Compliance checklist: legal due diligence on local targets in Georgia in the construction and real estate sector

Foreign investors acquiring Georgian construction companies or real estate assets frequently encounter ownership structures and regulatory histories that are materially more complex than the transaction documents suggest. Under Georgian law, undisclosed encumbrances on land parcels, unregistered construction phase changes, and beneficial ownership arrangements that differ from the formal register are each capable of frustrating a closing or, worse, generating post-acquisition liability that cannot be unwound. This checklist sets out the five categories of legal due diligence that counsel acting for an inbound investor should complete before any binding commitment is made in the Georgian construction and real estate sector.

The five items below are organised in order of diligence priority. Each addresses a distinct risk register. Together they constitute a minimum compliance baseline for any inbound investment in a Georgian construction or real estate target, whether through share acquisition, asset purchase, or joint venture formation. [For an overview of Georgian market entry structures available to foreign companies, see the firm's Georgia jurisdiction page at /jurisdictions/georgia/.]

The starting point for any legal due diligence on local targets in Georgia in the construction and real estate sector is verification of the target's corporate standing through the National Agency of Public Registry (NAPR). NAPR maintains the Georgian legal entity register, and an extract confirms current registration status, stated capital, director appointments, and the registered ownership chain. This extract is publicly accessible and should be obtained at the outset of every engagement.

The more consequential step is tracing beneficial ownership beyond the registered shareholders. Georgian corporate law does not yet mandate real-time beneficial ownership disclosure at the same depth as some EU member states, meaning that nominee arrangements and multi-tier holding structures are common among locally registered targets in the construction sector. Counsel should request a complete corporate history extract — not merely the current state — to identify prior ownership changes, restructurings, and any pledges registered over shares.

• Obtain current and historical NAPR extract for the target entity
• Verify director authority to execute transaction documents (verify against current charter and any board resolutions)
• Identify all shareholders holding more than five per cent of voting rights, including indirect holdings
• Confirm absence of any registered pledges or liens over shares
• Request founding documents (charter, foundation agreement) and all amendments

Note: If the corporate history shows a change of ownership within the preceding 36 months, request the underlying transfer documentation and verify that transfer taxes were assessed and paid. Undisclosed transfer tax arrears become the buyer's risk on acquisition of shares.

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Georgian real property is registered through NAPR's cadastral and property register, which is a single integrated system covering both ownership and encumbrances. A Georgian property title extract confirms the registered owner, the cadastral description of the parcel, surface area, permitted land use category, and all registered encumbrances including mortgages, easements, servitudes, and any registered disputes.

What the extract does not always reveal is the administrative history of land-use reclassification — a significant issue in construction transactions, where a parcel may have been reclassified from agricultural or green-zone use in circumstances that are being informally challenged by a municipality. Counsel must therefore cross-reference the cadastral entry with municipal zoning records and, for larger parcels, with environmental use designations.

• Obtain current property title extract from NAPR for each parcel in scope
• Verify that the registered owner matches the contracting party (not merely the same name — verify identification numbers)
• Confirm land-use category and that the category permits the intended construction use
• Check for registered mortgages, pledges, or hypothecs; obtain release documentation if encumbrances are stated as discharged but remain on register
• Verify absence of registered boundary disputes with neighbouring parcels
• For multi-parcel developments: confirm that all parcels form a unified cadastral unit or that subdivision approvals are in place

Note: Georgian law permits the registration of a "reservation" (analogous to a lis pendens) against a property parcel during court proceedings. A reservation does not always appear immediately in an NAPR extract if proceedings were filed within the preceding five business days. Instruct the target to provide a formal written confirmation that no court proceedings affecting title have been filed or are threatened.

Georgian construction activity is regulated under the Law of Georgia on Spatial Planning and Construction, and permits are issued at municipal level by local self-governing bodies (typically the city or municipality). For any construction-phase target, due diligence must verify not merely that a permit exists, but that the permit issued corresponds to the structure actually built. Post-permit deviation is common in the Georgian construction sector and generates regularisation risk that can affect both the asset's market value and its insurability.

The relevant permit categories are: the construction permit (building permit), the commissioning act (act of acceptance into operation), and, where applicable, the architectural planning conditions issued at the pre-permit stage. Each document should be reviewed against the as-built drawings.

• Obtain all construction permits for every structure on the target parcels — including permits for ancillary structures, fencing, and utility connections
• Verify that each permit was issued by the competent municipal authority and has not been suspended or revoked
• Obtain the commissioning act (act of acceptance into operation) for any completed structure; absence of this document means the structure is legally unfinished regardless of physical completion
• Cross-reference permit dimensions, floor count, and use designation against as-built drawings and the NAPR cadastral description
• Confirm that any deviations from the original permit have been regularised through a permit amendment or approved change procedure

Note: Under Georgian law, an unauthorised construction may be subject to demolition order by the municipality, even if it has been occupied and operating for several years. A demolition risk is a material liability that should be quantified and, if present, reflected in pricing or in a vendor warranty with adequate escrow.

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Tax compliance verification for a Georgian target in the construction sector involves two distinct registers: the Revenue Service of Georgia (the Georgian tax authority) and the Social Service Agency for mandatory social contribution obligations. A tax compliance certificate from the Revenue Service confirms current standing, but it does not capture contested assessments that are under appeal or audits that have been initiated but not yet concluded.

Construction companies in Georgia frequently engage in multi-year project finance structures that involve deferred VAT accounting and advance payment arrangements. These structures are legitimate but generate audit exposure if the revenue recognition methodology is not consistently applied. Counsel should review the past three years of tax filings and any correspondence with the Revenue Service.

