existing business. The objective is to create a system in which the functions of shareholders, directors and other responsible persons are clearly defined in advance, procedures for adopting significant decisions are properly documented, and persons acting on behalf of the company operate within clearly established authority.
Company legal structuring is particularly important for companies with multiple shareholders, family-owned businesses, companies with foreign investment, companies managed by several directors, rapidly growing businesses and companies whose activities involve significant assets, financial resources or regulatory risks.
The principal framework of Georgian corporate law is established by the Law of Georgia on Entrepreneurs. The current legislation assigns an important role to a company’s charter and shareholders’ agreement and, in a number of cases, allows shareholders to adapt the general statutory model to the specific needs of the company. Accordingly, company legal structuring should extend beyond organising information registered with the Public Registry and should take into account the company’s actual business model, governance processes and legal risks.
1. Audit of the Existing Corporate Structure
The first stage involves determining whether the company’s corporate documentation corresponds to the way the business actually operates. It is common for a company to operate for years under a standard charter while, in practice, decisions are made according to an entirely different arrangement. Shareholders may also have informal agreements that are not reflected in the charter, shareholder resolutions or other corporate documents.
In such circumstances, company legal structuring includes comparing the existing documentation with actual corporate practices, identifying inconsistencies and determining which issues may create future risks of shareholder disputes, director liability or legal problems relating to significant transactions.
2. Designing the Corporate Structure
Following the audit, the appropriate governance model is determined. This may require reallocating powers among directors, reserving significant matters for shareholder approval, introducing additional consent mechanisms, establishing a supervisory board or defining the functions of particular internal corporate bodies.
At this stage, company legal structuring translates the practical logic of business management into legally effective corporate documentation. The resulting structure should be practical, understandable and capable of being applied effectively in the company’s day-to-day operations.
II. Why Proper Corporate Structuring Is Important
Registration of a company does not in itself mean that its internal corporate relationships are fully regulated. Registration with the Public Registry creates the legal entity and records the principal information required by law, but the allocation of powers among shareholders, mechanisms for approving significant decisions and internal accountability of directors often require additional contractual and corporate regulation.
Company legal structuring reduces the risk that the operation of the company will depend solely on personal relationships or informal arrangements. Where key matters are regulated in advance, shareholders understand who has authority to make particular decisions, what voting threshold applies, when a shareholders’ meeting is required, which transactions require additional approval and who exercises control over financially or strategically significant decisions.
Choosing the appropriate organisational form is also part of this process. Where a business begins on a smaller scale and the founder is deciding between operating as an individual entrepreneur and establishing a company, it is important to consider the applicable liability regime, the possibility of admitting future shareholders and the expected development of the business. Further information is available in TB Legal’s material on registration as an individual entrepreneur.
1. Clear Allocation of Powers
In a company with several directors, one of the most important issues is the structure of management and representation. The Law on Entrepreneurs permits individual, joint or other forms of management established by the company’s charter, while the charter may also regulate the procedure by which directors make decisions.
Company legal structuring makes it possible to distinguish between the director’s authority over ordinary day-to-day operations and matters that require additional corporate approval.
2. Protection of Shareholders’ Interests
Where shareholders have different ownership percentages, investment amounts or levels of involvement in the business, the percentage of shares held may not fully reflect their actual commercial arrangement. Certain matters may require a qualified majority, unanimity, a veto mechanism or the consent of a particular shareholder.
Company legal structuring reflects these arrangements in the appropriate corporate documents and reduces the risk of future misunderstandings and corporate conflicts among shareholders.
III. The Charter and Incorporation Agreement as the Foundation of the Corporate Structure
Under Georgian legislation, the incorporation of a company requires an incorporation agreement that also includes the company’s charter. If the founders do not prepare an individual charter, a standard charter applies. A standard model may be sufficient for a business with a simple structure, while an individually drafted charter may provide a more effective legal framework where governance relationships are more complex.
If you are at the stage of establishing a business and would like further information about the registration procedure, you can review TB Legal’s material on LLC registration in Georgia. For an existing company, company legal structuring often begins with a review of the current charter.
1. The Role of an Individual Charter
An individually drafted charter may regulate the number and powers of directors, procedures for convening shareholders’ meetings and adopting decisions, restrictions on the transfer of shares, additional consent requirements, internal governance bodies and other corporate matters.
