(2022.12.06-ны өдрийн орчуулга)                                                    Unofficial translation

LAW OF MONGOLIA

May 6, 2021                                                                               Ulaanbaatar city

ON COOPERATIVES

/Revised edition/

CHAPTER ONE

GENERAL PROVISIONS

Article 1.Purpose of the law

1.1.The purpose of this Law is to regulate relations with respect to the establishment of a cooperative, its membership, management, organization, assets, control, and termination of operations of a cooperative.

Article 2.Cooperative Legislations

2.1.The cooperative legislations consist of the Constitution of Mongolia and the Civil Code, the Law on State Registration of Legal Entities, this Law and other laws and legal acts enacted in conformity therewith.

2.2.If an international treaty, to which Mongolia is party, provides otherwise, the provision of such international treaty shall apply.

Article 3.Scope of the Law

3.1.This Law shall apply to cooperatives other than cooperatives engaged in savings and credit operations.

Article 4.Legal Terms and Definitions

4.1.The following terms used in this Law shall have the following meanings:

4.1.1."cooperative" means a legal entity specified in Article 36.4 of the Civil Code;

4.1.2."cooperative member" means a person over 16 who has invested in the cooperative in an amount specified in the charter of a cooperative, and in the case of a joint cooperative, a cooperative or a legal entity;

4.1.3."goods and products of cooperative" mean raw materials, semi-finished and finished products prepared by a cooperative or a cooperative member;

4.1.4."payment to be paid to cooperative member" means a transaction price amount agreed to be paid by a cooperate to its member after selling goods and products of a cooperative member and using an intellectual property;

4.1.5."income of cooperative intermediary" means an amount after deducting the payment to be paid to a cooperative member or expenses related to the sales activity from the intermediary sales proceeds of goods and products of a cooperative member;

4.1.6."risk contingency fund" means funds to be accumulated from the sales proceeds of a cooperative in accordance with this Law and the charter of a cooperative to protect the cooperative against potential risk contingency;

4.1.7."income per cooperative member" means the funds to be distributed in an amount of the share capital and participation of a cooperative member after deducting the payment to be paid to the risk contingency fund and a cooperative member, and other expenses related to sales activities from the sales proceeds of a cooperative.

Article 5.Principles of Cooperative Activities

5.1.A cooperative shall adhere to the following principles in its activities:

5.1.1.to ensure voluntary membership without discriminating against race, ethnicity, language, color, age, gender, social origin, status, wealth, occupation, religion, opinion, or education;

5.1.2.to be independent;

5.1.3.to ensure democratic management, collective control, transparency and openness of cooperative members;

5.1.4.to ensure equal economic participation of cooperative members, and fair distribution;

5.1.5.to provide cooperative members and employees with training and information aimed to support cooperative development;

5.1.6.to support cooperation between cooperatives;

5.1.7.to respect the common interests of cooperative members.

Article 6.Forms and Directions of Operation of Cooperative

6.1.Cooperatives have forms such as primary and joint.

6.2.A primary cooperative can be established by nine or more citizens.

6.3.Cooperatives and legal entities can jointly establish a joint cooperative. At least 51 percent of the members of the joint cooperatives are a cooperative.

6.4.The legal regulation of the joint cooperative is the same as the general regulation of the cooperative stipulated in this Law.

6.5.A cooperative shall carry out activities specified in the charter of a cooperative that are not prohibited by legislations.

CHAPTER TWO

ESTABLISHMENT OF COOPERATIVES

Article 7.Name and Location of Cooperative

7.1.A cooperative has a proper name. The word "cooperative" shall follow after the name of a cooperative.

7.2.A cooperative shall not be named after any member of its cooperative.

7.3.A place where the general administration of a cooperative is located is considered as the center of a cooperative.

Article 8.Founders' Agreement

8.1.Founders of the cooperative shall enter into a founder's agreement, and specify the purpose of a cooperative, an amount of capital to be contributed by founders, their rights, duties, and responsibilities in the agreement.

8.2.A founder's agreement shall be terminated upon registration of the cooperative in the state registration.

Article 9.State Registration of Cooperative

9.1.According to the Law on State Registration of Legal Entities, the founder of a cooperative shall register with the state registration authority within 30 days upon issuance of a decision to establish the cooperative.

Article 10.Charter of Cooperative and Its Content

10.1.The founding document of a cooperative is a charter of a cooperative.

10.2.The charter of the cooperative shall be approved by the meeting of all members.

