LAW OF GEORGIA ON FACTORING

Article 1 – Scope of this Law

1. This Law shall define the concept and subject matter of factoring, the parties to factoring, their rights and obligations, the types of factoring, and conditions and rules for the implementation of factoring.

2. This Law shall apply to factoring where one of the parties is an entity referred to in Article 5(2) of this Law.

 

Article 2 – Definition of terms

For the purposes of this Law, the terms used herein shall have the following meanings:

a) commercial bank − a commercial bank defined in accordance with the Law of Georgia on the Activities of Commercial Banks;

b) micro-bank – a micro-bank defined in accordance with the Law of Georgia on the Activities of Micro-banks;

c) microfinance organisation – a microfinance organisation defined in accordance with the Law of Georgia on Microfinance Organisations;

d) beneficial owner − a person who receives monetary or other benefits based on the Law or a transaction and who is not obligated to transfer these benefits to another person, and if the beneficial owner is a legal entity established for non-entrepreneurial (non-commercial) purposes or the owner legal entity does not have a significant share owner – a member of its governing body;

e) significant share − more than 10 percent of the paid-in capital or declared capital and/or shares with voting rights of an enterprise directly or indirectly owned by a person or a group of jointly acting partners/shareholders and/or the ability a person or a group of jointly acting partners/shareholders to exert significant influence and/or control in an enterprise, regardless of the number of shares in the capital and/or shares with voting rights;

f) significant influence − the right to participate in making decisions related to the financial and operational policy of an enterprise, which does not control or jointly control that policy;

g) declared capital – the capital determined by the partners of an enterprise/shareholders and provided for by a statute of an enterprise;

h) paid-in capital – the actual paid-up share of declared capital;

i) initial capital – the portion of assets of an enterprise that remains after the deduction of all liabilities;

j) control − direct or indirect ownership of 50 percent or more than 50 percent of the shares of an enterprise with voting rights and/or the authority to manage the activities of an enterprise granted on the basis of an agreement concluded with the enterprise, its statute and/or agreement concluded with other partners/shareholders, which grants the controlling person an opportunity to receive economic benefits and influence their amount, including the power to appoint or dismiss the majority of administrators;

k) accounts payable – any existing short-term unmatured right to demand payment of an amount of money that has arisen, whether in whole or in part as a result of the provision of goods or services under the principal contract (for the purposes of this Law, the provision of services does not include employment relationships), including the provision of products and/or services related to intellectual property, with the exception of a cheque, bills of exchange, securities, or a right to receive payment arising from a letter of credit or a deposit account;

l) short-term unmatured right – accounts payable with a payment term not exceeding one year from the date they arose;

m) a party conceding a claim – a person defined by Article 5(1) of this Law who is a party to a factoring agreement and a principal agreement and who concedes accounts payable arising from a principal agreement to a factor in accordance with a factoring agreement;

n) debtor – a legal entity, individual entrepreneur or other organisational structure that is not a legal entity, which is a party to a principal agreement and in respect of which accounts payable exist;

o) tax invoice − a tax invoice provided for by Article 180 of the Tax Code of Georgia, which is issued in an electronic form;

p) Public Registry – the Legal Entity under Public Law called the National Agency of Public Registry operating under the Ministry of Justice of Georgia;

q) Factoring Register – a register maintained by the Public Registry in accordance with the Law of Georgia on the Public Registry, which is a set of data on tax invoices used for factoring purposes, invoices, relevant factors, the names of parties conceding claims and of debtors, the term of factoring agreements, the amount of remuneration provided for by factoring agreements and the status of payment of those remuneration;

r) factor − any entity defined by Article 5(2) of this Law, which is a party to a factoring agreement and to which a party conceding a claim transfers accounts payable;

s) factoring company – a legal entity established in the legal form of a limited liability company or a joint-stock company and registered by the National Bank of Georgia, which carries out activities provided for by this Law (except for a commercial bank and micro-bank licensed by the National Bank of Georgia and a registered microfinance organisation, which have the right to carry out factoring under the legislation of Georgia);

t) administrator of a factoring company − a member of the supervisory board of a factoring company, the member of the board of directors and/or another person who directly or indirectly has the authority and responsibility to plan, manage and/or control the activities of a factoring company. The list of relevant positions shall be approved by the supervisory board of a factoring company;

