The Right of an LLC Partner to Receive Information and Access Documentation
Introduction
According to the Law of Georgia on Entrepreneurs (Article 29), "a share is a right that implies a person's participation in the capital of an entrepreneurial company and is associated with rights and obligations. A share is an object of ownership." A partner of a limited liability company (hereinafter "LLC") has, in addition to property rights arising from ownership of a share, also non-property rights. Some non-property rights are exercised jointly by partners, while some rights belong to the partner individually. In Georgian law, the partner's right to control and inspect the company, to receive information about the company's activities, and to access the company's business correspondence is considered a non-property right of the partner (SUSG #AS-1340-2022).
Informational rights play an important role in the partner's decision-making process. In the relationships between the company's management bodies and the partner, issues of informational asymmetry and principal-agent problems arise. Compared to directors, partners are less informed about matters related to the company's activities and condition, while directors may not always act in the principal's interests.
To address these and other issues, corporate law seeks to grant partners the rights to receive information and access documentation. The Law of Georgia on Entrepreneurs, which entered into force on January 1, 2022, like its predecessor, provides for the individual informational rights of an LLC partner.
Naturally, an LLC partner has a substantial interest in having access to information related to the company's activities. "The fact that a partner's interest is to receive dividends itself determines at least the desire to have access to such information as to how successfully the company's activities are developing and whether the share acquired by disposing of their own capital for the benefit of the company is profitable." (SUSG #AS-1817-2019). In addition, access to information related to the company's activities enables the LLC partner to exercise other property and non-property rights (for example, making decisions at the general meeting, requesting the annulment of a general meeting decision, etc.).
However, corporate law also has to address the opposite problem. Not infrequently, a partner may be motivated to misuse the right and, apart from the aim of paralyzing the management body, may seek to use the information against the company. Accordingly, it is important to maintain a balance between the exercise of the partner's right and the protection of the company's interests. In one case (SUSG #AS-964-925-2014), among other types of information, LLC partners requested "a description of an ordinary working day of the company's director, indicating specific activities and the working hours required for them." The court (rightfully) did not satisfy the claim in this part. However, beyond the formulation of the claim, the case clearly highlights the issues related to defining the content and scope of the partner's individual informational rights and their exercise.
Peculiarities of the Right to Receive Information and Access Documentation in an LLC Compared to Other Forms of Entrepreneurial Companies
The Law of Georgia on Entrepreneurs recognizes various forms of entrepreneurial companies. It is clear that, on the one hand, there are essential differences between personal and capital companies, and on the other hand, between the forms grouped according to the classification of personal and capital companies.
