investments in georgia HOW TO ESTABLISH A BANK IN GEORGIA HOW TO ESTABLISH

					HOW TO
ESTABLISH
A BANK IN
GEORGIA
HOW TO
ESTABLISH
A BANK IN
GEORGIA
Table of
Contents
• INTRODUCTION
• BANK REGISTRATION
• Step 1: JSC Registration Requirements
• Step 2: Obtaining a Commercial Bank License

• TERMS AND CONDITIONS
• Restrictions on Ownership
• Types of Bank Capital
• The Corporate Structure of Commercial Banks
• Administrators’ Compatibility Criteria

• ESTABLISHING A BRANCH OF A FOREIGN
COMMERCIAL BANK
• Step 1: Branch Office Establishment Registration
Requirements
• Step 2: Licensing Obtainment for Foreign Commercial
Bank Branch Offices
• Foreign Reliable Bank Licensing Requirements
• FAQ
• Application Form Content For JSC Registration
• Documents Required for JSC Registration
• Documents Required for Obtaining a Banking License
• Documents Required for the Registration of a Branch
Office
• USEFUL CONTACT INFORMATION
INTRODUCTION
The Commercial Bank under Georgian
Legislation
• A Commercial Bank is a legal entity licensed by the
National Bank of Georgia that attracts deposits and, through
the relevant application process, conducts banking activities
on its own behalf pursuant to applicable Georgian law.
• A Commercial Bank can only be established in the
organizational legal form of a joint-stock company.

Commercial Bank Activities:
The license granted by the National Bank of Georgia (NBG)
allows commercial banks to engage in the following banking
operations inside the country as well as overseas:
• Receive interest-bearing and interest-free deposits (of
fixed period, upon demand and other) and other returnable
means of payment;
• To issue consumer, mortgage, unsecured and other loans;
to engage in factoring operations with and without the
right of recourse; to trade finance, including the granting
of guaranties, letters of credit, acceptance finance, and
forfeiting.
• To draw upon its own or clients’ funds; to buy and sell
monetary instruments such as promissory notes, checks,
certificates of deposit, as well as securities, futures,
options and swaps upon debt instruments or interest rates,
currencies or interest instruments, debt documents, foreign
currencies, precious metals and precious stones.
• To partake in cash and non-cash settlement operations
and the provision of collection services.
• To issuing money orders and manage money management
circulation (including tax cards, checks and bills of
exchange).
• To provide securities brokerage services;
• To provide trust operations on behalf of clients and fund
management;
• To safe-keep and register valuables including securities;
• To provide credit-information services;
• The engage in central depositary activities;1
• To carry out activities related to each of the above types
of services.




1 The Commercial Bank under Georgian Legislation


    HOW TO ESTABLISH A BANK IN GEORGIA HOW TO ESTABLISH A BANK IN GEORGIA   -1
BANK
REGISTRATION
Step 1: JSC registration requirements for
establishing
A JSC is a legal entity the charter capital of which is
divided into shares of equal nominal value. The liability
of a JSC is limited to its total assets. Shareholders
are not liable for JSC obligations.

In order to register a JSC, the founder(s) shall submit
to the National Agency of Public Registry the following
documents:
• Charter (Articles of Association) of JSC
(see Appendix #1);
• An application form as approved by the Ministry of
Justice of Georgia; and
• Supplementary documents (see Appendix #2).

The total state and tax registration fee for a JSC is
100 GEL provided that the registration shall be carried
out in one business day. Fee payable for immediate
registration of JSC amounts to 200 GEL.




Step 2: Obtaining a Commercial Bank License
The banking license is issued by the NBG.

In order to obtain a license to carry out banking
activities the JSC shall submit the following
documents to the NBG:
• An application form; and
• Additional documents (see Appendix #3).

The banking license is valid for an unlimited period
of time.

The banking activities licensing fee amounts to
500 GEL.




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TERMS AND
CONDITIONS
Restrictions on Ownership
Resident as well as non-resident individuals and
legal entities, whose ownership is not restricted
according to the applicable legislation, can become
shareholders of a commercial bank.

