How to set up a company in Mongolia? Do you find this question difficult? Do you need information? With the right information and the right methodology, this is not a difficult task.
How to set up a company in Mongolia – registration
In Company Law of Mongolia, company is defined as a legal entity whose purpose is primarily for profit, and whose capital is split into shares. The Company law allows two types of company structures: Joint Stock Company and Limited Liability Company.
| Joint Stock Company (JSC) | Limited Liability Company (LLC) | |
|---|---|---|
| Right to trade shares | Freely traded, unless otherwise agreed by its shareholders | Limited by Company Law and the company’s charter |
| Number of shareholders | No limit | 50 shareholders in maximum when foundation |
| Minimum equity at registration | For local company, no minimum requirement | For local company, no minimum requirement |
The following Government offices involvement is mandatory when founding a legal entity in Mongolia:
| Organizations | Web sites |
|---|---|
| General Authority for State Registration (GASR) | https://zasag.mn/en/m/gast |
| Mongolian Tax Authority (MTA) | http://en.mta.mn |
| Ministry of Finance (MOF) | https://mof.gov.mn/en/ |
| National Development Agency (NDA) | http://nda.gov.mn |
Mongolian citizens are not required to participate in the establishment of a company with foreign investment. A company can be established in the name of a 100 percent foreigner.
How to set up a company in Mongolia – procedure
- The establishment process for a new company starts by applying for verify and reserve a unique company name in GASR.
- Open a bank account in any banks of the country.
- Also, proof of equity is required for the registration, which is to be submitted along with other required documents to GASR. Once application process is successful, company registration certificate is issued.
- Obtain the unique seal number
- Afterwards, the usual step would be to register the company to MTA for tax compliance, and local agency of MOF for financial statements.
- Apply for Social Security Code
- Make a seal
- Register for VAT
Any Foreign State-owned Legal Entities (FSLE) that hold more than 33% interest in a Mongolian incorporated entity must have permit from National Development Agency if they are to operate in the following fields:
- Mining
- Banking and finance
- Media and telecommunications
There are number of supporting documents that helps National Development Agency to make decisions regarding the new company and at least one supporting document is required. These include business plan, feasibility study, details of investors etc… Decision is then made within 45 days after application has been received by NDA.
It is also worth noting that the establishment of any type of foreign-invested entity in Mongolia would require start-up minimum equity of one-hundred thousand USD.
Mergers, acquisitions and restructurings
The Company Law of Mongolia allows company to be established from another legal entity via restructuring in forms of merger, consolidation, division, separation or transformation. However, these kinds of restructuring require official decision from shareholders meeting, have all its creditors to be informed about the decision within 15 days, and still required to be registered through the authorities as above. For each type of restructuring, we discuss its requirements below:
Consolidation is the merger and acquisition of many smaller companies into few larger ones which render majority of the smaller companies to be terminated and have its rights, assets and liabilities transferred into the newly established entity.
Division is the process of forming multiple new smaller companies from an existing bigger company, which involves termination of the existing company. Separation on the other hand does not terminate the existing bigger company, rather it is a process of divestment of assets, rights and liabilities from the bigger to establish a separate new company. Transformation does not necessarily mean creation of new company is required in comparison to the above types, as it is only transforming a public to limited liability, or the other way around. Each of these can only be done if decided by a majority rule from shareholders meeting.
Exit strategy
Liquidation can either be done voluntarily through major rule of shareholders meeting or by law through court decision as per Civil Code, Company Law and other related legislation. Compulsory liquidations by law includes bankruptcy and lack of shareholders. However, voluntary liquidation is a complex procedure that requires the Board of Directors or Executive Team in the absence of board to prepare a liquidation plan that includes the appointment of liquidation committee, settlement of debts and liabilities as well as distribution of any remaining assets to the shareholders.
We look forward that we have answered your question about how to set up a company in Mongolia. If you want to easily solve the problems of establishing a company in Mongolia, please contact us.
