LAW OF MONGOLIA

July 02, 2015 Ulaanbaatar city

LAW ON PLEDGES OF MOVABLE PROPERTY AND INTANGIBLE PROPERTY

CHAPTER ONE

GENERAL PROVISIONS

Article 1.Purpose of the law

1.1.The purpose of this Law is to protect the rights and lawful interest of the parties to the relations with respect to pledges of movable property and intangible property, and increasing the circulation of the assets and financial accessibility.

Article 2.Legislation on pledges of movable property and intangible property

2.1.Legislation on pledges of movable property and intangible property shall consist of the Constitution of Mongolia, Civil Code, this Law and other legislative and administrative acts adopted in consistence therewith.

2.2.The relations with respect to the pledges of minerals exploration and mining licenses shall be regulated by the Minerals Law.

2.3.The relations with respect to the pledge of securities on a regulated market shall be regulated by a regulation passed based on this law by an authority competent to regulate and control securities.

2.4.If an international treaty to which Mongolia is a party provides otherwise, the provisions of the international treaty shall prevail.

Article 3.Scope of the Law

3.1.This Law shall apply to the relations with respect to pledges that shall arise under agreement and law with respect to movable properties and intangible properties of individuals and legal entities.

3.2.This Law shall be applied to the lessor's right under financial lease agreement, buyer's right that is purchasing receivables, seller's right to reclaim the agreement item from the buyer who fails performing its obligations under agreement for sale and purchase on credit and seller's right to re-purchase the agreement item under sale and purchase agreement with condition to re-purchase the property, and right of an authorized person to purchase the property with preemptive right same as an pledge right. This law shall regulate the relations only with respect to order of the rights and registration matters of above-mentioned rights.

Article 4.Definitions

4.1.The terms used in this law shall have the following meaning:

4.1.1."securing a pledge" means the act of securing the validity of pledge right before a third party, and the order of pledgee's right to have its claim secured from the pledge item;

4.1.2."income gained from the disposal of the pledge item" means property, money, asset similar to money gained from the sale of the pledged property and bringing it into transaction in any manner, and payments for loss incurred due to breakage and destruction of the pledged property, and reimbursement of its mobilization and insurance compensation;

4.1.3."pledge right" means that an authorized person specified in the law keeps a property in its possession for the period until the transfer of fee and payment to a person in exchange of the services rendered by such person including eliminating defect and breakage in the property, and transportation and storage of the property, and fixed and improved the property;

4.1.4."seller's pledge right" means a seller sold property on credit, or a lender extended loan to a buyer for purchasing the property pledges such sold property as a security for execution of the obligation;

4.1.5."pledge right to be created under law" means a pledge right to be triggered under laws regulating relations with regard to enforcement of court judgment, and tax and bankruptcy matters.

Article 5.Parties to a pledge

5.1.Pledgee is an individual or legal person that holds pledge of movable property and intangible property as a security for execution of obligation to satisfy its claims in case the debtor fails performing its obligation.

5.2.Pledgor is an individual or legal person that delivers movable property and intangible property of its ownership as a security for execution of its obligation.

5.3.Pledgor may be a debtor or a third party.

Article 6.Obligation secured by a pledge

6.1.Obligation to be secured by a pledge shall be one or several main obligations that can be expressed in means of money, and unless otherwise provided by the law and agreement, other relevant facultative obligations.

6.2.The facultative obligations shall include loss, default interest, forfeit, stamp duty, and court expenses to be reimbursed incurred by the pledgee in relation to securing the claim of a pledge due to failure of execution of the main obligations.

6.3.If stated in the agreement, the amount of obligation to be secured by a pledge may be changed.

6.4.If stated in the agreement, a pledge can be used for securing the execution of obligation to be created in the future, or conditional obligations.

Article 7.Pledge item

7.1.Movable properties which have not been excluded from commercial transaction existing or to be created in the future, and are eligible to be transferred to other's ownership have, all types of shares, securities, right to claim, all types of science, literature, and art works, production model, trademark, efficient model, and other movable properties and intangible properties may be a pledge item.

7.2.Pledge item may not be a movable property that is not subject to payment claim in accordance with the law, and a right that may not be transferred to other's ownership.

7.3.Unless otherwise provided for by the law and agreement, income gained from disposition of pledge item shall be the pledge item.

