March, 2013. Issue I
Some major legislative changes introduced during the relevant period covered in this newsletter primarily relate to the following normative acts:
1. Resolution of the Parliament of Georgia on Basic Directions of Georgia’s foreign policy;
2. Amendments to the Law of Georgia on the National Bank;
3. Amendments to the Law of Georgia on Microfinance Organizations;
4. Amendments to the Order of the President of the National Bank of Georgia №170/01;
5. Amendments to the Law of Georgia on State Property;
6. Amendment to the order of the president of the National Bank of Georgia on Approving the Rules of Maintaining the Minimum Reserve Requirements by Commercial Banks;
7. Resolution of the Parliament of Georgia on the ratification of the Agreement with the Republic of Croatia on the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital;
8. Amendments to the Law of Georgia on Enforcement Procedures.
1. Resolution of the Parliament of Georgia on Basic Directions of Georgia’s foreign policy
On March 21st, 2013 Georgian parliament adopted resolution on basic directions of Georgia’s foreign policy.
We want to emphasize some points of resolution regarding Georgia’s economic relations with other countries:
- For the purpose of achieving strategic priorities such as gaining membership in the European Union and the North Atlantic Treaty organization, Georgia will take further steps for ensuring irreversible 5sustainable economic development;
- Georgian authorities will ensure implementation of all conditions, which will allow country successfully complete negotiations with European Union on the Association Agreement, the Deep and Comprehensive Free Trade Area and the Visa Liberalization Action Plan;
- Cooperation with the EU within the frames of the Eastern Partnership and European Neighborhood Policy will develop in four main directions. One direction is economic integration and approximation to European Union legislation;
- Cooperation with the United States of America will carry out in four main directions under the terms defined by Strategic Partnership Charter. One direction is cooperation in economic, trade and energy areas, including reaching an agreement on free trade;
- Georgia will foster political dialogue and economical cooperation for the purpose of concurrence in Caucasus region countries’ basic interests;
- Expansion of bilateral relations with Azerbaijan, Turkey and Armenia is important. Georgia should become the area of realization of mutually beneficial political and economic relations, as well as business opportunities;
- One of the priority directions of Georgia’s foreign policy is to broaden economic relations with the countries of Black Sea, Caspian region and Asia;
- It is important for Georgia to deepen economical relations with the countries of central and south-east Europe, as well as with Scandinavian countries.
2. Amendments to the Law of Georgia on the National Bank
In the March of 2013 amendments were introduced to the Law of Georgia on the National Bank. Amendments relate to the article, which regulates the authority of the National Bank of Georgia (NBG) in terms of the financial sector supervision.
According to the amendments, NBG is authorized to refuse the registration/licensing of the entity, subject to its supervision, or purchase of the significant share in such entity in the following circumstances:
If registration/licensing of entity or purchasing significant share in entity may cause:
- threat to Georgian financial sector stability;
- violation or failure to comply with the requirements, foreseen in mandatory decisions of international organizations or/and their recommendations;
- breach of agreements signed between Georgia and other country;
In case when:
- notwithstanding the demand of NBG, the interested person has not presented complete information regarding minimum capital requirements, foreseen by Georgian legislation for starting the activities or regarding origin of the sums, needed for purchasing significant share.
3. Amendments to the Law of Georgia on Microfinance Organizations
On March 20th, 2013 amendments were introduced to the Law of Georgia on Microfinance Organizations. Four paragraphs were added to the article 7, which regulates eligibility criteria.
According to the amendments, the person, who has decided to purchase significant share of microfinance organization is obliged to present to the NBG the application form and documentation confirming, that the acquirer is not convicted for serious or particularly serious crime, financing of terrorism or/and legalization of illegal income or other economic crimes. NBG reviews requisition form within15 days and gives consent or justified refusal for the operation to the interested person. No response from NBG after the lapse of 15 days period should be considered as automatic consent.
Amendments have set the ground for annulling agreement on purchasing significant share of microfinance organization – if, notwithstanding the failure to submit to NBG the application form or in case of justified refusal by NBG, the interested person nonetheless acquired the significant share of microfinance organization.
