According to the Doing Business 2010 Georgia has made a progress and moved forward by five steps to the 11th place with regard to the ease of doing business. At the same time, Georgia recently made the amendments to its company law restricting limited liability in Georgia.
1. ABOLITION OF LIMITED LIABILITY CONCEPT IN GEORGIA
Prior to these changes, limited liability was a concept whereby a person's financial liability in Georgia was limited to a fixed sum, most commonly the value of a person's investment in a company or partnership with limited liability. A shareholder in a limited company was not personally liable for any of the debts of the company, other than for the value of his investment in that company.
Although the shareholder's liability for the company's actions was limited, the shareholders could have been liable for their own acts. For example, the directors of small companies (who are frequently also shareholders) are often required to give personal guarantees of the company's debts to those lending to the company. They will then be liable for those debts in the event that the company cannot pay, although the other shareholders will not be so liable.
Limited liability was supposed to encourage enterprise. Notably, there have never been calls to restrict limited liability in Georgia. Nevertheless, the Parliament of Georgia and the President of Georgia decided that there can be no limited liability in a free Georgian market. Georgian political elite came to the conclusion that the Georgian pos-Soviet society should be a full-liability society where everyone will be fully responsible for his/her actions and any harmful consequences they might cause.
According to the current draconian wording of the Section 3.6 of the Law of Georgia “On Entrepreneurs” adopted by the Parliament of Georgia on March 14, 2008, the partners of all kinds of commercial legal persons (“enterprises” or “companies”) are personally liable for the debts of the companies if they (i.e. the partners) “misuse the legal forms of limited liability”.
It means that the concept of the limited liability of partners (shareholders) was practically abolished, and if any damages or liability is imposed on the Company, the Georgian courts of law will be able to impose joint liability on the shareholder(s) of the Company.
In other words, a shareholder in a “limited company” became personally liable for any of the debts of the company.
Notably, according to the Article 465 of the Civil Code of Georgia, the obligee, at his own discretion, may demand the performance from any of the obligors, both in part or in full. In addition to that, current wording of the Article 415 of the Civil Code of Georgia says that if an action of a party also contributed to the occurrence of the damages, then the duty to compensate and the amount of compensation shall depend on which party’s fault was more responsible for causing the damages.
Limited liability in the past was a State-granted privilege. It allowed shareholders to supply capital to the company without worrying about being assessed on their personal assets if the company creates damage claims.
However the truth is that the Georgian Government does not realize that the limited liability corporation is the bedrock of the market economy. It is likely that the Georgian market will deflate like a punctured balloon as the Georgian corporations were stripped of limited liability for shareholders.
In my opinion, the limited liability corporation is the greatest single discovery of modern times. Even steam and electricity are less important.
Currently in Georgia full liability is assessed on the individuals who own companies. If we do not support limited liability, we will scare away practical-minded and entrepreneurial people worried about values being destroyed or market economy principles being destroyed.
2. OFFER IN COMPROMISE
Dealing with the tax debts can be a stressful problem in Georgia.
Pursuant to the amendments made to the Tax Code of Georgia on December 31, 2009, the problem that one may face can be somewhat easily managed using the following steps:
1. Decide to handle this yourself or hire a tax professional.
2. Double check your original tax returns.
3. Choose the tax debt plan that best suits your current financial situation.
4. Submit the tax debt reduction (tax settlement) offer to the Revenue Service of the Ministry of Finance of Georgia.
Notably, the Government of Georgia makes a final decision as to the approval of the tax settlement.
You can resolve your tax debts on your own if owe the State Budget of Georgia more than GEL 10,000.
Zurab Vanishvili
Managing Partner
ZURAB VANISHVILI LAW FIRM
Mobile: +99577 LAWYER (529937)
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