(2022-11-23-ны өдрийн орчуулгын хяналт)                                   Unofficial translation

LAW OF MONGOLIA

July 2, 2015                                                                                         Ulaanbaatar city

ON PLEDGES OF MOVABLE PROPERTY AND INTANGIBLE ASSETS

CHAPTER ONE

GENERAL PROVISIONS

Article 1.Purpose of the law

1.1.The purpose of this Law is to protect the rights and legal interest of the parties to the relations with respect to pledges of movable property and intangible assets, and to increase the circulation of the assets and financial accessibility.

Article 2.Legislation on pledges of movable property and intangible asset

2.1.The legislation on pledges of movable property and intangible assets shall consist of the Constitution of Mongolia, Civil Code, this Law and other legislative and administrative acts enacted in conformity with these laws.

2.2.The relations with respect to the pledges of minerals exploration and mining licenses shall be regulated by the Law on Minerals.

2.3.The relations with respect to the pledge of securities on a regulated market shall be regulated by a regulation passed based on this law by an authority competent to regulate and control securities.

2.4.If an international treaty to which Mongolia is a party provides otherwise than this Law, the provisions of the international treaty shall prevail.

Article 3.Scope of application of the law

3.1.This Law shall apply to the relations with respect to pledges that shall arise under contract and law with respect to movable properties and intangible assets of individuals and legal entities.

3.2.This Law shall be applied to the lessor's right under a financial lease agreement, the buyer's right that is purchasing receivables, and the seller's right to reclaim the agreement item from the buyer who fails to perform its obligations under the agreement for sale and purchase on credit and seller's right to re-purchase the agreement item under sale and purchase agreement with the condition to re-purchase the property, and right of an authorized person to purchase the property with preemptive right same as a pledge right. This law shall regulate the relations only with respect to the order of the rights and registration matters of the above-mentioned rights.

Article 4.Definitions of terms of the law

4.1.The terms used in this law shall have meanings as follows:

4.1.1."Perfecting a pledge" means the act of securing the validity of the pledge right before a third party, and the order of the pledgee's right to have its claim secured from the pledge item;

4.1.2."Revenue gained from the disposal of the pledge item" means property, money, or asset similar to money gained from the sale of the pledged property or transaction in any manner, and payments for loss incurred due to breakage and destruction of the pledged property, and reimbursement of its mobilization and insurance compensation;

4.1.3."Right to lien" means that a legally authorized person keeps a property in its possession for the period until the transfer of fee and payment to a person in exchange for the services of eliminating defect and breakage, transporting, storing, repairing, or improving the property;

4.1.4."Seller's right to lien" means a seller sold a property on credit, or a lender granted loan to a buyer for purchasing the property lien on the such sold item as a security for the obligation fulfillment;

4.1.5."Pledge right created under law" means a pledge right to be created under laws regulating relations regarding enforcement of court judgment, and tax and bankruptcy matters.

Article 5.Parties to a pledge

5.1.A pledgee is an individual or legal entity that holds a pledge of movable property and intangible asset as a security for the obligation fulfillment to satisfy its claims in case the obligor fails to perform its obligation.

5.2.A pledgor is an individual or legal person who pledges movable property and intangible assets of its own as a security for fulfilling its obligation.

5.3.A pledgor may be an obligor or a third party.

Article 6.Obligation secured by a pledge

6.1.Obligation to be secured by a pledge shall be one or several principal obligations that can be expressed in means of money, and other relevant accessory obligations unless otherwise provided by the law and contract.

6.2.The accessory obligations shall include loss, default interest, forfeit, stamp duty, and court expenses to be reimbursed incurred by the pledgee in relation to satisfaction of the claim of a pledge due to failure of the principal obligations fulfilment.

6.3.If stated in an agreement, the amount of obligation to be secured by a pledge may be changed.

6.4.If stated in an agreement, a pledge can be used for securing the obligation fulfilment to be created in the future, or conditional obligation.

Article 7.Pledge item

7.1.Movable properties which have not excluded from a commercial transaction, existing or to be created in the future, and are transferable to other's ownership, all types of shares, securities, claim rights, all types of science, literature, and artworks, invention, production model, trademark, efficient model, and other movable properties and intangible assets may be a pledge item.

7.2.Pledge item may not be a movable property that is not subject to payment claim in accordance with the law, and a right that may not be transferred to other's ownership.

