(2022.08.02-ны өдрийн орчуулга)               Unofficial translation

LAW OF MONGOLIA

February 10, 2012                       Ulaanbaatar city

ON CREDIT GUARANTEE FUND

CHAPTER ONE

General provisions

Article 1. Purpose of the law

1.1. The purpose of this law is to define the legal basis of credit guarantee fund, which has goals to increase financial opportunities necessary for operations of citizens and/or legal entities, to support the employment, and to provide a stable source of income for citizens, and, to govern relations related to services of the credit guarantee fund.

/This section was revised according to the law as of November 12, 2021/

Article 2. Legislation on Credit guarantee fund

2.1. The legislation on credit guarantee fund consists of the Constitution of Mongolia, Civil Code, this law and other legislative acts enacted in conformity with these laws.   

2.2. If an international treaty to which Mongolia is a party stipulates otherwise than this law, then the provisions of the international treaty shall prevail.

Article 3. Scope of the law

3.1. This law shall govern relations related to activities of the credit guarantee fund in which the Government participates as a founder, investor and co-guarantor.

Article 4. Legal status of Credit guarantee fund

4.1. The credit guarantee fund shall be a non-profit legal entity issuing credit guarantees to citizens and/or legal entities and/or small and medium enterprises that lack collateral.

/This clause was amended according to the law as of November 12, 2021./

Article 5. Definitions of terms

5.1. Terms used in this law shall have the following meaning:

5.1.1. "small and medium enterpriser" means an entity stated in the provision 5.1 of the law on small and medium enterprises;

5.1.2. "guarantee" means as stated in Article 458 of Civil Code;

5.1.3. "credit guarantee" means as stated in Article 28 of the law monetary deposit, transfer of monetary transaction, and loan activities of the bank and competent legal entity;

5.1.4. "the Small and medium enterprise development fund" means as specified in Article 6.4.4 of the Law on Government Special Fund.

/This clause was repealed in accordance with the law as of November 13, 2019./

CHAPTER TWO
ESTABLISHMENT OF FUND, ITS MANAGEMENT, STRUCTURE AND ORGANIZATION

Article 6. Establishment of the fund

6.1. State and non-state organizations, international organizations, citizens and/or legal entities can be a founder of the fund. 

6.2. A charter of the fund shall be approved by the first meeting of founders, and it shall be considered that the fund to be founded by approving the charter of the fund.

Article 7. The fund management, structure and organization

7.1. The fund shall have a Board of Directors, a supervisory board, an executive director and a credit guarantee committee.

7.2. The charter may state that the fund may have other organizational structures in addition to those specified in the provision 7.1 of this law.  

7.3. The highest authority of the fund shall be the Board of directors, and the directors of the Board shall be appointed by the meeting of founders according to the charter of the fund.

7.4. The first meeting of founders of the fund has a right to approve the charter, and after appointing the directors of the Board this right of founders shall be transferred to the Board of directors, and any amendment and addendum to the charter can be made by an overwhelming majority of directors of the Board.  

7.5. The Board shall consist of the state central administrative body in charge of budget, finance and small and medium enterprises, investors, donors, supporters and their appointed representatives.

7.6. The Board of directors may include representatives of persons directly involved in the fund's activities.

Article 8. Charter of the fund

8.1. The charter of the fund shall include the following:

8.1.1. name, address and location;

8.1.2. purpose;

8.1.3. types and principles of activities;

8.1.4. procedures for management and organizational structure, control system, appointment and dismissal of authorized persons;

8.1.5. powers and functions of the Board of directors, supervisory board, executive management and other organizational structures;

8.1.6. a procedure for making decisions at the board meeting.

8.2. In order to approve and amend the charter, a permission must be taken from The financial regulatory commission.

CHAPTER THREE
FUND ACTIVITIES

Article 9. Key activity of the fund

9.1. The fund shall carry out the following activities:

9.1.1. to issue guarantees for up to 60 percent of loans to small and medium enterprises that request loans from banks and financial institutions but do not have sufficient loan collateral;

9.1.2. to issue a guarantee for the purchased bond if a bank or financial institution has purchased a closed bond issued by a small and medium enterprise in accordance with Article 5.1 of the Law on Securities Market;

9.1.3. to issue guarantees for up to 60 percent of advances and/or collateral of individuals and/or legal entities who have applied for loans from banks and financial institutions according to the programs and measures approved by the Government in compliance with the policy of decentralization and housing, but have insufficient down payments and collateral.

/This clause was added according to the law as of November 12, 2021./

9.2. The fund shall issue a guarantee specified in 9.1 of this law based on the conclusion of the bank or financial institution that will issue the loan.

/This section was amended according to the law as of November 12, 2021./

9.3. The fund's assets may be placed in the bank in the form of deposits, current accounts, government bonds and other forms approved by the Financial regulatory commission.

