2 files changed, 17 insertions, 15 deletions
diff --git a/refs/files-backend.c b/refs/files-backend.c
index 153efe6662..054ecdbca3 100644
--- a/refs/files-backend.c
+++ b/refs/files-backend.c
@@ -3229,8 +3229,25 @@ static int files_init_db(struct ref_store *ref_store,
 	struct strbuf sb = STRBUF_INIT;
 
 	/*
+	 * We need to create a "refs" dir in any case so that older versions of
+	 * Git can tell that this is a repository. This serves two main purposes:
+	 *
+	 * - Clients will know to stop walking the parent-directory chain when
+	 *   detecting the Git repository. Otherwise they may end up detecting
+	 *   a Git repository in a parent directory instead.
+	 *
+	 * - Instead of failing to detect a repository with unknown reference
+	 *   format altogether, old clients will print an error saying that
+	 *   they do not understand the reference format extension.
+	 */
+	strbuf_addf(&sb, "%s/refs", ref_store->gitdir);
+	safe_create_dir(sb.buf, 1);
+	adjust_shared_perm(sb.buf);
+
+	/*
 	 * Create .git/refs/{heads,tags}
 	 */
+	strbuf_reset(&sb);
 	files_ref_path(refs, &sb, "refs/heads");
 	safe_create_dir(sb.buf, 1);
 
diff --git a/setup.c b/setup.c
index 6c8f656f7c..abb271e017 100644
--- a/setup.c
+++ b/setup.c
@@ -1927,21 +1927,6 @@ void create_reference_database(unsigned int ref_storage_format,
 	struct strbuf err = STRBUF_INIT;
 	int reinit = is_reinit();
 
-	/*
-	 * We need to create a "refs" dir in any case so that older versions of
-	 * Git can tell that this is a repository. This serves two main purposes:
-	 *
-	 * - Clients will know to stop walking the parent-directory chain when
-	 *   detecting the Git repository. Otherwise they may end up detecting
-	 *   a Git repository in a parent directory instead.
-	 *
-	 * - Instead of failing to detect a repository with unknown reference
-	 *   format altogether, old clients will print an error saying that
-	 *   they do not understand the reference format extension.
-	 */
-	safe_create_dir(git_path("refs"), 1);
-	adjust_shared_perm(git_path("refs"));
-
 	repo_set_ref_storage_format(the_repository, ref_storage_format);
 	if (refs_init_db(get_main_ref_store(the_repository), 0, &err))
 		die("failed to set up refs db: %s", err.buf);