7.4.Unless otherwise provided for by the pledge agreement, the fruits of the pledge item shall be the pledge item.

7.5.If provided for by the pledge agreement, pledge item, and its quantity may be changed

Article 8.Grounds for pledge rights

8.1.Movable property and intangible property shall be created under law, or under an agreement between a pledgee and a pledgor.

8.2.Articles and provisions of this law other than those related to securing a pledge right, and order of the pledge right shall not apply to the relations with respect to the pledge to be created under law.

CHAPTER TWO

PLEDGE AGREEMENT AND PLEDGE

SECURING A PLEDGE

Article 9.Pledge right to be created under agreement

9.1.Pledge right to be created under agreement shall be created upon the execution of a pledge agreement between a pledgee and a pledgor.

9.2.As for the pledge to be created under a agreement, pledge item may be transferred to possession of the pledgee.

Article 10.Content of pledge agreement

10.1.Pledge agreement shall be executed in writing in compliance with the common regulations of the Civil Code and this law, and the agreement must include the followings:

10.1.1.if a pledge and a pledgor is an individual, father/mother/'s name, first name, registration number, residing address; if a legal entity, it's name, state registration number of the legal entity, and its residing address;

10.1.2.obligation to be secured by the pledge, if it is known by the time of execution of the agreement, amount of the claim to be secured by the pledge;

10.1.3.if the pledge and the pledgor agreed under the agreement that the obligation to be secured by the pledge may be created in the future or may be changed, regulations to define the same and other conditions;

10.1.4.specifications of the pledge item, definition of its individual, or fungible characteristics;

10.1.5.a party to posses the pledge item during the effective term of the pledge agreement;

10.1.6.date of the pledge agreement.

10.2.Information set forth in above Article 10.1.1 hereof with regards to the following persons must be provided in the pledge agreement:

10.2.1.if the debtor is not the pledgor, the debtor;

10.2.2.if the pledge item is common ownership asset, the owners of such common ownership asset;

10.2.3.if the creditor or the pledgee are several entities, the creditors.

10.3.The pledgee, the pledgor, or their respective representatives shall sign and secure the pledge agreement.

10.4.Pledge agreement which was not executed in writing shall be invalid.

Article 11.Securing a pledge

11.1.If the pledge agreement states to transfer the pledge item to the possession of the pledgee, the pledge shall be secured upon transfer of pledge item to possession of pledgee or its authorized representative.

11.2.If pledge item is not transferred to the pledgee, the pledge shall be secured upon registering pledge notice with electronic database in accordance with this law.

11.3.Pledge to be created under law shall be secured upon registering pledge notice with electronic database.

11.4.Transfer of secured pledge right to others shall not constitute a ground for securing the pledge, or grounds for changing the order of such pledge right.

11.5.If pledge right is secured uninterruptedly in forms otherwise, it shall be considered secured from the period of initial securing process.

Article 12.Exceptional regulation of securing a pledge

12.1.In case of monetary savings pledge, the pledge shall be secured as the pledge gets the control of such savings account.

12.2.If the pledgee's right has been secured as to the said pledge item, pledge of income gained from disposition of the pledge item shall be considered as secured.

12.3.In case it is impossible to recognize that the income has been gained from disposition of the pledge item and it is not clearly stated in the registration of electronic database, the securing a pledge shall be terminated after 15 days of the receipt of income gained from disposition of the pledge item by the pledgee.

12.4.The pledge notice of an auto transportation vehicle shall be considered secured upon registration with electronic database by its each serial number.

12.5.In case the registration is made in accordance with Article 40.3 hereof, once the pledge right is created, the pledge right shall be considered secured at the time of such registration.

12.6.When a seller sold property on credit, or a lender extended loan to a buyer for purchasing the property registers the sold item with electronic database within 10 days after transferring the sold item to the buyer, the pledge right of the seller shall be considered secured from the time of transfer of the item.

CHAPTER FOUR

PRINCIPLE OF ORDER TO EXERCISE PLEDGE RIGHT,

PRIVILEGE OF THE PLEDGEE

Article 13.Order to exercise pledge right

13.1.Unless otherwise provided for by this law, the order of right of several pledgees to secure the performance of obligations preemptively from one pledge item shall be determined in chronological order based on their securing process.