Company legal structuring requires the charter to function as more than a document prepared merely for registration purposes. It should reflect the company’s actual governance model and provide a legal framework for its internal processes.
2. Registration and Updating of Corporate Documents
The National Agency of Public Registry is responsible for registering business entities and publishes information and documentation relating to business registration on its official website.
Where an amendment to the charter or other registered information requires a registration procedure, company legal structuring should be completed by recording the relevant changes with the Public Registry.
This is particularly important in cases involving a change of director, modification of the company’s representation arrangements, change of legal address, adoption of a new version of the charter or other circumstances requiring registration.
IV. Shareholders’ Rights and the Decision-Making Framework
For the stability of a company, it is important that the shareholder decision-making process is clearly determined in advance. In a limited liability company, the law identifies matters requiring shareholder approval, including the appointment and dismissal of directors, amendments to the charter, reorganisation, dissolution and other significant corporate matters.
At the same time, the charter may establish different voting thresholds or additional procedural requirements for certain matters where permitted by law.
1. Distinguishing Ordinary and Significant Decisions
Company legal structuring often involves dividing corporate decisions into several categories. Matters relating to ordinary day-to-day operations may remain within the authority of the director, while transactions of particular importance may require prior approval from the shareholders or another competent corporate body.
Such matters may include obtaining substantial financing, purchasing or disposing of real estate, encumbering company assets, entering into related-party transactions, commencing a new line of business, terminating a material contract, establishing a new company or acquiring an interest in another enterprise.
2. Qualified Majorities and Reserved Matters
In a company with several shareholders, it may be appropriate to identify certain matters that require more than a simple majority of votes. Such a structure does not necessarily give a minority shareholder control over the company, but it may protect economic or governance interests that are of particular importance to that shareholder.
Company legal structuring should connect these mechanisms to the shareholders’ actual commercial arrangements rather than introducing purely formal restrictions.
V. Directors’ Powers, Representation and Liability
A director plays a central role in the company’s day-to-day operations. The director manages the company and represents it in relations with third parties. For this reason, properly defining the director’s authority is one of the principal components of company legal structuring.
Further information regarding directors’ powers, fiduciary duties and representation-related risks is available in TB Legal’s article on company directors.
1. Internal Restrictions and Representation Before Third Parties
It is important to distinguish between a director’s internal authority and the director’s authority to represent the company in relations with third parties. Therefore, an internal rule requiring shareholder consent for a particular transaction may not, by itself, provide complete protection to the company in its dealings with third parties.
Company legal structuring should address this risk through a combination of internal controls, documented approval procedures, financial controls, organisational signing rules and appropriate accountability mechanisms.
2. Directors’ Duty of Care
The Law on Entrepreneurs requires persons responsible for managing a company to conduct its affairs lawfully and with the care expected from a conscientious business manager. A director may become liable for damage caused to the company as a result of a breach of these duties.
TB Legal’s material on director liability towards the company discusses circumstances in which the improper use of company assets or funds by a director may give rise to liability.
VI. Internal Controls and Approval Mechanisms
A properly structured corporate framework does not end with the company’s charter. In practice, additional internal rules are often required to ensure that significant financial and legal actions undertaken on behalf of the company remain subject to appropriate controls.
1. Approval Systems and Financial Thresholds
Company legal structuring may include the creation of an internal approval framework. Such a framework determines what value or category of transaction a particular director or manager may approve independently and when the consent of another person, management body or the shareholders is required.
Separate rules may be introduced for banking transactions, procurement, loans, guarantees, disposal of assets, recruitment of employees or significant commercial agreements.
2. Powers of Attorney and Signing Authority
As a business grows, directors frequently delegate specific powers to employees or other representatives. An unclear or excessively broad power of attorney may become a significant source of legal risk.
Company legal structuring includes reviewing existing powers of attorney, regulating their duration, scope and termination, and determining which powers may appropriately be delegated.
VII. Legal Regulation of Relationships Among Shareholders
Disagreements among shareholders often arise when the initial informal arrangements are no longer sufficient following the growth or increased success of the business. Different expectations may arise regarding profit distribution, additional investment, appointment of directors, sale of shares, admission of new shareholders or the conditions for exiting the business.
Company legal structuring places these relationships within a clearly defined legal framework.
