Legal Grounds and Forms of Restriction on the Circulation of LLC Shares
Author : Ekaterina Pipia 26/12/2025
Article ABSTRACT
This article analyzes the legal grounds and forms of restrictions on the circulation of both existing and newly issued shares in a limited liability company (LLC). The purpose of the research is to examine and interpret the legal norms regulating the restriction of share transfers in Georgian LLCs and the forms and conditions of charter-based restrictions on share circulation, through a comparative legal analysis. The study is based on historical and comparative methods. In particular, it reviews the norms that governed the circulation of LLC shares prior to the adoption of the current Georgian legislation, as well as the regulations in leading Western jurisdictions (the United States, the European Union, Germany, and the United Kingdom). The article relies on Georgian and foreign legislative acts (including the Constitution of Georgia, the Civil Code of Georgia, the 1994 and 2021 versions of the Law of Georgia on Entrepreneurs, Directive 2017/1132, AktG, GmbHG, Companies Act 2006, and MBCA), judicial precedents and practice, and Georgian and foreign legal scholarship.
The research reveals that Georgian law establishes the general principles of (1) the free disposal of shares by LLC partners and (2) the pre-emptive right to acquire newly issued shares before their placement with third parties. However, it was also found that the law allows both (a) the restriction by charter of the transfer of existing shares to third parties and (b) the exclusion of the pre-emptive right for newly issued shares. Moreover, the charter may restrict not only the disposal of a partner’s shares (by sale, exchange, or donation) but also the acquisition of shares by inheritance or as a result of divorce. In addition, the charter may introduce flexible forms of share circulation restrictions—such as requiring the company’s consent for share transfers, inheritance, or transfer upon divorce, as well as granting pre-emptive rights in respect of existing or newly issued shares. It may also set specific conditions or limitations applicable to the parties involved in the circulation of shares.
In conclusion, the Georgian model of restricting the circulation of LLC shares functionally balances the approaches of the European Union, Germany, the United Kingdom, and the United States, which are oriented toward both statutory and charter-based regulation. Importantly, the current Georgian legislation allows an LLC charter to implement a customized restriction model tailored to the specific goals and preferences of its partners—one that maintains the stability of the company’s ownership structure while ensuring its continued development and investment attractiveness.
Key words: Georgia, Charter Autonomy, Pre-emptive Right, Company Consent to Share Transfer, Comparative Legal Analysis
Article DOI: https://doi.org/10.55367/VDNY7909