• Obtain a current tax compliance certificate from the Revenue Service of Georgia
• Request all Revenue Service correspondence, audit notices, and decisions issued in the past three years
• Review VAT treatment of advance payments from project purchasers — confirm consistency with filed returns
• Verify corporate income tax treatment of any intra-group transactions (particularly relevant for targets held through offshore structures)
• Confirm property tax assessments on all parcels are current; verify there are no outstanding municipal tax liabilities
• Check for any Revenue Service liens or enforcement measures registered against the target

Note: Georgia operates a territorial tax system, and the Revenue Service's audit powers extend to transactions with related parties in other jurisdictions. If the target has transferred assets or funds to a related offshore entity within the preceding five years, request the transfer pricing documentation used to support those transactions. Absence of documentation is itself an audit trigger.

The Georgian court system does not yet provide a single consolidated electronic database from which all pending proceedings involving a named legal entity can be retrieved without professional access to the court information system. Accordingly, litigation diligence for a Georgian target requires active document requests from the target itself, supplemented by searches through the Common Courts of Georgia portal and, for commercial disputes, the Tbilisi City Court commercial division records.

Enforcement measures registered against the Georgian target by the National Enforcement Bureau should be checked separately — enforcement registration is distinct from the court proceedings that gave rise to it, and a target may be subject to active enforcement measures arising from a judgment that is no longer active in the court's own records.

• Request a comprehensive litigation certificate from the target confirming all pending, threatened, and concluded proceedings in the past five years
• Conduct independent searches of the Common Courts of Georgia portal for proceedings involving the target entity and its directors by name
• Search the National Enforcement Bureau register for any enforcement proceedings involving the target
• Verify absence of arbitration proceedings under the Georgian Arbitration Act — Georgian institutional arbitration proceedings are not publicly searchable
• Confirm that no administrative proceedings are pending before the Ministry of Economy and Sustainable Development (which oversees construction licensing at national level)
• Review any outstanding warranty claims from purchasers of previously sold units in completed projects

Note: Under Georgian civil procedure, a judgment creditor may register an enforcement measure against a legal entity's bank accounts with immediate effect upon obtaining an enforcement title. An undisclosed enforcement measure of this kind can freeze operating accounts on the day of closing, making post-closing working capital unavailable. This risk is not visible in a standard NAPR extract and must be verified through the Enforcement Bureau directly.

• [Market entry and company formation in Georgia: a guide for foreign investors](/jurisdictions/georgia/company-formation/)
• [Georgian joint ventures in the construction sector: structuring options](/jurisdictions/georgia/corporate-jv/)
• [Tax structuring for inbound investment in Georgia](/jurisdictions/georgia/tax/)

Q: Does Georgian law require a foreign investor to use a local legal entity to acquire construction assets? A: Georgian law does not require foreign investors to hold construction assets through a locally incorporated entity. Foreign legal entities and individuals may hold registered title to Georgian real property directly, and Georgian corporate legislation permits full foreign ownership of Georgian legal entities without sector-specific restrictions in construction and real estate. In practice, however, many inbound investors prefer to establish a Georgian limited liability company for operational and tax reasons, and certain municipal permitting processes are administratively more straightforward where a locally registered entity is the applicant. The choice of acquisition structure — direct foreign holding versus Georgian holding entity — should be assessed as part of the due diligence process, not after it.

Q: What is the standard timeline for completing legal due diligence on a Georgian construction target? A: A full-scope legal due diligence engagement covering all five categories in this checklist typically requires three to six weeks from the date of access to the target's documentation, assuming the target is cooperative and provides documents promptly. The NAPR title and corporate extracts are available within one to three business days. The principal variables affecting timeline are the completeness of the target's permit archive, the volume of tax correspondence, and the accessibility of historical cadastral records for older parcels. For time-constrained transactions, a red-flag review can be structured to cover ownership, title, and permit status within five to seven business days, with a full report to follow.

Q: How should cross-border transactions involving both Georgia and Russia be structured from a due diligence perspective? A: Cross-border transactions involving Georgian targets and Russian parent companies, funders, or co-investors require parallel diligence streams: Georgian law diligence on the target entity and its assets, and a review of the Russian-law aspects of the transaction structure — including any Russian regulatory approvals required for the outbound investment, the tax treatment of the investment in Russia, and any contractual arrangements between the Georgian target and Russian group entities. The two streams should be coordinated from the outset to ensure that issues identified in one jurisdiction are reflected in the representations and warranties in the transaction documents, regardless of governing law. Vetrov & Partners coordinates Russian-law aspects of such structures and works with Georgian regional counsel for the Georgian-law components.

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Vetrov & Partners is a Russian boutique law firm established in 2009, recognised by Pravo-300 for eight consecutive years. The firm advises foreign companies and investors on Russian-law aspects of cross-border transactions, including outbound investment structures involving Georgian, CIS, and EAEU jurisdictions. For Georgian-law components, the firm works with contributing regional analysts and trusted local counsel in Tbilisi.

The firm's legal due diligence practice supports foreign investors at every stage of inbound transactions — from preliminary risk assessment through to closing documentation review. With over 1,000 matters handled since inception, the team maintains direct partner involvement on every engagement.

Enquiries: info@vetrovpartners.com | WhatsApp / Telegram: +7 (983) 510-38-76 | t.me/vitvetcom

This publication is provided for informational purposes only and does not constitute legal advice under Georgian, Russian, or any other applicable law. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Vetrov & Partners is a Russian-qualified law firm. For matters governed by foreign law or requiring local admission in another jurisdiction, we collaborate with trusted counsel in the relevant jurisdiction. For advice regarding your particular situation, please contact info@vetrovpartners.com.

— Nino Beridze Contributing Regional Analyst — Georgia, Vetrov & Partners vetrovpartners.com/contributions/