Navigating liability of controlling persons in Georgia: a step-by-step overview

When a Georgian company becomes insolvent or simply refuses to satisfy a judgment debt, foreign creditors frequently encounter a familiar obstacle: the entity itself holds no recoverable assets, while the individuals or corporate structures that directed its affairs remain financially intact. Georgian law provides mechanisms to reach those controlling persons directly – but the procedural pathway is specific, the evidentiary burden falls squarely on the creditor, and the window for effective action is shaped by insolvency timelines that move faster than many foreign practitioners expect.

This guide sets out the key stages of pursuing liability of controlling persons in Georgia, from identifying the right target to enforcing a judgment. It is written for foreign creditors, distressed investors, and their advisers approaching this question for the first time. Counsel with Georgian admission is required for active proceedings; Vetrov & Partners coordinates with trusted local Georgian counsel and can assist in structuring the cross-border dimension of recovery strategy.

Before initiating any claim, a creditor pursuing controlling-person liability in Georgia should assemble the following materials. Missing items at the outset routinely extend timelines by months.

• Corporate registry extract confirming the debtor entity's registration, share structure, and registered directors (available from the National Agency of Public Registry of Georgia)
• Documentation establishing the control relationship – shareholder agreements, board resolutions, power of attorney instruments, or correspondence demonstrating operational direction
• The underlying debt instrument: judgment, arbitral award, contract with default documentation, or confirmed account receivable
• Transaction records for the period most likely to be scrutinised: transfers to related parties, asset disposals, and inter-company loans made in the run-up to insolvency or default
• Certified translations of all foreign-language documents into Georgian; courts will not proceed on untranslated materials
• Evidence of the debtor entity's current financial position: balance sheet, tax arrears information if obtainable, and any existing enforcement proceedings

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Georgian law – primarily the Law of Georgia on Entrepreneurs and, where insolvency proceedings have opened, the Law of Georgia on Insolvency Proceedings – recognises that individuals or entities who exercise actual control over a company may bear liability for its obligations beyond the formal corporate structure. The concept broadly corresponds to what other civil-law systems term subsidiary liability or piercing of the corporate veil, though Georgian courts apply it through their own doctrinal framework.

The creditor's first task is to identify which liability ground applies:

• Voluntary (non-insolvency) liability claims against controlling persons – available where the controlling person caused damage to the company or its creditors through abusive direction, typically requiring proof of intentional or grossly negligent conduct
• Insolvency-triggered liability – where the debtor has entered Georgian insolvency proceedings, the insolvency administrator or creditors with standing may assert claims against controlling persons on the basis of deliberate misconduct, wrongful continuation of insolvent trading, or fraudulent asset stripping
• Enforcement-stage piercing – in execution proceedings, Georgian courts and the National Enforcement Bureau may in certain circumstances look through the corporate form where it has been used to obstruct a final judgment

Each ground has a different evidentiary standard, a different forum, and a different limitation period. Conflating them at the pleading stage is among the most common errors foreign creditors make when instructing Georgian counsel without prior familiarity with Georgian regulation.

The procedural options available to a creditor depend significantly on whether Georgian insolvency proceedings are already open against the debtor entity.

Where insolvency proceedings are not yet open and the creditor holds a confirmed debt, it may be strategic to file an insolvency petition against the debtor – provided the statutory insolvency threshold under Georgian legislation is met. Opening insolvency proceedings creates a supervised forum in which controlling-person liability claims are administered alongside all creditor claims, and it activates the insolvency administrator's mandate to investigate pre-insolvency transactions.

Where insolvency proceedings are already open, the creditor should register its claim in the creditor register without delay. Georgian insolvency procedure sets firm deadlines for claim registration; creditors who miss them may lose voting rights and, in some proceedings, their priority position. Registration also establishes standing to participate in any subsequent action against controlling persons pursued through the insolvency estate.

