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Unofficial translation
THE LAW OF MONGOLIA ON STATE AND LOCAL PROPERTY
May 27th, 1996 Ulaanbaatar
CHAPTER ONE. GENERAL PROVISIONS
Article 1. Purpose of the Law
1.1. The purpose of this Law is to regulate relations arising from the matters of powers of the legislative and executive organs concerning ownership rights on state and local property, level of authority of a legal person with state property and its administration, principle and regulations of activity of an organ implementing policy on state property.
Article 2. Law's scope of effect
2.1. This law effects to the regulation of matters concerned to the enjoying ownership rights on state and local properties, specified in the Constitution and the Civil Law of Mongolia.
2.2. This law shall not affect to the regulation of matters concerning the composition, distribution and expenditure of the State central and local budgets and State treasury fund.
(this provision was amended by the law of January 2nd, 2003)
CHAPTER TWO. STATE PROPERTY ITEMS
Article 3. Concept and classification of state property items
3.1. State property consists of state property for public use and state's own property. State property for public use and state's own property divides to immovable and movable properties in accordance with the article 84 of the Civil Code.
(this provision was amended by the law of July 4th, 2002)
Article 4. State property for public use
4.1. State property for public use is items for public use proclaimed as people's property by the Constitution and other laws of Mongolia.
4.2. The following immovable and movable property to be considered as a State property for public use:
4.2.1. Land that is not in citizens' ownership;
4.2.2. subsoil with its mineral wealth;
4.2.3. Water and water resources;
4.2.4. Forest and its wealth;
4.2.5. Flora and fauna resources;
4.2.6. Historical and cultural relicts and monuments;
4.2.7. Archeological and paleontological findings;
4.2.8. Other items considered as State property for public use by law;
4.3. The State Ikh Khural realizes the ownership right, use, dispose of the State property for public use and this law shall not effects relations arisen from this.
4.4. Citizen (citizen of Mongolia, foreign resident, stateless person) in accordance with this Law regulation may transfer the right of possession and use of State property for public use to other legal persons.
Article 5. State's own property
5.1. The following items except that indicated in the paragraph 2, Article 4 where the State may own, use, dispose to be considered as State's own property:
5.1.1. property owned by State bodies and departments;
5.1.2. property owned by State owned enterprises;
5.1.3. State share in partly State owned enterprises;
5.1.4. State central budget and other State special funds;
(this provision was amended by the law of January 2nd, 2003)
5.1.5. State reserves for special use;
5.1.6. other immovable and movable property indicated in the law;
5. 2. The items of State's own property in accordance with its economic purpose shall be divided on basic and circulating capital as indicated in the paragraph 1, Article 69 of the Partnership and Company Law.
5.3. Matters concerned to the ownership, use, disposal of the State's own property shall be regulated by this law.
5.4. Regulations on transferring state's own property items to property for public use or other ownership shall be determined by the law.
Article 6. Purchase of stock for the State property
6.1. Purchasing stocks for the state property shall be made in following form:
6.1.1. Stock which was in state ownership by the time this law came into force;
6.1.2. Stock appeared as a result of production, service;
6.1.3. Stock purchased by the decision of a competent body;
6.1.4. Stock purchased as contribution, aid, present, inheritance;
6.1.5. Stock purchased as a result of socialization, expropriation in accordance with the grounds and regulations indicated in laws and international treaties to which Mongolia is a signatory.
Article 7. Completion of the right of ownership of the items of the State property
7.1. The right of ownership of the items of the State property shall be completed in accordance with the grounds indicated in the Civil Law and other laws.
CHAPTER THREE. MANAGEMENT OF THE STATE PROPERTY
Article 8. The State Ikh Khural's powers concerning the State property
8.1. The State Ikh Khural has the following powers on State property:
8.1.1. The State Ikh Khural representing all the people shall be the owner of the state property;
8.1.2. Discuss the Government report on results of taking inventory of the State property and determine power on ownership, use, disposal of the State property;
8.1.3. Adopt the State budget in accordance with law, control its implementation;
(this provision was annulled by the law of January 2nd, 2003)
8.1.4. Making decisions on transferring the State property to local ownership;
8.1.5. Adopt the basic directions on the privatization of the State property, making list of stock not to be privatized, making amendments to them;
8.1.6. Approve the primary strategy of privatization of state owned or state property involvement banks and impose supervision through the Bank of Mongolia on the compliance of the privatization process to the legislation;
(this provision was added by the law of July 21st, 1999)
8.1.7. Other kind of power indicated in the law.
(this provision was amended by the law of July 21st, 1999)
8.2. Only the State Ikh Khural has right to make a decision on socializing.
Article 9. The Government's powers on state property.
9.1. The Government bears responsibility on safety of the state property to the State Ikh Khural and has the following powers on this:
9.1.1. Organizing the implementation of the state policy, law and regulations on the state property;
9.1.2. Establishing the size and limits of ownership, use, disposal of items as share of the state property of the legal persons;
9.1.3. Making decisions selling, transferring state immovable property not included in the privatization;
9.1.4. Adopting list of legal persons, items to be privatized;
9.1.5. Making decisions on establishing, changing, abolition of legal persons with state property, confirm their charters, if not indicated in the law in other way;
9.1.6. Consideration and making decisions on suggestions from legal persons other kind of property about jointly establishing legal persons with full or partly ownership of state property, making investment to them, returning back the invested share;
9.1.7. Making decisions on requisition of other's ownership items to the state ownership, if indicated in the law, submitting proposal and draft decision on socializing to the State Ikh Khural;
9.1.8. Submitting the report to the State Ikh Khural on the results of taking inventory of the state property, performance of budget, fulfilling its decisions;
9.1.9. Determine and change legal persons with state property ownership's co-relation to the state and local budget;
(this provision was amended by the law of January 2nd, 2003)
9.1.10. approve with the agreement of the Bank of Mongolia the regulation on the privatization program of the part allocated to the state in banks under state ownership or with involvement of the state property and on the assessment of the state property in banks;
(this provision was added by the law of July 21st, 1999)
9.1.11. Other kind of power indicated in the law.
(this provision was amended by the law of July 21st, 1999)
Article 10. State Property Committee
10.1. State Property Committee is an organization within main Government structure whose duties are to own, use, and protect the state property.
10.2. State Property Committee shall consist of the Chairman, 8 non-established members. The Government shall appoint the members of the State Property Committee by the proposal of the Chairman.
10.3. State Property Committee shall have a State Property Agency, whose duties are to implement state representation in legal persons with full or partly ownership of state property. The Government shall adopt Agency's Charter.