4. Amendments to the Order of the President of the National Bank of Georgia on Approval of the List of Recognized Stock Exchanges of the Foreign Countries and the Rule of Public Offer of the Securities by the Securities holders, admitted to trade therein
Pursuant to the set of amendments dated April 1, 2013 new paragraph was added to the first article, regulating the scope of the Order. As a result of the amendment, the order also defines periodic reporting requirements for the international financial institute, which is allowed to trade on recognized stock exchanges of the foreign countries.
According to further amendments, Article 5 was added to the Order, setting forth periodic reporting requirements for the International Financial Institution.
The international financial institution, which is allowed to trade on recognized stock exchanges in the foreign countries and is carrying out public offering, is obliged to present to the National Bank of Georgia all financial and other reports, presenting of which is mandatory on the foreign stock exchanges, where its securities are allowed for trade and of which such financial institution has reported to the National Bank of Georgia during public offering. International Financial Institution must submit the documents in the same form and terms as on the recognized stock exchanges.
Pursuant to the amendment, some of the stock exchanges were removed from the list of recognized stock exchanges in foreign countries1 .
5. Amendments to the Law of Georgia on State Property
Amendments were introduced to the Law of Georgia on State-Owned Property in the March of 2013. Pursuant to the amendments:
Payment with the third party shall be made no later than 30 calendar days after the end of the auction. In case of direct selling terms of payment shall be defined by the agreement between the asset manager and the third party.
Amendments made to the subparagraph 11 of the article 36 shall not be applicable to the rule and terms of the procedure of transferring the state forest funds for agricultural use. Rather, the changes affect the entities, authorized to perform such actions. Legal Entity of Public Law-National Forestry Agency under the Ministry of Environment and Protection of Natural Resources and the Legal Entity of Public Law - Adjarian Forestry Agency National Forestry Agency under the Ministry of Environment and Protection of Natural Resources of the Autonomous Republic of Adjara.
The Ministry of Economy and Sustainable Development of Georgia together with the Ministry of Finance should draw up and adopt standard for the cooperation with the third parties.
6. Amendment to the order of the president of the National Bank of Georgia #10/04, dated 11th of February, 2011 on Approving the Rules of Maintaining the Minimum Reserve Requirements by Commercial Banks
Pursuant to the Amendments, the list of balance accounts have been subject to change. Further, the new reserve account has been added to the list of the reserve accounts, set by the National Bank of Georgia. As a result of the amendments, the reserve accounts shall be as follows:
- Special Account in US dollar at NBG;
- Special account in Euro at NBG;
- Settlement account in Lari at NBG, and
- Cash service account in Lari at NBG.
7. Resolution of the Parliament of Georgia on the ratification of the Agreement with the Republic of Croatia on the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital
On March 20, 2013 the Parliament of Georgia ratified the Zagreb agreement, dated January 18, 2013 on the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital. The text of the agreement is based on the model of the Organization for Economic Co-operation and Development. The main purposes of the Agreement is promotion of economic cooperation between countries and encouragement of foreign investments.
8. Amendments to the Law of Georgia on Enforcement Procedures
Pursuant to the amendments dated March 25, 2013 the enforcement procedures have been extended to the administrative acts (claims of reimbursement of the damages to the environment) of the controlling agency, foreseen under the chapter II1 the Law of Georgia on Environmental Protection- demand for environmental damage issued by the controlling authority according to the chapter II1 of the Georgian Law on Environmental Protection.
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1 Tirana Stock Exchange, Kyrgyzstan Stock Exchange, Philippines Stock exchanges, Philippines Dealing Exchange, Hanoi Securities Trading Center, Ho Chi Minh Stock Exchange, Dhaka Stock Exchange, Chittagong Stock Exchange, Thailand stock exchange, Market for Alternative Investment, Bombay Stock Exchange, Inter-connected stock exchange of India – Mumbai, National Stock Exchange of India, OTC Exchange of India, Indonesia Stock Exchange, Jakarta Futures Exchange, Islamabad Stock Exchange, Karachi Stock Exchange, Damascus Securities exchange, Tehran Stock Exchange, Beirut Stock Exchange, Iraq Stock Exchange, Kuwait Stock Exchange, Barbados Stock Exchange, Cayman Stock Exchange, Buenos Aires Stock Exchange, Bolsa de Valores de Bolivia, Bolsa de Valores de Colombia, Bolsa Nacional de Valores, Bolsa de Valores de Nicaragua, Nairobi Stock Exchange, Casablanca Stock Exchange, Namibia Stock Exchange, Nigerian Stock Exchange