10.3.The charter of the cooperative specifies the followings:

10.3.1.proper name and address of a cooperative;
10.3.2.cooperative member's family name, surname, father's / mother's/ name, given name, residential address, civil registration number, and in the case of a joint cooperative, proper name and residential address of a member cooperative or legal entity;

/This sub-paragraph was amended by the law dated June 3, 2022/

10.3.3.objectives and directions of operation of a cooperative;

10.3.4.operation term if it is agreed to carry out activities for a certain period of time;

10.3.5.conditions and procedures for joining or leaving, or depriving from the cooperative, rights, duties, and responsibilities of a cooperative member;

10.3.6.form and method of evaluation of equity capital contributed by cooperative members;

10.3.7.amount and period of compulsory contribution of cooperative members;

10.3.8.maximum amount of capital that can be added to the cooperative in addition to the mandatory share of a cooperative member;

10.3.9.cooperative membership procedure;

10.3.10.form of service to cooperative members;

10.3.11.conditions and procedures for the participation of non-members of the cooperative in cooperative activities;

10.3.12.procedure for cooperative property, its registration, use, and disposal;

10.3.13.procedure for calculating, recording and distributing cooperative income and expenses;

10.3.14.procedure for distribution of revenue per cooperative member and return on invested capital;

10.3.15.procedure for structure, form, management composition of the cooperative, its powers, responsibilities, and decision-making process;

10.3.16.internal and external auditing over cooperative activities;

10.3.17.requirements for an executive management of cooperatives;

10.3.18.procedure for operation and grounds for establishment of cooperative branches and representative offices, their rights, duties, and responsibilities;

10.3.19.other matters other than those specified in this Law related to convening a meeting of all members of a cooperative, the Leaders of a cooperative /hereinafter referred to as the "Leaders"/, and the Controlling Board of a cooperative /hereinafter referred to as the "Controlling Board"/;

10.3.20.rate of capital to be accumulated in the risk contingency fund and an amount of funds that must be kept in the fund;

10.3.21.rate of funds to be collected in the cooperative development fund;

10.3.22.joining or leaving the cooperative union;

10.3.23.procedure for reorganization and liquidation of cooperatives, settlement of debts and distribution of remaining assets to members;

10.3.24.procedure for rights of the cooperative to enter into large-scale or conflict-of-interest transactions, and for compensation of damages caused by such transactions, and elimination of consequences;

10.3.25.procedure for succession and transfer of equity invested in the cooperative by a member of a cooperative;

10.3.26.other issues related to cooperative activities.

Article 11.Amendments to Charter of Cooperative

11.1.An issue on amendments or changes to the charter of a cooperative shall be discussed at the meeting of all members and decided by the majority vote of the members present at the meeting.

11.2.The following amendments or changes to the charter of the cooperative shall be decided by a vote of at least three quarters of all members of the cooperative:

11.2.1.amend the form and direction of operation of a cooperative;

11.2.2.change an amount of capital to be contributed by a cooperative member to the cooperative;

11.2.3.issues related to obligations of cooperative members to use cooperative goods, products, work, and services to a certain extent;

11.2.4.reorganize or liquidate cooperatives.

11.3.Leaders shall notify the state registration authority within 15 working days after a decision on amendments to the charter of a cooperative has been made at a meeting of all members.

11.4.A cooperative member who does not accept any amendments made to the charter of the cooperative may exercise the right to leave the cooperative in accordance with Article 17.1.12 of this Law.

Article 12.Rights and Obligations of Cooperative

12.1.A cooperative shall have the following rights when it operates:

12.1.1.to participate in programs, projects, and measures implemented by the government to support cooperatives, or obtain discounted loans, technical, technological, and financial supports;

12.1.2.to approve an internally enforceable act of rights, and make amendments to, or revoke it in compliance with this Law and the charter of a cooperative;

12.1.3.to own, use, manage, dispose, transfer, rent, lease, or pledge movable and immovable property in accordance with the law;

12.1.4.to receive loans, donations, or assistance from citizens or legal entities in accordance with this Law and the charter of a cooperative if such activities do not adversely affect the operation of a cooperative;

12.1.5.to participate in foreign economic relations independently.

12.2.A cooperative shall have the following duties when it operates:

12.2.1.to evaluate the cooperative member's participation, create opportunities for cooperative work, provide financial support and assistance to a cooperative member;

12.2.2.to improve the financial capacity of a cooperative and increase an amount of income per member of the cooperative;

12.2.3.to introduce techniques and technologies for prompt and high-quality delivery of cooperative services, and dispose cooperative assets efficiently;

12.2.4.to create a network and services for the sale of cooperative goods and products, and cooperate with other cooperatives and legal entities in the form of cooperation and diversification, in consideration of the characteristics and directions of operations of cooperative goods, products, work and services;

12.2.5.to support cooperative movement;

12.2.6.other duties prescribed by law.

