Before establishing cooperation with a new business partner, for transaction security and one’s own, due diligence must be exercised in their selection, as required from professional entities in economic activity, such as entrepreneurs. It is obvious that verifying a foreign contractor poses more difficulties. How to check a company from Georgia?
Exercising due diligence in verifying the contractor
In today’s times, establishing a company is very easy. In many countries, it can be done even without leaving home, through the Internet. Therefore, one can never be certain who is truly hiding behind a created name and entry in the registry until it is verified. Verification is carried out through actions commonly used in economic intelligence, consisting primarily of checking the reliability and currency of the contractor’s documentation, KRS, NIP, REGON, as well as permits and certificates necessary for conducting a specific type of activity.
Verification can be done by obtaining information from the appropriate individuals and institutions, such as registration courts, ZUS, tax offices, or national and international chambers of commerce. It is worth delving into knowledge about the company’s history and its owners, including opinions about the company, also by searching the Internet or asking other entrepreneurs, contractors of this entity, and the interested party directly. It must be remembered that failure to exercise due diligence in selecting a contractor carries legal consequences, e.g. being accused of willful participation in irregularities and resulting in further tax and legal sanctions.
National and EU sanctions
For over a year, Polish companies have been even more cautious about cooperating with foreign, including Georgian, business partners due to the Russian military aggression in Ukraine. By the end of 2022, the European Union imposed 9 sets of sanctions on Russia. Poland also imposes its additional sanctions. These include important individuals in Russia, as well as companies from this country and Belarus. Trade in goods and services with Russian and Belarusian companies is prohibited. Polish entrepreneurs may face a financial penalty of up to 20 million PLN and even up to 15 years of imprisonment for violating this ban. However, Russian and Belarusian entrepreneurs have learned to bypass international prohibitions by using, among other things, complex holding structures established in other countries, where the real ownership structure is difficult to detect.
The risk of establishing cooperation with an unknown company from Georgia is particularly significant, as this country is under strong influence from Moscow. As the Centre for Eastern Studies claimed in its analysis on May 25, 2023, Georgia is getting closer to Russia. Despite strongly aspiring to join the ranks of European Union member states (the Union is to decide whether to grant Georgia candidate status by the end of 2023), it pursues a pro-Russian policy. Georgia did not join the EU’s restrictions imposed on Russia in connection with its aggression on Ukraine, did not close the sky for planes from there, and intensified trade exchange. It is more difficult in the case of Georgian companies to obtain a one-hundred-percent confirmation of the ownership structure and the real beneficiary of the enterprise.
Economic cooperation with Georgia
On August 30, 2014, the European Union and the European Atomic Energy Community, along with their member states, signed an association agreement with Georgia, which served as a prelude to Georgia’s accession to the EU. The goal of the agreement is political integration and increased economic cooperation. It entered into force in July 2016, deepening the free trade area, reducing tariffs, facilitating customs procedures, and trade exchange by gradually aligning Georgian regulations, principles, and procedures, including norms, with EU regulations.
Poland and Georgia concluded a bilateral agreement on economic cooperation on November 5, 2007. According to data from the Central Statistical Office (GUS), trade in goods between Poland and Georgia in 2021 increased by 29% compared to 2020 and amounted to USD 204.2 million, of which Polish exports were USD 161.1 million (a 30.7% increase), and imports to Poland were USD 43.2 million (a 22.6% increase compared to 2020). We sell the most to Georgia: chemical industry products, electromechanical industry products, and agri-food products. In the other direction, primarily agricultural and food products, light industry products, and metallurgical products are traded.
Economic cooperation is also facilitated and promoted by the Partnership and Cooperation Agreement between the European Communities and their Member States, on the one hand, and Georgia, on the other hand, signed in Luxembourg on April 22, 1996, as well as the agreement on the avoidance of double taxation and prevention of tax evasion in the field of income and property taxes signed in Warsaw on November 5, 1999.
National and EU information sources
Detailed information about the type of economic transactions with Belarus and Russia covered by the EU’s ban can be found on the websites of the European Council: https://www.consilium.europa.eu/. The Official Journal of the European Union contains a list of individuals and entities subject to sanctions: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02014R0269-20220721. The Polish Ministry of Internal Affairs and Administration also maintains an up-to-date register of entities subject to sanctions, where you can check a contractor, its connections, the reasons for inclusion in the register, and the applied sanctions: https://www.gov.pl/web/mswia/lista-osob-i-podmiotow-objetych-sankcjami.
In the first step of checking a company from Georgia, you can therefore check whether it appears in any of the aforementioned registers. The Regulation (EU) 2022/576 of April 8, 2022, amending Regulation (EU) No 833/2014 concerning restrictive measures in relation to actions undermining the situation in Ukraine, is also a source of useful information.
