Law of Georgia on the Georgian National Investment Agency

LAW OF GEORGIA

ON THE GEORGIAN NATIONAL INVESTMENT AGENCY

Chapter 1 - General Provisions
           

Article 1 - Scope

1. This Law determines the legal, organisational and economic principles for implementation of public purposes existing in the industrial and investment policy sphere and the specific mechanisms for their implementation.

2. The rules laid down by this Law shall apply to all types of industrial and investment programmes prepared with the participation of the State and to entities participating in their implementation, except for the cases specified in the treaties and international agreements and laws of Georgia.

Article 2- Goals of the Law

The goals of this Law are:

a) to create an efficient spending mechanism for funds allocated for financing industrial and investment projects corresponding to priorities defined by the Economic and Social Development Indicative Plan of Georgia and to ensure their management;

b) to ensure that the organisations proposing industrial and investment projects are treated in a fair and non-discriminatory way when financing industrial and investment programmes;

c) to ensure publicity of industrial and investment programmes;

d) to ensure the financing of industrial and investment programmes and the creation of state support systems;

e) to stimulate investment activity in Georgia and facilitate preparation of proposals required for creating its legal basis.

Article 3 - Interpretation of terms

1. The terms used in this Law shall have the following meanings:

a) investment - placement of capital by the State in industrial and investment projects, industrial and investment programmes and enterprises of various fields, the main goal of which is to activate the industrial potential of the country with maximum efficiency and decrease the unemployment level by supporting the development of production;

b) state industrial and investment policy - a set of basic principles developed by state bodies, the purpose of which is to attract investments and support the development of entrepreneurship;

c) industrial and investment programme - a financial and economic plan designed for the development of individual sectors and enterprises, as well as for improvement and sustainable development of the country's social and economic state, which is in line with the priorities defined by the Economic and Social Development Indicative Plan of Georgia;

d) industrial and investment project - a specific action plan designed for developing the fields defined by the industrial and investment programme;

e) financing system of industrial and investment programmes - a set of norms defined by this Law that regulate the financing of industrial and investment programmes and determine their implementation principles;

f) (deleted - 24.9.2013, No 1288)

g) organisation submitting an industrial and investment project - a resident natural or legal person that presents an industrial and investment project under this Law;

h) bidder - a natural or legal person that expresses willingness to receive financing from the Fund's resources and for this purpose participates in a tender for industrial and investment projects;

i) subvention - a certain amount of targeted cash assistance that the Georgian National Investment Agency allocates for financing relevant activities and/or undertakings;

j) suretyship - guarantee provided by the Georgian National Investment Agency to a bank or other credit institution for an enterprise that cannot satisfy the requirements of the bank or other credit institutions in terms of business related risk and/or provision of guarantees;

k) subsidy - financial or other type of material support that the Georgian National Investment Agency grants to a natural or legal person to cover a certain part of the bank credit interest rate, taking into consideration priorities defined by the Economic and Social Development Indicative Plan of Georgia;

l) small enterprise - enterprises of all types of organisational and legal forms set up under the Law of Georgia on Entrepreneurs, where the average annual number of employees does not exceed 20 and where annual turnover is not more than GEL 500 000;

m) medium-sized enterprise - enterprises of all types of organisational and legal forms set up under the Law of Georgia on Entrepreneurs, where the average annual number of employees does not exceed 100 and where annual turnover is not more than GEL 1 500 000;

n) annual turnover of small and medium-sized enterprises - gross proceeds received during the previous financial year by small and medium-sized enterprises.

2. An enterprise shall not be deemed as small or medium-sized if:

a) more than 25 % of its authorised capital belongs to the person(s) who does not satisfy the requirements defined by this Law for small and medium-sized enterprises;

b) its principal activity is banking, insurance or financial services of another type;

Law of Georgia No 3087 of 24 May 2006 - LHG I, No 20, 9.6.2006, Art. 166

Law of Georgia No 1288 of 24 September 2013 - website, 8.10.2013

Article 3¹ - Number of employees in small and medium-sized enterprises

1. The average annual number of employees in small and medium-sized enterprises shall be defined by a labour contract, including part-time workers (except for seasonal employees) and employees of representative offices of the legal person, which shall be reflected in forms submitted to the local agencies of the Legal Entity under Public Law (LEPL) – the National Statistics Office of Georgia (Geostat).

2. The average number of employees in a newly created enterprise, which has no previous financial year, shall be calculated for the period starting from its registration up to the end of the year.