(this provision was annulled by the law of January 2nd, 2003)
10.4. State Property Committee shall conduct its activities on self-financing basis.
(this provision was annulled by the law of January 2nd, 2003)
10.5. There shall be a State Property Committee representative in the capital city and in aimags. The Government shall determine the regulations and rules of the work of a State property representative.
(“property committee” was removed by the law of June 19th, 1997)
Article 11. State Property Committee's powers
11.1. State Property Committee shall have the following powers:
11.1.1. organize the work on improvement of the ownership, use, storage, protection of the items of state property and supervise its implementation;
11.1.2. organize and conduct the works on preliminary registration, taking inventory, issue balance reports on items of state property, supervising use of items of state property, take measures to improve its efficiency;
11.1.3. stipulate with the relevant organizations standards of planning, distribution of income and profit, salary standards to be followed by legal persons with state property;
11.1.4. organize the work of privatization in accordance with the list adopted by the Government, report the fulfillment;
11.1.5. render professional and methodological assistance on management of local property;
11.1.6. appoint State property representatives to legal persons with state property, supervise its activity;
11.1.7. supply necessary items to government bodies in the order basis;
(this provision was annulled by the law of January 2nd, 2003)
11.1.8. supervise and confirm proposals of legal persons with state property, to cut from balance their immovable property and movable property related to basic capital, supervise and confirm orders, make decisions on purchasing new item;
11.1.9. other kind of power indicated in the law.
Article 12. Authority of ministries and special bodies on state property
12.1. Maintain professional management of legal persons with state property in the fields and framework concerned, work out and submit proposals on order, planning, investment and other necessary problems.
12.2. The state central administrative institution in charge of the relevant matter shall implement the powers regarding the management and property of legal entities under the state property manufacturing products intended for the national security and defense.
(this provision was amended by the law of July 10th, 2002)
CHAPTER FOUR. LEGAL PERSON WITH STATE PROPERTY
AND RIGHTS OF ITS STOCK
Article 13. Concept and classification of legal person with state property
13.1. A legal person with state property is a legal person established by state by its own property with the purpose of implementing its policy and maintaining social consumption. Legal status of stock of a legal person with state property shall be classified as follows:
13.1.1. government body, department;
13.1.2. state owned enterprise.
Article 14. Authority of stock of government body, department
14.1. The government body, department is organization financed by the state budget, except state owned enterprises with state property.
14.2. Government body, department has the following rights and duties on stock given to it:
14.2.1. maintaining safety of stock given to it, own and use according to purpose in its activity;
14.2.2. using funds delivered from state budget in accordance with the Law on Management and Financing of Budget Organizations and reporting on it;
(this provision was amended by the law of January 2nd, 2003)
14.2.3. Income as a result of production, service shall be owned, used, disposed in accordance with its Charter purpose, if not prohibited by law;
(this provision was annulled by the law of January 2nd, 2003)
14.2.4. proposals on purchasing, ordering, transferring, liquidating of stock referred to basic capital shall be submitted to the State property Committee, receiving authorization in accordance with regulations indicated in this law.
Article 15. Classification of state owned enterprises
15.1. A state owned enterprise is an enterprise based only on state property and receiving funds from state budget, and it shall be divided, in accordance with its legal status: to self-financing enterprise and budget-funded enterprise.
15.2. A self-financing enterprise is a legal person independently entering into civil circulation, based on self-financing principle on given state property items.
15.3. A budget-funded enterprise is a legal person, on the basis of given state property items financed from state budget and whose activity is limited to producing and service only for state demand.
Article 16. Authority of property items of self-financing state owned enterprise
16.1. A self-financing enterprise shall have the following rights and duties on property items:
16.1.1. own and use given immovable property in accordance with its activity Charter;
16.1.2. disposal of basic capital within the framework of authority indicated in this law;
16.1.3. keep, use, dispose part of manufactured productions in accordance with the limits issued by an empowered body;
16.1.4. independently sell own production.
16.2. Basic capital of self-financing enterprise shall be transferred, sold, liquidated only by the permission of the State Property Committee.
Article 17. Authority of property items of budget-funded enterprise
17.1. Property items of budget-funded enterprise shall enjoy the same rights as the rights of the government bodies and departments as indicated in the article 14 of this law.
17.2. Executive director and administrative officer of budget funded enterprise shall be public administrative servants, others (temporary workers not included) shall be public service servants. Regulations on appointing, changing of director and administrative officer shall be regulated by the Law on Civil service.
(this provision was annulled by the law of May 6th, 2008)
Article 18. Administration of self-financing enterprise
18.1. Director shall manage day-to-day activity of self-financing enterprise. The State property Committee in agreement with the ministry concerned shall appoint or change the director.
18.2. A person to be appointed as the director shall meet the following requirements:
18.2.1. have higher education;
(this provision was amended by the law of June 19th, 1997)
18.2.2. have not less than 2 year experience of administration work at any legal person or its branch, have necessary managing skills; and
18.2.3. observe ethics of management.
18.3. A person who's right to be appointed in post concerned or to have activity in fields concerned were deprived by a decision of the court, or punished for criminal case by the decision of the court, or bankrupted a legal person which was under its administration, or changed due to not fulfilling duties on management shall be prohibited to be appointed as director.
18.4. Director shall be prohibited to enter Representative managing council of state and private property, or half-shared private property legal person, simultaneously work in its administration.
18.5. State Property Committee shall form list of posts, personnel of the administration of self-financing enterprise.
18.6. Administration officer of self-financing enterprise shall be civil servant and others shall be considered as hired workers.
(this provision was annulled by the law of May 6th, 2008)
Article 19. Contracting with the director of the administration of self-financing enterprise
19.1. Contract shall be made when appointing director of self-financing enterprise (hereinafter referred to as "director"). Contract shall reflect following conditions:
19.1.1. rights and duties indicated in this law;
19.1.2. level of economic efficiency to be reached;
19.1.3. instruction on technological renewal;
19.1.4. measures to be taken in field of labor security and social policy;
19.1.5. management policy;
19.1.6. Director's and Government Commitments on discharging of their duties;
19.1.7. Asset and its amount allowed to the managing enterprise by the owner;
19.1.8. Wages and salary, remuneration regulated by this law;
19.1.9. Work condition (car, communication and others)
19.1.10. Assets (property) responsibility stated in this law;
19.1.11. Regulation for the evaluation on contract obligation's fulfillment and its period;
19.1.12. Other conditions except unlawful;
19.2. If the director's non-fulfillment of his duties due to the agreed contract appears without any legitimate excuse it can cause to his dismissal.