u) factoring platform – a legal entity established in the legal form of a limited liability company or a joint-stock company and registered by the National Bank of Georgia, which carries out activities provided for by this Law;

v) administrator of a factoring platform − a member of the supervisory board of a factoring platform, the member of a directorate and/or another person who directly or indirectly has the authority and responsibility to plan, manage and/or control the activities of a factoring platform. The list of relevant positions shall be approved by the supervisory board of a factoring platform;

w) factoring-related services − services that are carried out as a result of factoring and include one of the following activities:

w.a) the financing of a party conceding a claim within the scope of accounts payable, including advance payment;

w.b) maintaining accounts (metering) related to accounts payable;

w.c) the collection of accounts payable;

w.d) other activities necessary for carrying out factoring;

x) principal agreement – an agreement concluded between a debtor and a party conceding a claim/creditor for the supply of goods or the provision of services, including the transfer of intellectual property rights;

y) resident − a resident as defined by the Tax Code of Georgia;

z) non-resident − a non-resident as defined by the Tax Code of Georgia;

z₁) document confirming the existence of a claim against a debtor − a tax invoice or invoice, which is issued in an appropriate manner and confirms the existence of a claim against a debtor;

z₂) transfer of accounts payable − the transfer of the ownership of accounts payable to a factor by a party conceding a claim;

z₃) invoice – a financial document that is concluded between a buyer and the seller of goods and/or services, confirming the existence of accounts payable towards a buyer and which records at least the names of an invoice issuer and recipient, personal numbers and/or identification numbers, the name, list and quantity of goods sold and/or services provided, the date of issuing an invoice, the amount of money to be reimbursed and currency;

z₄) related parties – related parties as defined by the Law of Georgia on Competition.

 

Article 3 – Notion of factoring

1. Factoring is a transaction that involves the transfer of accounts payable arising from a principal agreement and is registered in the factoring register, as a result of which the ownership right arising from accounts payable is transferred to a relevant factor.

2. The parties to factoring shall be a party conceding a claim and a factor.

3. Only the entities specified by Article 5(2) of this Law shall have the right to carry out factoring and provide factoring-related services.

 

Article 4 – Subject of factoring

1. The subject of factoring may only be the transfer of accounts payable.

2. The subject of factoring shall not be the transfer of accounts payable arising from the supply of goods or the provision of services for personal or household needs, except for cases where trade in goods or the provision of services is the part of the entrepreneurial activity of a party conceding a claim.

3. For the purposes of factoring, a document confirming the existence of a claim against a debtor shall be a tax invoice. An exception to the above rule is established by paragraph 4 of this article.

4. If a tax invoice is not issued in the cases determined by the legislation of Georgia, an invoice shall be considered a document confirming the existence of a claim against a debtor. An invoice must be easy to identify; for that purpose it shall have a unique identification code assigned by the issuer of an invoice.

 

Article 5 – Parties to factoring

1. A party conceding a claim may be any legal entity, individual entrepreneur or other organisational formation that is not a legal entity.

2. A factor may be:

a) a commercial bank;

b) a micro-bank;

c) a microfinance organisation;

d) a factoring company.

3. The parties to factoring shall be obliged to carry out factoring in compliance with the requirements of this Law.

 

Article 6 – A factoring company

1. A factoring company may exist in the legal form of a limited liability company or a joint-stock company as defined by the Law of Georgia on Entrepreneurs.

2. A factoring company shall be obliged to establish a supervisory board. The rules established for the supervisory board of a joint-stock company by the Law of Georgia on Entrepreneurs shall be applied to the supervisory board of a factoring company.

3. A commercial bank, micro-bank, microfinance organisation and their related parties shall be prohibited from equity participation in a factoring company.

4. No one shall have the right to use the term ‘factor’ or ‘factoring company’ or any other word combination containing this term without being registered as a factoring company in accordance with this Law and in accordance with the procedure established by this Law, except for cases where the use of the said term or word combination is established or recognised by law or an international treaty of Georgia, or when it is clear from the context in which the term ‘factor’ or ‘factoring company’ is used that the relevant entity does not carry out activities as provided for by this Law.

5. Except for the entities defined by Article 5.2 (a)-(c) of this Law, no one shall have the right to carry out factoring and factoring-related services without being registered as a factoring company by the National Bank of Georgia.

6. If a factoring company violates the norms established by the legislation of Georgia, the National Bank of Georgia shall be authorised to apply a relevant sanction in accordance with the procedure established by the National Bank of Georgia.