Article 13.Responsibility of Cooperative

13.1.A cooperative shall be responsible for obligations arising from its activities with the property of the cooperative.

13.2.A cooperative is not responsible for obligations of cooperative members to others.

13.3.A cooperative member is not responsible for obligations of the cooperative and is only responsible for the capital invested in the cooperative.

CHAPTER THREE

MEMBER OF COOPERATIVE

Article 14.Joining a Cooperative

14.1.Citizens who agree the charter of a cooperative will voluntarily join the primary cooperative.

14.2.Cooperatives or legal entities that agree to the charter of a joint cooperative shall voluntarily join the joint cooperative.

14.3.A person who desires to join a cooperative shall submit a request to the head of a cooperative.

14.4.Unless otherwise specified in the charter of a cooperative, a request to join the cooperative shall be discussed at the meeting of all members of a cooperative and decided by the majority vote of members present at the meeting.

14.5.The right of a cooperative member shall be certified after an applicant has invested his/her capital in the cooperative and paid a membership fee of a cooperative in an amount specified in the charter of a cooperative based on the decision of the meeting of all members.

14.6.In case of admission of members to the cooperative, the Leaders shall register with the state registration authority within 90 days after such decision is issued.

Article 15.Keeping Records of Cooperative Members

15.1.A register appointed by the Leaders' meeting shall keep records of members of the cooperative.

15.2.The register of members of the cooperative shall include the followings:

15.2.1.cooperative member's family name, surname, father's / mother's/ name, given name, residential address, civil registration number, and in the case of a joint cooperative, proper name and residential address of a member cooperative or legal entity;

15.2.2.information on joining, leaving or depriving from the cooperative;

15.2.3.type and amount of capital contributed by a cooperative member to the cooperative, or revenue allocated to a cooperative member.

Article 16.Reviewing Records of Cooperative Members

16.1.A cooperative member has the right to review his/her records.

16.2.Other persons may review the records of a member upon consent of the member of a cooperative.

16.3.Pursuant to Article 16.2 of this Law, a person who has received information related to the registration of a cooperative member shall not disclose such information to others.

Article 17.Rights and Obligations of Cooperative Member

17.1.A cooperative member shall have the following rights:

17.1.1.to have one voting right regardless of an amount of the invested capital;

17.1.2.to participate in all members' meetings, ask questions or make proposals;

17.1.3.to participate in activities of a cooperative, and elect or be elected as a Leader or member of the Controlling Board, or compete for or be appointed to the position of an executive management;

17.1.4.to make a proposal to convene a meeting of all members;

17.1.5.to be provided services by the cooperative, or sell goods and products through the cooperative according to this Law and the charter of a cooperative;

17.1.6.to obtain the necessary information on finances, solvency, operations, and management of a cooperative, and demand that information be transparent and open to members of the cooperative;

17.1.7.to evaluate participation in activities of a cooperative in accordance with this Law and the charter of a cooperative;

17.1.8.to receive income per cooperative member from the revenue to be distributed in accordance with this Law and the charter of a cooperative;

17.1.9.to read or review a conclusion of the Controlling Board prior to the discussion of the cooperative's operational and financial annual reports at the meeting of all members;

17.1.10.to read or review the meeting minutes of all members;

17.1.11.to require the management of a cooperative to fulfill its obligations under this Law and the charter of a cooperative;

17.1.12.to leave or rejoin the cooperative at his/her own request;

17.1.13.to receive a share of the remaining assets from the sales proceeds upon the liquidation of the cooperative in accordance with this Law and the charter of a cooperative;

17.1.14.to be a member of another non-competitor cooperative or shareholder of a legal entity, unless otherwise specified in this Law and the charter of a cooperative;

17.1.15.other rights specified in this Law and the charter of a cooperative.

17.2.A cooperative member shall undertake the following duties:

17.2.1.to participate in cooperative activities actively, be provided with goods, products, work, and services from cooperatives, or to be mediated by cooperatives;

17.2.2.to comply with this Law, the charter of a cooperative, and the decision of a meeting of all members;

17.2.3.to fulfill contractual obligations to the cooperative and other members;

17.2.4.to notify the cooperative immediately in case of becoming a member or shareholder of a legal entity in another non-competitor cooperative that provides similar work and services;

17.2.5.to participate in a meeting of all members;

17.2.6.other obligations specified in this Law and the charter of a cooperative.

Article 18.Termination of Powers of Cooperative Member

18.1.If a member of the cooperative leaves the cooperative, or if he is excluded from the membership of the cooperative, his/her power shall be terminated.

