Challenging transactions in insolvency in Georgia against insolvency estates: what changed in 2027

Following amendments to Georgian insolvency legislation that took effect in the course of 2027, the legal framework for challenging transactions against insolvency estates in Georgia has shifted in ways that foreign creditors and cross-border investors cannot afford to overlook. The revised rules alter the look-back periods applicable to preferential and undervalue transactions, tighten the procedural standing requirements for creditors seeking to initiate challenge proceedings, and introduce a more structured set of presumptions that shift the burden of proof in ways that differ materially from what creditors experienced under the prior regime. For foreign companies with Georgian counterparties that are in, or approaching, insolvency, the 2027 amendments represent a recalibration of the risk landscape — and an occasion to reassess existing positions before the new rules are turned against them.

Before the 2027 reform, Georgian insolvency law provided a relatively compressed set of avoidance rules. Creditors and insolvency administrators could challenge transactions concluded prior to the commencement of proceedings, but the grounds were narrowly framed and the procedural pathway was frequently described by practitioners as opaque. In practice, challenges were pursued selectively and with uncertain outcomes, particularly where the counterparty to the impugned transaction was a foreign entity.

The 2027 amendments introduced three material changes.

First, the look-back window for challenging transactions concluded with related parties has been extended. Under the prior framework, the period during which transactions with connected persons could be examined was shorter and applied a relatively high threshold of intent. The amended rules extend this window and introduce a rebuttable presumption of intent where the counterparty falls within the statutory definition of a connected person — a definition that, following the amendment, now expressly captures offshore holding structures that maintain economic interests in Georgian entities.

Second, the amendments introduce a broadened category of transactions at an undervalue. Previously, the undervalue analysis was conducted against a strict market-price comparator at the time of the transaction. The revised standard incorporates a forward-looking assessment: courts may now consider whether the consideration received was disproportionate in the context of the debtor's financial position at the time, not merely whether it differed from the prevailing market rate. This is a meaningful shift for foreign investors who acquired Georgian assets from counterparties now in insolvency and whose purchase price, while commercially justifiable at the time, may now be scrutinised against the debtor's deteriorating balance sheet.

Third, the rules on procedural standing have been clarified. The 2027 reform confirms that creditors holding claims that have been admitted to the insolvency register may bring challenge proceedings directly, without routing the claim through the appointed administrator. This was a contested procedural point under the prior legislation. The clarification is significant for foreign creditors who previously faced the practical difficulty of persuading an administrator — who may have conflicting interests or limited resources — to pursue a challenge on their behalf.

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The 2027 amendments have asymmetric effects depending on which side of the transaction a foreign company finds itself.

Foreign creditors holding admitted claims. For creditors already participating in a Georgian insolvency estate, the reform is largely positive. The expanded standing rule removes a structural barrier that previously made it difficult to compel challenge proceedings when the administrator was passive or conflicted. Creditors who previously accepted that a transaction would go unchallenged because the administrator had no commercial incentive to pursue it now have a direct procedural route. The extended look-back period for related-party transactions also increases the pool of potentially challengeable transactions, which may improve recovery outcomes in estates where assets were moved to connected parties in the period before insolvency was formally declared.

Foreign creditors considering a claim but not yet admitted. For creditors whose claims are not yet on the insolvency register, the reform introduces urgency. The standing to bring challenge proceedings is linked to admission status — a creditor must be registered as a participating creditor before it can invoke the direct challenge right. The window between a counterparty entering insolvency proceedings and the deadline for lodging claims is finite and, in Georgian insolvency practice, has not been extended by the 2027 amendments. Foreign creditors who receive late notice of proceedings — which remains a practical risk in cross-border situations — may find that the new standing right is one they cannot exercise unless they act promptly on the admission of their claim.

Counterparties to pre-insolvency transactions. For foreign companies that received assets or payments from a Georgian entity now in insolvency, the amendments increase exposure. The broadened undervalue category and the extended look-back for related-party transactions mean that transactions that appeared legally unchallenging under the prior rules may now fall within the scope of avoidance. The rebuttable presumption of intent in connected-party transactions shifts the burden: the counterparty, not the challenger, must establish that the transaction was at arm's length and at fair value. This matters particularly for cross-border transactions where documentary evidence of the commercial context may be held outside Georgia and may require effort to produce and authenticate within Georgian proceedings.

The reform does not operate in isolation. It sits alongside Georgia's general trend towards closer alignment with international restructuring standards, including the UNCITRAL model framework, though Georgia has not formally adopted the model law in its current form. Foreign creditors and their advisers should treat the 2027 amendments as part of a broader legislative trajectory rather than as isolated technical adjustments.

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The practical implications of the 2027 amendments resolve differently depending on the client's position, but several steps are advisable across all scenarios.

Creditors with existing claims in a Georgian insolvency estate should verify their admission status and review the transactions concluded by the debtor in the extended look-back period. Even where a challenge was previously considered unviable because the administrator showed no interest, the direct standing rule introduced by the amendments should prompt a reassessment. The question is whether identifiable assets were transferred at undervalue or to connected parties in circumstances that now fall within the broadened avoidance categories.

Creditors yet to register their claims should prioritise admission without delay. The registration deadline in Georgian insolvency proceedings is set by the supervising court and is not automatically extended for foreign creditors. Instructing local counsel promptly — and ensuring that the claim is submitted in the correct form with the necessary supporting documentation — is the threshold step before any challenge right can be exercised.

Counterparties to transactions now being scrutinised should begin assembling contemporaneous evidence of the commercial rationale for the transaction and the valuation basis adopted at the time. The shift in the burden of proof means that passive reliance on the challenger's inability to prove intent is no longer a safe position. Specific areas of focus include: internal valuation memoranda, board or management approvals that reference market conditions, any third-party pricing benchmarks, and correspondence evidencing arm's-length negotiation.