 

Article 7 – Activities of a factoring company

1. A factoring company shall have the right to carry out only the following activities:

a) factoring;

b) factoring-related services.

2. A factoring company shall not receive deposits from both individuals and legal entities.

3. A factoring company shall not receive repayable funds from both individuals and legal entities, except for the partners of a factoring company and financial institutions (including foreign financial institutions). The prohibition provided for by this paragraph shall not apply to the public offer of securities and the private offer of securities to informed (experienced) investors as defined by the Law of Georgia on Securities Market, as well as to the cases determined by the National Bank of Georgia.

4. By a normative act, the National Bank of Georgia shall be authorised to establish for a factoring company the procedure for providing necessary information to the parties to factoring when providing services.

5. The National Bank of Georgia shall be authorised to establish additional requirements for and/or restrictions on a factoring company in the carrying out of specific activities.

 

Article 8 – Capital of a factoring company

1. In order to register a person as a factoring company, its paid-in capital must be at least 300,000 (three hundred thousand) GEL. A factoring company shall not reduce the minimum amount of paid-in capital throughout the entire period of its activity.

2. The initial capital of a factoring company shall be at least 300,000 (three hundred thousand) GEL.

3. The National Bank of Georgia shall be authorised to establish additional requirements related to the capital of a factoring company by a normative act, including the procedure for forming the initial capital of a factoring company.

 

Article 9 – Registration of a person as a factoring company

1. A person shall register as a factoring company if, under an agreement on conceding claims, at any time it has the right to simultaneously pursue claims in respect of at least five accounts payable.

2. A person shall have the right to carry out factoring only after the National Bank of Georgia registers it as a factoring company.

3. The National Bank of Georgia shall establish the rules for the registration, cancellation and regulation of a factoring company.

4. The National Bank of Georgia shall publish information on registered factoring companies on its official website.

5. The registration obligation specified in paragraph 1 of this article shall not apply to cases related to the reorganisation and merger of enterprises and/or the transfer of accounts payable in accordance with the Law of Georgia on Rehabilitation and the Collective Satisfaction of Creditors’ Claims. The National Bank of Georgia shall be authorised to establish exceptions to the registration obligation specified in paragraph 1 of this article, taking into account the specifics and content of a transaction.

 

Article 10 – Eligibility criteria

1. A person shall be prohibited from being an administrator of a factoring company if:

a) he/she has participated in an operation that caused significant damage to a financial institution, has violated the rights of the depositors or other creditors of a financial institution or has caused their insolvency or bankruptcy;

b) he/she has been an administrator of a financial institution and as a result of his/her activities the said financial institution went insolvent;

c) he/she has failed to fulfill a financial obligation towards any financial institution;

d) he/she has been convicted of a serious or particularly serious crime, the financing of terrorism and/or illicit income legalisation or other economic crimes;

e) he/she does not have the relevant education and/or experience.

2. The administrator of a factoring company shall be prohibited from participating in decision-making on a matter in which he/she has a personal interest.

3. A director (a member of the board of directors) of a factoring company shall not simultaneously be a partner (shareholder), a member of the supervisory board and/or a member of the board of directors of any financial institution.

4. A person shall be prohibited from being the significant shareholder or beneficial owner of a factoring company if he/she has been convicted of a serious or particularly serious crime, the financing of terrorism and/or illicit income legalisation or other economic crimes.

5. A person shall be prohibited from being the administrator, significant shareholder or beneficial owner of a factoring company if the National Bank of Georgia has information that he/she is engaged in illegal activities and/or corrupt and/or dangerous business practices.

6. A factoring company shall, prior to the appointment of an administrator, submit to the National Bank of Georgia an application on compliance with the requirements established by paragraph 1 of this article.

7. A person who intends to acquire a significant share of a factoring company in an amount such that the direct or indirect participation of a person or its beneficial owner(s) in the capital and/or voting shares of that factoring company exceeds 10 percent or 50 percent, shall submit to the National Bank of Georgia an application and documentation on compliance with the requirements established by paragraph 4 of this article, as well as information on the origin of funds required for the acquisition of such a share.

8. The National Bank of Georgia shall consider the application provided for by paragraphs 6 and 7 of this article within 30 calendar days from its submission and shall give an interested party consent to carry out the relevant operation or shall give a reasoned refusal.