Where the debtor has been dissolved or struck off without insolvency proceedings, and assets have been distributed in circumstances suggesting deliberate evasion, a direct civil claim against the controlling persons in the Georgian common courts remains available, though it carries a higher independent evidentiary burden.

Note: In Georgia, insolvency proceedings can move from commencement to completion within a compressed timeframe in cases involving entities with limited assets. A foreign creditor who defers action pending the outcome of parallel negotiations risks finding that the insolvency estate has been formally closed before its claim is registered. Local Georgian counsel should be instructed to monitor filing deadlines from the moment default becomes apparent.

Whether the claim proceeds through insolvency or through a direct civil action, the creditor must establish two elements: (i) that the respondent exercised actual control over the debtor entity, and (ii) that the respondent's conduct caused or materially contributed to the creditor's loss.

Georgian courts have, in practice, assessed control on the basis of formal shareholding, directorship, and proxy authority, but also on the basis of factual patterns – where an individual not formally listed as a director was demonstrably directing the company's commercial and financial decisions. Evidence of this second category is harder to obtain but often decisive in cases where the formal structure has been deliberately obscured.

For causation, the most persuasive evidence typically involves: documented instructions from the controlling person to execute the harmful transactions; timing correlations between the controlling person's decisions and the dissipation of assets; and expert accounting analysis demonstrating that the debtor was insolvent at the time of specific asset transfers that benefited the controlling person or related parties.

Cross-border Georgia recovery matters frequently involve document repositories outside Georgia – in Russia, Cyprus, the UAE, or other jurisdictions where related-party transactions were executed. Obtaining and presenting this material in a form admissible in Georgian proceedings requires coordination between Georgian counsel, counsel in the relevant foreign jurisdiction, and, where applicable, formal legal assistance mechanisms.

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Georgian civil procedure provides for interim measures – including asset freezes and prohibition orders – in advance of a final judgment on the merits. For liability of controlling persons in Georgia, interim protection is often critical: once the controlling person becomes aware of impending proceedings, asset dissipation risk increases sharply.

The standard for obtaining interim measures in Georgian courts requires the applicant to demonstrate a prima facie case on the merits and the risk of irreparable harm if measures are not granted. In practice, this means the creditor must present credible evidence of both the underlying debt and the controlling person's exposure at the ex parte or initial hearing stage – before the full evidential picture has been assembled.

Foreign creditors with existing judgments or arbitral awards may also seek to attach Georgian-situs assets of a controlling person as part of broader enforcement strategy. The National Enforcement Bureau administers compulsory execution proceedings in Georgia; coordination between court-obtained protective measures and Bureau enforcement is a practical step that experienced Georgian counsel will manage.

A Georgian court-ordered asset freeze does not automatically extend to assets held by the controlling person in other jurisdictions. Where the controlling person holds significant assets in Russia or other CIS states, parallel protective applications in those jurisdictions – timed to coincide with the Georgian application – may be necessary to prevent dissipation across the full asset pool.

If the claim against the controlling person succeeds on the merits, the Georgian court will issue a judgment establishing the controlling person's liability and quantifying the recoverable amount. This judgment is then submitted to the National Enforcement Bureau for compulsory enforcement against the controlling person's Georgian-situs assets.

Where the controlling person holds assets outside Georgia, enforcement of the Georgian judgment in foreign jurisdictions will be governed by the bilateral or multilateral instruments applicable between Georgia and the relevant state. Georgia is not a party to the 1958 New York Convention in the context of court judgments (which governs arbitral awards, not court decisions), and recognition of Georgian court judgments in foreign jurisdictions depends on bilateral treaties, domestic reciprocity principles, or both.

For creditors whose recovery target includes assets in Russia or CIS jurisdictions, a parallel strategy running Georgian proceedings alongside Russian enforcement – where the debt instrument supports it – may produce a better aggregate outcome than sequential enforcement. The interplay between Georgian insolvency proceedings and Russian asset-tracing or enforcement measures is a cross-border coordination point that Vetrov & Partners regularly assists with.