A person shall have no right to be a Significant
Shareholder2     if he/she has been tried for
the laundering of unlawful income, financing
terrorism, economic crime and/or crimes against
entrepreneurial or other economic activities.



Types of Bank Capital
Declared Charter Capital – is charter capital specified
by the shareholders and envisaged by the charter
which shall be paid up only in cash.

Regulatory Capital – is the capital formed for
the purposes of performing banking activities;
indemnifying possible financial losses and; protecting
these from other types of risk. This Regulatory Capital
should be paid up only in cash.

Equity Capital – is capital paid into a bank or other
company by its shareholders and represents the
difference between total assets and total liabilities;

Paid up Capital – is the actually paid-in portion of the
Declared Charter Capital;

Corporate Structure of Commercial Banks
• General Meeting of Shareholders – the supreme
administrative body of the bank is the General
Meeting of Shareholders, which acts in accordance
with legislation and charter. It elects the Supervisory
Board.
2 A “Significant Shareholder” refers to any person who directly
or indirectly owns 10% or more of the declared or paid up charter
capital.
     HOW TO ESTABLISH A BANK IN GEORGIA HOW TO ESTABLISH A BANK IN GEORGIA   -3
• Supervisory Board – this consists of no less than
three and no more than 21 members. The total
number of elected members should be odd. Each
member of the Supervisory Board shall be elected
for a term of four years and may be re-elected for an
unrestricted term. Director(s) can be member(s) of
the Supervisory Board but they may not make up the
majority of the board members.

• Management Board (Board of Directors) - carries
out managerial functions and holds the representative
authority of the bank.

The Management Board shall consist of at least three
individuals appointed by the Supervisory Board for
a term of four years and may be reappointed for an
unrestricted term.

• The Audit Committee - encourages the proper
functioning of the bank’s internal and external audits.
The Audit Committee, which includes the independent
member of the Supervisory Board (if there are any) is
created by and attached to the Supervisory Board.

Administrators’ Compatibility Criteria
A person to be appointed as an administrator of a
commercial bank has to comply with the following
compatibility criteria:

• Members of the Board of Directors, branch heads
or the heads of other similar subdivisions and their
deputies should hold high degrees in one of the
following university majors: economics, finances,
banking, business administration, audit, accounting
or law;
• The chief accountant of the bank/branch and
its deputy should hold high degrees in one of the
following majors: economics, finances, banking,
business administration, audit or accounting;

• The members of the bank’s Board of Directors,
the head of the branch or other similar subdivision
or their deputy must have appropriate professional
qualifications and experience for which they should
have at least four years of work experience in the



HOW TO ESTABLISH A BANK IN GEORGIA HOW TO ESTABLISH A BANK IN GEORGIA   -4
banking-finance field, including two years experience
of occupying a managerial position (head or deputy of
a structural unit);

• The chief accountant of the bank/branch and
its deputy should have at least three years of work
experience in the banking-financial field;

• A person cannot be appointed as an administrator
if he/she occupies/has occupied one of the following
positions:
- Member of a Supervisory Board or Revision
Commission of the same commercial bank; and/or
- Member or administrator of the Board of Directors
of another commercial bank, non-banking depositary
institution – credit union, and/or other company;

• A member of the Board of Directors shall not be the
spouse, child or close relative of any other member of
the Board of Directors of the same bank;

• The chief accountant of the bank and his/her deputy,
the chief accountant of the branch, should not be the
spouse, child or close relative of the director or the
deputy of the same bank or the same branch.




   HOW TO ESTABLISH A BANK IN GEORGIA HOW TO ESTABLISH A BANK IN GEORGIA   -5
ESTABLISHING
A BRANCH OF
A FOREIGN
COMMERCIAL
BANK
Step 1: Registration requirements                                            for
establishing a branch office
A branch office is a sub-unit of a business entity and
is not a separate legal entity. Therefore, the founder is
financially liable for the obligations of the branch. Any
Commercial Bank may establish a branch office by
means of submitting respective documentation to the
National Agency of Public Registry (see Appendix #4).
Please note, that registration requirement applies
only to the branch of a foreign commercial bank,
while no registration is required for the branch of a
local bank.

A branch of a Commercial Bank is a unit of a bank
which directly conducts all or some banking activities.