Article 20. Assets right and obligation of the director
20.1. The director possesses the following rights and duties:
20.1.1. To represent a concerned enterprise without a proxy and grant a proxy to others;
20.1.2. To dispose the assets within his terms of reference stated in the law or contract on behalf of the enterprise;
20.1.3. To work out production and financial planning for the enterprise, and obtain necessary approval by a relevant authority, and provide a necessary conditions for execution;
20.1.4. To form an administrative structure of the enterprise, appoint and dismiss officials, and fix the salary and wages according to the Scheme Fund set by a relevant authority;
20.1.5. To determine an information belonging to the production and technology secrets for the enterprise;
20.1.6. To approve and follow its internal labor regulation in conformity with the labor law and legislation;
20.1.7. To make an entry in the book- keeping according to the legal accounting rules, and reveal the balance sheet and statistical information, and be responsible for their truthfulness;
20.1.8. To claim on matter in dispute to the court on behalf of the enterprise;
20.1.9. To set prices and tariffs for the goods and services expect the fixed ones by the government;
20.1.10. Within his competence, to establish relevant orders and rules to be followed by the enterprise in order to implement the legislation and the government decisions;
20.1.11. Other rights and duties stated in the law.
20.2. In addition to the rights and duties stated in this law, other rights and duties to be entitled to the director taking into account the specific character of activity of a particular enterprise can be stated in the contract said in the Article 19 of this law.
20.3. The director is entitled to establish a Council of Directors consisting of relevant professionals and officials and the members and regulation for the activity of above said Council will be approved by the director's order. The members of the Council are entitled to work with deliberative power to the director.
20.4. The following incentives to be given to the director can be stated in the contract:
20.4.1. to give a particular percentage from the profit gained by the enterprise in a particular period;
20.4.2. to give a particular cash remuneration due to the fulfillment of his contract duties.
20.5. If because of director's quilt activity or he offends any crime through his ultra vireos or abuse of the rights entitled to him in the ownership, use and dispose of assets said in the contract and causes damages to the enterprise, the director is to bear completely these damages by his private property.
Article 21. Business entity with state ownership participation, its property rights and features
21.1. The business entity with the public shares or public shared capital is called a business entity with public ownership participation.
21.2. The delegation of public property by the business entity shall be executed through the following ways:
21.2.1. The State Property Committee is to appoint the representative of state ownership to the Members' (shareholders) Meeting as a supreme Authority of the business entity with a state ownership.
21.2.2. The members of the representative governing board for the business entity shall be appointed by the State Property Committee in proportion to the state ownership in a particular business entity according to the paragraph 2 of the Article 85 in the Partnership and Company Law of Mongolia.
21.3. The Member of the Members' Meeting of business entity with a state ownership, who is appointed by the State Property Committee shall be entitled to be appointed to the Representative Governing Board.
21.4. The representative of state ownership possesses the following rights and duties:
21.4.1. to participate in the meetings of Members and Governing Board with the judgment making power
21.4.2. to make a draft on the efficient disposal of assets by the business entity implementing the state ownership delegation and submit it to the State Property Committee;
21.4.3. to implement the state ownership delegation within the terms of reference permitted;
21.5. Nominees satisfying the requirements specified in 21.2 of the Law on Management and Financing of Budget Organizations shall be appointed to the members of the board of directors.
(this provision was revised by the law of January 2nd, 2003)
21.6. The representative of state ownership shall work according to the guidelines and rules approved by the State Property Committee. A violation or non-fulfillment of the guidelines or rules can cause the abolishment of the decision for his/her appointment.
21.7. The allocated remuneration to the people as a representative of state ownership and member of the governing board shall be concentrated at the State Property Agency. Depending on his)her performance of the delegation obligation or whether a particular business entity makes a profit or not, a relevant remuneration or incentives shall be given to him/her. The rule of such remuneration or incentives shall be set by the State Property Committee.
(this provision was annulled by the law of January 2nd, 2003)
21.8. The attending person in the Members' meeting representing the government has no right to vote for the member to the governing board from other private owners of a particular business entity. In conformity with this and other laws, the Government of Mongolia can issue a specific regulation on the delegation of state ownership in corporate entitles with state ownership.
Article 22. Establishment and registration of the business entity with state ownership
22.1. An enterprise and institution is to be established by the decision of the Government or authorized body having a special permission according to the law, and it is considered to be established from the date of such decision and shall be registered as the following procedures:
22.1.1. Unless it was stated in the law otherwise, the Ministry of Finance shall register in the state registration the government organizations, institutions and budget-funded enterprises described in the paragraph 1 of the Article 13 and paragraph 3 of the Article 15 in this law;
(this provision was annulled by the law of May 23rd, 2003 and shall be effective on October 1st, 2003)
22.1.2. The self-financed enterprises described in the paragraph 2 of the Article 15 in this law, shall be registered according to the Partnership and Company Law of Mongolia.
(this provision was annulled by the law of May 23rd, 2003 and shall be effective on October 1st, 2003)
Article 23. Dissolution of business entity with state ownership
23.1. The liquidation of s business entity shall be effected according to the cause and procedures in the Civil Law and other laws.
CHAPTER FIVE. REGULATION ON POSSESSION, USE AND DISPOSAL OF THE PROPERTY BELONGING TO THE STATE OWNERSHIP
Article 24. Acquisition of the property of state ownership
24.1. The list of required assets for the performance of its function and objectives of a self-financed state enterprise shall be issued at least 3 month before the beginning of financial year and the maximum expenses amount shall be approved by the State Property Committee and Ministry of Finance.
24.2. Except the government organizations, all other corporate entities with state ownership shall purchase by themselves the required assets within their approved expenses, and the government can allocate them without any compensation. A business entity with state ownership can acquire real estate on the basis of the order and only with the permission granted by the State Property Committee.
Article 25. Valuation and registration of the property of state ownership
25.1. The property of state ownership shall be registered in accordance with the procedures provided in the Article 7 of the Accounting Law.
25.2. The Government can make its decision to re-value the property due to the market price and exchange rate changes.
25.3. If it is considered that the prices set for the goods and services by the self-financed state enterprises have negative results to the government policy on the market price of such goods and services, as well as to the interest of society, the government is entitled to make decision for monitoring and changing these prices.
25.4. The procedures and rules on the valuation and entry of assets into the accounting book- keeping shall be issued by the Ministry of Finance.
Article 26. Possession and use of the property of state ownership
26.1. A business entity with state ownership owns and uses the acquired property in accordance with this law.
Article 27. Possession and use of state property by the entity without state ownership
27.1. The property of state ownership can be owned and used by others through a concessive and leasing agreement approved by an authorized body or free of charge if warrantable by laws.
