15 April, 2017
The Parliament of Mongolia adopted the Law of Mongolia on Pledges over Movable Property and Intangible Assets ("Pledge Law") and the Law of Mongolia on the Implementation of the Pledge Law ("Implementation Law") on 2 July 2015. These laws became effective on 1 March 2017.
The Implementation Law provides that pledges over movable property and intangible assets created prior to entry into force of the Pledge Law can be registered within six months from the effective date of the Pledge Law and pledges so registered will be considered as perfected (i.e. become enforceable against the pledgor and third parties) from the date of the underlying pledge agreement. If pledge agreements are not registered by 1 September 2017, such pledges will be considered as perfected only from the date of registration in the database.
Therefore, it is essential for individuals and legal entities who have pledges over movable properties that were created prior to 1 March 2017 to register these existing pledges before 1 September 2017.
1. About the Online Database
Under the Pledge Law, security interests (pledges) over movable property and intangible assets i.e. all items other than land and buildings, such as equipment, vehicles, shares, securities and rights of claim, all types of scientific, literary and artistic works, inventions, industrial designs, trademarks and utility models can be perfected upon registration in the online database maintained by the General Authority for Intellectual Property and State Registration of Mongolia.
The online database, which can be accessed at mpr.gov.mn, aims to inform the public of the existence of pledges over movable property and intangible assets, and to establish the order of priority of any such security interests.
With the adoption of the Pledge Law, the Minister of Justice and Home Affairs approved the Regulation on the Registration of Notice of Security Interests over Movable Property and Intangible Assets on 3 March 2017 ("Regulation"), which provides regulations as to operation and the use of the database.
2. Registration of Notice of Security Interest
Under the Pledge Law, a pledge can be perfected either by the transfer of the pledged item to the possession of the pledgee or its authorised representative, or by the registration of a pledge notice in the online database.
In the latter case, a notice of security interest must be registered online by the pledgee or its authorised representative upon obtaining the written consent of the pledgor.
Under the Regulation, individuals and legal entities must obtain a username and a password in order to register notice of a security interest, amend the register, extend the registration period, terminate the notice, obtain a reference letter or make additional comments on the registration.
The Pledge Law provides the list of information to be included in various types of notices concerning security interests.
For example, an initial pledge notice must contain information such as the names, registration numbers and addresses of the parties, the security period and description of the pledged property. Further, minimal service fees (between MNT 5,000-20,000 (US$ 2-8)) are required to complete the registration.
A notice of a security interest registered in the online database becomes effective upon becoming accessible to the public.
3. Conducting Searches
The Pledge Law provides that the online database is to be open to the public for obtaining information and conducting searches of pledges. The Regulation also provides that searches can be conducted free of charge without the need to open an account.
The following parameters can be used to conduct a search:
(a) the registration number of the initial pledge notice;
(b) the following information concerning the pledgor:
- if a Mongolian citizen, his/her registration number;
- if a foreign national, his/her passport or other similar document number; or
- if a legal entity, its registration number(s) and name.
(c) the plate or serial number of a pledged vehicle.
In addition to online searches, electronic and paper-based letters of reference can be obtained from the registration authority upon payment of a minimal service fee.
We will soon issue a detailed note on how to access the online database and registering pledges over movable property.
For further information, please contact:
Chris Melville, Partner, Hogan Lovells
chris.melville@hoganlovells.com