The establishment of branches or bank representative
offices shall be authorized by the bank’s Supervisory
Board and shall be subject to conditions and
restrictions established by the regulation of the NBG.



Step 2: Obtaining a banking license for the
branch office of the Foreign Commercial Bank
A license for a foreign bank branch office shall be
issued only in cases when the bank itself is authorized
to attract deposits or other funds in the country where
its head office is located.




HOW TO ESTABLISH A BANK IN GEORGIA HOW TO ESTABLISH A BANK IN GEORGIA   -6
In this case, the license is issued, after the submission
of an approval for establishing a branch in Georgia
issued by the supervisory authority of the country
where the bank is registered. This rule does not
apply to the establishment of the branch office of the
Foreign Reliable Bank3.

In order to obtain licenses for the banking activities
of the branch office of the Foreign Commercial Bank,
the latter shall submit an application and respective
supplementary documentation to the NBG (see
Appendix #3).

License requirements for a branch of a foreign
reliable bank

The license requirements for establishing a branch
office of a Foreign Reliable Bank have been simplified.
The NBG shall issue a banking license to a Foreign
Reliable Bank for the establishment of a branch office
upon submission of the following documents:
• Application;

• Approval on establishing a branch in Georgia, issued
by the supervisory authority of the country where the
bank is registered;

• The document granting the bank the status of
“Foreign Reliable Bank” on the basis of presented
rank;

• The act appointing administrators of the branch;

• The document envisaging authorization of the
person submitting the documents indicated above.




3 The Foreign Reliable Bank refers to a bank of developed country,
which has certain rank granted by competent international rating
organization.


     HOW TO ESTABLISH A BANK IN GEORGIA HOW TO ESTABLISH A BANK IN GEORGIA   -7
FAQ
Does the banking activity require any license/
permit?
A commercial bank should obtain a Banking License
in order to carry out banking activity. Banking licenses
should be applied for in writing to the NBG.

What are the minimum regulatory capital
requirements?
At the moment the minimum required amount of the
Charter Capital for the creation of a bank is its Regulatory
Capital, which should constitute at least 12 million GEL.

What is the applicable timing for registering a
commercial bank in Georgia?
Given that a two-step procedure is required for
establishing a Commercial Bank, the aggregate time-
frame is as follows:
•         The state and tax registration of JSC, carried
out by the National Agency of Public Registry, is
performed within one business day or immediately upon
the submission of all necessary documents subject to
payment of additional fee for accelerated registration.
•         The registration of the JSC is followed by the
obtaining of a Banking License which is granted within
the period of 3 months from the date of submission of the
Application.

What are the Preconditions of a legal stay in
Georgia?
A Person possessing an ordinary visa and wishing to
stay on the territory of Georgia longer than the period
stated by the visa, should apply to the respective regional
service of the Civil Registration Agency of the Ministry of
Justice of Georgia to receive a temporary or permanent
residence permit, before this should be done before the
expiration of the terms of their legal stay. The duration of
a temporary residence permit can be up to 6 years.

For what time-period can a bank be
incorporated?
In accordance with Georgian legislation a bank can be
incorporated for an unlimited time-period. This period
depends entirely upon the choice of the founders.


HOW TO ESTABLISH A BANK IN GEORGIA HOW TO ESTABLISH A BANK IN GEORGIA   -8
Can a foreign national be a managing officer of
a bank?
Yes. Georgian legislation does not contain any restraints
as to the nationality of persons that are entitled to
participate in corporate governance of the bank.

What is the minimum/maximum number of
Directors/Founders Permitted in Georgia?
Georgian legislation does not contain any limitations with
regard to the minimum/maximum number of Directors/
Founders of a bank.

What is Legalization?
Legalization of a document by the respective authority
of a State certifies that the document accords with the
legislation of that particular State. It attests the validity
of notary signature and the seal thereto. Legalization is
carried out by the embassies and consular departments
of Georgia in foreign states.

What is Apostille?
A certificate confirming the authenticity of a document
issued in one of the signatory countries for legal purposes
in all the other signatory states. Georgia is a member of
The Hague Convention Abolishing the Requirement of
Legalization for Foreign Public Documents (October 5,
1961). Therefore, legalization can be substituted by the
Apostille in the countries that are also signatories to
Hague Convention.