Economic intelligence, or how to check a contractor from Georgia?
Verification of a contractor can be entrusted to a professional economic intelligence agency that deals with such orders on a daily basis. A private detective in Warsaw, Poznań, Wrocław, or other cities will know how to obtain the necessary information verifying the current or future contractor.
The most important way to verify a contractor and their potential connections with Belarus or Russia is to determine the entity that is their ultimate beneficiary and then check whether it is listed on the aforementioned sanctions list maintained by the Ministry of Internal Affairs and Administration. Determinations can be made in the Central Register of Ultimate Beneficial Owners maintained by the Minister of Finance: https://crbr.podatki.gov.pl/adcrbr/#/wyszukaj.
Direct inquiry to the contractor
In case of difficulties in determining the ownership structure of a business partner through available registers, you can use another method of verification within the scope of economic intelligence, which is to directly inquire with them to confirm who their ultimate beneficiary is. Of course, to authenticate the response, you can ask the Georgian entrepreneur to provide documents confirming their declarations.
Environmental intelligence
A publicly accessible method of obtaining information about a contractor is to search the Internet resources. Verifying the company, checking if it has a website, and examining opinions about it may lead to finding some publications about the company. You can also request references from other firms that have dealt with this contractor.
If you prefer not to do this on your own, you can entrust the research to a detective agency specializing in professional economic intelligence. There are many sources of information other than the World Wide Web. Polish-Georgian chambers of commerce or the Embassy of the Republic of Poland in Tbilisi can also provide such information.
Polish and EU registers
In the Bulletin of Public Information of the Ministry of Entrepreneurship and Technology, as the minister responsible for the economy, a register of representations of foreign entrepreneurs is maintained. If we find the representation of our contractor in this register, we can assume that the contractor still exists and conducts business.
Another register where you can check a contractor is the European Union’s VAT taxpayer register and EORI register. Companies and individuals wishing to conduct commercial activities within the EU must use the EORI number as their identification number in all customs procedures. The VAT Information Exchange System (VIES), operated by the European Commission, is a search engine that allows you to check whether a particular entity is registered as conducting intra-Community transactions. This is essential, among other things, to apply the 0% VAT rate to a particular transaction. If VIES does not confirm the registration of the contractor, you can request verification from the tax authorities of the country where the contractor is based. It is also important to check whether the company has the necessary permits and certificates, if required in a particular country.
The Insolvent Debtors Register allows you to check whether a specific contractor is listed. There are also economic information bureaus that have detailed information about business activities. BIK, the Credit Information Bureau, established by the Polish Bank Association, collects data on the credit history of bank clients, credit unions, and quasi-banking loan companies.
Georgian business registers
The official state register of entrepreneurs is available on the website https://enreg.reestri.gov.ge. The register, maintained by the National Agency of Public Registries, offers a search engine for commercial and non-profit entities. The database includes free corporate documents, also translated into English. Through this website, you can search for any economic entity (individual entrepreneur, legal entity conducting business, non-profit legal entity, etc.). It allows you to browse registration applications and monitor application procedures and decisions, as well as access registration statements and other documents.
The Companyinfo.ge portal (https://www.companyinfo.ge) was launched by Transparency International Georgia to create a more accessible version of the official register of companies maintained by the National Agency of Public Registries. The website contains data on all Georgian companies starting from 2010. You can easily search and check how the management and ownership of companies have changed over the past few years, and how the shareholders and directors of different companies are connected through ownership or management rights. This is a database of companies that can be searched by company name, directors and shareholders, and company ID. Searching is also possible in English.
The website of the Revenue Service of Georgia, Electronic Services (https://eservices.rs.ge), provides information on the revenues of various companies, but it is primarily available only in Georgian. It requires registration and account creation.
The last of the registers that can be helpful in verifying a company from Georgia is the official website of the Georgian Stock Exchange. Available in both English and Georgian, it provides information about listed companies, including reports on issuers and securities (https://gse.ge/en).
It is essential to thoroughly check the contractor
Before conducting transactions or establishing cooperation with a contractor from Georgia, it is essential to conduct economic intelligence and thoroughly verify them, especially for any connections with Belarus or Russia. Violation of sanctions imposed on transactions with these countries may result in a financial penalty of up to 20 million PLN and 3 to 15 years of imprisonment. Apart from that, commercial prudence and due diligence in selecting a contractor are always required. These are obligations that entrepreneurs must fulfill every day, regardless of the current situation in Eastern Europe, and failure to comply with them can lead to specific sanctions imposed by the law on companies as professional entities in commercial transactions.
Do you know how to check a company from Georgia? If not, or if you need to find more detailed information, we can assist you. Contact us.