9. A transaction for the acquisition of a significant share of a factoring company shall be invalid if an interested party has not submitted an application to the National Bank of Georgia, or received a reasoned refusal from the National Bank of Georgia but nevertheless acquired a significant share of a factoring company.

10. By a normative act, the National Bank of Georgia shall be authorised to establish additional criteria and assessment rules for the eligibility of an administrator of a factoring company, an administrator of a factoring platform and owners of a significant share.

 

Article 11 – Supervision and regulation of the activities of a factoring company

The activities of a factoring company shall be supervised and regulated by the National Bank of Georgia within the powers defined by the Organic Law of Georgia on the National Bank of Georgia, this Law and other legislative and subordinate normative acts.

 

Article 12 – Registration of a factoring agreement

1. Only a factor shall have the right to apply to the Public Registry for the registration of factoring in the Factoring Registry.

2. The right of ownership to the right of claim arising from accounts payable shall be valid from the moment of its registration in the Factoring Registry.

3. Issues related to registration in the Factoring Registry shall be regulated by the Law of Georgia on the Public Registry and a normative act of the Minister of Justice of Georgia.

4. A written agreement shall be deemed invalid if, as a result of that agreement, accounts payable in respect of which the ownership rights of a factor are registered in the Factoring Register are transferred to the purchaser.

 

Article 13 – Types of factoring

1. Factoring can be concluded with or without the right of recourse.

2. The ownership rights of different factors may be registered for different parts of the same accounts payable.

3. Factoring may include:

a) a single-factor system, where the factor is only a factor resident in Georgia;

b) a two-factor system, where the parties to factoring are a factor resident in Georgia and a factor non-resident in Georgia.

4. One of the types of factoring is a reverse factoring.

 

Article 14 – Factoring without the right of recourse

Within the factoring concluded without the right of recourse, a factor shall have no right to claim towards the party conceding a claim if a debtor has not paid the relevant accounts receivable.

Article 15 – Factoring with the right of recourse

1. Within the factoring concluded with the right of recourse, a factor shall have the right of recourse towards the party conceding a claim if a debtor has not paid the relevant accounts receivable. In such case, a factor shall have the right to demand the satisfaction of the transferred claim from a debtor or a party conceding a claim. A party conceding a claim shall have the right to refuse to satisfy a factor until a factor attempts to compulsory enforce against the debtor.

2. After exercising the right of recourse against a party conceding a claim, a factor shall be obliged to return accounts payable to the party conceding a claim, unless the factor and the party conceding a claim have agreed otherwise.

 

Article 16 – Determining the type of factoring

If it is impossible to determine whether factoring was concluded between parties with or without the right of recourse, factoring shall be deemed to have been concluded without the right of recourse.

 

Article 17 – Reverse factoring

1. Reverse factoring shall be the type of factoring initiated by a debtor. The prior written consent of a creditor shall be required for reverse factoring.

2. As a result of reverse factoring, the factor incurs an obligation to repay accounts payable to the creditor of a debtor. A factor shall cover accounts payable within the period specified in the written agreement concluded between a debtor and a creditor, or before the expiry of that period.

3. The provisions of this Law relating to factoring shall also apply to reverse factoring, unless those provisions contradict the essence of reverse factoring.

 

Article 18 – Form and scope of carrying out factoring

1. Factoring may be carried out only based on a written agreement (including an agreement concluded in an electronic form). An agreement concluded in an electronic form shall mean an electronic document defined by the Law of Georgia on Electronic Documents and Electronic Trust Services.

2. Factoring shall not be considered a credit or loan agreement, except in cases specified by the legislation of Georgia.

 

Article 19 – Terms for carrying out factoring

1. A factoring agreement (including additional terms and conditions concluded/agreed upon in writing (including in an electronic form) by parties to a factoring agreement and annexes to that agreement, which are its constituent and integral part, shall include:

a) information about the parties to the factoring, including the names, identification numbers, and legal addresses of relevant entities, as well as information about persons having powers of representation;

b) the type of factoring;

c) the legal basis of accounts payable that are the subject of the factoring agreement and other information related to them, including the amount of transferred accounts payable, the procedure and conditions for its calculation and payment to the authorised party of those accounts payable;

d) the amount of interest due to the factor, the procedure for its calculation and payment;

e) the dates of the conclusion of the principal agreement and the factoring agreement, as well as the validity period of the factoring agreement;

f) the signature of each party to the factoring agreement and its authorised representative;

g) in the case of securing a claim, information about each subject of security.