18.2.A cooperative member will leave the cooperative in the following cases:

18.2.1.a member has submitted a request to leave the cooperative;

18.2.2.a member has become unable to participate in activities of the cooperative after moving to a different territory from a place where a cooperative is located;

18.2.3.a member has transferred all the capital invested in the cooperative to others;

18.2.4.a member has been dead, or considered missing by a valid court decision, or declared as dead;

18.2.5.the court decision regarding the civil legal incapacity due to mental illness has entered into force.

18.3.A cooperative member shall submit a request to leave the cooperative in writing to the head of a cooperative at least three months prior to the end of the financial year.

18.4.Members of the cooperative may be removed on the following grounds:

18.4.1.in case of violation of obligations stipulated in this Law and the charted of a cooperative, the violation was repeated after receiving a warning from the Leaders for removing the member from the cooperative;

18.4.2.established a cooperative that competes with that cooperative or invested in a competitor cooperative;

18.4.3.did not attend the meeting of all members two or more times without excuse reason;

18.4.4.other grounds specified in this Law and the charter of a cooperative.

18.5.In the event that the grounds specified in Article 18.4 of this Law occur, the Leaders shall notify a cooperative member in advance in writing and enable him/her to provide an explanation.

18.6.If a cooperative member does not agree with the reasons to remove him/her from the cooperative, he/she has the right to convene a meeting of all members within 30 days after receiving the notice, and to ensure conditions for explanations.

18.7.Unless otherwise specified in the charter of a cooperative, any issues on termination of the powers of a cooperative member shall be solved at a meeting of all members.

18.8.Grounds or reasons for the decision shall be clearly reflected in the decision to remove a member from the cooperative.

18.9.The full rights or powers of the member shall be terminated upon the decision to leave or exclude from the cooperative.

18.10.If an entity does not agree with the decision to remove the member from the cooperative, such entity may submit a complaint to the Controlling Board within 14 days after receiving the notification specified in Article 18.5 of this Law.

18.11.A person who disagrees with the decision of the Controlling Board may submit a complaint to the court according to the appropriate procedure.

Article 19.Making Financial Settlements with Person whose Power of Cooperative Member Has Terminated

19.1.Based on this Law and the charter of a cooperative, financial settlement will be made with the person who left or was excluded from the cooperative.

19.2.If a cooperative member transfers all of capitals invested in the cooperative to another member, his/her property rights shall be fully transferred to the cooperative member who received the capital.

19.3.In accordance with this Law and the charter of a cooperative, a person who leaves or is removed from the cooperative is obliged to pay fees to the cooperative's customer enterprises, organizations, or citizens, as any other member of the cooperative.

19.4.Unless otherwise specified in the charter of a cooperative, the financial settlement of the person who left or was removed from the cooperative shall be based on the final financial report of the current year.

Article 20.Transfer of Invested Capital to Others

20.1.A cooperative member may transfer his/her invested capital to others on the basis of a written agreement.

20.2.The cooperative member shall have preferential rights to take over the assets invested in the cooperative by a cooperative member.

20.3.In accordance with Article 20.1 of this Law, the total amount of the transferred and invested capital of the person who received the equity of the cooperative member shall not exceed the maximum limit established by the charter of a cooperative.

Article 21.Transfer of Property Rights of Cooperative Member to Successor

21.1.If a cooperative member dies or is declared dead, the property rights of a member shall be transferred to his/her successor as specified in the Civil Code.

21.2.If there are two or more successors, the successors have the right to one vote until the membership is resolved.

21.3.Unless otherwise specified in the charter of a cooperative, an issue on joining of a successor as a member of the cooperative shall be discussed and solved at the meeting of all members in accordance with the procedure for membership.

CHAPTER FOUR

COOPERATIVE EQUITY AND SOURCES

Article 22.Equity of Cooperative

22.1.The equity of a cooperative consists of the following sources:

22.1.1.capital contributed by a cooperative member;

22.1.2.funds given to the cooperative as a gift, donation or grant;

22.1.3.capital allocated to the risk contingency fund;

22.1.4.funds collected in the cooperative development fund;

22.1.5.profit and loss of the cooperative.

Article 23.Registration of Cooperative Equity and Sources

23.1.Cooperative equity and sources shall be registered in accordance with the Accounting Law and procedures and instructions specified in this Law.

23.2.The state central administrative body in charge of financial matters shall approve the accounting procedures and instructions of the cooperative.

Article 24.Equity Invested by Cooperative Member

24.1.A cooperative member may contribute equity to the cooperative in the form of property, cash, labor participation, work, services, or intellectual property.

24.2.The maximum amount of an equity contributed by a cooperative member to the cooperative shall not exceed 15 percent of the cooperative's equity capital.

24.3.The type and amount of equity capital to be contributed by a cooperative member to the cooperative shall be determined by the charter of a cooperative in accordance with Article 24.2 of this Law.