27.2. The relations on possession of real estate like state owned land and under- earth through a concessive agreement shall be regulated by a specific law.
Article 28. Leasing of state- owned property
28.1. The regulations of state property to be leased which is designated to the public- by the State Ikh Khural and of its own property to be leased to others are ruled respectively by the Government in conformity with the Civil Law.
28.2. A business entity with state ownership possesses its right to give in lease for own and use of the real estate to the others except the especially regulated by the Government.
28.3. The leasing agreement shall cover on a mandatory basis the regulation on the duration of lease, its payment, terms, reasons to annul before the expire date, consequences to be raised, taking of measures on offset, an addition to the provisions described in the Article 105 of the Civil Law.
(this provision was amended by the law of July 4th, 2002)
28.4. In case of selling the leased property, whether to qualify the rights (preferential rights to buy) or not, described in the paragraph 2 of the Article 105 of the Civil Law, is subject to the State Property Committee's decision.
(this provision was amended by the law of July 4th, 2002)
28.5. The payment of lease on the state property shall be collected to the State Central Budget. This payment is not related to the total payment for purchase of this property.
(this provision was amended by the law of January 2nd, 2003)
Article 29. Selling of the state owned property
29.1. In case of selling the state owned property without any regard to the privatization, through the Government, the tangible assets from the basic assets of a business entity with state ownership - through the State Property Committee, and the other property - through the own decision of a particular business entity shall be sold respectively only by the auction trading.
29.2. The initial price of the auction shall not be below the price indicated in the balance sheet.
(this provision was annulled by the law of June 19th, 1997)
Article 30. Transfer of the state owned property without compensation
30.1. In order to constitute the local administration property, the transfer of the property without compensation shall be decided only by the State Ikh Khural.
30.2. Except the state owned real estate and the property belonging to a business entity, the other movable property can be transferred by the Government and by the State Property Committee's decision only in case of granted permission from the Government.
30.3. Unless otherwise it was stated in the law, the state owned property is prohibited to donate, present and mortgage or contribute as a capital stock to the legal person with other ownership without permission from an authorized body.
30.4. The procedures on provision of allowances and support for single use only from the state property shall be set by the Government.
Article 31. Sale, transfer and liquidation of the excess and incompetent
property, or with expired date of utilization
31.1. A business entity with state ownership holding excess capital assets and assets with the expired date of utilization or assets with the expired date of utilization or assets impossible to use because of accident occurrence and it was confirmed that the use of them after repair is considered to be inefficient can sell, transfer and liquidate such assets with a relevant verifying documentation.
31.2. The sale and transfer of the property stated in the paragraph 1 of this Article shall be permitted by an authorized body said in the Article 29 and 30 of this Law.
31.3. The sale, transfer and liquidation of the property described in the paragraph 1 of this article shall be effected through the following provisions:
31.3.1. A conclusion on the property to be sold, transferred and liquidated, shall be issued by the Standing Council for property protection;
31.3.2. The price for the excess assets, or repaid assets with wear and tear payment, or wearied and torn and damaged assets possible to use for the purpose after repair can be set upon the consultation with the State Property Committee;
31.3.3. To liquidate the property impossible to repair;
31.3.4. However the utilization date has not been expired, the property impossible to use because of serious damages shall be decided upon a permission of the State Property Committee as described in the procedure of this article;
31.3.5. the reason for the occurred damages shall be stated and if such damages are resulted from a particular person's guilty, the compensation is subject to the provisions of the Civil Law.
31.4. The Standing Council to protect the property stated in sub-paragraph 1 of paragraph 3 of this Article shall consist from the professional people such as a deputy director in charge for main production and/or headed by a manager who fulfils his/her duties, a general accountant and technologist and be approved by the decision of the director of an entity.
CHAPTER SIX. PRIVATIZATION OF THE STATE OWNED PROPERTY
Article 32. Concepts on the privatization of state owned property
32.1. The transfer of the state owned property into private ownership (hereinafter referred to as "privatization") on the basis of decisions made by an authorized body according to the methods and conditions described in this law means a privatization of state owned property.
Article 33. Privatization program
33.1. The government shall implement the actions to privatize the state owned property and the actions to privatize banks under the state ownership or with the state property involvement shall be implemented according to a program adopted jointly by the government and the Bank of Mongolia.
(this provision was revised by the law of July 21st, 1999)
33.2. The purpose of privatization, its stages, methods, forms and list of objects to the privatized shall be indicated in the program.
33.3. The government with the agreement of social policy and economic standing committees of the Grand State Assembly shall annually approve dates, forms and the list of organizations for the changes in the social sector, renovation or privatization.
(this provision was added by the law of July 10th, 2002)
Article 34. Methods of privatization and its definition
34.1. Privatization of state owned property shall be conducted by the following methods solely or combined with others respectively:
34.1.1. Auction trade;
34.1.2. Tendering (Selection of proposed projects);
34.1.3. Sale of public shares and stocks;
34.1.4. Reorganization of a business entity with the state ownership to the joint-stock entity;
34.1.5. To privatize the assets by dissolution;
34.1.6. Privatization taking account the management results;
34.1.7. To issue shares with preferential and specific rights;
34.1.8. privatize by reducing the state ownership by a certain percentage according to the payment of the state financing;
(this provision was added by the law of July 10th, 2002)
34.2. The privatization method among the described methods in this Article to the used for a particular state owned property shall be set beforehand in the list approved by the government and according to this list the decision shall be made by the State Property Committee.
Article 35. Preparation for the privatization process
35.1. Before the privatization of the state owned property, there shall be taken stock and valuation of the property according to the Article 37 and 70 of this Law, then such re-valued property shall be transferred to the supervision of the trustee representative from the State Property Committee.
35.2. The trustee representative of the State Property Committee shall bear his duties to protect the safety of the property to be privatized, and to transfer it to a new owner upon the decision of the State Property Committee. Any disputes including excess and losses of the property shall be submitted to the State Property Committee for consideration.
35.3. Any movement of the property to be privatized is prohibited during the period from the transfer to the trustee representative to next transfer to a new owner without a permission given by the trustee.
35.4. If necessary, the business entity with the state ownership can be reorganized before the privatization process begins. In this case, the State Property Committee can consult about such decision with concerned government bodies.
Article 36. Furnishing of information on the property to be privatized
36.1. Information on the shares and dividends related to the government from the business entity with state ownership to be privatized shall revealed to the public through media not less than 30 days before the start of privatization process by the State Property Committee.