7.3.Unless otherwise provided by the law and contract, revenue gained from disposition of pledge item shall be the pledge item.

7.4.Unless otherwise provided by the pledge agreement, the fruits of the pledge item shall be the pledge item.

7.5.If provided by the pledge agreement, pledge item and its quantity may be changed.

Article 8.Grounds for pledge rights

8.1.Pledge on movable property and intangible asset shall be created under law, or under an agreement between a pledgee and a pledgor.

8.2.Articles and provisions of this law other than those related to perfecting a pledge right, and order of the pledge right shall not apply to the relations with respect to the pledge to be created under law.

CHAPTER TWO

PLEDGE AGREEMENT ANDPERFECT/SECURING IN A PLEDGE

Article 9.Pledge right to be created under agreement

9.1.Pledge right to be created under agreement shall be created upon the execution of a pledge agreement between a pledgee and a pledgor.

9.2.As for the pledge to be created under agreement, pledge item may be transferred to possession of the pledgee.

Article 10.The contents of pledge agreement

10.1.Pledge agreement shall be executed in writing in compliance with the general regulations of the Civil Code and this law, and the agreement shall include the followings:

10.1.1.if a pledge and a pledgor is an individual, father/mother/'s name, first name, citizenship registration number, residing address; if a legal entity, its name, state registration number of the legal entity, and its address;

/The amendment to this sub-paragraph was made according to the law as of June 3, 2022/

10.1.2.obligation to be secured by the pledge, if it is known by the time of execution of the agreement  amount of the claim to be secured by the pledge;

10.1.3.if the pledge and the pledgor agreed under the agreement that the obligation to be secured by the pledge may be created in the future or may be changed, regulations to define it and other conditions;

10.1.4.specifications of the pledge item, a description of whether it is specific or generic;

10.1.5.a party to possess the pledge item during the effective term of the pledge agreement;

10.1.6.date of the pledge agreement.

10.2.Information set forth in above Article 10.1.1 hereof with regards to the following persons shall be provided in the pledge agreement:

10.2.1.if the obligor is not the pledgor, the obligor;

10.2.2.if the pledge item is common property, the owners of such common ownership;

10.2.3.if the obligee or the pledgee are several persons, the obligees.

10.3.The pledgee, the pledgor, or their respective representatives shall sign to confirm the pledge agreement.

10.4.Pledge agreement which was not executed in writing shall be invalid.

Article 11.Securing a pledge

11.1.If the pledge agreement states to transfer the pledge item to the possession of the pledgee, the pledge shall be perfected upon transfer of pledge item to possession of pledgee or its authorized representative.

11.2.If the pledge item is not transferred to the pledgee, the pledge shall be perfected upon registering pledge notice with electronic database in accordance with this law.

11.3.Pledge to be created under law shall be perfected upon registering pledge notice with electronic database.

11.4.Transfer of perfected pledge right to others shall not constitute a ground for termination of the perfection of the pledge, or grounds for changing the order of such pledge right.

11.5.If right of pledge is perfected uninterruptedly in forms otherwise, it shall be deemed perfected from the time of initial perfection.

Article 12.Exceptional regulation on perfecting a pledge

12.1.In case of monetary savings pledge, the pledge shall be perfected as the pledgee gets the control of such savings account.

12.2.If the pledgee's right has been perfected as to the pledge item, the pledge of revenue gained from disposition of the pledge item shall be deemed perfected.

12.3.In case it is unrecognizable that the revenue has been gained from disposition of the pledge item and it is not clearly stated in the registration of electronic database, the perfection of a pledge shall be terminated after 15 days of the receipt of revenue gained from disposition of the pledge item by the pledgee.

12.4.The pledge notice of an auto transportation vehicle shall be deemed perfected upon registration with electronic database by its each serial number.

12.5.In case the registration is made in accordance with Article 40.3 of this law, once the pledge right is created, the pledge right shall be deemed perfected at the time of such registration.

12.6.When a seller sold property on credit, or a lender granted loan to a buyer for purchasing the property registers the sold item with electronic database within 10 days after transferring the sold item to the buyer, the pledge right of the seller shall be deemed perfected from the time of transfer of the item.