13.2.A secured pledge shall have the preemptive right over the unsecured pledge regardless of the period when the pledge right is created.

13.3.As for unsecured several pledges, the order whereby the pledge rights have been created shall be applied when determining the order of the pledgees' right.

Article 14.Pledge order of the income gained from disposing the pledge item

14.1.Order of rights exercised by the pledgees with respect to the pledge item shall remain effective as for the income gained from disposing such pledge item.

Article 15.Seller's privilege to pledge

15.1.If a lender extended loan to a buyer for purchase of equipments, and auto-transportation vehicles, or a seller sold equipments, and auto-transportation vehicles on credit secures its pledge right within 10 days of transferring the property to the purchaser by registering with the electronic database, such lender or a seller shall have privilege to secure its claim prior to other secured pledgees regardless of the chronologic order.

Article 16.Pledgee's privilege to livestock, and domestic animal

16.1.If a person transferred a property for the purposes of food and medical treatment of livestock and domestic animal secured its pledge right, such person shall have privilege to secure its claim prior to other secured pledgees regardless of the chronologic order as for such livestock, domestic animal, and income gained from disposing the same.

Article 17.Pledgee's privilege to wheat

17.1.The secured pledge right of wheat which is being grown in a land area possessed under law shall have a privilege over the land owner's right of demand and the claim of the pledgee of land.

17.2.The secured pledge securing the performance of the obligation created in order to procure the availability of growing and collecting the wheat within 6 months prior to growing wheat, or at the time during the growth of wheat shall have a privilege over other secured pledge rights regardless of the chronologic order as for such wheat.

Article 18.Privilege of a person authorized to pledge

18.1.A person pledges a property pursuant to Articles 354, 392, 422.3.8 and 429.17 of the Civil Code shall have a privilege to secure the performance of obligation in the first place over the other pledgees with the secured pledge right with respect to the movable property.

Article 19.Pledge right of a movable property constitutes a simple component of an immovable property

19.1.Unless the pledge agreement provides otherwise, in case a pledged movable property constitutes a simple component of an immovable property, the pledge right of such movable property shall remain effective.

19.2.In cases other than registering a right that created in relation to an immovable property with the state registration under the regulations stated in applicable law prior to securing a pledge right constituting a simple component of such immovable property, the pledge of such simple component shall have privilege over any rights related to the said immovable property.

19.3.In case a pledged movable property constitutes a main component of an immovable property, pledge right of such movable property shall be terminated.

Article 20.Pledge right of property combined with other items

20.1.The pledge right of a movable property that is combined with the main items shall remain effective after such combination.

20.2.If the pledge right specified in Article 20.1 hereof has been secured at the time of combination with the main items under this law, the pledge right of the property shall be considered to be registered following such combination.

20.3.The secured pledge right of a property combined with the main items shall have privilege over the pledge right in the main items.

Article 21.Pledge right of a replaceable property during the combination, and mixture

21.1.If the replaceable movable property that is an pledge item has been combined and mixed with other's property, the property formed as result of such combination and mixture shall be the pledge item.

21.2.In case the pledge is secured prior to combining and mixing the pledge item, the pledge in the property formed as result of such combination and mixture shall be considered secured.

21.3.In cases other than those specified in Article 21.4 hereof, order of pledge right of the property formed as result of combination and mixture shall be determined in chronological order whereby the movable property pledge has been secured.

21.4.If several pledge rights are triggered in relation to the property formed as result of combination and mixture, the order of exercising the pledge right shall be determined as follows:

21.4.1.at the period of combining and mixing a movable property, the secured pledge shall be secured prior to the unsecured pledge right;

21.4.2.as for several unsecured pledges, the pledge right which was created first shall be secured in the first place;

21.4.3.As for several secured pledges, the demand of their pledge rights shall be secured proportionally to price of the property formed as result of combination and mixture with the value at the time of such combination and mixture of the property.

Article 22.Pledgee changes the order of its preemptive right

22.1.A pledgee may at any time change the order to secure the demand of pledge by reducing it entering into agreement in writing with another pledgee.

Article 23.Transferring pledge item to other's ownership

23.1.Unless the agreement provides otherwise, if the pledgor disposes the pledge item by selling, trading, or giving as gift the pledge item, the pledgor shall inform the pledgee of the same.

