Two Founders, One Georgian LLC: What Goes in the Charter and What Goes in the Shareholders' Agreement
A single-founder LLC can live on the registry's model charter. The moment there are two owners, or an investor, the default rules start deciding things nobody discussed: who can sell to whom, what happens when one founder leaves, how a deadlock is broken. Georgia's 2021 law leaves most of this to the founders, in two documents with different audiences. Which terms belong where, and what the defaults do if you write nothing.
Georgia's Law on Entrepreneurs gives the owners of an LLC unusual freedom to decide how their company works, and then fills every gap they leave with a default. For a founder who owns everything, the defaults are harmless. For co-founders, an investor or a family, they are a set of decisions made by the legislature about matters the parties never discussed: transfers, exits, deadlocks, dividends. The remedy is two documents that do different jobs: a charter, which is public and binds the company and the registry, and a shareholders' agreement, which is private and binds the people who signed it.
2021
Law on Entrepreneurs adopted
In force since 1 January 2022: broad charter freedom, with defaults that apply where the charter is silent
Public
The charter
Filed with the registry; anyone dealing with the company can read it
Private
The shareholders' agreement
A contract between the owners, not on the register
Charter or agreement: what goes where
| Term | Charter | Shareholders' agreement | Why |
|---|---|---|---|
| Decision thresholds and reserved matters | Yes | Often repeated | The registry and counterparties rely on the charter for who can bind the company |
| Share transfer restrictions and pre-emption | Yes | Yes, in detail | A restriction in the charter binds the registry; the agreement adds process and pricing |
| Founder vesting and leaver provisions | Rarely | Yes | Personal commercial terms between founders, not a matter for the register |
| Drag-along and tag-along | Sometimes referenced | Yes | Mechanics of a sale are contractual; the charter may need to permit the transfer |
| Deadlock resolution | Sometimes | Yes | Escalation, mediation and buy-sell procedures are contractual |
| Dividend policy | Optional | Yes | A commitment between owners; the law requires a resolution for each distribution regardless |
| Non-compete and confidentiality | No | Yes | Personal obligations of the founders |
| Governing law and dispute forum | Georgian law for corporate matters | Choice of law and arbitration possible | Corporate status follows Georgian law; the contract can choose its own forum |
The charter of a limited liability company may regulate the relations between the partners and the company differently from the provisions of this Law where the Law does not expressly prohibit it. Agreements between partners that are not reflected in the charter bind the partners who concluded them and do not affect third parties.
The clauses co-founders actually need
- Vesting and leaver terms: what share a founder keeps if they leave in year one, year three, or are removed; without them, a departing founder keeps everything and votes on your future from a distance.
- Transfer restrictions: consent of the others, pre-emption at an agreed valuation method, and a ban on transfers to competitors; the charter must carry the restriction for the registry to enforce it.
- Drag-along and tag-along: a majority can deliver the whole company to a buyer, and a minority can join a sale on the same terms; both need the charter to allow the transfers they imply.
- Reserved matters: the short list of decisions that need everyone, or a supermajority, however the shares are split: new shares, debt above a threshold, sale of the business, changing the charter.
- Deadlock: a procedure for a two-way tie, from escalation and mediation to a buy-sell mechanism, so a disagreement does not become a paralysed company.
- Money: how salaries are set, when dividends are declared, what happens to founder loans, and who can approve related-party transactions.
What the defaults do if you write nothing
A company whose founders register the model charter and shake hands on the rest is governed by the Law's defaults. Decisions pass by the majority the Law sets, whoever holds it. Shares can be transferred on the terms the Law provides, with the pre-emption and consent rules it specifies and no others. A founder who stops working keeps their share in full. A two-founder deadlock has no exit except agreement or a court. Dividends need a resolution that a majority can pass or block. None of this is wrong; it is simply not what most founders would have chosen had anyone asked.
The order matters. The charter is filed at registration and can be amended later by a resolution and a registry filing; the shareholders' agreement can be signed at any time but binds only its signatories. Founders who sign the agreement first and forget to mirror its transfer restrictions in the charter discover the gap when a co-founder sells to someone the registry was entitled to register.
Next step
The charter is filed at registration
Everything the founders want to change from the statutory default has to be in the charter that goes to the registry, which makes registration the cheapest moment to get it right. Trustlex drafts it with a Georgian advocate.
See the registration routePutting it in place
- 1
Agree the commercial terms between the founders in plain language first: shares, roles, vesting, what happens on exit, who decides what.
- 2
Draft the charter to carry the terms that bind the company and the registry: thresholds, transfer restrictions, reserved matters; file it at registration or by amendment.
- 3
Draft the shareholders' agreement to carry the personal and procedural terms, cross-referencing the charter and choosing a dispute forum the founders can actually use.
- 4
Review both when an investor arrives: an investment round rewrites the reserved matters, adds a class of share or its economic equivalent, and usually replaces the founders' agreement with a new one everyone signs.
The three founders who split 40, 40 and 20
Three founders register an LLC with the model charter and an informal understanding. Two years in, one 40% founder wants to leave and sell to an outside buyer; the other 40% founder objects; the 20% founder holds the deciding vote and is being courted by both.
- 1Under the defaults, the departing founder keeps the full 40% and may transfer it on the terms the Law allows; there is no vesting to reduce the share and no agreed valuation.
- 2The remaining founders have no drag or tag rights, no deadlock procedure and no reserved matters beyond what the Law prescribes; every question turns on which way the 20% votes.
- 3A charter amendment now needs a majority the departing founder can block, and a shareholders' agreement needs a signature he has no reason to give.
- 4The matter settles by negotiation at a price the others consider excessive, because the alternative is litigation over a company whose value is its founders' cooperation.
Every term the founders needed was available for the asking in 2024: vesting, pre-emption at a formula, drag and tag, a deadlock procedure. Written at formation, in the charter and an agreement, they would have decided the exit in an afternoon. Written after the dispute, they could not be agreed at all.
Illustrative. The defaults and the founders' freedom to vary them are set by the Law on Entrepreneurs; take advice on the specific provisions.
Next step
A charter and agreement built for your founders
We draft charters that carry the terms the registry must see and shareholders' agreements that carry the rest, in English and Georgian, for co-founders, family companies and first investment rounds, and file the charter with the registration so nothing waits for a dispute.
Discuss your founder termsGeneral information, not legal advice. The rights of partners, the freedom to vary them and the effect of agreements not reflected in the charter are governed by the Law of Georgia on Entrepreneurs and change with amendments; the right terms depend on the founders' circumstances.