CHAPTER THREE

PRINCIPLE OF ORDER TO EXERCISE PLEDGE RIGHT,

PREEMPTIVE RIGHT OF A PLEDGEE

Article 13.Order to exercise pledge right

13.1.Unless otherwise provided by this law, the order of right of several pledgees to be satisfied the fulfilment of obligations preemptively from one pledge item shall be determined in chronological order based on their perfection of the pledge.

13.2.A perfected pledge shall have the preemptive right over the unperfected pledge regardless of the time when the pledge right is created.

13.3.As for unperfected several pledges, the order whereby the pledge rights have been created shall be applied when determining the order of the pledgees' right.

Article 14.Pledge order of the revenue gained from disposing the pledge item

14.1.Order of rights exercised by the pledgees with respect to the pledge item shall remain effective as for the revenue gained from disposing such pledge item.

Article 15.Seller's preemptive right to pledge

15.1.If a lender granted loan to a buyer for purchase of equipment, and auto-transportation vehicle, or a seller sold equipment, and auto-transportation vehicle on credit perfects its pledge within 10 days of transferring the property to the buyer by registering with the electronic database, such lender or a seller shall have preemptive right to be satisfied its claim prior to other perfected pledgees regardless of the chronological order.

Article 16.Pledgee's preemptive right to livestock, and domestic animal

16.1.If a person transferred a property for the purposes of food and medical treatment of livestock and domestic animal perfected its pledge right, such person shall have preemptive right to be satisfied its claim prior to other perfected pledgees regardless of the chronological order as for such livestock, domestic animal, and revenue gained from disposing the same.

Article 17.Pledgee's preemptive right to wheat

17.1.The perfected pledge right on wheat which is being grown in a land area possessed under law shall have a preemptive right over the landowner's claim right and the claim of the land pledgee.

17.2.The perfected pledge to be satisfied the obligation fulfilment created in order to procure the availability of growing and collecting the wheat within six months prior to growing wheat, or at the time during the growth of wheat shall have a preemptive right over other perfected pledge rights regardless of the chronological order as for such wheat.

Article 18.Preemptive right of a person authorized to lien

18.1.A person has a lien over a property pursuant to Articles 354, 392, 422.3.8 and 429.17 of the Civil Code shall have a preemptive right to satisfied the obligation fulfilment preemptively over the other pledgees with the perfected pledge right with respect to the movable property.

Article 19.Pledge right over a movable property which is a regular component of an immovable property

19.1.Unless the pledge agreement provides otherwise, if a pledged movable property is a regular component of an immovable property, the pledge right of such movable property shall remain effective.

19.2.In cases other than registering a right that created in relation to an immovable property with the state registration under the regulations stated in applicable law prior to perfecting a pledge right on a regular component of such immovable property, the pledge of such regular component shall have preemptive right over any rights related to the immovable property.

19.3.In case a pledged movable property becomes a main component of an immovable property, pledge right on such movable property shall be terminated.

Article 20.Pledge right over property combined with other items

20.1.The pledge right of a movable property that is combined with the main items shall remain effective after such combination.

20.2.If the pledge right specified in Article 20.1 hereof has been perfected at the time of combination with the main items under this law, the pledge right of the property shall be deemed to be perfected following such combination.

20.3.The perfected pledge right of a property combined with the main items shall have preemptive right over the pledge right in the main items.

Article 21.Pledge right over a substitutable property in times of combination or mix

21.1.If the substitutable movable property that is a pledge item has been combined and mixed with other's property, the property formed as result of such combination and mix shall be the pledge item.

21.2.In case the pledge is perfected prior to combining and mixing the pledge item, the pledge in the property formed as result of such combination and mix shall be deemed perfected.

21.3.In cases other than those specified in Article 21.4 of this law, order of pledge right of the property formed as result of combination and mix shall be determined in chronological order whereby the movable property pledge has been perfected.

21.4.If several pledge rights are created in relation to the property formed as result of combination or mix, the order of exercising the pledge right shall be determined as follows:

21.4.1.at the period of combining and mixing a movable property, the perfected pledge shall be satisfied prior to the unperfected pledge right;

21.4.2.as for several unperfected pledges, the pledge right which was created first shall be satisfied in preemptively;

21.4.3.as for several perfected pledges, the claim of their pledge rights shall be satisfied proportionally to price of the property formed as result of combination and mix with the value at the time of such combination and mix of the property.

Article 22.Pledgee changes the order of its preemptive right

22.1.A pledgee may at any time change the order to satisfy the claim of pledge by degrading it entering into agreement in writing with another pledgee.