23.2.When selling pledge item within the scope of business activities of the pledgor, the notice specified in Article 23.1 hereof shall not be required.

23.3.The activities of selling pledge item within the scope of business activities specified in Article 23.2 hereof shall refer to the activity that a person engages in activities of selling certain type of property for profit-making purposes on a constant basis sells its property held under pledge.

Article 24.Survival of demand of pledge when transferring pledge item to other's ownership

24.1.Unless law and agreement provide otherwise, in case of selling, trading pledge item, or otherwise changing its owner, the pledge right of such movable property shall remain effective.

24.2.Buyer shall obtain the movable property without the pledge right regardless of whether being aware that the movable property sold within the scope of business activities of the pledgor has been pledged, or whether the pledge rights has been secured.

24.3.If it is permitted by the pledge, the movable property and the intangible property shall be transferred to others without a pledge right.

24.4.In case a person who is receiving pledge item under its ownership does not know that the movable property and intangible property are pledged, or there is possibility of knowing the same, and that person receives such property with due payment prior to securing it under this law, then such movable property and intangible property shall be transferred to such person's ownership without any pledge right.

24.5.In case a buyer of an auto-transportation vehicle that does not know at the time of acquiring the property that it has been pledge to others, and failure to secure as stated in Article 12.4 hereof, the property shall be transferred without a pledge right.

24.6.If the pledge item has been disposed under procedures specified in Articles 24.2, 24.3, 24.4 and 24.5 of this law, the pledge right shall be created in the income gained from such disposition under Article 12.3 hereof.

Article 25.Specialties of pledge of receivables

25.1.Pledge of receivables shall be secured upon the registration of the pledge notice under this law.

25.2.In case of a pledge of receivables, the pledgee is obliged to notify the person obliged to such receivables of the grounds for pledge and its securing process.

25.3.In case the pledgee fails to inform the person obliged to the receivables about violation of the obligation by the pledgor, and the pledge right, then the person obliged to the receivables shall perform its obligation to the pledgor and such payment shall be used for performing the main obligation secured by the pledge.

25.4.In case the pledgee notifies the person obliged to the receivables about the pledge right and the pledgor's failure to duly perform its obligations, and demands the person obliged to the receivables to perform its obligations to the pledgee, the execution of such obligation shall be used for performing the main obligation secured by the pledge. If the person obliged to the receivables performs the obligation to the pledgor's after receiving notice from the pledgee, the obligation of the receivables shall not be considered performed.

25.5.The notice stipulated in Article 25.4 hereof shall be in writing and include the following information:

25.5.1.name of the pledgee;

25.5.2.amount of the receivables, its value, period, terms and regulations of receiving;

25.5.3.instruction on to whom the receivables to be paid; and

25.5.4.evidence regarding the pledge of receivables.

CHAPTER FOUR

RIGHTS AND OBLIGATIONS OF PARTIES WITH RESPECT TO PLEDGE ITEM

Article 26.Utilization of pledge item

26.1.Unless the pledge agreement provides otherwise, the pledgor of the pledge that has not been transferred to the possession of the pledgee /referred to as "non-possessory pledge"/ shall be entitled to use pledge item for its designated purposes.

26.2.As for the non-possessory pledge, the pledgor shall be entitled to the income gained from pledge item and its fruits, and unless the pledge agreement provides otherwise, the pledgee shall exercise any right with respect to such income and fruits.

Article 27.Handling and maintenance of pledge item

27.1.Unless the pledge agreement provides otherwise, the pledgor of the non-possessory pledge shall maintain and protect pledge item for the period until the termination of pledge obligation, and shall conduct routine maintenance and be responsible for the incurred expenses within the period and under the regulations stated in law and agreement, if there is not set period, then within the reasonable period of time.

27.2.Unless the pledge agreement provides otherwise, pledgee of the pledge transferred to the possession of the pledgee /referred to as "possessory pledge"/ shall be maintain and protect pledge item and be responsible for necessary repair and services.

Article 28.Insurance of pledge item

28.1.The parties may insure the pledge item by entering into mutual agreement.