Note: Where the controlling person is also exposed to criminal liability under Georgian law – for example, in cases involving fraud, deliberate insolvency, or fraudulent transfer – the criminal investigation track may run concurrently with civil proceedings. This can create both strategic opportunities (state investigative tools becoming available to creditors as injured parties) and complications (sequencing civil and criminal strategy requires care). Any criminal dimension should be assessed by Georgian criminal counsel at the outset.

• [Restructuring & Insolvency in Georgia](/jurisdictions/georgia/)
• [Asset Tracing & Recovery — Georgia](/jurisdictions/georgia/asset-recovery/)
• [Enforcement of Foreign Judgments & Awards — Georgia](/jurisdictions/georgia/enforcement/)
• [Insolvency proceedings in Kazakhstan: creditor rights overview](/jurisdictions/kazakhstan/insolvency/)
• [Insolvency and creditor protection in Armenia](/jurisdictions/armenia/insolvency/)

Q: What is the difference between insolvency-track and direct civil liability claims against a controlling person in Georgia?

A: In Georgian insolvency proceedings, claims against controlling persons are typically administered by the insolvency administrator or asserted by creditors with statutory standing within the insolvency framework. The evidentiary standard focuses on whether the controlling person's conduct triggered or worsened the insolvency, and the recovered amount flows into the insolvency estate for distribution. A direct civil claim – outside insolvency – is brought independently by the creditor in the general courts and requires the claimant to establish the full chain of control, breach, and causation without the investigative support of an insolvency administrator. Direct claims are available where no insolvency proceeding has opened or where the creditor's loss resulted from specific conduct that falls outside the insolvency framework. In practice, the insolvency-track route typically offers more investigative leverage; the direct civil route offers more flexibility in timing and forum.

Q: How long does a controlling-person liability claim typically take in Georgian courts?

A: Timelines vary depending on the complexity of the control structure, the volume of documentary evidence, and whether interim measures applications require separate hearings. As a general indication, straightforward liability claims in the Georgian commercial courts proceed from filing to first-instance judgment within twelve to twenty-four months, though complex multi-party matters with cross-border evidence can extend beyond this range. Appeals to the Court of Appeals of Georgia add further time. Parallel insolvency proceedings may accelerate or constrain the timeline depending on the stage of those proceedings. Foreign creditors should build realistic timeline assumptions into their recovery strategy from the outset, particularly where parallel enforcement in other jurisdictions is contemplated.

Q: Can a foreign arbitral award be used as the foundation for a controlling-person liability claim in Georgia?

A: A foreign arbitral award that has been recognised and enforced by a Georgian court creates an enforceable obligation against the award debtor – the entity named in the award. That recognition does not automatically extend to the controlling persons of the award debtor. To pursue controlling persons, the creditor must separately establish their liability under Georgian law, using the recognised award as evidence of the underlying debt owed by the entity they controlled. The process of recognising foreign awards in Georgia follows the New York Convention procedure before the Georgian common courts; once recognition is obtained, the creditor holds a domestic enforcement instrument that can support both direct enforcement against the entity and the commencement of proceedings against controlling persons.

Vetrov & Partners is a Russian boutique law firm established in 2009, recognised by Pravo-300 for eight consecutive years and 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 investors, and distressed-debt purchasers – on recovery strategy across Russian and post-Soviet jurisdictions. For matters in Georgia and other non-Russian jurisdictions, the firm coordinates with trusted local counsel who hold the required domestic admission, ensuring that the cross-border dimension of a recovery matter is managed as a single, coherent strategy rather than disconnected parallel instructions.

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

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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. This article was prepared with the assistance of a contributing regional analyst and reflects the general framework of Georgian law as understood at the time of writing; it does not substitute for advice from a Georgian-admitted lawyer on the specific facts of your matter. For advice regarding your particular situation, please contact info@vetrovpartners.com.

— Giorgi Kavtaradze Contributing Regional Analyst — Georgia, Vetrov & Partners vetrovpartners.com/contributions/