3. An enterprise shall not be deemed as small or medium-sized from the day it exceeds the amount specified in Article 3(1)(l and m).

4. Under the first paragraph of this article, small enterprises need not keep additional reporting, except as provided for in the legislation of Georgia.

Law of Georgia No 3087 of 24 May 2006 - LHG I, No 20, 9.6.2006, Art. 166

Law of Georgia No 2293 of 11 December2009 - LHG I, No 45, 21.12.2009, Art 324

Law of Georgia No 4469 of 22 March 2011 - website, 1.4.2011

Article 4 - Georgian National Investment Agency

1. The Georgian National Investment Agency (the Agency) shall be created under the Law of Georgia on Legal Entities under Public Law as an independent and permanent body for the purpose of implementing, coordinating and monitoring activities related to financing industrial and investment programmes.

2. The Agency Supervisory Board shall coordinate and implement general supervision over the Agency activities.

3. The Supervisory Board shall appoint and dismiss from office the director of the Agency.

4. The legal basis for the Agency’s activity shall be the Constitution of Georgia, treaties and international agreements, this Law, the Law of Georgia on Legal Entities under Public Law and the Law of Georgia on the Promotion and Guarantees of Investment Activities, the General Administrative Code of Georgia, the Agency Statute and other normative acts.

5. The Agency Supervisory Board shall be created to ensure transparency of industrial and investment programmes financing systems, publicity of the Agency's activity and democratic management. The Supervisory board shall be composed of three members, including the Chairperson of the Agency Supervisory Board.

6. The Agency Supervisory Board shall approve the Agency Statute.

7. The Ministry for Economy and Sustainable Development of Georgia shall deliver to the Agency state property as prescribed by the legislation of Georgia.

8. The Agency, with the approval of the Agency Supervisory Board, may:

a) acquire, alienate, or encumber the real property in its possession;

b) take out a loan;

c) stand as a surety;

d) determine the Agency staff schedule.

8¹. The Agency budget shall be agreed with the Agency Supervisory Board.

9. The activity defined by paragraph 8(b, c and d) of this article shall require additional confirmation from the Ministry for Finance of Georgia.

10. The Agency shall be financed:

a) from the State Budget of Georgia;

b) from income received through the performance of contractual work;

c) from the funds of private investors and investment institutions that are attracted by state guarantees within the limits determined by the Law on the State Budget of Georgia;

d) through grants and assistance allocated by international donor countries and organisations for entrepreneurship development;

e) through other income allowed by the legislation of Georgia.

11. The Agency shall maintain accounting and reporting of its financial and economic activities, draw up a balance sheet and submit it for approval to the Agency Supervisory Board according to the Legislation of Georgia.

12. The main areas of the Agency activity shall be:

a) rational management and distribution of the financial resources of the Fund in the form of suretyship, subvention and subsidies according to the priorities or targeted programmes determined by the Economic and Social Development Indicative Plan of Georgia;

b) negotiating with potential investors to attract investments and grants required for implementation of industrial and investment programmes;

c) systematic study and analysis of the situation of industrial and investment programme financing based on reports of organisations implementing industrial and investment projects, as well as preparing proposals for the Government of Georgia in order for it to make appropriate decisions;

d) determining the criteria that shall be satisfied by an enterprise in order to be eligible to participate in the implementation of industrial and investment projects;

e) selecting industrial and investment projects on the basis of a tender, taking into consideration priorities defined by the Economic and Social Development Indicative Plan of Georgia. The bank credit interest rate of the projects shall be subsidised from the resources of the Fund;

f) submitting annual reports on the situation in state industrial and investment policy financing to the Ministry for Economy and Sustainable Development of Georgia;

g) preparing proposals in order to facilitate creation of an investment environment and the legal basis for supporting entrepreneurship development;

h) preparing and publishing standard tender documentation required for operation of this Law and bringing it in line with international norms;

i) preparing special educational programmes and educational and methodological materials for persons participating in investment relationships, for state's central and local self-government bodies and mass media representatives, as well as conducting seminars and training for other interested persons;

j) developing a common information base for implemented industrial and investment programmes;

k) providing expert, consulting and advisory services for organisations submitting industrial and investment projects.

13. The Agency shall arrange public discussions of the activities carried out by the Agency and ensure publication of corresponding information according to the legislation of Georgia, as well as to establish special periodic bulletins.