28.2.In the occurrence of insurance event of the insured pledge item, the pledgee shall have right to secure its demand of pledge from the insurance compensation fund. Translation from Mongolian Page 10

Article 29.Consequences of mobilization of the pledge item

29.1.If a pledge item is mobilized as specified in the law and the compensation and price for mobilizing such pledge item are paid, the pledgee shall have a right to have demand for performance of obligation from such compensation and price.

Article 30.Prevent from loss of or damage to an pledge item

30.1.Person possessing the pledge item shall be responsible to ensure integrity of the pledge item and safety of the rights, especially to take measures specified in the law and agreement in order to protect from other person's illegal attack and sudden danger and it shall be obliged to take requisite and ordinary measures unless specified in the law and agreement.

30.2.Pledgee shall promptly notify the other party of the agreement in the event of real danger of loss of or damage to the pledge item.

Article 31.Examination of the pledge item

31.1.Party to the agreement which does not possess the pledge item shall have a right to examine reality and maintenance of the pledge item on the basis of notice to the other party.

31.2.In the event of exercising rights stipulated in Article 31.1 of this law, it shall not cause any obstructions to possession and utilization of the pledgee.

Article 32.Transfer of the obligation secured by pledge

32.1.Unless otherwise stipulated in the agreement, transfer of obligation secured by pledge shall be deemed as transfer of right of pledge.

Article 33.Bankruptcy and insolvency of the pledgor

33.1.Order of the confirmed pledge shall also apply to the order to satisfy the demand of the claim for bankruptcy matter.

33.2.If bankruptcy case is instigated against the pledgor, right of pledge shall become valid and firstly bailiff shall secure the demand of the pledgee by sales income of the pledge item and the remaining part shall refer to the property allotted by the defendant.

33.3.In the event the pledgor is bankrupted or is deemed as insolvent, if the income earned from the pledge item is not sufficient for the demand of pledgee, such insufficient part shall be transferred to the ordinary claim order.

CHAPTER FIVE

REGISTRATION OF PLEDGE NOTICE

Article 34.Registration authority

34.1.State administrative body in charge of registration /hereinafter referred to as "registration authority"/ shall register pledge notice of movable property and intangible property with electronic database and issue registration number in accordance with the regulation specified in this law. Translation from Mongolian Page 11

34.2.Registration of pledge notice determined in this law has purpose to inform public that a right of pledge arose for movable property and intangible property of certain possessor and to determine the order of right of pledge. Interested person may request clarification from the pledgee or pledgor with respect to the content of pledge agreement.

Article 35.Electronic database

35.1.Registration authority shall have an electronic database /hereinafter referred to as "electronic database"/ that registers the pledge notice of movable property and intangible property.

35.2.Registration authority shall carry responsibility for the establishment of electronic database in statewide and its continuous operation, preservation, protection and reliability.

35.3.Registration authority shall prepare statistic report concerning the registration of pledge notice registered with electronic database by month, quarter and year in statewide and shall deliver them to the relevant authority.

35.4.Electronic database specified in Article 35.1 of this law shall be consolidated and open for public in statewide.

Article 36.Regulation for operation of electronic database

36.1.Government member in charge of state registration shall adopt the regulation to compose electronic database, to formulate information, to provide and exchange information, to register the notice of right of pledge and to issue the number, to keep open for public and to determine type of statistical information with the suggestion by the head of the registration authority.

Article 37.Searching in electronic database

37.1.Electronic database shall be public for acquiring and searching information with respect to the pledge.

37.2.Enquiry for registration of pledge notice may be acquired from the registration authority.

Article 38.Service fee

38.1.In the event of searching, register the pledge notice arising as specified in the law in electronic database and cancel the registration of pledge notice, service fee does not apply.

38.2.In order to register the pledge notice with electronic database, make changes in registration, extend the registration period and acquire registration enquiry, service fee specified in the Law on state stamp duties shall be paid.

Article 39.Pledge notice

39.1.Pledge notice shall contain the following matters:

39.1.1.If the pledgor is the citizen, his/her surname, given name, registration number /passport or similar document number if foreign citizen or stateless person/, current address and if the pledgor is a legal body, its name, registration number and residing address;

39.1.2.If the pledgee is the citizen, his/her surname, given name, current address and if the pledgee is the legal body, its name, registration number and current address;

39.1.3.Pledge item, its quantity and general description;

39.1.4.Term of obligation secured by pledge.