    HOW TO ESTABLISH A BANK IN GEORGIA HOW TO ESTABLISH A BANK IN GEORGIA   -9
               CONTENT OF
               CHARTER
Appendix # 1




               (ARTICLES OF
               ASSOCIATION)
               OF JSC
               The Charter (Articles of Association) must contain the
               following information:

               • Company (firm) name of a business entity;
               • Legal form of the business entity (JSC);
               • Legal address of the business entity;
               • Name, residing address, personal number and signature
               of founding partner(s), persons (including proxies)
               responsible for representing and leading the business
               entity. If the founder is a business entity, then the application
               should include its legal name and registration details, legal
               address, the name of a body that registered the business
               entity, the date of registration and identification code,
               information regarding its representatives;
               • The executive body of the JSC and the rule of decision
               making within the JSC;
               • The limitation (if any) of representative power vested in the
               JSC representative;
               • The duration of a business entity (if a company is founded
               for a determinate time period, its duration shall be indicated
               by years);

               The Charter (Articles of Association) must be signed by all
               of the founding partners of the JSC. If the founding partner
               is a legal person, its duly authorized representative shall be
               entitled to sign the Charter (Articles of Association).

               Charter (Articles of Association) must be notarized and if it
               is sent from abroad should be notarized and legalized in
               founder’s country / or certified by apostille, translated and
               notarized in Georgia.




               HOW TO ESTABLISH A BANK IN GEORGIA HOW TO ESTABLISH A BANK IN GEORGIA   - 10
          DOCUMENTS
        REQUIRED FOR




                                                                                   Appendix # 2
      REGISTRATION OF
                 A JSC
To register a JSC, the following documents shall
be submitted (including the Charter (Articles of
Association)) to the National Agency of Public
Registry4:

• The decision of the founders to create a JSC in Georgia;
• Application form as approved by the Ministry of Justice
of Georgia;
• A document certifying the proof of registration by the
founder in the foreign jurisdiction; if the founder is a legal
entity, the same or a separate document should indicate
the names of the authorized representatives, supervising
authority and other corporate details of the founder
(Certificate of Registration);
• A decision on appointing the Head of the Company
(Director) envisaging name, surname, place of residence
and personal/passport number thereof; If a business entity
has several persons responsible for its representation,
the decision should indicate whether they represent the
company jointly or separately;
• Passport photocopies of the founders and director(s).

The Application should be accompanied by signature
samples (facsimiles) of the person(s) responsible for
managing the company. The signature samples should
either be certified by a Notary or done at the National Agency
of Public Registry itself in the presence of a responsible
official of the National Agency of Public Registry.

If the founders (partners) are not present for the submission
of the Application Form at the National Agency of Public
Registry, they shall issue a power of attorney. In addition, if
a person responsible for representation or the manager of
the company (the director) is not in Georgia to certify his/her
signature sample at a local Notary Office, it is necessary to
send dully executed signature sample.
4 Please note that document issued abroad, also the samples of the
signatures needed, should be notarized and legalized in founder’s
country / or certified by apostille, translated and notarized in
Georgia
    HOW TO ESTABLISH A BANK IN GEORGIA HOW TO ESTABLISH A BANK IN GEORGIA   - 11
               DOCUMENTS
               REQUIRED FOR
Appendix # 3




               OBTAINING A
               BANKING LICENSE
               The NBG requires the following documents to be
               submitted by the JSC for obtaining a banking license
               (including Application)5:

               • The originals or notarized copies of the JSC registration
               documents;

               • Information regarding the qualification of directors of the
               commercial bank and their experience of working in the
               banking field;

               • A bank statement confirming the amount of the Declared
               Charter Capital and its paid up part, as well as the
               information regarding the ownership of Declared Charter
               Capital and Regulatory Capital and the origins thereof;

               • A compatibility declaration concerning the direct as
               well as the beneficiary owner with regards to the criteria
               established by the respective Georgian legislation 6;

               • Additional information determined by the rules of the NBG,
               which should include at least information regarding the
               Charter Capital and other financial resources, the location
               of the head office and the branches of the bank as well as
               additional information, which is requested by the NBG on
               case by case basis.

