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How to open bank in georgia


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HOW TO OPEN BANK IN GEORGIA
Prepared by the BLC Law Office

BLC Law Office

4, Gudiashvili Square

Tbilisi, 0105, Georgia

Telephone: (995 32) 92 24 91, 93 25 03

Facsimile: (995 32) 93 45 26

Contact Person: Alexander Bolkvadze – Partner

Email: alex.bolkvadze@blc.ge

Web: www.blc.ge






INTRODUCTION


  • Commercial Bank under Georgian Legislation

Commercial Bank is a legal entity licensed by the National Bank of Georgia that attracts deposits and, through their application, conducts banking activity on its own behalf pursuant to applicable Georgian law.
Commercial Bank can be established only in the organizational legal form of a joint-stock company.


  • The Activities of the Commercial Bank:

The license granted by the National Bank of Georgia (the NBG) allows commercial banks to engage in the following banking operations inside the country as well as overseas:

  • Receiving interest-bearing and interest-free deposits (of fixed period, upon demand and other) and other returnable means of payment;

  • Issuing consumer loans, mortgage loans, unsecured and other loans, engaging in factoring operations with and without the right of recourse, trade finance including the granting of guaranties, letters of credit, acceptance finance, and forfeiting.

  • Upon its own or clients’ funds, buying and selling of 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.

  • Cash and non-cash settlement operations and the provision of collection services.

  • Issuing money orders and managing money circulation (including tax cards, checks and bills of exchange).

  • Securities brokerage services;

  • Trust operations on behalf of clients and funds management;

  • Safekeeping and registration of valuables including securities;

  • Credit-information services;

  • Depositary central activities;1

  • Activities related to each of the above types of services.



REGISTRATION OF THE BANK


  • Joint Step 1: Registration requirements for establishing JSC

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 entire assets. Shareholders are not liable for obligations of the JSC.

In order to register a JSC, the founder(s) shall submit to the Tax Inspection the following documents:



  • application form as approved by the Ministry of Finance of Georgia (see Appendix #1); and

  • supplementary documents (see Appendix #2).

State and tax registration fee for JSC amounts to 360 GEL.



  • Step 2: Obtaining Commercial Bank License

The banking license is issued by the NBG.

In order to obtain the license for banking activities JSC shall submit to the following documents to the NBG:



  • application form; and

  • additional documents (see Appendix #3).

The banking license is issued for unlimited time period.

The fee for issuing the license for the banking activities amounts to 500 GEL.
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 was tried for the legalization of unlawful incomes, financing terrorism, economic crime and/or crimes against entrepreneurial or other economic activities.



  • Types of Bank Capital

Declared Charter Capita l- is the 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 the banking activities, indemnifying the possible financial losses and protect from other types of risk. The Regulatory Capital should be paid up only in cash.

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

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

  • Corporate Structure of Commercial Banks

    • General Meeting of Shareholders - the supreme administrative body of bank is the General Meeting of Shareholders, which acts in accordance with legislation and charter. It elects the Supervisory Board.

  • Supervisory Board - consists of no less than 3 and no more than 21 members. The number of the 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 the member(s) of the Supervisory Board without making the majority of the board members.



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

The Management Board shall consist of at least 3 individuals appointed by the Supervisory Board for the term of four years and may be reappointed for an unrestricted term.



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




  • Administrators’ Compatibility Criteria

Person to be appointed as an administrator of the commercial bank has to comply with the following compatibility criteria:

  • The member of the Board of Directors, head of the branch or other similar subdivision and its deputies should hold high degree in one of the following majors: economics, finances, banking, business administration, audit, accounting or law;

  • The chief accountant of the bank/branch and its deputy should hold high degree in one of the following majors: economics, finances, banking, business administration, audit or accounting;

  • The member of the Board of Directors of the bank, head of the branch or other similar subdivision or its deputy must have appropriate professional qualification and experience for which they should have at least 4 years work experience in banking- financial field, including 2 years experience of occupying the managerial position (head or deputy of the structural unit);

  • The chief accountant of the bank/branch and its deputy should have at least 3 years work experience in banking-financial field;

  • A person can not be appointed as an administrator if he/she occupies one of the following positions:

    • member of Supervisory Board or Revision Commission of the same commercial bank; and/or

    • member or administrator of the Board of Directors of other commercial bank, non-banking depositary institution – credit union, and/or other company;

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

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



ESTABLISHING BRANCH OF FOREIGN COMMERCIAL BANK


  • Step 1: Registration requirements for establishing a branch office

Any Commercial Bank may establish a branch office by means of submitting respective documentation to the Tax Inspection (see Appendix #4). 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.

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

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

Registration fees:



    • Branch Office of JSC- 180 GEL

    • Branch Office of LLC- 80 GEL

    • Branch Office of JLC – 30 GEL

    • Branch Office of LP- 40 GEL

    • Branch Office of CO- 60 GEL




  • Step 2: Obtaining banking license for the branch office of the Foreign Commercial Bank

A license to a foreign bank branch office shall be issued only in case if the bank itself is authorized to attract deposits or other funds in the country where its head office is located.

In this case, the license is issued, after submission of an approval on 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 license for banking activities of the branch office of 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 a branch office of a Foreign Reliable Bank are rather simplified. The NBG shall issue the banking license to Foreign Reliable Bank for establishing 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.



FAQ


  • Does the banking activity require any license/permit?

Commercial bank should obtain Banking License in order to carry out the banking activity. Banking licenses shall be applied for in writing to the NBG.