Law of Georgia No 2038 of 28 March 2003 - LHG I, No 8, 14.4.2003, Art. 47

Law of Georgia No 4469 of 22 March 2011 - website, 1.4.2011

Law of Georgia No 6627 of 5 July 2012 - website, 9.7.2012

Law of Georgia No 1288 of 24 September 2013 - website, 8.10.2013

Article 5 - Rights and obligations of the Agency director

1. The Agency shall be managed by a director who shall:

a) issue orders on internal organisational issues;

b) decide on issues falling within the competence of the Agency;

c) approve, according to established procedures, regulations of structural units and monitor the activities of Agency employees, as well as performance of obligations by structural units of the Agency;

d) appoint and dismiss from office Agency employees within the scope of its authority;

e) manage Agency funds and monitor that they are spent for their intended purpose.

2. The Agency director shall represent the Agency with other organisations and authorities.
 If the director is absent, he/she shall be represented by the deputy designated in an order issued by the director.

3. The Agency director shall be responsible for the Agency's activity under the legislation of Georgia.

4. The Agency director shall submit the annual report on the activities carried out by the Agency to the Agency Supervisory Board for approval.

Article 6 - Agency Supervisory Board

1. The members of the Agency Supervisory Board shall be: the Executive Director of Joint Stock Company (JSC) Partnership Fund, the Deputy Minister for Economy and Sustainable Development and the Deputy Minister for Finance.

2. The chairperson of the Agency Supervisory Board shall be the Executive Director of JSC Partnership Fund.

3. The Agency Supervisory Board shall operate on a pro bono basis.

4. (Deleted - 5.7.2012, No 6627)

5. The chairperson of the Agency Supervisory Board (in case of his/her absence, the deputy chairperson or the acting chairperson) shall convene meetings of the Agency Supervisory Board and prepare the meeting agendas.

6. A meeting of the Agency Supervisory Board shall be duly constituted if two thirds of the members of the Supervisory Board are present. The Agency Supervisory Board shall make decisions by a majority of votes of the members present.

7. Meetings of the Agency Supervisory Board shall be conducted as necessary in accordance with the Agency's activity, but not less than once in every three months. The members of the Agency Supervisory Board shall be given at least seven days notice of a meeting.

8. The Agency Supervisory Board:

a) shall approve the projects of surety, subvention, and subsidy programmes prepared within the limits of the funds held by the Agency;

b) shall take into consideration the main directions of the State industrial and investment policy and provide opportunities to parties participating in industrial and investment activity to freely present their interests at meetings of the Agency Supervisory Board;

c) shall approve the criteria determined by the Agency that have to be satisfied by bidders in order to be eligible to participate in the implementation of industrial and investment projects;

d) may request from organisations participating in industrial and investment programmes to present information on the industrial and investment projects implemented by them and may verify its correctness;

e) shall approve the composition of the tender commission;

f) shall review at its meetings the draft regulations of structural units of the Agency and the results of their activities;

g) shall review and approve the annual report on activities conducted by the Agency to be submitted to the Government of Georgia;

h) (deleted - 5.7.2012, No 6627)

9. The Agency Supervisory Board shall submit an annual report on its activity to the Government of Georgia and ensure its publicity.

Law of Georgia No 4469 - of 22 March 2011 - website, 1.4.2011

Law of Georgia No 6627 of 5 July 2012 - website, 9.7.2012

Law of Georgia No 1288 of 24 September 2013 - website, 8.10.2013

Chapter II - (deleted)

Law of Georgia No 1288 of 24 September 2013 - website, 8.10.2013

Article 7 - (Deleted)

Law of Georgia No 1288 of 24 September 2013 - website, 8.10.2013

Article 8 - (Deleted)

Law of Georgia No 1288 of 24 September 2013 - website, 8.10.2013

Chapter III - State Support for Implementation of Entrepreneurship Development Programmes

Article 9 - Forms of state support for implementation of entrepreneurship development programmes

The forms of state support for implementation of entrepreneurship development programmes shall be:

a) standing as a surety for financing that is required for an industrial and investment project in order to develop production or a particular sector;

b) subvention, which shall be returned to the Georgian National Investment Agency if it is not used for its intended purpose;

c) subsidy.

Article 10 - Standing as a surety for financing required for an industrial and investment project in order to develop production or a particular sector

1. If the Agency decides to act as a surety for a bidder before the financing organisation within the limits of financing required for an industrial and investment project in order to develop production or a particular sector, then a contract shall be concluded between the Agency and the borrower.

2. The contract entered into by the Agency and the borrower shall specify the obligations of the parties, the surety amount provided by the Agency, and the duration, terms and penalties for breaching the contract.

