Dechert OnPoint: Amendments to the Law on Public Registry

Dechert Georgia, through the contribution of partners Archil Giorgadze and Nicola Mariani, joined by senior associate Irakli Sokolovski and associates Ana Kostava and Ana Kochiashvili, is partnering with Georgia Today on a regular section of the paper which will provide updated information regarding significant legal changes and developments in Georgia. In particular, we will highlight significant issues which may impact businesses operating in Georgia.

Introduction

Noteworthy changes were recently introduced to the Law of Georgia on Public Registry (the “Law on Public Registry”). The National Agency of Public Registry (the “Public Registry”) combines various registries, including the registry of real property, the registry of movable and intangible properties and the registry of entrepreneurial and non-entrepreneurial (non-commercial) legal entities. The recent amendments to the Law on Public Registry now authorize the Public Registry to record data on the economic activities of registered commercial entities and sole proprietors.

Previously, the registered data of commercial entities included information about their shareholders, management bodies, obligations or restrictions, tax pledges, mortgages and other relevant registration data such as their address, date of registration and registration number. Based on the recent amendments, the Public Registry will now also record public information on the economic activities of commercial entities in a separate Registry of Economic Activities.

The Minister of Justice of Georgia will establish by a special order the specific regulations related to the documents required for registration, the term of registration and the registration fees. The amendments to the Law on Public Registry are scheduled to enter into force on 2 September 2016.

Registry of Economic Activities

The Registry of Economic Activities contains information about the specific economic activities of commercial entities. The classification of economic activities is established by the National Statistics Office of Georgia (the “Statistics Office”). The Statistics Office adopted an official classification of economic activities based on the statistics classification of the European Union. The official press release of the Statistics Office notes the reasons behind the need to establish a new classification system, namely the compatibility and harmonization of the official statistics produced by various states. During the production of a new classification system, the Statistics Office has used the revised detailed structure of economic activities in the EU member states and combined them with specific features of national Georgian classifications. By this development the Statistics Office has ensured that the State of Georgia complied with the requirements of the Association Agreement with the European Union.

The registration of economic activities is voluntary, except for in cases provided by Georgian legislation. In cases where the registration of economic activities is compulsory, the commercial entities will only be allowed to perform such activities after their successful registration with the Registry of Economic Activities. In certain cases the commercial entities may be fined as much as GEL1,000 if they perform the economic activities without due registration.

The registered commercial entities will be entitled to receive official extracts from the Registry of Economic Activities in both Georgian and English languages. The registration shall remain in force for one year and is subject to extension at the request of the commercial entity or sole proprietor.

Compulsory Registration under the Law on Migration

Labor migration is a notable field where registration in the Registry of Commercial Activities is mandatory. The Law of Georgia on Labor Migration (the “Law on Labor Migration”) provides that legal entities, sole proprietors and foreign entrepreneurial or non-entrepreneurial entities that are involved in providing assistance to migrants to aid their finding employment abroad are required to register their activities with the Registry of Commercial Activities.

Providing assistance with finding employment abroad is a regulated area, which is why mandatory registration is required to verify that these entities comply with the regulations under the Law on Labor Migration. The core regulations in addition to the registration requirement require the conclusion of a contract between the company providing assistance and the foreign employer, the collection of data on that employer, the conclusion of a contract between the migrant and the foreign employer and providing information to the migrant about his or her rights.

Before the respective amendments enter into force on 2 September 2016, registration under the Law on Labor Migration is combined with the incorporation of a legal entity and with its respective registration with the Registry of Entrepreneurial and Non-Entrepreneurial (Non-Commercial) Legal Entities.

Conclusions

The amendments to the Law on Public Registry is a strong indication that Georgia’s legislators and public officials are determined to ensure that Georgian legislation is harmonized and compatible with the recent international economic and legal developments, especially those relevant to Georgia’s Association Agreement with the European Union. In particular since the Association Agreement was concluded, the State of Georgia has assumed numerous new obligations in legal and non-legal fields. The above innovations on registration demonstrate the government’s will and determination to duly perform these obligations and follow the chosen path of development and growth.

* * *

Note: this article does not constitute legal advice. You are responsible for consulting with your own professional legal advisors concerning specific circumstances for your business.

Dechert’s Tbilisi office combines local service and full corporate, tax and finance support with the global knowledge that comes with being part of a worldwide legal practice.

Dechert Georgia is the Tbilisi branch of Dechert LLP, an international specialist Law firm that focuses on core transactional and litigation practices, providing world-class services to major corporations, financial institutions and private funds worldwide. With more than 900 Lawyers in our global practice groups working in 27 offices across Europe, the CIS, Asia, the Middle East and the United States, Dechert has the resources to deliver seamless, high quality legal services to clients worldwide. For more information, please visit www.dechert.com or contact Nicola Mariani at nicola.mariani@dechert.com.