Addressing Gaps: Insights into Georgia's Insolvency Law Two Years Post-Implementation

Two years following the enactment of Georgia's Insolvency Law, conceptual inadequacies within the legislation have surfaced, according to Giorgi Batlidze, an insolvency practitioner and partner at BLC law firm. He voiced these concerns during a recent appearance on the "Business Partner" program.

Batlidze highlighted that there are gaps in the law's execution that hinder the embodiment of the concept's intentions. He stated, "Some provisions are vaguely defined, which creates ambiguities for judges, creditors, and practitioners."

He believes that these ambiguities require resolution, suggesting two possible pathways - either through practical application within court rulings or via legislative amendments. Batlidze cautions, however, "I believe it's still premature for legislative changes, considering the two-year gap is quite brief. We must approach this carefully. Is it prudent to enact changes every year? The necessity for modification must accumulate before we can progress the issue."

Batlidze credits the court for establishing effective practices, particularly regarding the appeal of the creditors' registry. "The Supreme Court has provided clear guidelines, and this approach continues to be applied appropriately," he adds.

When it comes to the state's role in the process of insolvency law, Batlidze indicates that the state appears in two capacities: as a creditor, predominantly for tax purposes, and as a party concerned with macroeconomic factors. He points out, "What are the state's interests here? Firstly, it is about revitalizing assets. Secondly, it's about ensuring that entrepreneurial individuals aren't perpetually in crisis - we need to rejuvenate human resources."

He emphasizes the significance of clearing up the organization either through rehabilitation or bankruptcy. "Although bankruptcy seems a daunting term, in international practice it's seen as 'the organized exit of an enterprise from the economic arena'. This is crucial because an organized exit results in an emancipated entrepreneur who can launch a new business, and satisfied creditors," Batlidze explained on "Business Partner".

The insolvency reform, supported by the USAID Economic Governance Program, has led to a noticeable increase in business rehabilitations in Georgia. Approximately 40 companies have benefited from the new insolvency law to date.