  • What are the minimum regulatory capital requirements?

Minimum required amount of the Charter Capital at the moment of the creation of the bank is its Regulatory Capital, which should constitute 12 million GEL.



  • What is applicable timing for registering commercial bank in Georgia?

Given that two-step procedure is required for establishing Commercial Bank, the aggregate time-frame is as follows:

  • The state and tax registration of JSC, carried out by Tax Inspection, is performed immediately after submission of all necessary documents, within one business day.

  • The registration of JSC is followed by obtaining the Banking License which is granted within the period of 3 months from the date of submission of the Application.




  • What are the Preconditions of legal stay in Georgia?

A Person possessing ordinary visa and wishing to stay on the territory of Georgia longer than the period determined by the visa, should apply to respective regional services of the Civil Registration Agency of the Ministry of Justice of Georgia for receiving temporary or permanent residence permit, 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 the Georgian legislation a bank can be incorporated for unlimited time-period, thus latter entirely depends upon the choice of the founders.

  • Can a foreign national be a managing officer of a bank?

Yes, the Georgian legislation does not contain any restraints as to the nationality of personas 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 the 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.
Appendix #1

CONTENT OF APPLICATION FORM FOR REGISTRATION OF JSC

Application form4 contains the following information:

  • Company (firm) name of a business entity;

  • Legal form of a business entity (JSC);

  • Legal address of a business entity;

  • Name, residing address, personal number and signature of founding partner(s), persons (including a proxy) responsible for representing and leading a business entity; If the founder is a business entity – 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 duration of a business entity (if a company is founded for a determinate time period, its duration shall be indicated by years);

  • If a business entity has several persons responsible for its representation, the application should indicate whether they represent the company jointly or separately;

  • The date of submitting the application for registration.


Appendix #2

DOCUMENTS REQUIRED FOR REGISTRATION OF JSC

For registration of JSC, the following documents shall be submitted (including Application) to the Tax Inspection5:



  • Decision of the founders on creation of JSC in Georgia;

  • Charter (Articles of Association) of the founder company;

  • 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);

  • Decision on appointing the Head of the Company (Director) or the relevant Power of Attorney thereof;

  • Passport photocopies of the founders and director(s)

The Application should be accompanied by signature samples (facsimile) of person(s) responsible for managing the company. The signature sample should either be certified by the Notary or done at the Tax Inspection itself in attendance of a responsible official of the Tax Inspection.

If the founders (partners) are not present at submitting the Application Form at the Tax Inspection, 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.

Appendix #3

DOCUMENTS REQUIRED FOR OBTAINING BANKING LICENSE

The NBG requires following documents to be submitted by the JSC for obtaining a banking license (including Application)6:



  • 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;

  • 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; 7

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

  • 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 the use of the immovable property, where the commercial bank or its branch shall be located;

  • Receipt of paying the registration fee.


Appendix #4

DOCUMENTS REQUIRED FOR THE REGISTRATION OF A BRANCH OFFICE

The Tax Inspection requires following documents to be submitted by foreign legal entities of a branch8: (including an application for registrations)



  • Decision of the founder on opening a branch in Georgia;

  • Charter (Articles) of the founder company;

  • Document certifying the proof of registration of the founder company in the foreign jurisdiction; if the founder is a legal entity, the same or the separate document 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 of 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 Tax Inspection itself in attendance with a responsible official of Tax Inspection;

  • Power of Attorney from the director (head) to be appointed at the branch;

In addition, the Application Form shall include the following information:



  • Firm name of a branch;

  • Legal address of a 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;




USEFUL CONTACT INFORMATION

MINISTRY OF ECONOMIC AND SUSTAINABLE DEVELOPMENT OF GEORGIA

Address: 12 Chanturia St. 0108 Tbilisi, Georgia

Tel/Fax: +995 32 921 1845

Tel: +995 32 991 088/921 1845

E-mail: ministry@economy.ge

Webpage: www.economy.ge


Georgian National Investment Agency

Ministry of Economic Development of Georgia

Address: 12 Chanturia St. 0108 Tbilisi, Georgia

Tel/Fax: +995 32 433 433

Tel: +995 32 106 394/106 391

E-mail: info@investingeorgia.org

Webpage: 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


MINISTRY OF FINANCE OF GEORGIA

Webpage: www.mof.ge

Hot line: 077

Revenue Service of the Ministry of Finance of Georgia
Address: 16 Gorgasali St., Tbilisi, 0105, Georgia

Contact Centre Tel: 077

e-mail: callcenter@mof.ge
Large Taxpayers inspection

Address: 30 Tsotne Dadiani St., Tbilisi

Tel: (832) 26 21 37; (832) 26 21 42
Tbilisi Tax Inspection (Regional Center)

Address: 8 Baghdadi St., Tbilisi



Tel: (832) 26 17 59; (832) 26 17 45





1 As defined in the Law of Georgia on the Securities Market

2 A Significant Shareholder refers to any person who directly or indirectly owns 10% or more of the declared or paid up charter capital.

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

4 Sample of Application for as approved by the Ministry of Finance of Georgia can be found on: http://www.mof.ge/default.aspx?sec_id=2150&lang=1


5 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

6 Please note that document issued abroad, also the samples of the signature needed, should be notarized and legalized in founder’s country / or certified by apostille, translated and notarized in Georgia

7 Branch office of a foreign commercial bank shall submit information regarding the resources allocated for it by its head office.

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


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