2. At least the following documents/information shall be attached to a factoring agreement as an annex, in writing (including in an electronic form):

a) the principal agreement;

b) a document confirming the existence of a claim against the debtor;

c) information about the amount provided for by the document confirming the existence of a claim against the debtor;

d) information about the payment date provided for by the document confirming the existence of a claim against the debtor;

e) in the case of reverse factoring, also the written consent of the creditor.

3. The date of the sale of accounts payable shall be considered the date of registration of the factoring in the factoring register.

 

Article 20 – Invalidity of a factoring agreement

1. It shall not permissible to transfer the same accounts payable to several factors, except for the cases provided for by Article 13(2) of this Law.

2. Any factoring agreement concluded by a party conceding a claim in relation to accounts payable transferred on the basis of factoring after the transfer of accounts payable shall be null and void.

 

Article 21 – Factoring platform

1. A factoring platform is an electronic platform whose main activity shall be the provision of factoring transactions with exchange services, including the automation of factoring transactions, the electronic implementation of factoring and other actions related to the conclusion of an agreement between parties.

2. For the purposes of paragraph 1 of this article, the provision of factoring transactions with exchange services shall mean the placement of accounts payable by a party conceding a claim; and in the case of reverse factoring by a debtor, on the factoring platform in order to obtain financing from factors participating in the factoring platform, and shall not mean the provision of services by a factor to a party conceding a claim; and in the case of reverse factoring to a debtor, through the electronic channel operated by that factor individually.

3. A factoring platform shall have rules and procedures in place to ensure the integrity and security of a factoring transaction accounting system, including the reduction of risks associated with factoring accounting, maintenance and settlement.

4. A factoring platform shall have publicly disclosed, transparent, objective and non-discriminatory criteria for participation in its system that ensure open and fair access to the factoring platform for legal entities wishing to participate therein.

5. A factoring platform shall have management and control systems and technical infrastructure that ensure monitoring, identification and management of risks arising from internal and external circumstances related to its activities and operations, and the minimisation of the damage caused by those risks.

6. A factoring platform shall have the minimum amount of capital at each stage of its activities. The minimum amount of capital of a factoring platform and additional requirements related to that capital, including the procedure for forming the initial capital of a factoring platform, shall be established by a normative act of the National Bank of Georgia.

7. The owner of a factoring platform shall not simultaneously be a factor.

8. No one shall have the right to carry out the activities specified in paragraph 1 of this article without being registered as a factoring platform by the National Bank of Georgia.

9. The procedure for the registration, cancellation of registration and regulation of a factoring platform shall be established, and the eligibility criteria of the administrator of a factoring platform shall be determined, by a normative act of the National Bank of Georgia.

 

Article 22 – Documentation relating to factoring

Upon transfer of each account payable by a party conceding a claim or a debtor to a factor on the basis of factoring, a party conceding a claim and/or a debtor shall, upon request, provide a factor with documentation related to factoring, namely:

a) documents confirming the existence of accounts payable;

b) the copy of a written (including in an electronic form) notification sent to a debtor, and in the case of reverse factoring, to a creditor, about the transfer of accounts payable to a factor.

 

Article 23 – Notification about the transfer of accounts payable to a factor

1. Accounts payable acquired by a factor, specified in a tax invoice or an invoice, shall be paid by a debtor specified in the same tax invoice or invoice. A party conceding a claim shall be obliged to notify a debtor in writing (including in an electronic form) no later than the next business day after the transfer of accounts payable to a factor and to provide the information necessary for the payment of said accounts payable, including a tax invoice or an invoice confirming the existence of a claim against a debtor, information on the volume of accounts payable transferred to a factor, the terms of its payment, and the bank details of a factor, the owner of accounts payable arising from a tax invoice or an invoice.

2. The written notification of the transfer of accounts payable to a factor shall be deemed to have been delivered to a debtor on the next business day after the factoring agreement is registered in the factoring register.

3. ⁠ A factor shall be obliged to register the termination of the ownership of accounts payable arising from a relevant tax invoice or an invoice in the factoring register no later than the next business day after a debtor has fully paid accounts payable to a factor.

 

Article 24 – Repayment of factoring-related accounts payable

1. After receiving the notification provided for by Article 23(1) of this Law, a debtor shall be obliged to reimburse a factor for accounts payable transferred to it in the appropriate amount within the period specified in the principal agreement.