Article 23.Transferring pledge item to other's ownership

23.1.Unless otherwise provided by the agreement, if the pledgor disposes the pledge item by selling, trading, or gifting the pledge item, the pledgor shall inform the pledgee of it.

23.2.When selling pledge item within the scope of business activities of the pledgor, the notice specified in Article 23.1 hereof shall not be required.

23.3.The activities of selling pledge item within the scope of business activities specified in Article 23.2 of this law shall refer to the activity that a person engages in activities of selling certain type of property for profit-making purposes on a constant basis sells its property held under pledge.

Article 24.Retention of pledged claim when transferring pledge item to other's ownership

24.1.Unless otherwise provided by law or agreement , if selling, trading pledge item, or otherwise changing its owner, the pledge right of such movable property shall remain effective.

24.2.Buyer shall obtain the movable property without the pledge right regardless of whether being aware that the movable property sold within the scope of business activities of the pledgor has been pledged, or whether the pledge rights has been perfected.

24.3.If it is permitted by the pledgee, the movable property and the intangible asset may be transferred to others without a pledge right.

24.4.In case a person who is receiving pledge item under its ownership does not know that the movable property and intangible asset are pledged, or it was unforeseeable, and that person receives such property with due payment prior to perfecting it under this law, then such movable property and intangible asset shall be transferred to such person's ownership without any pledge right.

24.5.In case a buyer of an auto-transportation vehicle did not know that it has been pledged to others at the time of receiving the property, and it has not been perfected as stated in Article 12.4 of this law, the property shall be transferred without a pledge right.

24.6.If the pledge item has been disposed under procedures specified in Articles 24.2, 24.3, 24.4 and 24.5 of this law, the pledge right shall be created over the revenue gained from such disposition under Article 12.3 hereof.

Article 25.Characteristics of pledging receivables

25.1.Pledge of receivables shall be perfected upon the registration of the pledge notice under this law.

25.2.In case of a pledge of receivables, the pledgee is not obliged to notify the obligor of such receivables of the grounds for pledge and its perfection.

25.3.In case the pledgee did not notify the obligor of the receivables regarding failure of the obligation by the pledgor, and the pledge right, then the obligor of the receivables shall fulfill its obligation to the pledgor and such payment shall be used for fulfilling the principal obligation satisfied by the pledge.

25.4.In case the pledgee notifies the obligor of the receivables about the pledge right and the pledgor's failure to duly fulfill its obligations, and demands the obligor of the receivables to fulfill its obligations to the pledgee, the fulfilment of such obligation shall be used for fulfilment of the principal obligation satisfied by the pledge. If the obligor of the receivables fulfill its obligation to the pledgor's after receiving notice from the pledgee, the obligation of the receivables shall not be deemed fulfilled.

25.5.The notice stipulated in Article 25.4 of this law shall be in writing and include the following information:

25.5.1.name of the pledgee;

25.5.2.amount of the receivables, its value, period, terms and procedure for receiving;

25.5.3.instruction on to whom the receivables to be paid; and

25.5.4.evidence regarding the pledge of receivables.

CHAPTER FOUR

RIGHTS AND DUTIES OF PARTIES WITH RESPECT TO PLEDGE ITEM

Article 26.Use of pledge item

26.1.Unless otherwise provided by the pledge agreement, the pledgor of the pledge that has not been transferred to the possession of the pledgee /hereinafter referred to as "non-possessory pledge"/ shall be entitled to use pledge item for its designated purposes.

26.2.As for the non-possessory pledge, the pledgor shall be entitled to the revenue gained from pledge item and its fruits; and unless the pledge agreement provides otherwise, the pledgee shall not exercise any right with respect to such revenue and fruits.

Article 27.Maintenance and repair of pledge item

27.1.Unless otherwise provided by the pledge agreement , the pledgor of the non-possessory pledge shall maintain and protect pledge item until the conclusion of pledge obligation, and shall conduct routine maintenance and be responsible for the incurred expenses for the period and under the regulations stated in law and agreement, if there is not set period, then for the reasonable period of time.

27.2.Unless otherwise provided by the pledge agreement, the pledgee transferred to itself the pledge possession /referred to as "possessory pledge"/ shall maintain and protect the pledge item and be responsible for necessary repair and services.

Article 28.Insurance of pledge item

28.1.The parties may be insured the pledge item by entering into mutual agreement.

