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Company liquidation in Georgia: procedure and consequences

A company is set up with a plan and usually closed without one. Yet "stopping work" and "liquidating" are entirely different things: in the first case the company carries on existing, along with every obligation that follows from it.

What abandoning a company actually means

A company that has stopped trading does not disappear. It stays on the register, it still has a director, a registered address and a duty to file. Filings nobody submits turn into arrears, arrears turn into assessments, and assessments turn into claims against the company and, to the extent of the director's liability, against a person.

That is why "let's leave it as it is, we might need it" is almost always more expensive than it looks. If the company is not needed, it is closed; if it might be needed, it is kept in order deliberately, with a clear view of what that upkeep costs.

The procedure in outline

Liquidation runs through several stages, and its purpose is for the company to leave the register without unsettled obligations behind it.

1. A shareholders' resolution on liquidation and on who will carry it out.
2. Notice and publicity: the liquidation becomes a matter of public record so that creditors can bring their claims.
3. Settlements: identifying and discharging obligations - towards counterparties, employees and the budget.
4. The tax side: filing for the period, settling assessments, deregistration.
5. Closing the accounts and distributing whatever assets remain among the shareholders.
6. Removal from the register - the moment the company ceases to exist.

The timing of each stage and the document requirements are set by legislation and secondary rules; these change, and they need checking on the date the procedure begins.

Debts do not go away

Liquidation is not a way to shed obligations. While they remain unsettled the procedure does not complete, and trying to close a company around the settlements creates risks of its own - including for the director and the shareholders.

If the obligations exceed the assets, that is a different situation and it is not resolved through ordinary liquidation. Telling one case from the other belongs at the start, not halfway through.

Employees

If the company has staff, dismissing them on liquidation is a separate procedure with its own notice and settlement requirements. Leaving this until later does not work: open employment obligations stop the procedure.

It is also worth remembering that a foreign employee's status in the country may be tied to working for this company. Liquidation affects their position too, and they are better warned in advance.

Assets and accounts

Assets left after settlements are distributed among the shareholders, and that distribution can carry tax consequences - for the company and for the recipients alike. If some shareholders are tax residents of other countries, the consequences are assessed under those countries' rules as well.

Bank accounts are closed as part of the procedure. An open account belonging to a company already struck off the register is a source of separate trouble, so the order of steps matters here.

Alternatives to closing

Liquidation is not the only route. Depending on the situation, the options include selling the shareholding to a new owner, reorganisation, or keeping the company dormant but properly managed with minimal filing. Which is cheaper depends on whether there is turnover, property, staff and any intention to return to trading.

The analysis starts from the facts, not from a decision made in advance.

What to prepare for the consultation

• An extract from the register for the company.
• The charter and shareholders' resolutions for the period of its existence.
• Details of the shareholders and where they are tax resident.
• The filing position: what has been submitted, what has not, whether there are assessments or arrears.
• A list of obligations: counterparties, credit facilities, shareholder loans.
• Details of employees and current employment contracts.
• A list of the company's assets and account balances.
• Details of open accounts and the banks holding them.
• A view on whether the company will be needed in future or is closing for good.

Disclaimer. This material is for reference, sets out the general procedure and is not legal advice. It has been prepared without regard to the circumstances of any particular matter and cannot serve as a basis for decisions on filing documents, entering transactions or taking other legally significant steps. Reading it or relying on it does not create a lawyer-client relationship. Document requirements, fee levels and time limits are set by Georgian legislation and secondary rules; the law and the practice of applying it change, so the currency of any information is checked on the date of the enquiry. Decisions in state procedures are taken by the competent authority, and no outcome can be guaranteed.