2. Payment by a debtor of accounts payable to a party conceding a claim shall not cancel the obligation of a debtor to pay accounts payable to a factor if the notification of the transfer of the right of claim arising from that debt was delivered to a debtor before the payment of the said debt.

 

Article 25 – Collection of factor-related overdue accounts payable by a factor

A factor acts in its own name when collecting factor-related overdue accounts payable.

 

Article 26 – Auditing, accounting and reporting

1. A factoring company and the factoring platform shall:

a) maintain transparent financial reporting and tax reporting and comply with the principle of publicity;

b) develop and implement an internal control system and procedures, including a compliance control system specified by the legislation of Georgia regulating the prevention of money laundering and terrorist financing;

c) invite an auditor annually to conduct the audit of financial reporting in accordance with the legislation of Georgia;

d) be responsible for the accuracy of reporting, as well as for the complete submission of statements and information;

e) submit financial statements to the National Bank of Georgia. The form of financial statements to be submitted by a factoring company and a factoring platform, as well as the deadline and procedure for their submission, shall be determined by a normative act of the National Bank of Georgia;

f) submit to the National Bank of Georgia the reporting, in the relevant format and within established deadlines, as provided for by the legislation of Georgia regulating the prevention of money laundering and terrorist financing.

2. If a factoring company or a factoring platform fails to submit the reports specified in this Article to the National Bank of Georgia twice in a row in the form and at the frequency established by it and the legislation of Georgia, the National Bank of Georgia shall be entitled to cancel the registration of the said factoring company or factoring platform.

3. A factoring company and a factoring platform shall be obliged to maintain the following documentation for 6 years:

a) ledgers, inventory description, balance sheet, as well as related instructions and other organisational documents;

b) accounting documents confirming the entries in ledgers.

 

Article 27 – Responsibility of a party conceding a claim

1. A party conceding a claim shall be responsible for the accuracy and validity of accounts payable transferred to a factor on the basis of factoring, including the accuracy of the amount of a debt at the time of the transfer of accounts payable to a factor, taking into account any netting agreement that may exist between a party conceding a claim and a debtor.

2. If accounts payable transferred to a factor by a party conceding a claim becomes disputed (including if the item provided for by a principal agreement is defective), a party conceding a claim shall be obliged to pay accounts payable to a factor in the amount provided for by a factoring agreement, within the period specified in the same agreement. This rule shall apply even when parties had agreed upon factoring without the right of recourse.

 

Article 28 – Netting agreement

1. If there is a netting agreement that directly provides for netting accounts payable that are transferred to a factor, a debtor shall have the right to exercise the said netting right also with respect to a factor.

2. A debtor shall have the right to exercise the right of netting specified in paragraph 1 of this Article only with respect to accounts payable that are directly provided for by the netting agreement, and only if the said right of netting was in force at the time of the delivery of the written notification to a debtor on the transfer of accounts payable to a factor in accordance with Article 23(2) of this Law. In the case provided for by Article 442(2) of the Civil Code of Georgia, netting shall be possible only with the consent of a factor.

 

Article 29 – Transfer of rights related to accounts payable

1. When transferring an account payable to a factor, the means of securing that debt and other rights related to the relevant claim shall be transferred to it.

2. A debtor shall have the right to submit to a factor non assumpsit that he had against a party conceding a claim upon the receipt of the notification of the transfer of accounts payable to a factor.

3. The rule established by paragraph 1 of this Article shall apply even if parties to the principal agreement have agreed otherwise.

 

Article 30 – Inadmissibility of restricting the right to transfer accounts payable to a factor

A debtor or a pledgee shall not restrict the right of a creditor to transfer accounts payable to a factor. A debtor shall not impose additional conditions on a creditor for transferring accounts payable to a factor. The existence of such a restriction and/or additional condition shall be null and void.

 

Article 31 – Transfer of accounts payable by a factor to another factor

Unless otherwise specified in the factoring agreement, the transfer of accounts payable by a factor to another factor shall be permitted in accordance with the provisions of this Law.

