GEORGIA Law and Practice Contributed by: Tamar Jikia and Archil Giorgadze, Andersen in Georgia
Directors who have a conflict of interest should disclose such interest and abstain from voting. A director may be deemed to be an interested person if they or persons related to them, in the case of the entry into a transaction by a public company or its subsidiary (a company in which the reporting company holds more than 50% of shares), meet one of the following conditions. The person: • is the other party to the transaction; • directly or indirectly holds 20% or more of the total number of votes of the other party to the transaction; • is a member of the governing body of the other party to the transaction; • is appointed/elected as a member of the gov - erning body of the reporting company upon the proposal of the other party to the transac - tion or of the holder (holders) of 20% or more of the total number of votes of the other party to the transaction; • receives monetary or any other benefits on the basis of the transaction, which are not related to the ownership of shares in the reporting company or to membership of the governing body; or • is considered an interested person under the charter of the reporting company. Conflict of interest cases may be further regulat - ed by the company charter as well as the service agreement concluded with the director. 4.6 Legal Duties of Directors/Officers The principal legal duties of directors and offic - ers of a company are as follows. • Duty of care – Act diligently and in good faith, like a prudent manager, and liable for harm caused by negligent or intentional breaches.
• Duty of loyalty – Respect the rights of the company and all partners equally, avoiding actions that harm the company or its stake - holders. • Avoiding conflicts of interest – Disclose personal interests in transactions and cannot vote on related matters. Certain transactions require prior approval. • Acting within authority – Operate within the legal and statutory limits of their role and fol - low decisions of authorised company bodies. • Insolvency filing – File for insolvency within three weeks if the company becomes insol - vent, to protect creditors’ interests. • No misuse of opportunities – Cannot exploit company-related business opportunities for personal or third-party gain without consent, even for up to three years post-dismissal. • Non-competition – Cannot engage in com - peting activities or manage a competing com - pany without consent, for up to three years after leaving the role. The directors and the members of the supervi - sory board shall conduct the company’s busi - ness in good faith. In particular, they shall take care as an ordinary person of sound mind in a similar capacity and under similar circumstances would, acting in the belief that their action is in the best interest of the company. If directors fail to fulfil the above obligation, they shall be jointly and severally liable for damages incurred by the company. Moreover, while managing the com - pany, directors shall not have personal interests that conflict with the interests of the company. Directors shall not be entitled to make decisions in accordance with their interests or interests of related persons with respect to the opportuni - ties of the company. In the event of conflict, the interest of the company shall prevail.
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