• Home
• Legal Services
• Bankruptcy and Rehabilitation of a Company in Georgia: Grounds, Procedure and Consequences

Bankruptcy and Rehabilitation of a Company in Georgia: Grounds, Procedure and Consequences

Irakli

RegHub Georgia Specialist

Bankruptcy and a company's rehabilitation in Georgia are governed by dedicated legislation letting a business either restore solvency or wind down in an organised way that accounts for creditors' interests. For owners, investors and directors, the stakes sit in the court deadlines, the consequences of insolvency, the restrictions on disposing of assets, and management's liability.

Georgian regulation provides for judicial rehabilitation, a bankruptcy regime, and a regulated agreement as a separate restructuring mechanism -- reaching commercial companies, non-commercial entities, certain unregistered associations, and foreign structures whose centre of main interests sits inside the country.

Legal Grounds and Insolvency Criteria for a Company in Georgia

Bankruptcy and a company's rehabilitation in Georgia are governed by the Law "On Rehabilitation and Collective Satisfaction of Creditors' Claims" No. 7165-Ic, whose current text accounts for an amendment effective 1 August 2026 touching specific requirements around the international financing of aviation equipment.

The regime is built around insolvency proceedings. Within it, either a company's rehabilitation in Georgia opens or a bankruptcy regime does, while a regulated agreement covers preventive restructuring -- letting a debtor negotiate a change, deferral or other arrangement before a full court procedure. That negotiation moratorium runs a maximum of two months, extendable by a creditors' meeting resolution for two months more.

That two-plus-two-month ceiling is easy to misjudge: a debtor who spends the first month lining up advisers has, in practice, one working month left before the extension clock even starts -- treating all four months as available negotiating time overstates what's actually there.

Overdue debts aren't the only condition under which bankruptcy proceedings in Georgia can go forward -- the law also recognises anticipated insolvency, where reasonable grounds exist to forecast obligations won't be met.

Opening the Case and How the Moratorium Works

Procedural deadlines then apply: 7 days to review a debtor's own petition, 10 days for a creditor's petition once confirmed service is established, 7 days for the debtor's response to that petition, and 5 working days to fix formal defects in the submitted documents.

Once admissible, a bankruptcy case opens in Georgia and the moratorium applies: it suspends enforcement collection, restricts selling pledged items, and bans dividends, reorganisation and liquidation. Interest on old obligations stops being paid, though it keeps accruing and counts among the claims; any contractual penalty is suspended too.

Where necessary, the court can add further protective measures -- a ban on disposing of assets or ending critically necessary contracts -- solely because proceedings opened. Filing a company's insolvency petition in Georgia thus changes how property is handled well before any funds are actually distributed.

Filing the Petition: Court, Jurisdiction and What Has to Be Shown

The bankruptcy procedure for a company in Georgia begins with an authorised person's petition to the court -- the debtor, a creditor, the supervisory person under a regulated agreement, or the manager when a case moves regimes. The applicant states upfront which it wants: rehabilitation or bankruptcy.

Eastern Georgia cases go to the Tbilisi City Court; Western Georgia, to the Kutaisi City Court. How to declare a company bankrupt in Georgia therefore starts with territorial jurisdiction, fixed by the company's registered legal address.

A bankruptcy petition for a company in Georgia must confirm actual or anticipated insolvency, with data on activity, assets, liabilities, and future and contingent debts -- and, in a bankruptcy scenario, on encumbered property and secured creditors.

Managing a Company During Rehabilitation in Georgia: the Plan and Creditor Voting

When the regime opens, the court decides how the debtor is managed. Managing a company during rehabilitation in Georgia can mean keeping existing leadership under a rehabilitation supervisor's control, or transferring authority to a rehabilitation manager. Insolvency practitioners are authorised through the National Bureau of Enforcement, under the Ministry of Justice of Georgia.

Management's authority is limited: certain operations need the manager's or supervisor's consent, in particular contracts running longer than two months, deals outside ordinary business activity, and any transaction whose value -- alone or combined -- exceeds 30% of the prior year's turnover.

A report on the debtor's activity is prepared within 45 days of opening. It underpins a company's rehabilitation plan in Georgia, a draft of which reaches creditors within two months of the court's ruling. The court can extend that once, by a further month; total coordination runs up to six months, plus up to three more if the creditors' meeting grants it.

Plan content depends on the company's financial model. Restructuring a company's debts in Georgia can mean a new payment schedule, continuing the business, selling part of the property, or long-term repayment. Tax debt has a special rule: the Revenue Service of Georgia's consent is treated as given once the principal is repaid in equal annual instalments over a maximum of five years, other requirements met.

Restoring a company's solvency in Georgia goes through a vote by separate creditor groups, then court review. Secured and unsecured creditors vote separately, and votes of persons connected to the debtor are left out of the required majority.

Creditors' Claims, the Register, and the Payment Order in a Company's Bankruptcy in Georgia

Bankruptcy and a company's rehabilitation in Georgia cover claims of a different legal nature: due obligations, future and contingent ones, and debts whose final amount isn't yet fixed all enter the register.

A creditor may file a claim within the statutory deadline; the manager forms the register within 60 days of the petition's admission, and entries can be disputed within 10 days once a company's bankruptcy in Georgia is under way.