28.2.In the occurrence of insurance event of the insured pledge item, the pledgee shall have right to be satisfied its pledge claim from the insurance compensation.

Article 29.Consequences of mobilization of the pledge item

29.1.If a pledge item is mobilized as specified in the law and the compensation and price for mobilizing such pledge item are paid, the pledgee shall have a right to be satisfied the pledge claim from such compensation and price.

Article 30.Prevent a pledge item from loss or damage

30.1.Person possessing the pledge item shall be responsible to ensure integrity of the pledge item and safety of the rights, especially to take measures specified in the law and agreement to protect from other person's illegal attack and hazard and it shall be obliged to take requisite and ordinary measures unless specified in the law and agreement.

30.2.Pledgee shall promptly notify the other party of the agreement in the event of real danger of loss of or damage to the pledge item.

Article 31.Examination of the pledge item

31.1.Party to the agreement which does not possess the pledge item shall have a right to examine the actual condition and maintenance of the pledge item based on notice to the other party.

31.2.In the event of exercising rights stipulated in Article 31.1 of this law, it shall not impede the possession and use of the person who is possessing the pledge item.

Article 32.Transfer of the obligation secured by pledge

32.1.Unless otherwise stipulated in the agreement, transfer of obligation secured by pledge shall be deemed as transfer of right of pledge.

Article 33.Bankruptcy and insolvency of the pledgor

33.1.Order of the perfected pledge shall also apply to the order to satisfy the claim for bankruptcy case.

33.2.If bankruptcy case is instituted against the pledgor, the pledge right shall be valid, and firstly, bankruptcy trustee shall satisfy the pledgee's claim from the sales revenue of the pledge item and the remaining part shall refer to the property allotted by the defendant.

33.3.In the event the pledgor is bankrupted or is deemed as insolvent, if the revenue earned from the pledge item is not sufficient for the claim of pledgee, such insufficient part shall be transferred to the ordinary claim order.

CHAPTER FIVE

REGISTRATION OF PLEDGE NOTICE

Article 34.Registration authority

34.1.The state administrative body in charge of registration /hereinafter referred to as "registration authority"/ shall register pledge notice of movable property and intangible asset with electronic database and issue registration number in accordance with the regulation specified in this law.

34.2.Registration of pledge notice determined in this law has purpose to inform public that a right of pledge arose for movable property and intangible asset of certain possessor and to determine the order of pledge right. Interested person may request clarification from the pledgee or pledgor with respect to the content of pledge agreement.

Article 35.Electronic database

35.1.Registration authority shall have an electronic database /hereinafter referred to as "electronic database"/ that registers the pledge notice of movable property and intangible asset.

35.2.Registration authority shall be responsible for the establishment of electronic database in statewide and its continuous operation, preservation, safeguarding and reliability.

35.3.Registration authority shall prepare statistic report concerning the registration of pledge notice registered with electronic database by month, quarter, and annually in statewide and shall deliver them to the relevant authority.

35.4.Electronic database specified in Article 35.1 of this law shall be consolidated and open for public in statewide.

Article 36.Regulation for operation of electronic database

36.1.Government member in charge of state registration shall adopt the regulation to establish electronic database, to formulate information, to provide and exchange information, to register the notice of right of pledge and to issue the number, to keep open for public and to determine type of statistical information with the suggestion by the head of the registration authority.

Article 37.Searching in electronic database

37.1.Electronic database shall be public for acquiring and searching information with respect to the pledge.

37.2.Enquiry for registration of pledge notice may be acquired from the registration authority.

Article 38.Service fee

38.1.No service fee is charged in searching, registering the pledge notice created as specified in the law in electronic database and canceling the registration of pledge notice.

38.2.In order to register the pledge notice with electronic database, make changes in registration, extend the registration period and acquire registration enquiry, service fee specified in the Law on State Stamp Duties shall be paid.

Article 39.Pledge notice

39.1.Pledge notice shall contain the following matters:

39.1.1.if the pledgor is a citizen, father/mother/'s name, first name, citizenship registration number /passport or similar document number if foreign citizen or stateless person/, residing address; if a legal entity, its name, state registration number of the legal entity, and its address;

/The amendment to this sub-paragraph was made according to the law as of 3 June 2022/

39.1.2.if the pledgee is a citizen, father/mother/'s name, first name, residing address;  and if the pledgee is the legal entity, its name, registration number and its address;

39.1.3.pledge item, its quantity and general description;

39.1.4.term of obligation secured by pledge.

