By Elena Fehrbach
Sept. 24 – Mongolia has a substantial legal framework regulating local and foreign activities established in the country. The most important regulating vehicles are the Company Law, the Civil Code and the Law on Strategic Foreign Investment.
The Law on Strategic Foreign Investment is the most recent and the most discussed law in Mongolia, and is aimed at regulating foreign investment in Mongolia’s strategic sectors:
- Banking and finance
- Media and telecommunications
The initial documents required to start the registration process are the charter and the decision of the founders. In case the future company operates in one of Mongolia’s strategic sectors, the approval from the Government or the Parliament of Mongolia would be required.
Registration documents shall be submitted to the State Registration Office, and if operating in the strategic sector, to the Foreign Investment and Foreign Trade Agency (FIFTA). The documents for submission are as follows:
- Application and request letter
- Minutes of the meeting confirming foundation of new firm
- Document confirming the registration address
- Letter from the bank confirming possession of the amount required as an owner’s equity and the starting balance
- Letter from the banking institution confirming the good standing of accounts
- Business plan or good level due diligence study
- Receipts for the paid registration fee
- Documents confirming identity of company founders
Foreign-invested LLCs require a minimum of US$100,000 establishment capital, which is due for payment before registration is completed.
The termination terms are either through agreement of shareholders or by decision of the court in case legislation is applied. Termination may also be done through the reorganization or liquidation.
Registration of an LLC usually takes five day, providing no unforeseen delays. In case the new entity falls under the Strategic Foreign Investment Law rules, the approval timing in FIFTA and Parliament will take 90 days, according to the Law.
The interest in Mongolia as a final destination for foreign direct investment is increasing year after year, raising the necessity to shape the legal framework to be consistent with the country’s interests and keeping foreign investment allocation clear and understandable. The Law was adopted on May 17, 2012 after a certain time taken to show the draft public and open for a number of foreign legal companies to review and advice.