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How to Get an Investment License in Georgia

Irakli

RegHub Georgia Specialist

Promoters who intend to manage investment funds and collective capital, run client portfolios or supply other regulated financial services are the ones who need an investment license in Georgia. Georgian law does not recognize a universal investment permission as a single document, and a direct equity stake in a local company requires no separate regulatory approval. Activity, the mix of services and the type of investor addressed together decide which regime a promoter falls under.

Who Needs a License and Who Does Not

Only a person who will conduct regulated financial activity needs a license, while a foreigner or a resident may buy shares, participation interests, commercial assets and real estate without any document confirming investor status. What an investment license in Georgia normally denotes is narrower: permission to manage third-party and collective investor assets. That work runs from establishing the fund and issuing units through to running the portfolio and managing risk, and whoever does it holds a manager's license or registration while the fund receives a supervisory status.

The regime turns on whose assets the company manages, and an investor who puts their own capital into a business needs no permission whatsoever. Managing the assets of a fund is a different matter, because the manager needs a license or an entry in the register first, and setting up the vehicle brings authorization or registration with it. Individual client portfolios lie somewhere in between, and NBG assesses them on the mix of financial operations performed.

The statutes and the secondary acts list the licensed activities. Where a company takes investment decisions with client capital, allocates assets or manages the risk carried by a fund, the regime for an asset management company (AMC) applies to it. A company that instead executes orders and deals for the client's account comes under the securities-market rules, and neither route substitutes for a sector license. Projects in banking, insurance, energy, construction or an environmentally regulated field still go through the procedures prescribed for them. A special investment status attaches to state support measures and confers no right to carry on a licensed activity.

The two permissions apply concurrently but serve distinct legal purposes: the manager answers for investment decisions and internal control, while the fund pools what the participants have contributed. Neither is a preliminary license, which fixes the conditions of a sector permission still to come, and either status operates only once NBG has approved it and the company appears in the public register.

The Legal Framework and the Supervisor

Several statutes together decide who may enter the investment business, and collective investment is primarily governed by the Law of Georgia on Investment Funds. That Law sets the statuses open to managers and the categories of fund, and it lays down how each one is formed, how it is supervised and how it reorganizes or winds up. The Law of Georgia on the Securities Market covers public offering of financial instruments, brokerage and market infrastructure. Supervisory powers derive from the Organic Law of Georgia on the National Bank of Georgia. Fee amounts and the general permission procedure are set by two further statutes, the Law of Georgia on Licences and Permits and the Law of Georgia on Licence and Permit Fees.

Alongside the statutes, NBG has issued the secondary acts that put them into practice:

• Decree No 167/04 on licensing, registration, recognition and regulation of an asset management company;

• Decree No 168/04 on the rules of activity of the specialized depositary;

• Decree No 169/04 on keeping the register of investment fund unit-holders;

• Decree No 170/04 on authorization, registration, recognition and regulation of an investment fund.

The AML/CFT legislation applies from the same moment. A manager identifies its clients and their ultimate owners and assesses the risk each transaction carries. It keeps its records secure and files the mandatory reports with the Financial Monitoring Service of Georgia. Tax on distributed profit falls under the Tax Code, which sets special rules for certain funds and instruments.

NBG licenses managers, enters simplified-regime entities in the register and recognizes foreign structures, and its remit over investment funds in Georgia runs well beyond the initial approval. The regulator vets the owners, the managers and the ultimate beneficiaries. Financial ratios and reporting stay under its watch for as long as the status lasts, and so do the investment limits. Supervision comes with the license rather than after it, and NBG keeps public registers, requests information and inspects. It issues binding orders or withdraws a status where it finds a breach, but it does not reach every venture launched in the country, because the permission operates inside the financial market and nowhere else.

Regulatory Statuses for Managers and Investment Funds in Georgia

Six statuses make up the framework. They differ by who the participants are, how units reach them and which operations the holder may perform. A manager is licensed, entered in the register, or granted recognition as a foreign entity, while a fund is authorized, registered, or recognized as a foreign structure. A licensed manager may run authorized and registered funds alike, and with additional functions it may also take on individual portfolios, advise clients, look after separate pension assets and administer units. It may work with foreign funds where it meets NBG requirements.

A promoter needs authorization for a public offering; the same applies once retail investors number more than 20. UCITS funds and other retail structures fall here. They appoint a specialized depositary and meet the extended disclosure requirements that go with public money. Registration is the private-placement route for investment funds in Georgia, and a registered fund stays at or below the 20-investor line, though qualified investors fall outside the cap and no ceiling applies to their number. A public fund cannot operate in the registered regime at all, because addressing an indefinite range of persons requires authorization by definition.

A private fund is normally free of the specialized depositary requirement unless its own documents impose one, and a foreign fund reaches Georgian investors after NBG recognizes it or after it notifies a private placement. The category assigned to the fund fixes three things at once: how units reach the market, how much reporting the vehicle carries, and how far investors are protected.

What the Regulator Requires Before It Grants an Asset Management License

The license goes only to a Georgian legal entity, and that means an LLC or a joint stock company entered in the Register of Entrepreneurs. Its place of effective management must be in Georgia, with the ownership chain disclosed down to the ultimate beneficial owners. A formal presence will not do, and a company needs premises, management staff, internal systems and the specialists to exercise the powers it claims. Neither its foreign links nor its group model may obstruct the flow of information to NBG or the control it exercises.

A licensed manager needs initial capital of at least GEL 300,000. Cash must account for at least 50% of that sum, documents evidence that the capital is lawfully sourced, and the requirement holds throughout the life of the business, not on the filing date alone.