1. Transfer of Shares and Admission of New Shareholders
Depending on the company’s structure, it may be appropriate to introduce prior consent requirements for transfers of shares, rights of first refusal or other protective mechanisms. Such restrictions should be legally effective and properly reflected in the documents that are legally relevant to the particular mechanism.
2. Shareholders’ Agreement
In certain cases, it may be appropriate to prepare a separate shareholders’ agreement in addition to the company’s charter. Such an agreement may regulate business financing, shareholder involvement, information-sharing arrangements, deadlock resolution, confidentiality, non-compete obligations and the terms on which a shareholder may exit the business.
VIII. The Company’s Internal Legal Documentation System
Company legal structuring includes more than preparing several principal corporate documents. It also involves establishing a system for their continued use, maintenance and updating. A business should be able to demonstrate the history of significant decisions, delegated authority and important corporate arrangements.
1. Shareholder and Director Resolutions
Significant decisions should be properly documented. Minutes of shareholders’ meetings, written shareholder resolutions, directors’ decisions and corporate approvals should comply with the company’s charter and applicable legislation.
A properly designed procedure is particularly useful where shareholders are located in different countries or where corporate decisions must be adopted quickly.
2. Consistency Between Registered and Actual Information
Company legal structuring also includes reviewing information recorded with the Public Registry. Changes relating to directors, representation arrangements, legal address, shareholders or other registrable circumstances should, where required, be reflected in the Registry in a timely manner.
IX. When Does a Business Need Legal and Corporate Structuring?
The need for this service often arises at significant stages of business development. These may include the admission of a new shareholder or investor, redistribution of shares among existing shareholders, appointment or replacement of directors, rapid business growth, launch of a new business line, raising substantial financing, establishing subsidiaries or the first signs of disagreement among shareholders.
Company legal structuring can also be valuable before any actual dispute arises. Preventing legal and governance risks is often considerably more effective than resolving an already existing shareholder or management conflict.
Particular attention should be given to corporate structuring before the admission of an investor, sale of the company or financing transaction. In such circumstances, a potential investor or creditor will generally assess the consistency of the company’s corporate documentation in addition to its financial position: whether shareholder resolutions have been properly adopted, whether existing powers of attorney remain valid, whether registered information reflects the company’s actual situation, and whether approval of significant transactions has been properly documented.
TB Legal’s article on legal organisation of a company further discusses the principal legal risks associated with inadequate documentation and internal corporate processes.
X. The Company Legal Structuring Process at TB Legal
TB Legal’s Corporate Law practice assists companies with assessing their management and corporate structures, updating documentation and developing legal frameworks tailored to the actual needs of the business.
1. Assessment of Documents and Legal Risks
The first stage involves reviewing the existing charter, incorporation agreement, Public Registry extract, shareholder resolutions, documents relating to the appointment and authority of directors, powers of attorney and other relevant corporate materials.
The assessment identifies legal deficiencies, inconsistencies between documents, excessively broad or unclear powers and other matters requiring further regulation.
2. Development of an Appropriate Corporate Structure
At the next stage, company legal structuring involves developing a corporate model tailored to the particular business. This includes determining which matters should remain within the director’s authority, which matters should be reserved for the shareholders, what voting thresholds should apply and what additional control mechanisms may be appropriate.
3. Preparation of Documents and Implementation of Changes
Based on the agreed corporate model, the relevant documents are prepared. These may include a new version of the charter, shareholder resolutions, necessary agreements, documents defining the functions of directors or other corporate bodies, internal approval rules and other relevant documentation. Where required, the corresponding changes are registered with the Public Registry.
4. Ongoing Corporate Support
A corporate structure is not a one-time document. As the business grows, shareholders change, new investment is attracted or the governance system evolves, periodic review and adjustment may be required.
Company legal structuring is most effective when the company’s legal documentation continues to reflect its actual operations and stage of business development.
XI. A Proper Corporate Structure as a Mechanism for Protecting the Business
A properly designed corporate structure provides clear rules for the operation of the business, reduces the risk of internal conflict and misuse of authority, and ensures that significant decisions are appropriately documented. Company legal structuring is particularly valuable where shareholders wish to define the rules governing the business in advance and avoid leaving the company’s operations dependent on informal arrangements.
If you would like an assessment of your company’s existing documentation, governance system and representation arrangements, you can contact TB Legal for a legal consultation. The TB Legal law firm provides both assistance with specific corporate documents and comprehensive analysis and structuring of companies’ governance and legal frameworks.