39.2.If there are several pledgees and pledgors, information specified in Articles 39.1.1 and 39.1.2.of this law shall be contained for each related person.

Article 40.Registration of pledge notice

40.1.Pledgee or its representative shall register the pledge notice in electronic means.

40.2.Pledgee shall receive consent for registering pledge notice in written form from the pledgor and such consent may be indicated in the pledge agreement.

40.3.If pledgee and pledgor have agreed in writing, pledge notice may be registered before entering into the pledge agreement or before the agreement becomes effective.

40.4.The bankruptcy trustee appointed from the court shall make entry of the pledge arisen as stipulated in the legislation of bankruptcy in electronic database; and the court decision enforcement office shall make entry of the pledge arisen by the court decision; tax authority shall make entry of the pledge arisen as stipulated in the tax legislation in electronic database without permission of the pledgor.

40.5.If the pledge agreement is amended in writing in respect of information set in Article 39 of this law, the pledgee shall register such amendment with electronic database.

40.6.If the term of the pledge agreement is extended, the pledgee shall  register the extension of the pledge notice registration with electronic database.

Article 41.Effectiveness of pledge notice

41.1.Pledge notice registered with electronic database shall become effective when it becomes open for public.

41.2.Registration of pledge notice shall be valid for three years since it is registered with electronic database if the extension of pledge notice registration is not registered.

41.3.In the event the notice is not perfected in other way except the registration of the notice on extension of such pledge when registration period of pledge notice expires, such pledge shall be deemed as unperfected.

Article 42.Amendment to registration of pledge notice

42.1.Statement on amendment to registration of pledge notice shall contain the followings:

42.1.1.initial registration number of the pledge notice;

42.1.2.information specified in Article 39.1.2 of this law by the pledgee that consents to amend registration of the pledge notice;

42.1.3.other information required for pledge notice.

42.2. In the case to add pledge item in the registration of pledge notice or to get registered the notice to add information of new pledgor and pledgee, newly conducted pledge agreement and consent by new pledgor and pledgee shall be acquired in writing form.

42.3.Amendment to the pledge notice shall be only valid for the pledgee who consents such amendment.

Article 43.Extending registration period of pledge notice

43.1.Statement on the extension of registration period of pledge notice shall contain the followings:

43.1.1.initial registration number of pledge notice;

43.1.2.information specified in Article 39.1.2 of this law by the pledgee that consents to extend registration period of pledge notice.

43.2.Statement on the extension of the registration period of pledge notice shall be registered within six months before the expiry of initial registration.

43.3.Registration of statement on extending registration period of pledge notice shall be deemed as extended for three years regarding the pledgee that consents to valid extension of initial registration.

Article 44.Terminating registration of pledge notice

44.1.Statement on terminating registration of pledge notice /hereinafter referred to as "termination notice"/ shall include the followings:

44.1.1.initial registration number of the pledge notice;

44.1.2.information specified in Article 39.1.2 of this law by the pledgee that consents to terminate registration of pledge notice;

44.1.3.the note regarding the fact that registration of pledge notice becomes invalid for each pledgee who consent to terminate the registration.

44.2.In the following events, the pledgee shall register the statement on termination with electronic database within three days upon the receipt of written notice from the obligor or the pledgor:

44.2.1.the claim to be satisfied by pledge is terminated;

44.2.2.the obligator or pledgor did not consent for initial registration.

44.3.If the pledgee fails to register the statement on termination with electronic database within the period specified in Article 44.2 of this law, it shall pay damages caused to pledgor due to such failure of registration and forfeiture in the event it is determined in the agreement.

44.4.If the value of secured obligations arisen as stipulated in the law is fully satisfied, pledgee shall register statement on termination within 10 days upon the receipt of notice delivered from the pledgor.

44.5.Statement on termination shall only be valid for pledgee that consents to termination.

Article 45.Inserting additional statement to registration of pledge notice

45.1.Obligator or pledgor may insert additional statement with purpose to correct and clarify any information that has been published on electronic database.

45.2.Insertion of additional statement specified in Article 45.1 of this law shall not be the ground for deeming the pledge notice as invalid.

45.3.It shall be responsible to insert accurate information in electronic database and the guilty person who inserted information shall compensate the damage caused to others due to breach of this obligation.