Three further financial requirements sit on top:

• where assets under management exceed GEL 250 million, additional capital is calculated at 0.02% of the excess;

• professional liability is covered either by own funds of 0.01% of portfolio value or by insurance;

• outsourced operations count toward the asset calculation where liability for them stays with the licensed entity.

The initial capital requirement binds a licensed AMC and a fund that manages itself internally. No fixed figure applies to a registered manager, which does not make the test easier to pass. The applicant must still show that its funding, its staff and its technical base match what it proposes to do.

An asset management license also depends on the people in charge, and members of the management body of a licensed AMC must be professionally qualified and have at least four years of relevant financial experience. The supervisor examines any criminal record, involvement in insolvency and breaches of sector rules, and weighs sources of wealth and possible conflicts of interest alongside them. A fund must have risk management, internal control and compliance already established, with AML/CFT measures in place and client verification working. The license adds a further layer of its own. The applicant installs IT systems and information-security controls, plans for business continuity, then sets principles for valuing assets, pricing units and handling complaints.

Documents for an Investment License Application

An investment license in Georgia calls for three files, one corporate, one financial and one operational. The first holds the application, an extract from the Register of Entrepreneurs, the founding document and the decisions of participants or shareholders. The address goes in with it, together with evidence that the company occupies its premises lawfully, and the group structure and the ownership chart down to ultimate beneficial owners follow separately. For each owner the regulator requires standard forms, copies of identity documents, details of citizenship and tax residency, criminal-record certificates and a professional biography. Declarations, account statements, agreements, data on receipts and audited company accounts evidence where the capital came from.

The applicant documents management in parallel:

• questionnaires confirming the qualification and fit-and-proper criteria;

• documents on education and professional experience;

• job descriptions and the split of functions;

• declarations of no impediment, with information on conflicts of interest;

• criminal-record certificates from the applicable jurisdictions.

The second file holds a current balance sheet and explanatory material. Evidence that the capital is in place goes in with them, and an applicant that has been trading for some time adds audited annual accounts, while interim figures follow at the supervisor's request. The third must demonstrate the manager's internal standards, and it opens with the programme of activities, the business plan, the financial model and the forecast of receipts and costs. With them go the risk-control regulations, the AML/CFT procedures and the client verification rules, then the conflict-of-interest mechanism, the continuity arrangements and the asset valuation principles.

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The Application Route, Stage by Stage

The promoter files nothing until the supervisory regime is clear, and it decides first whether the company will manage a public or a private fund, take retail investors or run individual portfolios. That decision fixes the capital, the set of policies and the form the application to NBG takes.

At stage one the promoter settles which status applies and decides whether the AMC will act under a license or a registration. At the same time the fund follows one of three routes, authorization, entry in the register or recognition as a foreign entity.

At stage two the founders incorporate an LLC or a joint stock company, approve the charter, appoint management, disclose participants and secure premises.

At stage three the promoter capitalizes the business. A licensed AMC pays in its initial capital, at least 50% of it in cash, and prepares bank confirmations, source-of-capital documents and the calculation of the additional ratios.

At stage four the promoter builds the internal system, and the file opens with the programme of activities, the business plan and the regulations. With them go rules for risk management, client identification and conflict-of-interest control, then asset valuation, unit pricing, information security and continuity of processes.

At stage five the applicant pays the state fee and lodges the application and its annexes with NBG. Where the filing falls short, NBG asks for the missing material and allows at least five days to supply it.

At stage six NBG vets the file, and most applications for an investment license in Georgia are decided here. The regulator studies the participants, the ultimate owners and the members of the governing bodies, and it then examines the origin of the funding and the solvency of the structure. The license turns on how reliable the control procedures are and on whether the company is ready to perform the operations it claims, and the regulator satisfies itself that nothing obstructs supervision.

At stage seven NBG takes the decision, and on a positive outcome it issues an individual administrative act, records the permitted services and publishes the company's details. The fund itself is authorized or registered separately, and functions may be delegated once NBG has had notice at least 10 days in advance, though liability for them stays with the manager.

Timing, Cost and What Follows the Approval

NBG decides on an asset management license within one month of receiving the application, but cost is harder to state, because it does not come down to a single state payment. A licensed AMC puts up the initial capital. It also pays for the audit, the translation and the apostille, together with office rent and the cost of IT and staff. A public fund adds specialized depositary services and register maintenance on top of that.

The state license fee is GEL 3,000, and around it come the costs of drafting the internal regulations, identifying ultimate owners, auditing and staffing.

NBG refuses for a predictable set of reasons, and an incomplete document set, false information, capital below what the rules require or an unevidenced source of funding will each be enough on its own. So will management that fails the criteria, beneficial owners the regulator cannot establish, weak risk control, or a structure built in a way that obstructs supervision.

The approval starts a reporting cycle rather than ending one. A manager files financial and regulatory reports, data on own funds and asset valuation, the risks it has identified and its compliance with the limits. Once licensed, the company arranges the audit, determines net asset value and maintains the register of unit-holders, and it monitors transactions and applies the AML/CFT rules day to day.

Tax follows the nature of the receipts, and the Tax Code sets the rules. The basic profit tax rate is 15%, charged on distribution and on certain operations treated as equivalent, and until a taxable event arises, income retained inside the structure normally creates no liability at all.

Conclusion

The permission is available to a company with a clear ownership chain, the initial capital in place and evidenced capacity to handle client assets under National Bank supervision. The business model decides which regime applies: a licensed AMC works with public and private funds, a registered manager stays inside private placement, and a foreign entity goes through recognition. A promoter must structure the preparation around the fund's regulatory status, the source of capital, the qualification of management and the duties that continue long after NBG has issued the investment license in Georgia.