Separate protection is set aside for employees: wages and holiday pay accrued for up to three months before the case opened are preferential, except payments to directors, supervisory board members and their families. Sums owed for a workplace injury fall into that category too, up to GEL 1,000 per creditor.

That GEL 1,000 cap runs per creditor, not as one pool shared across the workforce -- several injury claims at the same company each get assessed against their own limit, not a combined one.

Distribution of the overall pool follows this order:

1. The costs of running the bankruptcy regime itself.

2. New obligations incurred after proceedings opened, including new tax debts.

3. Preferential claims.

4. Preferential tax claims.

5. Unsecured claims.

6. Interest, fines and penalties on obligations that predate the case.

7. Subordinated claims.

8. Dividends, the buy-out of shares or ownership interests, and the return of contributions.

A secured creditor doesn't fall under that conditional "first priority" at all -- in a company's corporate bankruptcy in Georgia, the pledgeholder or mortgage creditor is satisfied first out of the specific security item's value, under Article 105's special rules.

Voting weight is calculated on a monetary basis: GEL 1 of a claim carries one vote. The first meeting requires holders of more than 50% of the total vote present, and anyone holding at least 10% can demand a meeting be convened.

Challenging Transactions and Selling Assets During Bankruptcy in Georgia

Challenging transactions during a company's bankruptcy in Georgia applies to acts that shrank the asset pool or gave one party an edge over other creditors. The manager holds the right to initiate recovery; during rehabilitation, that authority sits with the rehabilitation manager or supervisory person instead.

Scrutiny covers pre-filing transactions. For a legal entity's bankruptcy in Georgia, the greatest risk comes from a gratuitous transfer or underpriced sale; early settlement of a not-yet-due obligation; giving one creditor an edge over the rest; a pledge for a previously unsecured debt; and concealing or disposing of property to shrink what creditors can reach.

The general scrutiny period is one year before opening -- two years for related-party deals, three years where there was intent to harm creditors. Stripping assets ahead of a company's bankruptcy in Georgia can mean the property returns to the debtor, any security over it is annulled, and the creditor's original claim is restored once the payment received goes back into the pool.

Once the case moves to realisation, the manager values the property and picks the method likely to raise the most. Selling assets during a company's bankruptcy in Georgia can happen as a single complex or as separate items; creditors may commission an alternative valuation at their own expense and propose a different method within the deadlines.

Creditors rarely order that alternative valuation in practice -- they pay for it themselves with no guarantee it changes anything, so it tends to make sense only when the gap against the manager's figure looks worth the cost of finding out.

Where an auction is used during a company's bankruptcy in Georgia, the first stage starts at 75% of market value; a repeat auction's benchmark is 50% (the manager may raise the starting price to 65%); a third stage prices at half the second auction's starting value. Auctions run 10 to 40 days apart, each lasting 7 to 10 days, and the winner pays within 10 days -- or 20 days where the price exceeds GEL 1,000,000. If a third round fails too, the asset goes to creditors under the shared-ownership transfer rules, with 10 calendar days to accept. Reverse conversion is provided for as well: a manager who can justify continuing operations economically may see the court move the company back into rehabilitation.

Need assistance with a bankruptcy procedure in Georgia?

Our specialists can assist with understanding the applicable procedures, preparing documents and addressing legal matters related to creditor claims, insolvency or company rehabilitation.

Request a consultation

Completing a Company's Bankruptcy in Georgia and What Comes Next

Completing a company's bankruptcy and rehabilitation in Georgia happens once the asset pool is realised and proceeds distributed: the manager files a final report within a reasonable time, no later than 15 days after the sale, after which the court terminates proceedings, usually followed by removal from the Register of Entrepreneurs and Non-Commercial Legal Entities.

Property discovered after the case closes doesn't fall outside the procedure either -- unsatisfied creditors can demand it be realised through the National Bureau of Enforcement within 15 days of notification or official publication.

A director's liability in a company's bankruptcy in Georgia carries particular weight: management must apply to the court in good time once insolvency arises, and once the regime opens, has 15 days from the ruling's legal effect to file outstanding tax declarations and correct identified errors.

The consequences of a company's rehabilitation in Georgia depend on the court-approved plan. Once its terms take effect, they bind the creditors it covers, including those who voted against it, with performance published every six months.

Moving from rehabilitation to bankruptcy in Georgia happens if the plan can't be approved, or the prospect of the recovery goals disappears. A material breach of the agreed payment schedule is grounds for opening bankruptcy too -- though a deviation of up to 20% of current obligations with a delay of no more than 15 working days, or a delay of up to seven working days regardless of sum, counts as insignificant.

Conclusion

Whether a company ends up in rehabilitation or bankruptcy in Georgia turns on one question: can solvency realistically be restored, or does an organised wind-down serve creditors better. The law gives owners, creditors and managers a structured way to answer it -- fixed court deadlines, a moratorium that buys room to negotiate, a plan tested against immediate liquidation, and a payment order that stays predictable however it ends.

The detail that gets missed most often is timing, not substance: a business that waits to see whether next quarter improves can lose the two-month window a regulated agreement would have given it, while one that files early keeps every option, reverse conversion included, genuinely open.