The Kathol Republic was established several decades prior to 8 ABY by a number of politicians who were seeking to escape the crumbling Galactic Republic. Leading a number of like-minded colonists, they traveled into the Kathol Outback, and settled fourteen planets in ten neighboring star systems. At first, only two planets were habitable without terraforming, and some required that the colonists lived in biospheres. However, the colonists did not mind this, and they were willing to work to build a better future for themselves and their descendants.
Unfortunately for the Republic, the union eventually fell into political infighting as the children and grandchildren of the original colonists began to take leadership roles. Never having experienced the chaos that their ancestors had sought to escape, they fell into the same underhanded patterns, vying for power as they struggled to become the President and make their homeworld the center of government for the Kathol Republic.
The government of the Republic was aware that the Galactic Republic that they had fled had fallen, and that the Galactic Empire had risen from its ashes. They were also aware that the Empire was engaged in a civil war with a group calling itself the New Republic. The original settlers were ill-disposed towards Palpatine and his Empire, but were not concerned with who was assigned to control the Kathol sector. As of 8 ABY, they had not formed an opinion on the fledgling New Republic.
In 7 ABY, Senator Sho'ban Do of Pitann started to plan a coup to overthrow President Chandra Hobat by developing a droid remote control that would enable him to take control of all droids on a planet. To cover up his work, he started a series of droid gladiatorial contests that became a contentious issue within the Senatorial Chambers.
After an incident in 8 ABY, the Kathol Republic initially thought that the New Republic was a tyrannical regime that wanted to take control of their planets. However, Captain Kaiya Adrimetrum, commander of the New Republic corvette FarStar, managed to convince President Hobat of the truth, and uncovered the plot by Do to overthrow the legal government. In the aftermath, Hobat agreed to a tentative alliance with the New Republic.
Regardless of its size, each member world of the Kathol Republic elected eleven senators to sit on the Senatorial Council. From these eleven, one was chosen to be that planet's presidential candidate. The president was then chosen from the fourteen candidates by a majority vote of all the inhabitants of the Republic.
The official seat of government for the Kathol Republic was always the homeworld of the current president. Due to the large population on the capital, Dayark, the elected president was more often than not a native of the colony. The president acted as a moderator for the senatorial council, and served as the figurehead of the military. The President served for a period of three years, and could serve at least two consecutive terms.
Under the proxy law of the Kathol Republic, representatives of a foreign state could be held accountable for the actions of other members of that state. Because of this, the crew of the FarStar were put on trial for the actions of the Lialic II (posing as the Lance of Endor) in 8 ABY, since both identified themselves as representatives of the New Republic.
The Kathol Republic operated a small fleet of capital ships, many of which were considered obsolete by the Empire. The backbone of the Kathol Republic fleet were a number of Republic Sienar Systems Marauder-class corvettes. The Republic also maintained a force of Marines for space-borne boarding actions.