Company Law of Mongolia (2011)
- 2017-02-15
- 956
Application of the Company Law
All companies operating in Mongolia must comply with the Company Law.
Formation and activities of companies operating in banking, insurance and securities sectors are regulated by other laws in addition to this law.
Forms of companies
A company may take a form of a limited liability company and a stock company. The stock company may either be public or closed.
Branch or Representative Office
A company’s branch (or a unit) will be located in a place different to the company’s principal location and may exercise company functions in whole or in part, and may represent the company.
A company’s representative office may enter into agreements on behalf of the company and also legally represent the company.
Founding of a company and Shares
A company may be founded by Mongolian national/s and legal entity/s. Subject to a law, foreign national/s and legal entity/s may found a company. Issued shares of a company may be held by Mongolian citizens, and legal entities and also foreign citizens and legal entities.
Company dissolution and Claims
Company may be dissolved by a decision of its shareholders and by a court ruling. The company dissolution is resolved by an overwhelming majority of its shareholders. A court may dissolve a company for bankruptcy, absence of membership, and other legal grounds.
The Financial regulatory committee of Mongolia may lodge a lawsuit for company dissolution.
Debts and payments to be made by a dissolving company are regulated by the Civil Code of Mongolia, this law and other relevant laws. Claims may be brought against the dissolving company within 2-6 months of the dissolution notice made to the public.
Corporate bonds
A company may, subject to providing a security over its assets, issue bonds upon a condition to pay interests and/or buy back the bonds. Corporate bonds may be guaranteed by another company subject to a specific guarantee.
Unless a company charter provides otherwise, a purchaser may pay for the issued securities of the company by cash, securities, properties and rights to properties.
Shareholder meetings
A regular shareholder meeting must be held within 4 months of the end of a financial year. Unless the regular shareholder meeting convenes within this time period, the Board of Directors and the Executive management of a company cannot exercise any authority vested by this law and the company charter except for convening a shareholder meeting. A company fully bears the costs of regular shareholder meetings. A shareholder meeting must convene within no less than 40 days after making the decision to convene the shareholder meeting.
Irregular shareholder meeting is held when:
- 50+ percent of the Board members are unable to fulfill their duties
- 2+ independent members of the Board or 10+ percent of shareholders propose or demand the irregular meeting
- Company’s debt exceeds its assets in 2 consecutive years
- The Board decides to convene
- Audit committee requests to convene
- Other occasions arise as provided in the company charter
Competent officers of the company
Competent officers of the company include members of the Board and executive management, Executive director, the head of a finance department, chief accountant, Board secretary and those who directly or indirectly participates in establishing agreements or issuance of official decisions by the company.
Competent officers of the company, within 10 days of their appointment, must provide the list of their common interest persons.
Major transactions
Major transactions are those relating to purchase, sale, and disposal of assets and rights to assets, or pledging assets and rights to assets of the value of 25+ percent of the total credits of the last balance sheet of a company produced before making the major transaction.
The Board or Shareholders meeting must unanimously decide on major transactions. If the Board cannot issue a unanimous decision on major transactions, the relevant matter must be decided by a majority of shareholders attending the shareholder meeting.
Conflict of interest transactions
A decision to permit a conflict of interest transaction is made by a majority of Board members (or shareholders if there is no Board) who are free from conflict of interests. A limited liability company with less than 10 shareholders may provide, in its charter, additional conditions where the Company law requirements for conflict of interest transactions do not apply. (please have a look at Article 89.3 of the Company law for details).