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Finance Regulations and Security Interests in Mongolia

Mongolia’s finance regulations and security interests play a crucial role in ensuring that lenders are protected and borrowers are able to access funds. Here are some key points about finance regulations and security interests in Mongolia.

Security Interests

  • A lender can take a security interest in movable property in Mongolia by executing a pledge of movable property agreement.
  • The agreement can be executed in English, but it must be authenticated by a notary public or a legal officer/corporate secretary.

Documentation and Electronic Signatures

  • Mongolia has adopted legislation enabling electronic signatures, but their use is still limited and may require additional regulations.
  • This means that while electronic signatures are possible, they should be used with caution and in accordance with relevant laws and regulations.

Bankruptcy and Insolvency

  • On the date of commencement of bankruptcy proceedings in court, a moratorium is established suspending creditors’ enforcement actions.
  • The statutory order of distribution of the borrower’s assets prioritizes payments to recover damages, expenses of the insolvency administrator, claims arising out of contracts, and other claims.

Restructurings

  • No, restructurings are a fully court-supervised procedure. This means that all restructuring activities must be approved by the court.
  • In addition to court approval of restructuring, loan restructuring is subject to the approval of the Central Bank of Mongolia in case of insolvency of a commercial bank.

Foreign Companies

  • Foreign companies can hold bank accounts in Mongolia and accept, hold, and transfer funds, subject to KYC (Know Your Customer) and other regulatory requirements.
  • This means that foreign companies are able to conduct financial activities in Mongolia, but must comply with relevant laws and regulations.

If you wish to receive further information about finance regulations and security interests in Mongolia, please contact Enkhbat Batsukh, Partner at KhanLex Partners LLP (EnkhbatB@khanlex.mn or +976-99111061).