39.2.If there are several pledgee and pledgor, information specified in Articles 39.1.1 and 39.1.2.of this law shall be contained for each related person.

Article 40.Registration of pledge notice

40.1.Pledgee or its representative shall get registered the pledge notice in electronic means.

40.2.Pledgee shall receive approval for registering pledge notice in written form and such approval shall be contained in pledge agreement.

40.3.If pledgee and pledgor have agreed in writing, pledge notice may be registered before concluding the pledge agreement or before the agreement becomes effective.

40.4.Bailiff appointed from the court shall add the pledge arisen as stipulated in the legislation of bankruptcy in electronic database and the court decision enforcement office shall add the pledge arisen by the court decision. Tax authority shall add the pledge arisen as stipulated in the tax legislation in electronic database without permission of the pledgor.

40.5.If the pledge agreement is amended in writing in respect of information set in Article 39 of this law, the pledgee shall register such amendment with electronic database.

40.6.In the event that term of the pledge agreement is extended, pledgee shall get registered the statement on extension of pledge notice registration with electronic database.

Article 41.Validity of pledge notice

41.1.Pledge notice registered with electronic database shall become valid when it is open for public.

41.2.Registration of pledge notice shall be valid for three years since it is registered with electronic database if the statement on extension of pledge notice registration is not issued.

41.3.In the event the notice is not secured in other way except get registered the notice on extension of such pledge when registration period of pledge notice expires, such pledge shall be deemed as unsecured.

Article 42.Amendment to registration of pledge notice

42.1.Statement on amendment to registration of pledge notice shall contain the following matters: Translation from Mongolian Page 13

42.1.1.initial registration number of pledge notice;

42.1.2.information specified in Article 39.1.2 of this law by the pledgee that allows to amend registration of pledge notice;

42.1.3.other information required for pledge notice.

42.2.In the case to add pledge item in the registration of pledge notice or to get registered the notice to add information of new pledgor and pledgee, newly conducted pledge agreement and approval by new pledgor and pledgeeshall be acquired in writing form.

42.3.Amendment to the pledge notice shall be only valid for the pledgee who approves such amendment.

Article 43.Extending registration period of pledge notice

43.1.Statement on extending registration period of pledge notice shall contain the following matters:

43.1.1.initial registration number of pledge notice;

43.1.2.information specified in Article 39.1.2 of this law by the pledgeethat allows to extend registration period of pledge notice.

43.2.Statement on extending registration period of pledge notice shall be registered within six months before the expiry of initial registration.

43.3.Registration of statement on extending registration period of pledge notice shall be deemed as extension for the period of three years regarding the pledgeethat allows valid extension of initial registration.

Article 44.Terminating registration of pledge notice

44.1.Statement on terminating registration of pledge notice /hereinafter referred to as "termination notice"/ shall provide the following matters:

44.1.1.initial registration number of pledge notice;

44.1.2.information specified in Article 39.1.2 of this law by the pledgee that allows to terminate registration of pledge notice;

44.1.3.the note showing the fact that registration of pledge notice becomes invalid for each pledgeewho allows to terminate the registration.

44.2.In the following event, pledgeeshall have registered the statement on termination with electronic database within three days upon the receipt of written notice from executor or pledgor:

44.2.1.demands to be secured by pledge is terminated;

44.2.2.executor or pledgor did not give permission for initial registration.

44.3.pledgeeshall pay damages caused to pledgor due to such failure of registration and fine in the event it is determined in the agreement if it fails to have registered the statement on termination with electronic database within the time period specified in Article 44.2 of this law.

44.4.If the value of secured obligations arisen as stipulated in the law is fully satisfied, pledgeeshall register statement on termination within 10 days upon the receipt of notice delivered from pledgor.

44.5.Statement on termination shall only be valid for pledgeethat gives permission to terminate.

Article 45.Insert additional explanation to registration of pledge notice

45.1.Executor or pledgee may insert additional explanation with purpose to correct and clarify any information that has been published on electronic database.

45.2.Insertion of additional explanation specified in Article 45.1 of this law shall not be the ground to deem pledge notice as invalid.

45.3.It shall be responsible to insert accurate information in electronic database and the guilty person who inserted information shall compensate the damage caused to others due to breach of this obligation.

