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CIVIL CODE

1997

(translated by the IRIS Center at the University of Maryland)

(excerpts)

Article 25. Capacity for Right [Passive Capacity] of a Legal Person

1. A legal person of public law is entitled to engage in an activity corresponding to the purposes prescribed by law or provided for in its founding documents.

2. A legal person of private law (entrepreneurial or non-entrepreneurial) is entitled to engage in any activity not prohibited by law, regardless of whether or not this activity is provided for in its charter.

3. A legal person may engage in certain kinds of activities, the list of which is determined by law, only on the basis of a special permit [license]. The right of a legal person to engage in such activity shall arise from the moment the license is received.

4. The capacity for right of a legal person shall arise from the moment of its registration and shall cease to exist from the moment that the completion of its liquidation is registered.

(...)

Article 30. Non-Entrepreneurial (Non-commercial) Legal Persons

1. A legal person whose objective is not entrepreneurial activity may exist as a union (association) or as a foundation. Entrepreneurial activity that is of an auxiliary nature and serves to accomplish a common goal does not alter the [fundamental] nature of a non-commercial legal person. The distribution of profits resulting from such activity among members of a union or among contributors to a foundation shall not be allowed.

2. A union is a legal person in which a number of persons set a common goal, and its existence is independent from changes in its membership. At least five founding members shall be required to constitute a union.

3. A foundation is a legal person in which one or more founders transfers a special property to the ownership of an independent subject having no membership, for the accomplishment of a useful, common and public purpose.

II. Norms Common to Unions and Foundations

Article 31. Registration of a Union and a Foundation

1. A union shall be subject to registration by a court, and a foundation shall be subject to registration by the Ministry of Justice.

2. The right to demand registration exists when the charter conforms to the provisions of law, and the objectives of the legal person, filed for the registration, do not contravene the law, recognized moral standards or constitutional-juridical principles of Georgia. In the case of a foundation the property shall correspond to the objectives set.

3. An application and charter signed by all founders and all members of the governing board are necessary for registration. The materials necessary for registration of a union shall be filed with the court [having jurisdiction over] the location of the residence of the union.

4. The court shall decide on the registration within one month from the day of filing of the application. If within this term no decision is made, the registration shall be deemed effective. The same rule applies when the registration is to be carried out by the Ministry of Justice.

5. The court’s refusal to register [a union] must be grounded on cause and provide for the possibility of appeal and the rule thereof. The appeal against the refusal may be filed with a court.

Article 32. The Charter of a Union and a Foundation

1. The organization and structure of a union and a foundation shall be regulated by a charter.

2. The charter shall include:

a. Objectives of the activity;

b. The name [of the organization];

c. The domicile (legal address);

d. The procedure for property liquidation and distribution;

e. The name, surname, date and place of birth, occupation and place of residence of each founder, contributor and member of the governing board of the union or the foundation, procedure for calling board meetings and making decisions at such meetings;

f. Authority [powers] of union members.

3. The charter may include other information as well, namely:

a. The functions of other bodies of management and control;

b. The competence of the [General] Meeting of the union members.

4. The charter of a foundation, in addition to the information referred to in paragraph (2) of this article, shall include:

a. The minimum amount and type of contributions;

b. Instructions on use of the amount;

5. The charter shall be notarized.

Article 33. Registration Data

1. The registration document [record] of a union and a foundation shall include the following information: name and domicile of the legal person, the object of its activity, the date of confirmation of the charter, the identity of the founders, the identity of the members of the governing board, and possible limitations on their representational authority.

2. Registration data shall be published.

3. Any person may examine the records in the register and demand its written extracts.

(...)

Article 39. Reorganization and Liquidation of Union and Foundation

1. Reorganization (merger, accession, division, spin-off, transformation) of a union or a foundation shall be carried out according to the procedure prescribed by law.

2. Liquidation of a union or a foundation occurs under the circumstances provided for in the charter; as a result of accomplishment of the object of the entity; or upon bankruptcy of the entity or revocation of its registration.

3. During liquidation of the entity the current affairs shall be concluded; claims ascertained; remaining property valued in monetary terms; the [claims of] creditors satisfied; and the remaining property distributed among entitled persons.

4. The persons entitled to the distribution of the property may be defined in the charter. [Otherwise] court or the Ministry of Justice [as the case may be] shall transfer the remaining property to one or several unions or foundations that promote the same or similar objectives as those of the union or the foundation being liquidated. If no such organizations exist, then a decision may be made on transfer of the remaining property to [another] charitable organization or to the state.

5. Information on the liquidation of the entity shall be made public. The property may be distributed one year after publication of the liquidation notice.

6. Liquidation is conducted by the governing board of the entity. In extraordinary circumstances, a court (or the Ministry of Justice) may appoint other liquidators. The liquidators are liable in the same manner as the members of the governing board.

III. Special Norms on Unions

Article 40. Governing Board

1. The Governing Board shall be elected by the [General] Meeting of the members for a term of four years, unless otherwise provided for in the charter of the entity. After expiration of this term, the powers of the Governing Board remain effective until the election of a new Board. The charter of the union shall also establish rules regarding the remuneration of the members of the Governing Board.

2. Decisions on election of members to the Governing Board may be revoked at any time. The charter may provide for significant grounds related to the revocation [of the authority of Board members].