24.4.The percentage of the cooperative's property allocated to a cooperative member shall be equal to an amount of the difference between the total capital invested by the member and the annual profit and loss of the cooperative member.

Article 25.Allocation of Capital to Risk Contingency Fund

25.1.Up to 20 percent of the total sales revenue of a cooperative for the current year shall be allocated to the risk contingency fund.

25.2.Funds of the risk contingency fund shall be used to ensure the financial stability of the cooperative, cover losses, and reduce risks.

25.3.Funds of the risk contingency fund shall not be used for investment purposes.

25.4.The amount of funds that must be kept in the risk contingency fund shall not exceed 20 percent of the average sales revenue of the cooperative for the last three years.

Article 26.Distribution of Revenue to Cooperative Member

26.1.The rate of revenue distributed to a cooperative member shall be decided at the meeting of all members, in consideration of the proposals of the Leaders and the Controlling Board.

26.2.If a cooperative member has debts to the cooperative, such debt shall be deducted from the revenue attributable to him/her and the remaining amount shall be distributed.

Article 27.Collecting Funds in Cooperative Development Fund

27.1.A cooperative may have a development fund for the purpose of cooperative development, improving the social and economic status of cooperative members, and advancing the quality of life and living environment.

27.2.In accordance with Article 26.1 of this Law, funds will be collected in the Cooperative Development Fund from the revenue after the distribution of such revenue per member of the cooperative.

27.3.The amount of funds to be collected in the cooperative development fund and the procedure for its management shall be approved by the meeting of all members.

Article 28.Investments to Support Cooperatives

28.1.The cooperative may receive an investment from non-members of the cooperative in order to expand its activities and increase equity resources. An amount of investment contributed in the cooperative shall not exceed 50 percent of the cooperative's equity.

28.2.Investment conditions shall be regulated by the agreement concluded between the cooperative and the investor.

28.3.The investor shall not participate in the management and operations of the cooperative, and shall not enjoy any rights of the cooperative member.

28.4.An issue of whether investors will receive shares shall be solved at a meeting of all members.

CHAPTER FIVE

COOPERATIVE MANAGEMENT AND ORGANIZATION

Article 29.Governing Body of Cooperative

29.1.The highest governing body of the cooperative is a meeting of all members.

29.2.The cooperative shall have Leaders, a head of the cooperative, and a Controlling Board elected by the members.

Article 30.Meeting of All Members

30.1.A cooperative member shall exercise his/her right to resolve issues related to the cooperative through a meeting of all members.

30.2.The meeting of all members shall be convened at least once a year.

30.3.The following issues shall be resolved at the meeting of all members:

30.3.1.to approve the charter of a cooperative, and make amendments to it;

30.3.2.to establish the conditions and procedures for managing the cooperative's property, and approve the operational and financial plans, income and expenditure budgets for the current year;

30.3.3.to approve reports and balances, distribute revenue for the current year, and solve issues of covering losses;

30.3.4.to determine the amount of funds to be allocated to the risk contingency fund;

30.3.5.to approve the procedure for the amount of funds to be collected in the cooperative development fund and its disposal;

30.3.6.to approve the methodology for evaluating the participation of cooperative members in cooperative activities;

30.3.7.to set the upper limit of the cooperative's loans to be taken from others and the financial support provided to cooperative members;

30.3.8.to discuss a report on operations of the leaders and the Controlling Board;

30.3.9.to elect, resign, or dismiss the members of the Controlling Board, Leaders and head of a cooperative;

30.3.10.to remove leaders and members of the Controlling Board from the cooperative;

30.3.11.to ensure indemnification of damages by a guilty party caused to the cooperative due to the illegal activities of the leaders and members of the Controlling Board;

30.3.12.to determine the amount of membership fee for a cooperative member;

30.3.13.to determine an amount of additional capital to be contributed by members to the cooperative;

30.3.14.to attract investment to support cooperatives, and approve conditions and procedures;

30.3.15.to reorganize or liquidate cooperatives;

30.3.16.other issues specified by law.

30.4.The meeting shall become effective when the majority of all members participate in the meeting of all members.

30.5.Unless otherwise specified in this Law, any decisions of the meeting of all members shall be made by the majority vote of the members present at the meeting.

30.6.Meetings of all members shall be chaired by leaders elected from the members participating in the meeting.

30.7.Any relations other than those specified in this Law related to convening a meeting of all members shall be regulated by the charter of a cooperative.

30.8.Matters not scheduled for discussion at the meeting of all members may be discussed with the consent of the majority of members present at the meeting.

30.9.A cooperative member shall participate in the meeting of all members and give votes in person.

30.10.A cooperative member who is unable to attend the meeting of all members in person shall exercise the rights specified in Article 17.1 of this Law through his/her legal representative.