Article 46.Refusal to register pledge notice

46.1.If the pledge notice registered for the first time does not contain the following information, registration in the electronic database shall be refused:

46.1.1.Registration number of pledgee;

46.1.2.Name and current address of pledgor;

46.1.3.Definition of pledge item.

46.2.Registration shall be rejected if registration number of notice to extend registration period is invalid, expired, terminated and the following information is not included:

46.2.1.Registration number of the basic notice which is to be amended;

46.2.2.Registration number of pledgor;

46.2.3.Name and current address of pledgee.

46.3.Registration shall be rejected if registration number of notice to extend registration period is invalid, expired, terminated and the following information is not included:

46.3.1.Number of the main notice to be extended;

46.3.2.Extending term of notice.

46.4.If registration number of such terminating notice is invalid, expired, terminated and main number of such terminating notice is not included for notice to terminate pledge notice registration, the registration shall be rejected.

46.5.Failure to pay service fee in order to register pledge notice specified in this law shall be the basis to reject registration of pledge notice.

CHAPTER SIX

EXERCISE OF A RIGHT OF PLEDGE

Article 47.Ground to exercise a right of pledge

47.1.Except otherwise provided by laws and if the executor did not perform its obligation to secure with pledge, the right to exercise a right of pledge shall arise for pledgee.

Article 48.Notice to exercise a right of pledge

48.1.In the case the ground to exercise a right of pledge comprised, the pledgeeshall provide notice in writing to the pledgor and executor and the notice shall include the following matters:

48.1.1.Information on pledge agreement;

48.1.2.Notice related to the condition to exercise a right of pledge is created and right of pledge is about to exercised;

48.1.3.Measures to be taken by the pledgor in relation to satisfaction of pledge;

48.1.4.Final possible term to take such measures.

Article 49.Term to secure the demand of pledge

49.1.Except as otherwise provided in the notice to implement the demand of pledge, the final possible term to secure the pledgor's demand of pledge shall be 14 days since delivering the notice to exercise right of pledge to the pledgor.

Article 50.Entry of notice to exercise right of pledge to registration and notify other pledgee

50.1.When term set to secure the demand of pledge expires, the pledgee shall exercise right of pledge.

50.2.If the pledge is secured by registration, pledgee shall enter information into electronic database that activity to secure the demand of pledge is started.

50.3.Pledgee who started activity to secure its demand of pledge shall deliver such notice to the address specified in the registration and notify the other pledgee who is secured by registration by pledging the item no less than 10 days following the date of selling pledge item. Notice specified in Article 50.3 of this law shall provide pledgee, pledgor, pledge item and measure, term and location of selling the pledge item.

Article 51.Submission of claim for enforcement of right of pledge

51.1.pledgeeshall have a right to transfer pledge item to its ownership upon the registration of the notice to exercise right of pledge with electronic database.

51.2.pledgeemay submit claim to the court if it is impossible for pledgeeto exercise right to take pledge item into its ownership.

51.3.In order to submit the claim determined in Article 51.2 of this law, the pledgeemay request to take pledge item into its ownership within scope of securing implementation of court decision stipulated in Article 69.1.5 of the Civil Procedure Code.

51.4.The judge shall provide an order to transfer pledge item into the ownership of pledgeewithin seven days after the receipt of request determined in Article 51.3 of this law on the basis that the conditions set in the pledge agreement are satisfied.

51.5.If pledge item is not unrepeatable, rare and irreplaceable, the court may transfer the pledge item into the ownership of pledgee and issue the permission to sell such item.

51.6.pledgee shall be obliged to keep income earned from sales of pledge item specified in Articles 51.4 and 51.5 of this law until the court resolves the claim determined in Article 51.2 of this law.

Article 52.Prohibition to impede exercise of right of pledge

52.1.Pledgor shall be prohibited to unlawfully impede the lawful action taken by pledgee as stipulated in this law in order to exercise its right of pledge.

Article 53.Methods to secure the demand of pledge

53.1.When selling pledge item, pledgee shall carry an obligation to choose rational method to honestly sell pledge item with less expense in consideration of attribute of such pledge item and in ways of choosing method appropriate for the condition and appointing the third party to sell pledge item.