 

Article 32 – Violations and sanctions

1. The National Bank of Georgia shall be authorised to apply sanctions as specified in paragraph 2 of this article to a factoring company/factoring platform and/or the administrator of a factoring company/factoring platform if a factoring company/factoring platform and/or the administrator of a factoring company/factoring platform:

a) has violated any provision of this Law or any provision, rule, resolution, requirement or written instruction of the National Bank of Georgia or a restriction established by the National Bank of Georgia;

b) has violated any condition or restriction accompanying the registration of a factoring company/factoring platform or attached to the relevant provision of the National Bank of Georgia;

c) has violated the deadline for submitting reports and/or has submitted incorrect reports and/or other inaccurate information;

d) has violated the requirements established by the legislation of Georgia regulating the prevention of money laundering and terrorist financing and the legal acts of the National Bank of Georgia;

e) has violated requirements established by the legislation of Georgia related to carrying out factoring;

f) has implemented or is implementing corrupt or dangerous entrepreneurial practices.

2. Upon the detection of a violation as specified in paragraph 1 of this article, the National Bank of Georgia shall have the right, proportionally and consistently to the violation, and inconsistently, depending on the seriousness of the violation and the existing or potential risk, to apply the following sanctions to a factoring company/factoring platform and/or the administrator of a factoring company/factoring platform:

a) send a written warning to a factoring company/factoring platform and/or the administrator of a factoring company/factoring platform;

b) impose special measures or issue an instruction requesting that a factoring company/factoring platform ceases and prevents the violation and take necessary measures to eliminate the violation within the period specified by the National Bank of Georgia;

c) impose a fine on a factoring company/factoring platform and/or the administrator of a factoring company/factoring platform in accordance with the procedure and in the amount established by the National Bank of Georgia;

d) suspend the signing powers of the administrator of a factoring company/factoring platform and request his/her temporary removal from office or dismissal;

e) prohibit a factoring company/factoring platform from distributing profits, accruing and issuing dividends, increasing employee remuneration, paying bonuses and other similar remuneration;

f) suspend or restrict certain types of operations of a factoring company/factoring platform;

g) cancel the registration of a factoring company/factoring platform.

3. The National Bank of Georgia shall be authorised to establish, by a normative act, the procedure for determining, imposing and enforcing the amount of a fine against a factoring company, a factoring platform, and the administrator of a factoring company or a factoring platform.

4. The amount of the fine imposed in accordance with this article shall be directed to the State Budget of Georgia.

 

Article 33 – Transitional provisions

1. A person who, prior to the entry into force of this Law, carries out activities provided for by this Law (except for a commercial bank, a micro-bank and a microfinance organisation), shall be obliged to submit the relevant registration documents/information to the National Bank of Georgia within 90 calendar days from the entry into force of the legal act of the National Bank of Georgia on the registration of a factoring company/factoring platform. The said person shall have the right to continue carrying out activities provided for by this Law until the National Bank of Georgia makes a relevant decision. In the case of a failure to submit the registration documents/information to the National Bank of Georgia within the period specified in this paragraph or in the case of a refusal by the National Bank of Georgia to register a factoring company/factoring platform, that person shall be obliged to terminate the said activities.

2. This Law shall not apply to cases of transfer of accounts payable prior to the entry into force of this Law.

3. In respect of the entry into force of this Law, the National Bank of Georgia shall issue the following legal acts within 9 months from its entry into force:

a) the procedure for the registration, the cancellation of registration and the regulation of a factoring company;

b) the procedure for the registration, the cancellation of registration and the regulation of a factoring platform;

c) the procedure for the provision of necessary information by a factoring company to parties to factoring when providing services;

d) additional criteria and assessment rules for the eligibility of the administrator of a factoring company, the administrator of a factoring platform and the owners of a significant share by a normative act;

e) the form of financial statements to be submitted by a factoring company and a factoring platform, as well as the deadline and rules for their submission;

f) additional requirements related to the capital of a factoring company, including the procedure for forming the initial capital of a factoring company, as well as the minimum amount of the capital of a factoring platform and additional requirements related to that capital, including the procedure for forming the initial capital of a factoring platform;

g) the procedure for determining, imposing and enforcing the amount of a fine against a factoring company, a factoring platform, and the administrator of a factoring company or a factoring platform.

 

Article 34 – Entry into force of this Law

1. This Law, except for Articles 1 to 32 of this Law, shall enter into force upon promulgation.

2. Article 1 to 32 of this Law shall enter into force on 1 January 2021.

 

 

President of Georgia                                           Mikheil Kavelashvili

 

Tbilisi,

1 April 2026

No 1451-V მს -XI მპ