               • Documents certifying the right of ownership or of use of
               the immovable property where the commercial bank or its
               branch shall be located;

               • A receipt of registration fee payment.




               5 Please note that documents issued abroad, also the signature
               samples needed, should be notarized and legalized in the founder’s
               country / or certified by apostille, translated and notarized in
               Georgia.
               6 The branch office of a foreign commercial bank shall submit infor-
               mation regarding the resources allocated for it by its head office.
               HOW TO ESTABLISH A BANK IN GEORGIA HOW TO ESTABLISH A BANK IN GEORGIA   - 12
     DOCUMENTS
REQUIRED FOR THE




                                                                                   Appendix # 4
 REGISTRATION OF
 A BRANCH OFFICE
The National Agency of Public Registry requires
following documents to be submitted by foreign legal
entities of a branch7 (including an application for
registration):

• The decision of the founder to open a branch in Georgia;
• The Charter (Articles of Association) of the founding
company;
• A document certifying proof of registration of the founder
company in the foreign jurisdiction; if the founder is a legal
entity, the same for the separate documents should indicate
the names of the authorized representatives and other
corporate details of the founder;
• Decision on appointing the Head of the Company (director)
or the relevant Power of Attorney thereof;
• Passport photocopies of the director to be appointed to a
branch ;
• The application for registration should be accompanied by
signature samples (facsimile) of person(s) responsible for
leading the branch (director(s). The signature sample should
either be certified by notary or done at the National Agency
of Public Registry itself in attendance with a responsible
official of the National Agency of Public Registry;
• Power of attorney from the director (head) to be appointed
at the branch;

In addition, the Application Form shall include the
following information:
• The firm name of the branch;
• The legal address of the branch;
• The legal name of the founder and its registration details,
its legal address, the name of the body that registered the
business entity, the date of registration and identification
code;
• The date of submitting the application for registration;




7 Please note that document issued abroad, also the samples of
the signature needed, should be notarized and legalized in found-
er’s country / or apostilled, translated and notarized in Georgia

    HOW TO ESTABLISH A BANK IN GEORGIA HOW TO ESTABLISH A BANK IN GEORGIA   - 13
USEFUL
CONTACT
INFORMATION
GEORGIAN NATIONAL INVESTMENT AGENCY
Ministry of Economic Development of Georgia
12 Chanturia St. 0108 Tbilisi, Georgia
Tel/Fax: +995 32 433 433
Tel: +995 32 106 394/106 391
E-mail: info@investingeorgia.org
website: www.investingeorgia.org


National Bank of Georgia
3/5 Leonidze St., 0105 Tbilisi, Georgia
Tel: (995 32) 442544
Fax: (995 32) 442577
E-mail: info@nbg.ge
web-page: www.nbg.ge



CIVIL REGISTRY AGENCY,
Ministry of Justice of Georgia
Hot line: 40 10 10
web-page: www.cra.gov.ge



THE MINISTRY OF JUSTICE OF GEORGIA
web-page: www.justice.gov.ge
Hot line: 0008


NATIONAL AGENCY OF PUBLIC REGISTRY
(REGIONAL CENTER)
www.reestri.gov.ge
Hot line: 8 800 282 828
Address: 2 N. Chkheidze St., 0102, Tbilisi, Georgia


HOW TO ESTABLISH A BANK IN GEORGIA HOW TO ESTABLISH A BANK IN GEORGIA   - 14
    TEXT




HOW TO ESTABLISH A BANK IN GEORGIA HOW TO ESTABLISH A BANK IN GEORGIA   - 15
TEXT
Prepared in cooperation with BLC (Professional
Legal Services), one of the leading law firms in
Georgia.

Contact person: Alexander Bolkvadze – Partner

Address: 4 Gudiashvili Square, Tbilisi, 0105,
Georgia; Tel: (995 32) 92 24 91; 93 25 03; 92 00
86;
Fax: (995 32) 93 45 26;
E-mail: alex.bolkvadze@blc.ge;

Website: www.blc.ge
Contact person: Alexander Bolkvadze - Partner

				
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