36.2. The following shall be included in the announcement on privatization:
36.2.1. The size of land in the possession of the business entity to be privatized; land character; if it is leased, the terms of agreement and payment report;
36.2.2. The balance sheet including the type and price of whole property, as well as debts and other indices indicating the economic results and solvency;
36.2.3. Type of the engaged production and services activity;
36.2.4. Minimum offering price for privatization; and
(this provision was amended by the law of June 19th, 1997)
36.2.5. Other information on the specific features and conditions related to the engaged activities;
36.3. Other information can be published from the State Property Committee.
Article 37. Valuation of the property to be privatized
(this article was revised by the law of June 19th, 1997)
37.1. A minimum selling price shall be determined prior to the privatization of the state property.
37.2. It shall be prohibited to sell the property lower than the minimum price.
37.3. The government shall adopt the regulation on the determination of the minimum selling price.
37.4. Where necessary, the government may appoint a team of experts to determine the minimum price.
Article 38. Auction trading
38.1. If there are no specific requirements for the future use of the privatized property, the auction methods are to be used in this case.
38.2. The auction shall be executed through open or limited way according to the paragraph 10 of the Article 197 in the Civil Law.
(this provision was amended by the law of July 4th, 2002)
38.3. The auction open to all interesting participants is called a public and within particular legal persons is called a limited auction.
(this provision was amended by the law of July 4th, 2002)
38.4. The participants of the auction shall express their own bid price by themselves or through their trustee by ascending offer in the auction, or submitting their maximum bid price in the sealed envelope.
38.5. The method to be used in a particular auction shall be determined by the State Property Committee and revealed to the public through the media.
Article 39. Furnishing of information about auction
39.1. The State Property Committee shall announce the information about auction trading not less than 30 days preceding the date determined to start this auction.
39.2. In addition to the procedures stated in the paragraph 2 of the Article 36 in this law, the announcement on the auction shall cover the following:
39.2.1. the date and time of the commencement of the auction;
(this provision was revised by the law of June 19th, 1997)
39.2.2. type of engaged production and services, definition of building and equipment, their quantity;
39.2.3. amount of pawn payment for the auction;
39.2.4. registration procedures and its period for the participants in the auction; and
39.2.5. general provisions of the purchase and selling agreements;
Article 40. Auction participants' rights and duties
40.1. The participants of the auction have the following rights:
40.1.1. to obtain free of charge a concerned information related to the property by the concerned persons in the auction;
40.1.2. to participate in the auction by himself or through his/her trustee representative;
40.1.3. If he/she fails to win in the auction attending by himself or trustee representative, the pawn payment made before shall be returned;
40.1.4. to be compensated the losses because of delayed or before execution of the auction from the determined date, or not holding the announced auction; and
5) to bring own claim concerning to the violence of the procedures to the State Property Committee and court.
40.2. The participants have the following duties:
40.2.1. to be registered in the participation list before the auction starts by the organizers;
40.2.2. to make deposits within specified time in the announcement and/or advertisement;
40.2.3. to provide truthful information on its financial situation and payment ability to trade organizers;
40.2.4. to make the pawn payment for the purchased property within the determined period, if he/she wins in the auction trading;
40.2.5. to compensate losses occurred to the seller, raised from the non-receipt of the property purchased in the auction within the determined period.
Article 41. General rule for auctions
41.1. An auction shall be conducted by a person nominated by the State Property Committee.
41.2. A conductor shall have the following duties:
41.2.1. to register participants of auction;
41.2.2. to start auction at planned place and time;
41.2.3. to write down each action of the auction process;
41.2.4. an auction shall be considered as insolvent, and closed with corresponding notice, if there were less than two participants and no bids higher than the minimum price;
(this provision was revised by the law of June 19th, 1997)
41.2.5. an auction record shall be correct and full.
41.3. A representative of State Property Committee shall participate through whole auction with the following duties:
41.3.1. to check whether auction is conducted according to the law, and control conductor's activity;
41.3.2. to check whether auction records were done correct and fully;
41.3.3. to stop auction, if there is law violation.
41.4. An auction shall be started at announced place and time, participants shall bid, and after last bid a sign shall be given or counted 1, 2, 3 and then the auction shall be closed.
41.5. It is prohibited for a conductor and representative of State Property Committee, or his empowered person to be an auctioneer.
Article 42. Illegality of an auction
42.1. An auction shall be considered as illegal if there are the following substantiation:
42.1.1. starting was before or more than 1 hour later scheduled time;
42.1.2. was in other place than it was announced;
42.1.3. bid order was mixed
42.1.4. was started and carried out without a representative of Committee;
42.1.5. was closed before last bid or without sign;
42.1.6. participation of conductor, or representative of Committee, or non registered person;
42.1.7. violation of other terms of announcement for auction.
Article 43. Substantiation to accomplish an auction
43.1. An auction shall be considered as accomplished with closing sign after final bid.
43.2. The participant of the auction with the highest bid shall be the winner.
(this provision was revised by the law of June 19th, 1997)
43.3. A possessor shall conclude contract with State Property Committee or authorized organization according to the paragraphs 20-23 of the Article 197 of the Civil Law. The following terms shall be included into a contract:
(this provision was amended by the laws of June 19th, 1997 and July 4th, 2002)
43.3.1. list of the property by items;
43.3.2. purchased price;
43.3.3. amount of a pawn to participate in the auction;
43.3.4. method of payments;
43.3.5. conditionally and timing for property transference;
43.3.6. substantiation, rule and amount of loss compensation in case of contract duties failure;
43.3.7. procedure to solve an argument related to the contract duties.
43.4. The right to possess the property sold in auction shall be realized after full accomplishment of the payments for items indicated in the selling-buying contract or after full payment and registration in the immovable properties registry in case of an immovable property. Payments procedure and methods shall be indicated in the contract.
(this provision was amended by the law of June 19th, 1997)
43.5. Buyer shall pay the purchased property cost within 14 days.
43.6. Where the winner does not pay the payment in the specified period, the right to purchase the property by own offered price shall transfer to the entity issuing the second offer in the auction. Such participant shall pay within fourteen days.
(this provision was added by the law of June 19th, 1997)
Article 44. Holding the auction once more
44.1. The auction shall repeat where the auction did not proceed according to 41.2.4 and Article 42 of this law or proceeded with breaches of the law or the next participant specified in 43.6 of this law does not pay within the specified period.
(this provision was revised by the law of June 19th, 1997)
44.2. Decision on holding the auction once more shall be taken by State Property Committee, and renewed auction shall be announced no later than fourteen days prior to the event and conducted according to the procedure specified in this law.
(this provision was revised by the law of June 19th, 1997)
Article 45. Solving an argument arisen from the auction
45.1. An argument arisen from the auction shall be solved by State Property Committee. If its solution was not accepted, appeal can be given to court.
