The Main Trends, Goals and Objectives of the Formation and Reform of Georgian Law on Entrepreneurs

The Georgian Law on Entrepreneurs was created after the collapse of the Soviet Union and Georgia’s regaining of independence. In the Soviet socialist system, the development of entrepreneurial law was not allowed. Accordingly, Georgia had scarcely any experience in legislative regulation of entrepreneurial relations. After the restoration of independence, the changing political, legal and economic situation required that the norms of the newly created Law on Entrepreneurs were frequently amended and updated, in order to bring Georgian entrepreneurial law into line with the laws of the rest of the civilized world. Taking global economic trends into account, the changes affected not only individual norms of Law on Entrepreneurs, but, in fact, a systemic change of entrepreneurial law, between Continental European and Anglo-American legal systems, was taking place. Along with frequent legislative changes, no developed judicial practice was in place. All of this created a chaotic and flawed legal regulation that, ultimately, once again, faced the country with the need to implement fundamental legislative changes.

   The present paper describes the development of the Georgian Law on Entrepreneurs, from the time of restoration of independence up to the present day.  The general trends of the development of the Law on Entrepreneurs, during the mentioned period, will be presented. Special emphasis will be placed on the obligation, to approximate the country’s legislation with that of European Union, based on the EU/Georgia Association Agreement, which is one of the important foundations for the creation of a new Law on Entrepreneurs. The legislative flaws that necessitated systemic reform, in the form of the creation of a new law, will be analyzed.

   In the paper, initially, the historical origins of the Georgian Law on Entrepreneurs will be discussed. The need for a new legislative regulation of entrepreneurial relations, for a country emerging from post-Soviet space, will be evaluated. The original legislative acts regulating entrepreneurial activity, as well as the formation of the Law on Entrepreneurs as a single law, a unified codified act, will be considered.

   In the following part of the paper, the main trends of the development of the Georgian Law on Entrepreneurs will be presented. The shift in regulation and deregulation regimes in the Law on Entrepreneurs and, ultimately, the need for reform of the law will be discussed. The anticipated outcomes of the approximation of the Law on Entrepreneurs with EU legislation, as laid down in the Association Agreement, as well as the importance of the establishment of regulated regimes, for a country such as Georgia, will be analyzed.

   In the following parts of the paper, the fundamental issues related to the activities of entrepreneurial entities, such as the norms regulating the beginning of entrepreneurial activity, as well as the legislative regulations related to the governance and control of a corporation, will be discussed. The main directions of changes in the norms regulating the foundation of entrepreneurial entity, the pre-incorporation entity and initial capital contribution, along with changes related to issues of corporate governance and control, regarding the corporate governance structures and the interrelationship between the governing bodies, as well as effective corporate governance, will be described. Special emphasis will be placed on the obligation, pursuant to the Association Agreement, to approximate the Georgian Law on Entrepreneurs with the EU corporate law directives and, in the light of the above, on the need to reform the law. The EU corporate law directives set out specific requirements for the foundation stage of an entity. Additionally, the registration legislation of an entity was presented with significant flaws. The legislative norms related to corporate governance and control also contained substantial flaws and shortcomings, which frequently led to many legislative failures. Therefore, the decision was made to discuss and analyze the changes and developments in the legislative regulation of precisely these issues.