 Article 10. Other activities

10.1. The fund shall carry out the following other activities in connection with its key activities:

10.1.1. to exchange information and obtain information with the authorized organization in charge of state registration of credit information and state property rights, and other necessary public and private databases;

10.1.2. to sell overdue debts and receivables arising from loan guarantees and other related activities and to take other measures permitted by law.

Article 11. Operational procedure of the fund

11.1. The Board of Directors shall approve the following procedures for the fund's operations:

11.1.1. type, amount, term, deduction fee, fee and other conditions of the guarantee;

11.1.2. the procedure for issuing a guarantee;

11.1.3. the procedure for performing the obligations under the guarantee;

11.1.4. procedures for cooperation with banks and financial institutions within the scope of issuing guarantees;

11.1.5. procedures for managing and placing the fund's assets and monetary assets;

11.1.6. registration and information storage procedures.

11.2. The Government shall approve procedures related to the double guarantee issued by the Small and medium enterprise development fund for risks arising from the activities of the fund from.

/This section was repealed according to the law as of November 13, 2019/

Article 12. Deduction fee of the guarantee and service fee

12.1. The fund shall receive a guarantee deduction fee and service in order to keep the fund's operation normal, and the amount of deduction fee and service fee shall be determined by the fund.               

CHAPTER FOUR
RIGHTS AND OBLIGATIONS OF THE GOVERNMENT

Article 13. Participation of the Government and its relevant organizations

13.1. Per the request of the fund, the Government may provide an additional funding and soft loans to the fund in order to increase the fund's financial capacity.

 13.2. Up to 60 percent of the total guarantees issued by the fund shall be guaranteed by the Small and medium enterprise development fund.

/This section was repealed according to the law as of November 13, 2019./

13.3. The Small and medium enterprise development fund shall deposit up to 10 percent of the total amount of guarantees planned to be issued by the fund in a given year in the form of cash to cover contingent liabilities.

/This section was repealed according to the law as of November 13, 2019./

13.4. The double guarantee deduction fee and service fee to be paid by the Small and medium enterprise development fund shall be determined by the state central administrative body in charge of small and medium enterprises and the state central administrative in charge of finance and budget matters in consultation with the fund.

/This section was repealed according to the law as of November 13, 2019./

CHAPTER FIVE
OWN ASSETS OF THE FUND, REGISRATION, FINANCIAL REPORT

Article 14. Own assets of the fund

14.1. The fund shall have own assets as a guarantee of its responsibilities in carrying out its activities.

14.2. The Financial regulatory commission shall determine the minimum amount and an appropriate ratio of the fund's own assets.

14.3. The total amount of guarantees to be issued by the fund shall not exceed 20 times the fund's own assets.

14.4. If the prudential ration of the fund's activities does not reach the level set by the Financial regulatory commission, the fund may make a proposal to re-invest in proportion to the amount invested by the investor to cover the shortfall of its assets. 

14.5. If the investor does not accept the proposal specified in the provision 14.4 of this law, one of the investors alone or several investors may provide the difference to cover the capital shortfall and take measures to bring the prudential ratio to the required level.  

Article 15. Financial report of the fund

15.1. The fund shall issue a financial report pursuant to the Law on Accountancy and international standards of the accountancy.

15.2. The fund shall submit the financial report to the Financial regulatory commission and the state central administrative bodies in charge of small and medium enterprises, and finance and budget annually.

15.3. The financial report of the fund consists of balance sheet, income statement, statement of changes in equity, statement of cash flows, and notes to financial statements

CHAPTER SIX
MONITORING FUND OPERATIONS

Article 16. Monitoring of Financial regulatory commission

16.1. The Financial regulatory commission shall issue rules and regulations on ensuring the fund's own assets and solvency and regulating the fund's activities, and monitor their implementation.

16.2. The Financial regulatory commission shall take an opinion of the state central administrative bodies in charge of small and medium enterprises, and finance and budget before approving the rules and regulations specified in the provision 16.1 of this law.

CHAPTER SEVEN
CLOSING DOWN THE FUND OPERATION

 Article 17. Liquidation of the fund

17.1. The fund shall be liquidated pursuant to the procedure stated in the Article 38 of Civil Code. 

CHAPTER EIGHT
MISCELLANEOUS

Article 18. Liabilities for violations of the law

18.1. If actions of an official violating this Law is not of a criminal nature, he/she shall be subject to liability specified in the Law on Civil Service.

18.1. A person or legal entity that violates this Law shall be subject to liability specified in the Criminal Code of Mongolia or the Law on Infringements.

/This article was revised according to the law as of December 4, 2015./

SPEAKER OF THE STATE GREAT KHURAL OF MONGOLIA          D.DEMBEREL