Article 46. Privatization by tenders
46.1. Privatization by tenders is the privatization on the basis of project selection.
46.2. Property shall be privatized by the following tenders:
46.2.1. to increase efficiency of the privatizing legal person by investing and technological renovation without changing its profile;
46.2.2. to change profile of the privatizing legal person in order to meet country, local and population needs.
46.3. Privatization by tenders shall be open or limited.
46.4. Tender among certain professional legal persons and individuals in order to meet professional, investment and technological requirements for purpose of maintain the profile and increasing efficiency of the privatizing property is considered as "limited"; with free public participation as "open";.
46.5. Limited tenders (legal persons) shall be indicated in list approved by Government. According to this State Property Committee shall make decision and publish it.
Article 47. Tender announcement
47.1. State Property Committee shall make announcement about tender according to the paragraph 1 of the Article 36 of this law not less than 60 days before the tender starts.
47.2. The following terms shall be indicated in announcement besides the information under paragraph 2 of the Article 36 of this law:
47.2.1. additional conditionally in use and disposal of the property;
47.2.2. main criteria of the tender;
47.2.3. preliminary registration for participants;
47.2.4. closing date to send a project to State Property Committee;
47.2.5. general contract provisions;
47.2.6. price, amount and items of a pawn.
Article 48. Requirements to a tender participant
48.1.Tender participants shall meet the following requirements:
48.1.1. property guarantee, solvency;
48.1.2. professionally skilled staff;
48.1.3. a project shall meet announced conditionality and appropriate professional level;
48.1.4. professional expertise shall be done;
48.1.5. a project shall be received in time;
48.1.6. pawning must be done in time.
48.2. The property security provided by the participants for the tender offer shall not be a pledge of bank or other business entities and organizations.
48.3. The State Property Committee may require for additional requirements in appropriate with peculiar attribute of the property to be privatized. Additional requirements shall be included in the announcement of the tender offer.
Article 49. Rights and duties of the participants of the tender offer
49.1. Besides the rights and duties stipulated in the Article 40 the participant shall exercise the following rights and duties:
49.1.1. the sealed projects to be selected shall be delivered to organizer in person or by trusted representative, if there is no possibilities of such delivery, to sent it by secured mail within the announced terms;
49.1.2. to deny the expert selecting the projects and to complain on experts' activities to the assigned organization;
49.1.3. to be responsible fully for the trustworthy of an information sent to the tender offer on the security interests, creditworthiness.
Article 50. Expert's rights and duties
50.1. On the date of the proclamation of the project the State Property Committee shall appoint based on the list of the experts an professional expert or a team of the professional experts including the former one.
50.2. The expert shall meet the following requirements:
50.2.1. to have high education in the field of the profession relevant to the project to be selected, working experience of no less than 3 years in that field;
50.2.2. expert to be included to the team shall have high education related to the matter of the project in such field as accounting, finance, law, technical science and have an appropriate experience.
50.2.3. to have no criminal conviction;
50.2.4. to have no any personal interest in the project and property subject to be privatized.
50.3. Considering the attribute of the property, the duty of the experts' team may be executed by the control or expertise organization.
50.4. The expert shall exercise the following rights and duties:
50.4.1. to require additional information on the project submitted for the tender offer;
50.4.2. to determine the forms of the tender offer in agreement with the representative of the State Property Committee;
50.4.3. to organize the tender offer on a high level in compliance with the law and regulations;
50.4.4. to keep state, organization and person's secrets have been found out from documents during his)her activities;
50.4.5. to renounce in consequence of the provision of the Article 51 of this Law on conditions prohibiting expert's participation;
50.4.6. if the expert included in a team has particular opinion he/she shall renounce by indicating its grounds in the written;
Article 51. Conditions prohibiting to participate as an expert
51.1. The expert shall renounce the participation in the selection of the project in the following conditions:
51.1.1. if the expert is one of the founder, owner, or shareholder of the legal person initiated the submitting project;
51.1.2. if the expert was or is employed in one of the participant's economic entity who submitted the project;
51.1.3. if the expert has close relationship with the participant who submitted the project (father, mother, husband, spouse, brother, sister, children, and members of their families).
51.1.4. if the expert has any other personal interests in it.
Article 52. Procedure for the receiving and initiating the project.
52.1. The Project shall be received and initiated according to the following procedure:
52.1.1. Organizers shall register all projects submitted within the announced period of time in order its receipts according to the rules determined in instruction of filling, make special notes and store its separately.
52.1.2. On expire date of receiving of the project the organizer shall record, sign and seal every project at present of the representative of the State Property Committee. The Organizer shall be responsible for confidentiality of the project;
52.1.3. On the day of the proclamation the organizer shall transfer all submitted projects and notes to the experts. The participant of the tender offer may be present, if he/she wish do so;
52.1.4. The experts shall receive the projects submitted for the tender offer revising its the intactness and sign the receipt;
52.1.5. The experts shall open the parcel and examine the completeness of the documents of the projects according to the announced list;
52.1.6. If the project is incomplete, the expert shall inform the participant and may not mark or mark down the project or may make decision to exclude the project from tender offer;
Article 53. Procedure of the evaluation of the project
53.1. The Projects shall be evaluated on 2 stages:
- on the first stage to ascertain whether the participant has fulfilled the conditions and requirements of the tender offer in compliance with the Law;
- on second stage to ascertain the person which offered the best price among the others with alike the conditions and requirements.
53.2. Before proclamation of the project the experts shall agree on its selecting procedure.
533. The evaluation activities of the experts shall be recorded.
Article 54. Evaluation of the expert
54.1. The Expert shall evaluate each project separately.
54.2. The expert' evaluation shall contain the followings:
54.2.1. evaluation in points on every criteria's of the selection of the project with its advantages or disadvantages;
54.2.2. brief summary of the evaluation and sum of the total points on each project;
54.2.3. the expert's special opinion;
54.3. The expert's evaluation shall be executed in writing and shall include the information on the expert's profession, the position, and the signature. In case if the expert's duty has been performed by the legal person the evaluation shall be executed on the blank form, signed by the responsible authority and sealed. The name of the place, the date and the term shall be indicated in the evaluation.
54.4. In case the evaluation has been done separately by each member of the expert's team, the team of experts shall provide the summary evaluation on each project with its signature and seal.
54.5. The expert shall submit the evaluation to the meeting of the State Property Committee. The State Property Committee shall approve the evaluation if consider it reasonable grounded, and if consider it groundless or in contempt of law the state property committee shall make a decision to deny for re-examination.