53.2.The demand of the pledge shall be satisfied by means of selling the pledge item as follows:

53.2.1.the pledgee shall sell directly or through a representative at an auction;

53.2.2.the pledge item shall be sold at an auction of a third person;

53.2.3.the pledge item shall be sold at an existing market or exchange where such type of property is sold or purchased.

Article 54.The distribution of the income generated from selling the pledge item

54.1.The pledgee shall, after paying the cost incurred with regards to the sales of the pledge item in accordance with the Article 53 of this law, satisfy the demand of the pledge of itself and other pledgees out of the income generated from selling the pledge item pursuant to the order set forth in this law and shall return the remaining sum to the pledgor.

54.2.Not less than 10 days before the distribution of the income generated from selling the pledge item in accordance with the Article 54.1 of this law, a notice shall be delivered to the person set forth in the Article 50.3 of this law, which contains the date and venue of the income distribution, the address to where the requirement on the distribution and evidence may be sent and the notice may be sent together with the notice set forth in the Article 50.3 of this law or separately.

54.3.The pledgee shall adhere to the following order when distributing the income generated from selling the pledge item in accordance with the Article 54.1 of this law:

54.3.1.Actual cost incurred with respect taking into its possession, keeping or selling the pledge item;

54.3.2.The requirement of the order which comes before it that is set forth in this law;

54.3.3.Own requirement of the pledgee who is exercising the right of pledge;

54.3.4.The requirement of other pledgees who come after it in terms of order regarding the delivery of the notice and evidence set forth in the Article 54.2 of this law before distribution of the income generated from selling the pledge item.

Article 55.The right of the pledgor to redeem its pledge item

55.1.At any stage before selling the pledge item, the pledgor may, after fully satisfying the demand of the pledge, stop the process to satisfy the demand of the pledge.

55.2.The pledgor shall reimburse the cost or damage incurred by the pledgee with regards to satisfying the demand of the pledge in the case set forth in the Article 55.1 of this law.

Article 56.Transferring the ownership right of the pledge item to the purchaser or other pledgees

56.1.The person who purchased the pledge item which is sold in accordance with this law shall transfer such item into its ownership free of any right of pledge.

56.2.The pledgee may, in case the pledgor, debtor or in case of such pledge item other pledgees who registered its right of pledge in accordance with this law agrees in writing, consider the obligation to satisfy with pledge partially or wholly satisfied and may partially or in wholly transfer the pledge item into its ownership.

Article 57.Satisfying its demand from receivables

57.1.The pledgee may have demand of pledge directly satisfied by the original debtor in case the pledge item is a receivable and obligation period has expired.

57.2.The pledgee may deduct the cost incurred with regards to satisfying the demand of the pledge and return the remaining sum to the pledgor in case sum exceeds the obligation to satisfy with a pledge after the pledged receivable is paid.

57.3.The pledgee may officially inform the debtor that the obligation backed with a pledge has been satisfied and may keep such payment until the payment date in case the payment was made during the period of right of pledge even though the payment date of the pledged receivable hadn't come.

57.4.The pledgee may have the demand of pledge directly satisfied by means of exercising its right which is expressed as an pledge item in case the pledge item is a non-bearer security which the pledgee took into his/her possession and the period to satisfy the obligation is over.

57.5.The pledgee bank may indisputably deduct the demand of the pledge from the money, in case the pledge item is money held in a bank account. If the pledgee is an entity other than a bank, the person who took over the control to manage the account shall have the right to have the demand of the pledge satisfied from the money which is the pledge item.

CHAPTER SEVEN

MISCELANNEOUS

Article 58.Grounds for termination of right of pledge

58.1.Except otherwise stated in the law, right of pledge shall terminate on the following grounds:

58.1.1.The parties to the pledge have mutually agreed;

58.1.2.The obligation to satisfy with a pledge has already been satisfied or terminated;

58.1.3.The pledge item doesn't exist anymore;

58.1.4.The pledge item has been transferred to the ownership of the pledgee;

58.1.5.The obligation to satisfy with a pledge has been transferred separately from the pledge item;

58.1.6.The pledge item was sold or transferred to others in accordance with the law.

Article 59.Coming into force

59.1The law shall come into force on 1 September 2016.

/This part was revised by the law of 30 August 2016/

SPEAKER OF THE PARLIAMENT OF MONGOLIA Z.ENKHBOLD