The Legal Role of the Operating Shareholders' Agreement in a Georgian LLC

Table of contents

TL;DR. Why This Document Determines Whether Your LLC Works or Fails

Introduction. The Document Everyone Ignores Until Control Is Tested

What Is an Operating Agreement in a Georgian LLC?

Why the Charter Alone Is Not Enough

What Happens If You Don’t Have an Operating Agreement?

Why Georgian Banks Care About Your Operating Agreement

Profit Distribution and Dividends. Why Silence Is Risky

Share Transfers and Exits. Where Most Georgian LLCs Break

Exit Clauses. Planning for the Moment Nobody Wants to Talk About

Operating Agreements and Banking Compliance. The Hidden Link

Operating Agreement vs Power of Attorney. Why Both Matter

Crypto, IT, and High-Risk Activities. Where Governance Must Be Explicit

Tax Alignment. Why Auditors Care About Your Agreement

Updating the Operating Agreement. When “Later” Becomes Dangerous

Final Perspective. Registration Is Easy. Governance Is Not.

Frequently Asked Questions (FAQs)

TL;DR. Why This Document Determines Whether Your LLC Works or Fails

A Georgian LLC can be registered without an operating agreement or shareholders’ agreement. Georgian law allows it. The Public Registry does not ask for it. Many founders skip it.

That does not mean it is optional in practice.

For foreign owners, especially those running a Georgia LLC remotely, the operating agreement is the document that defines who controls the company, who can access funds, how profits are distributed, and how disputes are handled. Banks, auditors, and future partners rely on it to understand how your company actually works beyond the registry extract.

Most problems foreign founders face in Georgia. Frozen bank accounts, shareholder disputes, blocked dividends, director abuse. Do not come from bad laws. They come from missing or poorly drafted operating agreements.

Introduction. The Document Everyone Ignores Until Control Is Tested

When founders register an LLC in Georgia, the process feels deceptively simple. Company registration in Georgia can take one or two business days. There is no minimum capital. Foreigners can own 100% of the company. Directors can be appointed easily. The system feels friendly.

That simplicity creates a false sense of security.

Many founders assume that once the Georgian LLC exists, internal matters can be handled informally. Decisions by email. Verbal agreements between partners. “We trust each other” logic.

That approach works only while nothing goes wrong.

The moment money starts moving, partners disagree, banks ask questions, or an exit becomes relevant, the absence of an operating agreement becomes a structural risk.

This article explains what the operating agreement actually does in a Georgian LLC, why default rules are dangerous for foreign owners, and why this document matters even for single-founder companies.

What Is an Operating Agreement in a Georgian LLC?

In Georgian practice, the terms operating agreement and shareholders’ agreement are often used interchangeably. Legally, it is a private agreement between shareholders that regulates how the company is governed internally.

How Georgian law treats operating agreements

Under Georgian law, an LLC is governed by:

• the Civil Code of Georgia

• the company charter (articles of association)

• internal agreements between shareholders

The operating agreement sits in the third category.

It is not filed with the Public Registry. It is not publicly visible. But it is legally enforceable between the parties and highly relevant for banks, auditors, and dispute resolution.

In simple terms, the charter defines that the company exists. The operating agreement defines how the company behaves.

Why the Charter Alone Is Not Enough

What the Georgian LLC charter actually covers

The charter is a mandatory document for Georgia LLC registration. It contains basic information:

• company name

• legal address

• share capital

• director appointment

• general decision-making framework

It is intentionally minimal.

That minimalism works for small local businesses with one owner and one director. It is not designed for:

• remote ownership

• multiple shareholders

• non-resident founders

• complex banking or tax structures

What the charter does not regulate

The charter does not clearly regulate:

• limits on director authority

• banking access rules

• profit distribution timing

• dispute resolution mechanisms

• exit procedures

When these points are not regulated elsewhere, Georgian default rules apply.

And default rules are where problems begin.

What Happens If You Don’t Have an Operating Agreement?

Default rules are not neutral

When no operating agreement exists, Georgian law fills the gaps automatically.

These default rules are simple, but not founder-friendly.

For example:

• Directors often have very broad authority

• Majority shareholders can dominate decisions

• Profit distribution can be blocked or delayed

• Disputes go straight to court

None of this is illegal. It is simply not optimized for foreign owners running a business from abroad.

Real-world consequences for foreign founders

In practice, missing operating agreements lead to:

• banks freezing accounts due to unclear control

• shareholders blocking dividends

• directors acting beyond what founders expected

• forced litigation in Georgian courts

These issues rarely appear in the first months. They surface when the company grows, attracts money, or faces stress.

Why Georgian Banks Care About Your Operating Agreement

Banks do not ask for operating agreements during company formation in Georgia. They ask later. Usually during bank account opening, compliance reviews, or transaction monitoring.

What banks are actually assessing

When a bank reviews a Georgian LLC, it wants to understand:

• who controls the company

• who can access and move funds

• how decisions are made

• how disputes would be resolved

The registry extract alone does not answer those questions.