Article 46.Rejection to register pledge notice

46.1.If the pledge notice registered for the first time does not contain the following information, registration in the electronic database shall be rejected:

46.1.1.citizenship registration number of the pledgor;

/The amendment to this provision was made according to the law as of 3 June 2022/

46.1.2.name and residing address of the pledgee;

46.1.3.definition of pledge item.

46.2. Registration shall be rejected if the registration number of notice to extend registration period is invalid, expired, terminated and the following information is not included:

46.2.1.registration number of the principal notice which is to be amended;

46.2.2.citizenship registration number of the pledgor;

/The amendment to this provision was made according to the law as of 3 June 2022/

46.2.3.name and residing address of the pledgee.

46.3.Registration shall be rejected if registration number of the statement to extend registration period is invalid, expired, terminated and the following information is not included:

46.3.1.number of the principal notice to be extended;

46.3.2.period to be extended.

46.4.For a notice to terminate pledge notice registration, if the registration number of such terminating notice is invalid, expired, terminated and the number of such terminating notice is not included, the registration shall be rejected.

46.5.Failure to pay service fee to register pledge notice specified in this law shall be the basis to reject registration of pledge notice.

CHAPTER SIX

EXERCISE OF A RIGHT OF PLEDGE

Article 47.Ground for exercising a right of pledge

47.1.Except otherwise provided by law, and if the obligator did not fulfill its obligation to secured with pledge, the right to exercise a right of pledge shall arise for the pledgee.

Article 48.Notice to exercise a right of pledge

48.1.If the ground for exercising the right of pledge comprised, the pledgee shall provide notice in writing to the pledgor and obligator and the notice shall include the followings:

48.1.1.information on the pledge agreement;

48.1.2.notice regarding the condition to exercise a right of pledge is created and commencing the exercise of the right of pledge;

48.1.3.measures that may be taken by the pledgor in relation to satisfaction of pledge;

48.1.4.final possible term to take such measures.

Article 49.Term to satisfy the pledge claim

49.1.Except as otherwise provided in the notice to implement the claim of pledge, the final possible term to satisfy claim of pledge for the pledgor shall be 14 days since delivering the notice to exercise right of pledge to the pledgor.

Article 50.Entry of notice to exercise right of pledge to registration and notification to other pledgees

50.1.When term set to satisfy the claim of pledge expires, the pledgee shall exercise right of pledge.

50.2.If the pledge is perfected by registration, the pledgee shall enter information into electronic database the commencement of procedures for satisfaction of the pledge claim.

50.3.The pledgee who commenced procedure to satisfy its claim of pledge shall deliver such notice to the address specified in the registration and notify the other pledgees who are perfected by registration of pledge no less than 10 days before selling the pledge item. Notice specified in Article 50.3 of this law shall provide pledgee, pledgor, pledge item and measure, term, and location of selling the pledge item.

Article 51.Submission of claim for enforcement of right of pledge

51.1.The pledgee shall have the right to transfer pledge item to its possession upon the registration of the notice to exercise right of pledge with electronic database.

51.2.The pledgee may lodge a claim with the court if it is impossible for pledgee to exercise right to take pledge item into its possession.

51.3.To lodge the claim provided in Article 51.2 of this law, the pledgee may request to take pledge item into its possession within scope of securing implementation of court decision stipulated in Article 69.1.5 of the Civil Procedure Code.

51.4.The judge shall issue an order to transfer pledge item into the possession of pledgee within seven days after the receipt of request determined in Article 51.3 of this law on the basis that the conditions set in the pledge agreement are satisfied.

51.5.If the pledge item is not unrepeatable, rare, and irreplaceable, the court may transfer the pledge item into the possession of pledgee and issue the permission to sell such item.

51.6.The pledgee shall be obliged to keep revenue earned from sales of pledge item specified in Articles 51.4 and 51.5 of this law until the court resolves the claim at final provided in Article 51.2 of this law.

Article 52.Prohibition to impede exercise of right of pledge

52.1.The pledgor shall be prohibited to unlawfully impede the lawful action taken by the pledgee as stipulated in this law to exercise its right of pledge.

Article 53.Methods to satisfy the claim of pledge

53.1.When selling pledge item, the pledgee is obliged to consider the quality of the pledge item, to choose appropriate method to sell it fairly and with less expense by appointing a third party to sell pledge.