30.11.The issue of electing, resigning or dismissing leaders, the Controlling Board and the head of the cooperative shall be solved by the majority vote of members present at the meeting of all members.

Article 31.Entity Who Convenes Meeting of all members

31.1.Leaders shall convene a meeting of all members.

31.2.If the leaders do not convene a meeting of all members in accordance with Articles 32.1 and 34.8 of this Law, the Controlling Board shall convene a meeting.

31.3.A meeting of all members may be convened by a vote of at least one-third of the members of the cooperative.

31.4.The initiator of convening a meeting of all members as specified in Article 31.3 of this Law shall present the grounds, reasons, and proposals for the agenda of the meeting of all members in writing and confirm it with signatures and inform members of the cooperative.

Article 32.Time and Venue of Meeting of All Members

32.1.A meeting of all members shall be convened within six months after the end of the financial year.

32.2.Meetings of all members may be convened at any time if deemed necessary.

32.3.The meeting of all members shall be held at the place where the headquarters of the cooperative is located, unless it is scheduled to be held elsewhere.

Article 33.Announcement of Meeting of All Members and Its Preparation Works

33.1.The time and agenda of a meeting of all members shall be announced at least 30 days prior to the meeting date.

33.2.Preparation works for the meeting of all members shall be carried out by the Leaders or other person who initiates a meeting.

33.3.Any matters to be discussed or reported without making a decision may be included in the agenda at least three days prior to the meeting of all members.

Article 34.Leaders of Cooperatives

34.1.Leaders shall manage activities of the cooperative during the free time of a meeting of all members.

34.2.Leaders consist of the head and an even number of members.

34.3.The decision-making form of leaders is a meeting. At the meeting, any issue will be resolved by a majority vote.

34.4.Leaders shall represent the cooperative and this right shall be exercised from time to time by majority vote of Leaders.

34.5.Leaders shall meet at least once every two months.

34.6.Leaders shall monitor the state of the cooperative's accounting, present an annual financial report to the Controlling Board, and discuss it at a meeting of all members.

34.7.When making half-yearly or annual reports, or if a loss occurs under the estimated calculation, and there is a need to cover it from the assets of the risk contingency fund in accordance with Article 25.2 of this Law, the Leaders shall notify the members of the cooperative.

34.8.If the assets of the risk contingency fund are insufficient to cover losses of the cooperative, the Leaders shall immediately convene a meeting of all members to discuss the issue.

34.9.In the cases specified in the charter of the cooperative, an issue of recruiting new members of the cooperative shall be solved at the meeting of Leaders.

Article 35.Responsibility of leaders

35.1.Leaders are obliged to fully implement the duties specified in this Law and the charter of a cooperative, and strictly keep the information related to the secret of the cooperative.

35.2.The leader shall compensate a damage caused to the cooperative due to the violation of the law and the charter of a cooperative or due to his/her own wrongful actions.

35.3.Leaders shall not be responsible for the damage caused to the cooperative due to activities conducted based on the decision of the meeting of all members.

Article 36.Head of Cooperative

36.1.The Head of a cooperative is a head of Leaders.

36.2.The head of a cooperative shall manage and organize daily activities of the cooperative.

36.3.The head of a cooperative shall chair a meeting of Leaders and sign on a decision of the meeting for confirmation.

36.4.The head of a cooperative shall sign on the power of attorney to represent the cooperative.

36.5.Upon the proposal of the leaders, the head of a cooperative shall appoint an executive director and sign a contract with him/her.

36.6.Any member cooperative and the management of a legal entity shall not serve as the head of a joint cooperative.

Article 37.Controlling Board

37.1.A controlling board is responsible for supervising activities of the cooperative and ensuring the implementation of a decision of an external auditing body.

37.2.A controlling board shall have at least three odd numbers of members.

37.3.A controlling board shall elect its chairman from among its members.

Article 38.Meeting of Controlling Board

38.1.The decision-making form of the Controlling Board is a meeting. The meeting will be convened by the chairman of the controlling board.

38.2.The meeting shall be considered valid if the majority of members of the Controlling Board participate in the meeting.

38.3.Any issues shall be resolved by the majority vote of members present at the meeting of the Controlling Board.

38.4.A meeting of the Controlling Board shall be chaired by the Chairman of the Controlling Board.

38.5.The Controlling board shall meet at least once a quarter.

38.6.If leaders or more than 50% of the members of the Controlling Board require a meeting, the Controlling Board meeting shall be convened by the Chairman of the Controlling Board.