An operating agreement does.

This is why banks often request it quietly, especially for:

• non-resident directors

• multiple shareholders

• crypto-adjacent activity

• companies with significant turnover

Banks are not being difficult. They are managing risk.

Control and Decision-Making. The Core Function of the Agreement

Voting rights and reserved matters

One of the most important roles of an operating agreement is defining how decisions are made.

Without it, decisions often default to simple majority rules.

With it, you can define:

• which decisions require unanimous consent

• which decisions require supermajority approval

• which decisions a director can make alone

This matters when:

• bringing in new shareholders

• opening additional bank accounts

• changing business activity

• distributing profits

For foreign founders, control clarity is often more important than tax optimization.

Director authority. Where most abuse happens

In many Georgian LLCs, the director has broad statutory authority.

If that authority is not limited by an operating agreement, the director may legally:

• sign contracts

• open accounts

• move funds

• bind the company

This is true even if shareholders “didn’t intend” it.

An operating agreement can:

• limit director authority

• require shareholder approval for banking actions

• define reporting obligations

Without these clauses, directors often have more power than founders realize.

Profit Distribution and Dividends. Why Silence Is Risky

How profits are taxed in Georgia

Under the Georgia corporate income tax system, LLCs pay tax only on distributed profits. Undistributed profits are not taxed.

This creates flexibility. But also conflict.

What happens without clear dividend rules

If the operating agreement is silent:

• dividends can be delayed indefinitely

• minority shareholders can be blocked

• tax planning becomes unpredictable

A well-drafted agreement defines:

• when profits can be distributed

• how much must be reinvested

• how disputes over dividends are resolved

Banks and auditors often look at these clauses when assessing whether profit flows make sense.

Single-Founder Georgian LLCs. Why You Still Need an Agreement

Many founders assume that operating agreements only matter when there are multiple shareholders.

That is a mistake.

Why solo founders face risk too

Even single-member LLCs face scenarios where:

• directors are delegated authority

• powers of attorney are issued

• heirs become relevant

• investors are added later

An operating agreement protects the founder’s intent before complexity appears.

Banks also prefer clarity, even in single-founder structures, especially when the founder is non-resident.

Multi-Shareholder LLCs. Where Problems Multiply Fast

Equal partners and deadlocks

50/50 ownership structures are common and dangerous.

Without an operating agreement:

• deadlocks go to court

• operations stall

• banks become nervous

With proper clauses:

• tie-breakers exist

• escalation paths are defined

• exits are structured

Unequal partners and minority protection

Minority shareholders are vulnerable without explicit protection.

Operating agreements can define:

• information rights

• veto rights

• exit rights

Without them, minority shareholders often discover their lack of power too late.

Dispute Resolution. Keeping Problems Out of Court

Why Georgian court disputes are a last resort

Court disputes are:

• slow

• expensive

• unpredictable for foreigners

Operating agreements can define:

• governing law

• jurisdiction

• arbitration mechanisms

• language of proceedings

These clauses matter immensely once a dispute arises.

Share Transfers and Exits. Where Most Georgian LLCs Break

Most founders think about operating agreements in terms of control and disputes. In practice, the first real stress test is usually a share transfer.

A partner wants to exit.An investor wants in.A founder wants to sell part of the business.

This is where the absence of a shareholders’ agreement turns a simple change into a legal and banking problem.

What Georgian law allows by default

Under default Georgian LLC rules, share transfers are relatively flexible. That sounds positive, but flexibility without structure creates risk.

Without an operating agreement, there may be:

• no restriction on who can acquire shares

• no requirement for shareholder consent

• no mechanism to block unwanted third parties

For foreign founders, this is not theoretical. Banks treat ownership changes as high-risk events. Sudden or poorly explained share transfers often trigger enhanced compliance review or temporary account restrictions.

Why banks care about ownership changes

From a bank’s perspective, ownership equals control.

If shares change hands without a clear contractual framework, the bank must reassess:

• who ultimately controls the company

• whether AML risk has changed

• whether prior KYC is still valid

An operating agreement that clearly defines transfer restrictions, consent requirements, and notification obligations reduces this risk dramatically.

Exit Clauses. Planning for the Moment Nobody Wants to Talk About

Voluntary exits

A well-drafted operating agreement defines:

• how a shareholder can exit

• how shares are valued

• who has priority to buy

Without these clauses, exits often turn into disputes. Not because parties are hostile, but because expectations were never aligned.

Forced exits and bad-actor scenarios

Operating agreements can also regulate what happens if a shareholder:

• violates the agreement

• competes with the company

• damages the business

Without explicit clauses, removing a problematic shareholder in Georgia usually requires court involvement. That is slow, expensive, and visible to banks.

Death, Incapacity, and Inheritance. The Quiet Risk for Non-Residents

This is one of the most overlooked issues in Georgian LLCs with foreign owners.