Article 55. Privatization through the shares of the stock
55.1. The state owned enterprise may be privatized by reorganizing into the company and selling its shares of the stock. The decision on it shall be issued by the State Property Committee. Due to the economic and social needs, the State may found a legal entity with state ownership by not offering some of the shares to the public and leaving into its ownership.
55.2. The foundation issue of the state owned enterprise under the paragraph 1 of this Article shall be undertaken by the State Property Committee and it shall exercise the duties represented by the promoters according to the Article 35 of the Partnership and Company Law.
55.3. The State Property Committee shall convene the meeting of the contributors within three months after the sale of the shares of the stock in compliance with the relevant procedures and transfer its rights and duties to the management of the newly founded legal entity.
Article 56. Privatization of the state owned shares of the stock and transfer of the ownership to the other persons
56.1. According to the provision of the paragraph 1 of the Article 55 of this law, the state owned shares of the stock of the company or state owned enterprise or legal persons with the state ownership shall be sold as a free or in approved forms of the shares through the stock exchange as stipulated in paragraph 2 of this Article or out of the stock exchange as stipulated in the Articles 38- 45 and 46-54, 58 of this Law based on the decision of the State Property Committee.
56.2. The shares of the stock shall be sold through the stock exchange in the following order and procedure:
56.2.1. in order to sale the shares through the stock exchange, the State Property Committee shall appraise the property of the enterprise which is to be privatized and determine the forms of the shares to be issued, its number, nominal selling price and if shares are in package, their size, then shall make a decision about public sale through the stock exchange. The state owned shares of the joint stock company may be sold as the above.
56.2.2. the activity of the selling shares through the stock exchange shall be taken under the procedure stipulated in the Law on Securities.
56.3. The opinion of the other owners of this legal entity shall be taken in selling the state owned shares of the legal person with state ownership in accordance with the paragraph 1 of the Article 91 of the Partnership and Company Law.
56.4. The Government may establish a special procedure on selling the state owned shares of the legal person with state ownership.
Article 57. Privatization through founding joint venture
57.1. Privatization may by done through foundation of the joint venture by joining the property of the state owned legal person as a whole or part with the property of the foreign or domestic investors. Therefore, the following is allowed:
57.1.1. to sell some part of the property (shares of the stock, dividends) of the state owned legal entity to the investors;
57.1.2. to add others property into with purpose to widen and renovate the state owned legal entity;
57.1.3. to sell the loan of the state owned legal entity to others and to give the shares into the ownership in the amount of the paid loan.
57.2. In any case referred in the first part of this Article, both parties shall execute the contract on the loan and the ownership of the shares, and appraise the contributed property on mutual agreement, and reflect the mutual rights and duties on the management of the enterprise in compliance with The Partnership and Company Law or International Treaties Law of Mongolia.
57.3. The duty of the representative of the state property shall be executed by the State Property Committee and person nominated by in any relations of the joint venture.
Article 58. Privatization considering the evaluation of the management's activities
58.1. The management of the state owned legal person may be undertaken by a legal and natural person in private ownership and with a high management professional experience and skills to manage the enterprise effectively on the basis of the contract.
58.2. The person employed on the basis of the contract may found own team if it is not stipulated otherwise in the contract.
58.3. If the law does not stipulate otherwise, the management contract shall be concluded on the basis of the tender offer and in written for the 3 years.
58.4. Besides Civil Law provisions related to contracts, the following conditions shall be included into a contract:
58.4.1. measures will be taken by manager to improve organizational structure and technology, to increase efficiency at an enterprise, set time-tables, stages, criteria and procedures in implementing these measures;
58.4.2. wage and bonus for a contractor;
58.4.3. portion, form and price for state property which will be privatized in case of full implementation of contract duties;
58.4.4. responsibility, compensation form and amount, and the security in case of failure.
58.5. Contract on management can be used by selling state shares of majority state owned enterprises or joint ventures as legal persons. In this case it shall be agreed with shareholders and managing representative’s council of the legal person.
Article 59. Privatization by golden shares
59.1. Golden shares with voting rights but without dividends can be used if there is necessity for state control over some activity for certain time regarding to a state owned legal person to be fully privatized.
59.2. State Property Committee shall publish about issuance of golden shares, authorized state representing person and timing, when a legal person will be privatized.
Article 60. Abolishment of a legal person and its privatization
60.1. Bankrupt, or with backward technique and technology, or without prosperity state owned enterprise can be abolished by Government resolution, and after debt clearing can be privatized.
60.2. Having done inventory and liquidation balance of an abolishing enterprise, State Property Committee will transfer or sell in auction the state property by portions according to the Article 30 of this Law on the basis of Government resolution.
Article 61. Contract to be concluded with property possessor
61.1. State Property Committee shall conclude a contract about property privatization with a new possessor before property transference.
61.2. The following conditions shall be included into the contract:
61.2.1. name, address and registration number of a person conducted privatization and new possessor;
61.2.2. list of privatized property, unit price and total cost, payments term and forms;
61.2.3. conditions to issue possession certificate;
61.2.4. place, time, rule for transference of privatized property, transferring and accepting persons, their rights and duties; and
61.2.5. if a new possessor was obliged to the state, the duties and responsibilities, and responsibility for failure of transference rule.
61.3. Other conditions can be included into a contract, which will not contradict to the legislation.
61.4. Property transference act, and if there is a project conditionality, corresponding documents shall be attached to a contract.
Article 62. Substantiation for privatization illegality
62.1. If there is one of the following substantiation, the privatization shall be considered as illegal and dissolved:
62.1.1. an entity is not in a list approved by Parliament or Government;
62.1.2. some entity privatized without State Property Committee decision;
62.1.3. violation of auction and tender rule;
61.1.4. a new possessor did not pay in time the payments by law and contract, or payments were done illegally;
61.1.5. was sold in lower price than minimum, or property not permitted to be privatized was obtained or given;
(this provision was amended by the law of June 19th, 1997)
61.1.6. a new possessor was over privileged regarding to the law;
61.1.7. a new possessor failed regarding to the contract duties;
61.1.8. illegal source was used to pay property cost;
61.1.9. other violations of this law and other laws.
61.2. State Property Committee will make solution on illegality of privatization according to the paragraph 1 of this Article and on loss compensation.
61.3. In case of illegal privatization, State Property Committee shall take measures to eliminate loss, protect property, and to make solution about further procedure.
61.4. If related person will not accept the State Property Committee resolution, he/she can apply to court.
Article 63. Financial source to pay privatized property cost
63.1. A new possessor shall cover the privatized property cost by own and legally obtained domestic and foreign credit resources (security).
