It does not take much time to register a business in Mongolia. The country has a wide range of promising activities: light industry, insurance, real estate privatization, IT technologies and much more.
For certain industries, individual benefits are provided in the form of a reduction in the tax rate and exemption from taxes for a certain period. Also, the state has agreements that exempt from double taxation.
Despite the fact that Mongolian legislation provides for a wide range of organizational and legal forms of commercial organizations (limited liability company or LLC, joint-stock company or JSC and joint venture), in practice, private entrepreneurs and foreign investors generally prefer LLC or JSC. Representative offices of foreign legal entities are also common.
OOO — this is the most commonly used form of a legal entity established by one or more individuals or legal entities — shareholders who are not liable for its obligations and bear the risk of losses associated with the company's activities, depending on the size of their contributions (participatory interests). The company's liability is limited to its assets. There is no minimum authorized capital requirement, and the shares of shareholders are proportional to their contributions. Shareholders have priority rights to each other's shares.
The bodies of a limited liability company are:
The current management of the company's activities is carried out by the director (sole executive body) or the board of directors (collective executive body), who are elected at the GMS. The powers conferred on the board of directors must be specified in the company's founding documents. The company may also have a Supervisory Board, which, however, is not mandatory.
According to the law, a foreign investor is defined as "a commercial organization with a total capital of USD 100,000 or more (or MNT equivalent)" where at least 25% must be owned by the foreign investor or investors. Investments in Mongolia can be made in the following ways:
If two or more investors plan to register an LLC with foreign investment in Mongolia, each investor must invest 100,000 USD or MNT equivalent.
JSC — is a legal entity that issues shares in order to raise capital for its activities.
A JSC can have an unlimited number of shareholders. Shareholders are not liable for the obligations of the JSC, but bear the risk of losses within the value of their shares. JSC has assets separated from the assets of its shareholders and is not liable for their obligations.
JSC management is carried out by the meeting of shareholders (MSA), the board of directors and the executive body.
The OSA is the supreme governing body of the JSC, which makes decisions on the highest priority issues, such as company management, administration, business policy, corporate structure, financial aspects, elections and some other issues.
The Board of Directors carries out the general management of the JSC, covering lower priority issues such as finance, policy development, implementation, etc., with the exception of issues referred by the Law and the Charter to the exclusive authority of the GMS.
Management of current activities is carried out by the executive body. The executive body can be collective and individual. The executive body has the right to make decisions on issues related to the activities of the company, which are not considered by the laws / legislative acts of Mongolia and the charter of the company as the powers of other bodies and officials of the company.
Representative offices of foreign legal entities are not considered legal entities, but represent the interests of foreign companies in Mongolia. As a subdivision of a foreign legal entity, a representative office is not entitled to carry out business activities that would lead to income generation in Mongolia. As a division of a foreign legal entity, a branch may perform all or part of the functions of its parent company.
The representative office operates in accordance with its Articles of Association and is managed by an individual authorized by the parent company on the basis of a power of attorney. The representative office is formed, in fact, in the same way as legal entities.
In order to establish an LLC in Mongolia, the founder(s) must(should) take the following steps in accordance with relevant laws and regulations:
1. Obtaining a company name The founder (founders) or an authorized representative acting on the basis of a power of attorney must obtain the name of an LLC in the State Registration.
The company name must meet the following requirements:
2. The founders must set up the company within 30 days of the LLC obtaining its name. Otherwise, the confirmation sheet for the company name will expire within 30 days.
Opening a temporary company account: along with obtaining the name of the company, the founder must receive forms to open a current temporary account (accounts) for a new company in any commercial bank in Mongolia.
This temporary checking account is required to deposit a paid up capital of USD 100,000 or MNT equivalent for a foreign invested company to develop one of the required documents listed in section (c) below.
Once the company is registered, with the assistance of the founder, the appointed chief executive or any other representative who is the first signatory, the deposited amount can be withdrawn.
3. Development of documents required for the institution. In accordance with the Law on State Registration of a Legal Entity, the founder (founders) of a limited liability company with foreign investments must prepare the following documents:
After 3-5 working days from the date of submission of the above documents, the state registration authority must register a limited liability company with foreign investment in Mongolia.
4. Obtaining a company seal. A company with foreign investment must provide the original company registration certificate in order to order a company seal. This is the final stage of company registration.
Registration of a new company with foreign investment in Mongolia is carried out in three agencies:
Currently, registration with these agencies is separate. Registration of a company with foreign investments first takes place at the State Registration Authority.
When a company is registered, its representative must register with the relevant tax office within 14 days and submit the following documents, in accordance with relevant laws and regulations:
If a foreign state legal entity owns 33 percent or more of the total number of shares issued by legal entities of Mongolia (foreign investment company) operating in the following industries, it must obtain permission from the State Investment Authority:
If a foreign state legal entity intends to own less than 33 percent of the total number of shares issued by legal entities in Mongolia (foreign investment company), such permission is not required.