53.2.The claim of the pledge shall be satisfied by selling the pledge item as follows:

53.2.1.the pledgee sells itself directly or through a representative at an auction;

53.2.2.to the pledge item at an auction of a third person;

53.2.3.to sell the pledge item at an existing market or exchange where such type of property is sold or purchased.

Article 54.The distribution of the revenue generated from the sale of the pledge item

54.1.The pledgee shall, after paying the cost incurred with regards to the sales of the pledge item in accordance with the Article 53 of this law, satisfy the claim of the pledge of itself and other pledgees out of the revenue generated from the sale of the pledge item pursuant to the order set forth in this law and shall return the remaining sum to the pledgor.

54.2.Not less than 10 days before the distribution of the revenue generated from selling the pledge item in accordance with the Article 54.1 of this law, a notice shall be delivered to the person set forth in the Article 50.3 of this law, which contains the date and venue of the revenue distribution, the address to where the claim on the distribution and evidence may be sent; and the notice may be sent together with the notice set forth in the Article 50.3 of this law or separately.

54.3.The pledgee shall adhere to the following order when distributing the revenue generated from selling the pledge item in accordance with the Article 54.1 of this law:

54.3.1.actual cost incurred with respect to its possession, preserving or selling the pledge item;

54.3.2.the claims in the order which comes before itself that is set forth in this law;

54.3.3.the claim of the pledgee's who is exercising the right of pledge;

54.3.4.the claims of other pledgees who come after it in terms of order regarding the delivery of the notice and evidence set forth in the Article 54.2 of this law before distribution of the revenue generated from selling the pledge item.

Article 55.The right of the pledgor to redeem its pledge item

55.1.At any stage before selling the pledge item, the pledgor may, after fully satisfying the claim of the pledge, stop the process to satisfying the claim of the pledge.

55.2.The pledgor shall reimburse the cost or damage incurred by the pledgee with regards to satisfying the claim of the pledge in the case set forth in the Article 55.1 of this law.

Article 56.Transferring the ownership of the pledge item to the buyer or other pledgees

56.1.The person who bought the pledge item which is sold in accordance with this law shall transfer such item into its ownership free of any right of pledge.

56.2.The pledgee may, in case the pledgor, obligor or other pledgees who registered its right of pledge in accordance with this law consents in writing, consider the obligation to satisfy with pledge partially or wholly satisfied and may partially or in wholly transfer the pledge item into its ownership.

Article 57.Satisfying its claim from receivables

57.1.The pledgee may have claim of pledge directly satisfied by the original obligor in case the pledge item is a receivable and obligation period has expired.

57.2.The pledgee may deduct the cost incurred with regards to satisfying the claim of the pledge and return the remaining sum to the pledgor in case sum exceeds the obligation to satisfy with a pledge after the pledged receivable is paid.

57.3.The pledgee may officially inform the obligor that the obligation backed with a pledge has been satisfied and may keep such payment until the payment date in case the payment was made during the period of right of pledge even though the payment date of the pledged receivable hadn't come.

57.4.The pledgee may have the claim of pledge directly satisfied by means of exercising its right which is expressed as a pledge item in case the pledge item is a bearer security which the pledgee took into his/her possession and the period to satisfy the obligation is over.

57.5.The pledgee bank may indisputably deduct the claim, of the pledge from the money, in case the pledge item is money held in a bank account. If the pledgee is an entity other than a bank, the person who took over the control to manage the account shall have the right to have the claim of the pledge satisfied from the money which is the pledge item.

CHAPTER SEVEN

MISCELLANEOUS

Article 58.Grounds for termination of right of pledge

58.1.Except otherwise provided by law, right of pledge shall terminate on the following grounds:

58.1.1.the parties to the pledge have mutually agreed;

58.1.2.the obligation to satisfy with a pledge has already been satisfied or terminated;

58.1.3.the pledge item doesn't exist anymore;

58.1.4.the pledge item has been transferred to the ownership of the pledgee;

58.1.5.the obligation to satisfy with a pledge has been transferred separately from the pledge item;

58.1.6.the pledge item was sold or transferred to others in accordance with the law.

Article 59.Entry into force

59.1.This Law shall enter into force on September 1, 2016.

THE CHAIRMAN OF THE STATE GREAT KHURAL OF MONGOLIA Z.ENKHBOLD