If a shareholder dies or becomes incapacitated and there is no operating agreement:

• shares may pass to heirs automatically

• decision-making can freeze

• banks may restrict accounts

An operating agreement can define:

• whether heirs can become shareholders

• buy-out mechanisms

• temporary management rules

For non-resident founders, this is not pessimism. It is basic risk management.

Operating Agreements and Banking Compliance. The Hidden Link

By the time a Georgian LLC reaches meaningful turnover, banks no longer rely solely on registry extracts.

They look for internal logic.

What banks want to see, even if they don’t ask directly

Banks want clarity on:

• who can access accounts

• whether directors act independently

• how shareholders supervise financial decisions

An operating agreement provides that clarity.

This is especially relevant when:

• multiple shareholders exist

• directors are not shareholders

• powers of attorney are issued

• crypto or high-volume transactions are involved

In these cases, the operating agreement often becomes part of ongoing compliance, not just onboarding.

Operating Agreement vs Power of Attorney. Why Both Matter

Founders often confuse these two documents.

They are not interchangeable.

• A Power of Attorney delegates authority externally

• An operating agreement defines authority internally

Banks read them together.

If a POA gives broad authority but the operating agreement limits that authority, banks follow the internal rules.If the operating agreement is silent, the POA effectively becomes unchecked power.

This is one of the most common causes of internal abuse and banking disputes in Georgian LLCs.

Crypto, IT, and High-Risk Activities. Where Governance Must Be Explicit

For companies involved in:

• crypto-adjacent services

• blockchain development

• IT outsourcing

• fintech or payment flows

banks expect higher governance standards.

Why operating agreements matter more here

In higher-risk activities, banks assess:

• segregation of duties

• internal controls

• responsibility allocation

An operating agreement can define:

• who is responsible for compliance

• who approves high-risk transactions

• whether client funds are handled

Without these clauses, even legally compliant companies may face unnecessary scrutiny.

Tax Alignment. Why Auditors Care About Your Agreement

Operating agreements are not tax documents. But they shape how tax rules are applied.

Dividend logic and corporate tax timing

Georgia taxes corporate profits only when they are distributed. If an operating agreement is unclear about:

• when profits can be distributed

• who decides

• how much can be retained

tax planning becomes unpredictable.

Auditors often review operating agreements to understand whether dividend distributions match declared governance rules.

Personal vs corporate income risk

Poorly drafted agreements can blur the line between:

• shareholder income

• director compensation

• company profits

This increases the risk of reclassification during audits.

Updating the Operating Agreement. When “Later” Becomes Dangerous

Operating agreements are not static documents.

They should be updated when:

• new shareholders join

• directors change

• banking structure changes

• activity expands

• investors appear

The most dangerous situation is an outdated agreement that no longer reflects reality. Banks and auditors compare documents to behavior. Mismatches trigger questions.

Why Generic Templates Fail in Georgian LLCs

Many founders use:

• foreign templates

• US-style operating agreements

• overly generic shareholders’ agreements

These often fail because:

• they reference non-existent legal concepts

• they ignore Georgian default rules

• they conflict with the charter

• they confuse banks rather than reassure them

A Georgian operating agreement must be drafted for:

• Georgian corporate law

• Georgian banking logic

• non-resident ownership realities

Anything else is decoration.

How the Operating Agreement Aligns With the LLC Charter

The charter is public.The operating agreement is private.

They must not contradict each other.

The charter sets the framework.The operating agreement fills in the logic.

When they conflict:

• banks get nervous

• auditors ask questions

• courts default to the charter

Alignment between these two documents is essential.

Final Perspective. Registration Is Easy. Governance Is Not.

Georgia makes it easy to register an LLC. That is its advantage.

But ease of entry does not remove the need for structure. It increases it.

Foreign founders who treat operating agreements as optional often pay for that decision later. In time. In stress. In frozen accounts. In disputes that never needed to exist.

Those who treat governance as part of setup, not an afterthought, rarely run into these problems.

Protect Control Before You Need to Defend It

If you already have a Georgian LLC without an operating agreement, the best time to fix it is now. Not during a dispute. Not during a bank review. Not during an audit.

If you are registering a new company, drafting this document early costs far less than repairing damage later.

At Gegidze, we don’t use templates. We draft operating agreements that align with:

• Georgian LLC law

• banking and KYC logic

• tax and audit reality

• non-resident ownership needs

Book a free consultation. We’ll review your structure and tell you honestly whether your governance protects you or exposes you.

Frequently Asked Questions (FAQs)

Is an operating agreement mandatory for a Georgian LLC?No. Georgian law does not require it. But banks, auditors, and investors often expect one.

Does the operating agreement need to be registered?No. It is a private agreement between shareholders, but legally enforceable.

Can it override the charter?No. It must align with the charter. Conflicts usually default to the charter.

Does a single-member LLC need an operating agreement?Yes, in many cases. Especially for non-resident founders, delegated directors, or future investors.

Can a missing operating agreement cause banking issues?Yes. Lack of clarity around control and authority is a common trigger for compliance reviews.

How often should it be updated?Whenever ownership, management, activity, or banking structure changes.