Article 39.Powers of Controlling Board

39.1.The Controlling Board shall exercise the following powers:

39.1.1.to monitor activities of leaders, collect and review necessary documents and information;

39.1.2.to make proposals and conclusions on issues such as the cooperative's financial report, current state news, revenue distribution, and compensation for losses, and discuss them at the meeting of Leaders and all members;

39.1.3.to monitor the implementation of duties of a cooperative member;

39.1.4.to ensure the implementation of a decision of an external auditing organization;

39.1.5.to report activities of the controlling board to the meeting of all members;

39.1.6.other powers specified in this Law and the charter of a cooperative.

Article 40.Member of Controlling Board

40.1.A member of the Controlling Board may not be elected as a Leader.

40.2.Expenses related to the performance of the Controlling board member's duties specified in this Law shall be paid by the cooperative.

40.3.A member of the Controlling board may be given a bonus according to the decision of the meeting of all members.

Article 41.Executive Management of Cooperative

41.1.A cooperative may have an executive management to carry out its daily activities.

41.2.Executive management shall be headed by an executive director of the cooperative or the head of the cooperative.

41.3.A person who is not a member of the cooperative may be employed in the executive management under a contract.

CHAPTER SIX

POWERS OF STATE ORGANIZATION, LOCAL SELF-GOVERNING ORGANIZATION, ASSOCIATIONS AND UNION OF COOPERATIVES

Article 42.Powers of State Central Administrative Body in Charge of Cooperative Issues

42.1.The state central administrative body in charge of cooperative issues shall exercise the following powers for cooperatives:

42.1.1.to provide a unified policy and management of projects, measures and funds implemented by the state budget, foreign loans and aid funds in the field of cooperatives;

42.1.2.to develop proposals for investment and financial resources necessary for the development of cooperatives and ensure that such proposals are solved by the Government;

42.1.3.to cooperate with relevant governmental and non-governmental organizations to implement policies and programs to support the development of cooperatives;

42.1.4.to create and record a unified electronic database of cooperatives;

42.1.5.to evaluate the cooperative's development every two years, report it, and develop proposals based on the results;

42.1.6.to form and develop a system of raw materials preparation and supply;
42.1.7.to approve the procedure for selection and approval of the best cooperative of the country and awarding;

42.1.8.to create, support and qualify a model cooperative;
42.1.9.to approve the procedures for granting discounted loans from the cooperative development fund, or selecting, repaying and monitoring, and to control on the spending of the fund, and provide unified policies and management;

42.1.10.other powers stipulated by law.

Article 43.Powers of Local Self-Governing Body and Governor

43.1.The Citizens' Representatives Meeting of provinces, soums, the capital city, and districts shall exercise the following powers for the cooperative:
/This paragraph was amended by the law dated April 22, 2022/

43.1.1.to develop cooperatives and provide necessary financial support;

43.1.2.other powers stipulated by law.

43.2.Governors of provinces, soums, the capital city, and districts shall exercise the following powers for the cooperatives:

/This paragraph was amended by the law dated April 22, 2022/

43.2.1.to organize works to support cooperatives and implement legislations related to cooperative activities;

43.2.2.to organize works to support cooperatives in the field of sales of cooperative goods and products and ensure cooperation of cooperative activities;

43.2.3.other powers stipulated by law.

Article 44.Association of Cooperatives

44.1.Cooperatives may unite and establish an association of cooperatives under the direction of their activities. A cooperative is a member of the association of cooperatives.
44.2.The association of cooperatives is a non-governmental organization that serves its members.

Article 45.Duties of Association of Cooperatives

45.1.The Association of Cooperatives shall exercise the following functions for cooperatives:

45.1.1.to provide professional and methodological advice and support in activities of a member cooperative;

45.1.2.to organize trainings or re-trainings for cooperative members and employees;

45.1.3.to provide professional assistance in the cooperative's accounting records and preparing financial reports;

45.1.4.to conduct research and analysis of financial, market and business environment of member cooperatives, and create a database and provide information;

45.1.5.to evaluate the level of development and capacity of member cooperatives and make a reference;

45.1.6.to provide trainings on cooperative operations, management, and accounting to citizens who desire to establish a new cooperative or join a cooperative;

45.1.7.to collect information on cooperative operations, financial status, and membership;

45.1.8.to represent the member cooperative to protect its interests;

45.1.9.to take measures to expand the movement of cooperatives and develop cooperatives;

45.1.10.other functions specified by law.

Article 46.National Cooperative Association

46.1.The Association of Cooperatives may unite and establish a National Cooperative Association to determine the development trends and policies of cooperative organizations and create a favorable environment for the sustainable development of cooperatives.