3. If the Governing Board has fewer than the minimum number of members required by the charter, then the court may designate members from the same union [to occupy the vacant slots] during a transitional period. In this case, the members of the Board shall call a General Meeting of the members of the union to make the final decision on Board membership.

Article 41. General Meeting of the Members of a Union

1. The General Meeting of the members is convened by the Governing Board at least once per year, or when the union’s interests so require. A General Meeting may be convened by the written request of one-tenth of the members, which shall indicate the agenda of the meeting.

2. Each member shall be notified of the convening of the Meeting either in writing or by the publication of a notice in the printed periodical of the union no later than two weeks before the Meeting.

3. The Meeting of the members makes decisions on all matters outside the competence of the Governing Board. A decision of the Meeting is valid only when an entry with respect to that matter appeared on the agenda included in the notice at the time of calling the Meeting.

4. A decision of the Meeting is made by a majority of the votes of members present and a decision on alteration of the charter by a majority two-thirds of such votes. A majority of four-fifths of the votes of all members of the union shall be required to alter the purpose of the union. Members who cannot be present at the meeting may submit their votes in writing. Such members shall have equal status to the members present at the meeting [i.e. for purposes of quorum and voting].

Article 42. Commissions

The General Meeting of members may establish commissions in accordance with the charter, and delegate to them the powers of the Meeting during periods between the Meetings, especially for supervising the activities of the union. Only members of the union may be members of such commissions.

Article 43. Advisory Bodies

In the process of carrying out the objectives of the union, the General Meeting of the members may establish special advisory boards, if so provided in the charter. A person who is not a member of the union may be a member of such an advisory group.

Article 44. Union Membership

1. The Governing Board admits members to the union on the basis of written applications by interested persons, or in other cases provided for in the charter.

2. Each member is entitled to withdraw from the union. The charter may provide for a certain period of time for withdrawal, which period may not exceed one year. If a member seeks to leave the union for a legitimate reason, then there is not a requirement for a period of time for withdrawal.

3. Membership may not be transferred to or inherited by other persons unless otherwise provided for in the charter.

4. In such cases as may be provided for in the charter, or if significant grounds exist, the General Meeting of the members may expel a member from the union. The expelled member may file an appeal against the decision to expel him with a court.

5. If a union serves a significant function in meeting the vital social or other needs of a person interested in joining, then such person is entitled to demand admission to the union, unless his admission would contravene the fundamental principles of the union.

Article 45. Non-registered Union [Unincorporated Association]

1. Matters concerning the organization and structure of a non-registered union [unincorporated association] are defined by the mutual agreement of its members. A non-registered union shall not be considered a legal person.

2. Membership fees or property acquired with such fees constitute the common property of the union.

3. A non-registered union may be represented in court or in extrajudicial relations by its members, or by persons so authorized.

4. The claims of creditors may be satisfied from the common property of the [non-registered] union. In addition, persons who have acted on behalf of the union shall be liable as obligors [debtors] both individually and jointly.

Article 46. Foundation for Recipients

The objective of a foundation, in addition to the objectives defined in paragraph (3) of Article 30, may also be the support of certain persons or specifically defined groups of persons. All persons who are entitled to receive a share from the property of the foundation (recipients) may, subject to the consent of all members of the Governing Board, dissolve the foundation or alter its objective, provided the Ministry of Justice agrees as well.

Article 47. Obligation to Contribute to a Foundation

1. A founder (founders) shall assume liability, in the form of a notarized document creating the foundation, to contribute property to the foundation in the amount required to accomplish the purpose of the foundation. If the property is inadequate, the registration of the foundation shall be refused.

2. Refusal to transfer the [indicated] property to the foundation may occur at any time before registration of the foundation. Within one month after registration, the property shall be transferred in full; otherwise the registration shall become invalid.

Article 48. Supervisory Body

1. The charter may provide for establishment of a Supervisory Body (Board of Trustees), the members of which are selected by the Founders of the foundation, for the purposes of appointing, recalling, and supervising the Governing Board and special representatives. After the death of the Founders, new members may be added to the composition of the Supervisory Body, by the Recipients or within the limits defined in the charter (rule of "co-optation").

2. In all other cases the Ministry of Justice ensures that the foundation is administered according to the law and its charter. The Ministry of Justice may obtain information on the activity of the foundation and examine its documentation.

3. The Supervisory Body (Board of Trustees) may suspend, declare invalid or demand revocation of the decisions and undertakings of the Governing Board if they contravene the law or the foundation’s charter.

4. The Supervisory Body ensures that the appointment of the Governing Board and other bodies conform to the charter. If the charter fails to regulate these relations, the Supervisory Body may issue additional instructions.

Article 49. Alteration of the Object of a Foundation

If the purpose of the foundation cannot be accomplished without Recipients, or if other grounds for the liquidation of the foundation exist, then the Ministry of Justice may, provided the charter does not otherwise address this issue, demand the alteration of the purpose of the foundation instead of liquidation, or the Ministry may, preserving the similarity with the initial purpose, carry out the merger of the foundation with other foundations; and if any of the Founders is alive, his consent thereto shall be required.

(...)

Chapter Twenty-five

JOINT ACTIVITY (PARTNERSHIP)

Article 930. Concept

Under a contract of joint activity (partnership), two or more persons undertake to act jointly for the accomplishment of common economic or other objects by the means stipulated in the contract, without forming a legal person.