Georgia is an attractive country for foreign investors and one investment option entrepreneurs have in this country is to open a holding company. This type of company offers a number of advantages when compared to a limited liability company, for example. The holding company will allow its founder to purchase equity ownership in other companies.
Although the company will not produce any goods or services itself, it offers the possibility to operate with a number of companies and obtain financial advantages and profits. Our company formation agents in Georgiacan give you detailed information about all the steps required for opening a holding company in Georgia and all the legal requirements this type of company needs to fulfill.
| Quick Facts | |
|---|---|
| Legal entities used | – Private limited liability company (LLC), – Joint stock company (JSC) |
| Incorporation method | Standard registration with the Trade Register in Georgia |
| Incorporation time | 1 – 2 weeks |
| Advantages | – quick incorporation procedure, – low maintenance costs
|
| Precautions | The company must have a legal address in Georgia. |
| Shareholding structure | At least one shareholder |
| Minimum Capital | No minimum share capital imposed |
| Taxation | 15% corporate tax rate |
| Control | Full foreign control is available |
| Accounting and Reporting | Tax returns to be filed annually, no audit required |
| Number of double taxation treaties | 57 |
Table of Contents
Opening a holding company in Georgia
The representatives of a holding company can target a number of business areas that are profitable and decide where to invest and focus their activities. The owners of this type of company can find a number of profitable small companies in Georgia and then purchase stocks in those companies. The amount of ownership in other companies will also determine the voting right the holding company has.
Because they are able to control the activities of the owned companies to a high extent, holding companies can also be called parent companies. A holding company is registered like any other legal entity in Georgia and can hire employees. Our Georgian company formation agents can give you personalized advice regarding the most suitable type of company, according to your business plans.
What is the process of opening a holding company in Georgia?
For this company type, foreign and local investors will have to follow the same steps for company formation in Georgia that are prescribed for other company types. In this case, they will have to decide upon a trading name for the company – which must be selected in accordance with the standards imposed by the Georgian law, and to select a business form for the company, as the holding company itself is not a legal entity, but merely a type of business created for a specific goal, but which must be incorporated under one of the legal entities recognized in Georgia.
Here, investors have to opt for one of the corporate entities that are prescribed by the national law – when opening a company in Georgia as a holding company, investors can choose to register a limited liability company or a joint stock company, depending on the characteristics investors want their company to have. Also, the decision should be based in accordance with the rights and obligations investors will have.
However, in both cases, investors will enjoy limited liability against corporate debts and this can be a major advantage, as in the case of other business forms, investors can become personally liable for the debts of the company (for instance, as it is the case of partnerships).
If these two steps are made, it means that the investors will have to register with the National Agency of Public Registry, a compulsory step in the process of opening a company in Georgia. The institution is legally required to maintain the data on all companies registered in this country and it is also the authority which will issue the incorporation certificates for local businesses. All companies registered with the institution will receive a registration number.
The registration number will be used for other incorporation steps; the company will also need to register for taxation purposes with other institutions, but, during the first steps of company formation in Georgia, it will also be necessary to select the company’s objects of activity (which can be a single business operation or multiple, but in all cases, they all have to be described).
The need to mention the company’s objects of activity is a legal requirement – this is not requested only in the relation with the Georgian authorities, but this has to be reflected in the company’s statutory documents as well. Our team of consultants in company registration in Georgiacan help you select the objects of activity in accordance with your business operations plans.
The selection is done following the Classification of Economic Activities. Georgia follows the same Classification system that is available in the European Union (EU) and, according with the information available with the National Statistics Office of Georgia, the country follows the NACE Rev 2 2016 model. With regards to the activities of holding companies, the following apply:
- • the activities of holding companies can be found under the NACE Class 64.20;
- • the Class 64.20 refers only to holding companies which own or hold shares in other companies, and which do not administer the said companies;
- • this category is included in the NACE system under the Section K – Financial and Insurance Activities, in the 64 grouping, the Class being 64.20, and the Subclass being 6420;
- • another activity that can be done by holding companies is the management of other companies, and this can be found under the Class 70.10;
- • the NACE Rev 2 2016 model introduced the Groups 64.2 and 70.1 and it replaced Annex D Point (h) Point 3.
Please mind that after these formalities are completed, it is necessary to register for tax purposes, as mentioned above. Holding companies in Georgia have to register for the payment of the value added tax (VAT) and for this, the company has to obtain a VAT number.
Our consultants in company formation in Georgia can help you obtain a VAT number and can provide you with in-depth consultancy services regarding the VAT obligations you have once the company begins its operations in this country. If the company will hire employees, it is legally required to register for social security.
Another obligation deriving from this is to draft and sign employment contracts with the company’s employees, in accordance with the applicable law. Here, all contracts have to include information regarding the type of contract that is signed, the number of hours the employee has to work for the company, the salary he or she will receive and other rights and obligations (such as the description of the job and the tasks the employee has to complete).
Other information about Georgian holding companies
Georgian holding companies can own tangible or intangible assets. The last category includes land, properties or copyrights. Holding companies are usually incorporated by experienced entrepreneurs who want to manage the activities of other companies with the purpose of making profit. Holding companies are not to be mistaken for trust companies.
The latter are companies that manage assets and are appointed specifically for this task. Our company incorporation agents in Georgia can tell you more about the differences between these types of companies and the relationship between the company ownership and voting rights. If you are interested in investing in Georgia and opening a holding company, please contact our company formation agents in Tbilisi.