Companies with ongoing commercial relationships with Georgian entities should consider the insolvency risk profile of those counterparties in light of the amended framework. A transaction that previously would not have attracted avoidance scrutiny — because the look-back period was shorter or the undervalue test was narrower — may now fall within the new rules if the counterparty were to become insolvent. This is particularly relevant for intercompany structures involving Georgian operating entities held by offshore or foreign holding companies, where the connected-party definition has been expanded.

Cross-border coordination remains central. Georgian insolvency proceedings sit alongside whatever claims a foreign creditor may have under the law of its home jurisdiction or the law governing the underlying contract. In situations involving Russian counterparties with Georgian assets, Russian insolvency proceedings may be running concurrently with Georgian proceedings, and the interaction between the two regimes — particularly on recognition of foreign insolvency orders and priority of claims — requires analysis under both Georgian law and Russian law. Vetrov & Partners advises on the Russian-law dimension of such cross-border matters and coordinates with regional counsel, including contributing analysts qualified in Georgian law, to provide a coherent view across both jurisdictions. For matters involving [Asset Tracing & Recovery](/jurisdictions/georgia/asset-recovery/) or [Enforcement of Foreign Judgments & Awards](/jurisdictions/georgia/enforcement/), a coordinated approach is typically more effective than parallel unilateral action.

More broadly, Georgia's insolvency landscape is worth monitoring as a jurisdiction in its own right. The country's combination of an accessible company registration regime, relatively low tax burden, and increasing use as a holding and operational jurisdiction by foreign investors — including investors with CIS and Russian commercial interests — means that insolvency exposure in Georgia is not a marginal risk. The 2027 amendments signal that Georgian courts are being equipped with a more robust set of tools to address pre-insolvency asset movements, and foreign creditors should calibrate their recovery strategies accordingly.

For context on related legal frameworks in the region, the [Georgia jurisdiction hub](/jurisdictions/georgia/) provides an overview of the legal environment. Creditors dealing with insolvency exposure across multiple CIS-adjacent jurisdictions may also find the comparable analysis for [Kazakhstan](/jurisdictions/kazakhstan/insolvency/) and [Armenia](/jurisdictions/armenia/insolvency/) relevant.

• [Insolvency in Georgia: an overview for foreign creditors](/insights/georgia-insolvency-overview-foreign-creditors/)
• [Enforcement of foreign judgments and awards in Georgia](/insights/georgia-enforcement-foreign-judgments-awards/)
• [Asset tracing and recovery across CIS-adjacent jurisdictions](/insights/asset-tracing-cis-adjacent-jurisdictions/)

Q: What specifically changed in Georgian law in 2027 regarding the challenge of transactions in insolvency?

A: The 2027 amendments to Georgian insolvency legislation introduced three principal changes. The look-back period for challenging transactions with related parties was extended, and a rebuttable presumption of intent was introduced for connected-party transactions. The definition of transactions at an undervalue was broadened to incorporate the debtor's financial position at the time, not only the market price comparator. Finally, the standing rules were clarified to permit creditors with admitted claims to bring challenge proceedings directly, without relying on the insolvency administrator to act. Together, these changes expand the scope of transactions that can be challenged and reduce the procedural barriers for creditors wishing to pursue avoidance claims.

Q: Which foreign creditors are most directly affected by the amended rules, and what should they do?

A: Foreign creditors holding admitted claims in a Georgian insolvency estate benefit from the expanded standing rule and should reassess whether transactions previously considered unchallengeable are now worth pursuing under the extended look-back and broader undervalue test. Foreign creditors not yet admitted to proceedings should prioritise registration, since the direct challenge right is conditional on admission status. Foreign companies that received assets or payments from a Georgian entity now in insolvency should review their exposure under the broadened avoidance categories and begin assembling contemporaneous evidence of the commercial rationale for the transaction. In all cases, taking early legal advice — from counsel familiar with both Georgian insolvency law and any applicable foreign-law dimension — is the recommended first step.

Q: What should foreign creditors do to protect their position under the new framework?

A: Three steps are advisable for most creditors. First, if not already admitted to proceedings, register the claim without delay using the correct local procedure. Second, review the debtor's transactional history in the extended look-back period for potential avoidance targets, with a focus on related-party payments and asset transfers. Third, if you are the counterparty to a transaction now under scrutiny, prepare and preserve contemporaneous evidence of arm's-length pricing and commercial rationale. Cross-border coordination between Georgian counsel and counsel in any other jurisdiction where the creditor or debtor has assets or proceedings is advisable at the earliest stage.

Vetrov & Partners is a Russian boutique law firm established in 2009. The firm is recognised by Pravo-300 — Russia's principal legal directory — for eight consecutive years, and is listed as a trusted adviser by the German Consulate General in Novosibirsk.

The firm's Restructuring & Insolvency practice advises foreign creditors — including trade creditors, institutional lenders, and distressed investors — on creditor-side mandates in Russian insolvency proceedings and in cross-border matters involving CIS-adjacent jurisdictions. For matters requiring Georgian law analysis, the firm works with contributing regional analysts qualified in Georgian law. With over 1,000 matters handled since inception, the team provides direct partner involvement on every engagement, with particular experience in matters that combine Russian-law insolvency positions with enforcement or asset-tracing dimensions in neighbouring jurisdictions.

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

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— Giorgi Kavtaradze Contributing Regional Analyst — Georgia, Commercial Disputes & Enforcement vetrovpartners.com/contributions/

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.