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April 4, 2022
By Nicholas P. Flint

As businesses and their owners flock from overly regulated states such as New York and California, Georgia and other business-friendly states have seen a sharp uptick in the number of foreign (i.e. out of state) entities seeking to move their state of incorporation or organization to Georgia through a process called “domestication”. The problem is that Georgia’s laws—for some bizarre reason—don’t allow it.

That’s right. Georgia, which prides itself as a haven for business with low corporate taxes and few regulatory hurdles, literally does not allow out of state businesses to move to Georgia. It’s the only state in the country that doesn’t allow for domestication of foreign entities. In what world would a legislature want to actually prohibit the influx of businesses into its state?

Instead, business owners and their counsel are forced to improvise and take one of two less-than-ideal alternatives to what should be a simple domestication process (assuming the business owner doesn’t pass over Georgia altogether):

• First, keep the foreign company’s existing state of domicile and qualify the entity to do business in Georgia as a foreign entity. This of course subjects the business to annual registrations, added fees, and jurisdictional nexus in multiple states when it may only need or want to be in one.
• Second, form a new entity in Georgia with the same or similar name as the foreign entity, then merge the foreign entity with and into the new Georgia company, with the Georgia company being the surviving entity. Sounds way more complicated than it should be, right? Needless to say, this is a multi-step process that involves filing certificates of merger in both states, preparing authorizing resolutions and a plan of merger, and, of course, more filing fees.

The solution is an easy one: Update the Georgia corporate code to permit domestication of foreign entities, and set forth the procedures for doing so through the Secretary of State, like every other state. As the Georgia General Assembly wraps up the 2022 legislative session today, perhaps this issue could be addressed next year—along with some additional updates to the corporate code which will be addressed in subsequent blogs.

Georgia consistently earns high marks as being one of the best states for business in the country—top 5 in almost every ranking. It should come as no surprise that Georgia is home to 18 Fortune 500 companies, with Atlanta as the city with the fourth most Fortune 500 companies in the United States. What does come as a surprise, though, is that nothing has been done by the Georgia legislature to address issues as simple as this one. If Georgia wants to keep attracting businesses from other states, allowing for domestication of foreign companies is as glaringly obvious as it is imperative.

Nicholas Flint is an associate attorney with Flint, Connolly & Walker, LLP who represents domestic and international clients on a variety of corporate and transactional matters, including mergers and acquisitions, joint ventures, private equity and venture capital transactions, financing and lending arrangements, and debt and equity offerings. In addition to his transactional work, Mr. Flint routinely serves as a general business and legal advisor to his clients, counseling on matters such as corporate governance, executive compensation, regulatory compliance, and commercial contracts.