46.2.The National Cooperative Association shall operate in the following areas:

46.2.1.to cooperate with the state central administrative body to expand the cooperative movement and the unified development policy of the cooperative sector, and to protect the interests of cooperatives;

46.2.2.to develop proposals on creating a favorable legal environment for the development of cooperatives;

46.2.3.to implement projects and programs to support cooperative development;

46.2.4.to coordinate activities of cooperative associations and government organizations to ​​involve their member cooperatives in projects and programs implemented by the government in support of cooperatives through cooperative associations, and to provide accessible and fair distribution of discounted loans and other project resources to members;

46.2.5.to organize works to promote cooperative advantages, best products and services, best experiences and practices;

46.2.6.to establish and enforce the methodology and criteria for evaluating the level of development and capacity of cooperatives;

46.2.7.to create a unified database of member associations and their member cooperatives and provide information.

CHAPTER SEVEN

LIQUIDATION OF COOPERATIVE

Article 47.Liquidate Cooperative By Decision of Meeting of All Members

47.1.The cooperative may be dissolved by the decision of the meeting of all members in the following cases:

47.1.1.the number of members has not reached the minimum level required by law;

47.1.2.it is deemed unnecessary to continue its activities as the term of the cooperative has expired or its goals have been achieved;

47.1.3.at least three-fourths of the total members of the cooperative have proposed to dissolve the cooperative.

47.2.A liquidation commission shall be appointed by the meeting of all members if the cooperative is liquidated by the decision of a meeting of all members. The Liquidation Commission shall conduct liquidation process in accordance with Article 32 of the Civil Code.

Article 48.Liquidate Cooperative by Court Decision

48.1.A court shall dissolve the cooperative on the following grounds:

48.1.1.the conditions specified in Article 32.1 of the Civil Code have been created;

48.1.2.the number of members has not reached the minimum level required by law or the cooperative is not dissolved on its own initiative;

48.1.3.the cooperative has performed activities other than those specified in this Law and the charter of the cooperative;

48.1.4.a meeting of all members has not been convened for three consecutive years;

48.1.5.other grounds prescribed by law.

Article 49.Notification of Liquidation of Cooperative

49.1.An authorized entity who has made a decision on liquidation of a cooperative shall notify the state registration authority as specified in Article 23.1 of the Law on State Registration of Legal Entities.

49.2.A liquidation commission shall inform the public on the registration of a liquidation of the cooperative in the state registration of legal entities.

49.3.A person who has receivables from the cooperative shall be specifically notified of such liquidation of a cooperative.

Article 50.Appoint Liquidation Commission and Liquidate

50.1.A commission appointed by the entity who made a decision based on Article 32.2 of the Civil Code shall perform a liquidation process.

50.2.If a liquidation commission is not appointed by the meeting of all members, it will be appointed by the Controlling Board.

50.3.If deemed necessary by the decision of an entity who established the liquidation commission, such commission may be dissolved prior to the expiry term.

Article 51.Notification of Liquidation Commission to State Registration Authority

51.1.Members of the liquidation commission shall be notified to the state registration authority and relevant documents shall be submitted.

Article 52.Liquidation Commission to Sign on Behalf of Cooperative

52.1.Members of the liquidation commission shall sign on behalf of the cooperative marking "liquidated" next to the name of the cooperative.

Article 53.Not to Increase Duties of Cooperative Members upon Termination of Operation of Cooperative

53.1.Upon the termination of the operation of a cooperative, an amount of equity capital that the cooperative member must contribute to the cooperative shall not be increased.

Article 54.Period to Prohibit Distribution of Assets

54.1.Claims related to debts of the cooperative shall be settled in the order specified in Article 32.5 of the Civil Code.

54.2.If a person who has the right to make a claim to the cooperative does not make a claim by excuse reason, the appropriate payment shall be distributed to him/her in the same way.

54.3.If there is a dispute for the payment, the remaining assets shall be divided among the members of the cooperative after separating an asset portion per person.

Article 55.Distribution of Cooperative Assets to Members

55.1.After the payments of claims of customers of the cooperative are completed, the remaining assets of the cooperative will be distributed to members of the cooperative.

55.2.The percentage allocated to members of the cooperative will be determined based on the liquidation report.

55.3.If a member of the cooperative invests an additional capital, the capital will be returned at priority.

55.4.After allocating assets to each member of the cooperative, the total remaining assets of the cooperative shall be divided equally among the members of the cooperative.

55.5.The amount specified in Article 55.4 of this Law may be determined differently by the charter of the cooperative.

CHAPTER EIGHT

MISCELLANEOUS

Article 56.Liability for Violation of Legislation

56.1.Any person or legal entity that violates this Law shall be charged with the liabilityy specified in the Criminal Law or the Law on Violations.

THE CHAIRMAN OF THE STATE GREAT KHURAL OF MONGOLIA G.ZANDANSHATAR