3. The Agency shall monitor performance of obligations by the enterprise. The enterprise shall submit to the Agency an accounting of the use of the loan once in every three months.

4. In each separate case a suretyship contract shall be concluded between the Agency and the organisation financing the industrial and investment project. The contract shall determine:

a) the amount of surety provided by the Agency;

b) the main principles and conditions for managing the surety amount;

c) the conditions for the organisation financing the industrial and investment project to submit to the Agency information on performance of credit obligations by the borrower;

d) the sale of collateral;

e) recourse against the surety.

5. If the enterprise fails to repay its loan and the organisation financing the industrial and investment project has exhausted all possibilities of receiving funds through the sale of collateral, the outstanding amount of the credit shall be repaid from the assets of the Fund.

Article 11 - Granting of subsidies by the Agency

1. If the decision is made to grant a subsidy requested by an enterprise in its industrial and investment project submitted to the Agency:

a) a contract shall be concluded between the Agency and the enterprise. The contract shall determine the purpose of the subsidy granted by the Agency, its amount, conditions for granting and penalties for breaching the contract;

b) a contract shall be concluded between the Agency and the organisation financing the industrial and investment project on collaboration during implementation of the subsidy requested in the industrial and investment project. The contract shall determine the terms of subsidising the amount to be allocated for financing; it shall also determine the conditions for submitting information by the financing organisation to the Agency on the fulfilment of credit obligations by the borrower, and other procedural issues.

2. The Agency shall monitor performance of the contract by the enterprise.

3. The enterprise shall submit information to the Agency on the use of the subsidy for its intended purpose every three months.

4. If the enterprise fails to repay the principal and interest of the subsidised loan for three months at the most, the Agency may terminate the subsidy.

Chapter IV - Industrial and Investment Projects Financing System

Article 12 - Selection of industrial and investment projects

Industrial and investment projects shall be selected on the basis of a tender, which shall be carried out according to procedures determined by this Law and the order of the Agency director.

Article 13 - Procedure for creating a tender commission and its rules of operation

1. A tender for industrial and investment projects shall be carried out by the tender commission. The chairperson of the tender commission shall be the Agency director.

2. The Agency Supervisory Board shall determine the composition of the tender commission.

3. A member of the tender commission may not be a close relative of the manager of the bidder which is either a natural or legal person; neither a person who has share in the legal person-bidder’s capital nor a person who is an authorised representative of the legal person.

4. The tender commission may invite specialists from relevant fields as experts and consultants.

5. The tender commission shall adopt decisions by a majority of members on the list. In the event of a tie vote the tender commission chairperson shall have the casting vote.

Article 14 - Announcement of tenders on industrial and investment projects

1. The tender commission shall publish an announcement of a tender on industrial and investment projects not later than 30 days before commencement of the tender.

2. The tender commission may alter the information specified in the announcement. The changes shall be published in the same media where the announcement was published.

3. The changes to the announcement shall be made and these changes shall be published (provided) not later than 15 calendar days before the commencement of the tender.

Article 15 - Tender conditions

1. A bidder shall submit to the Agency an industrial and investment project.

2. The Agency shall determine the procedure for financing and for submitting, reviewing and selecting industrial and investment projects through a tender.

3. When making decisions on financing industrial and investment projects preference shall be given to:

a) the priority of the industrial and investment project;

b) the stimulation of production of export and import replacement products;

c) implementation of advanced technologies and creation of new jobs.

d) co-investment made by the bidder from its own funds, including guarantees for recovering funds.

e) industrial and investment project financial risk insurance;

f) the bidder that is not indebted to tax or financial bodies, that is confirmed by these bodies;

g) ensuring growth of the budgetary and social efficiency.

Chapter V - Reorganisation and liquidation of the Agency

Article 16 - Reorganisation and liquidation of the Agency

1. The Agency shall be reorganised under the legislation of Georgia.

2. The Agency shall be liquidated under the legislation of Georgia.

3. In the event of liquidation of the Agency its property shall be returned to the Ministry for Economy and Sustainable Development of Georgia.

Law of Georgia No 2038 of 28 March 2003 - LHG I, No 8, 14.4.2003, Art. 47

Law of Georgia No 4469- of 22 March 2011 - website, 1.4.2011

Chapter VI - Final Provision

Article 17 - Entry into force

This Law shall enter into force upon promulgation.

President of Georgia                                                     Eduard Shevardnadze

Tbilisi,

19 June 2002

No 1519-IIS