63.2. Government can lend to a new possessor from privatization fund and other sources according to the legislation.
63.3. It is prohibited to use other sources, except indicated in paragraph 1 of this Article, to buy privatized property.
Article 64. Privatization revenue
64.1. Privatization revenue will consist of all kind of privatization fees, privatized property cost and donations given for this purpose.
64.2. The revenue from privatization shall proceed to the state budget.
(this provision was revised by the law of June 19th, 1997 and amended by the law of January 2nd, 2003)
Article 65. Privatization reporting
65.1. For each case of privatizing, official conducted the process shall write a report and submit to the State Property Committee. Report model (form) shall be approved by the Committee. The following items shall be indicated in a report:
65.1.1. privatized property inventory and evaluation;
65.1.2. authority solution to privatize;
65.1.3. privatization outcome, property selling cost and payments procedure;
65.1.4. concluded contract;
65.1.5. property transference status.
65.2. Contract and property list shall be attached to the report. A report is a main legal act certifying that a state property was privatized, and shall be considered and approved by the Committee meeting.
65.3. Approved report shall be put in archives for special fund.
65.4. The State Property Committee shall inform the immovable property registration organization regarding every privatization of the state owned immovable property.
(this provision was added by the law of June 19th, 1997)
CHAPTER SEVEN. CHANGES, REFORMS AND PRIVATIZATION IN THE SOCIAL SECTOR
(this chapter was added by the law of July 10th, 2002)
Article 651. Changes, reforms and privatization in the social sector
651.1. The implementation of services and managing activities of a state owned legal entity engaging in activities of the social sector by legal entities and individuals without the involvement of state property and the lease to others of items intended for the state property and used for social sector aid and services shall be considered as the scope of changes, reforms and privatization.
651.2. Any state property and any entitlement to the state property shall not transfer to others during the implementation of managing activities, rendering aid and services of a state owned legal entity upon a contract specified in Articles 652, 653 and 654 of this law by the managing and implementation contract or during the lease of the state owned property by a contract of lease.
651.3. The privatization of the social sector may similarly use the methods of privatization stated in the sixth chapter of this law.
651.4. Activities of changes, reforms and privatization in the social sector shall adhere to the following principles:
651.4.1. avoiding the change in the direction of activities and the purpose of the capital;
651.4.2. avoiding the reduction of the level of service and performance;
651.4.3. expanding the scope of services;
651.4.4. being open and transparent;
651.4.5.reducing the risks to employees.
Article 652. Implementation by a contract of management of the managing activities of a state owned legal entity operating in the social sector
652.1. A legal entity or an individual without the involvement of the state property who qualified in the tender may implement the managing activities of a legal entity operating in the social sector based upon a contract of management.
652.2. A legal entity or an individual employed by a contract of management shall be selected on the basis of a tender.
652.3. The State Property Committee and the central state administrative institution in charge of the relevant area to which the legal entity belongs shall jointly implement the work of organizing the tender, entering into a contract with the qualified legal entity or individual and evaluating the contract.
652.4. The government shall adopt the list of legal entities employed by the contract of management.
652.5. Entering into a contract of management shall consider the following conditions on a mandatory basis in addition to the provisions of the Civil Code on contracts of implementing an obligated work:
652.5.1. requirements stated in 58.4.1, 58.4.2 and 58.4.4 of this law;
652.5.2. quality of the primary activities of the legal entity, improvement of output, level of the reduction of budget financing, stages and time;
652.5.3. the amount of capital returned for the purpose of investments from the income exceeding the activity expenditures of the legal entity.
Article 653. Implementation of social sector aid and services by a contract of performance
653.1. The aid and services rendered by the state in the social sector may be assigned for implementation to legal entities or individuals without the involvement of the state property based upon a contract of performance.
653.2. A legal entity or an individual employed by a contract of performance shall be selected on the basis of a tender.
653.3. The State Property Committee and the central state administrative institution in charge of the relevant aid and services shall jointly implement the work of organizing the tender, entering into a contract with the qualified legal entity or individual and evaluating the contract.
653.4. The government shall adopt the list of legal entities employed by the contract of performance.
653.5. Entering into a contract of performance shall consider the following conditions on a mandatory basis in addition to the provisions of the Civil Code and the contract of work performance:
653.5.1. requirements stated in 58.4.1, 58.4.2 and 58.4.4 of this law;
653.5.2. ensuring the professional standards and requirements set forth for the aid and services.
653.6. Where there is a necessity to use the state property or entitlements to the state property during the performance, a separate contract shall be made between the State Property Committee and the contractor regarding the use of the state property or entitlements to the state property.
Article 654. Lease of state owned property for use in social sector aid and services
654.1. The state owned property for the social sector may be used upon a lease contract to legal entities and individuals without the state involvement.
654.2. A legal entity or an individual to use the state owned property according to a contract of lease shall be selected on the basis of a tender.
654.3. The State Property Committee and the central state administrative institution in charge of the use of the specific property shall jointly implement the work of organizing the tender specified in 654.2 of this law, entering into a contract with the qualified legal entity or individual and evaluating the contract.
654.4. 28.1, 28.2, 28.3 and 28.5 of this law shall similarly apply to the lease of the state property intended for aid and services to the social sector.
Article 655. Privatization by reducing the state ownership by the amount of payments of the budget financing
655.1. The activities of legal entities under the state ownership or with the state property involvement operating in the social sector may be privatized to legal entities and individuals upon a contractual basis through the reduction by a certain percentage of the state ownership by the amount of payment to the budget financing.
655.2. The government shall adopt the list of legal entities to be privatized according to 655.1 of this law.
655.3. A legal entity or an individual participating in the privatization specified 655.1 of this law shall be selected on the basis of a tender.
655.4. The State Property Committee and the central state administrative institution in charge of the legal entity under the state ownership or with the state property involvement shall jointly implement the work of organizing the tender specified in 655.3 of this law, entering into a contract with the qualified legal entity or individual and evaluating the contract.
655.5. The contract with a legal entity or individual shall on a mandatory basis specify the percentage by which the state ownership stipulated in 655.1 of this law is reduced.
CHAPTER EIGHT. CONTROL OVER STATE PROPERTY SAFETY AND PROTECTION, INSPECTION, REGISTRATION AND ACCOUNTING
(the number of this chapter was amended by the law of July 10th, 2002)
Article 66. Control and inspection system
66.1. State control and inspection over state property safety, protection, use and disposal are consist of general control by the State Ikh Khural and the Government, professional auditing by the State Control Committee and the Ministry of Finance, and own control and inspection of the State Property Committee and legal person.
66.2. Independent inspection on property use and disposal by state owned legal person can be done upon request of the State Property Committee and other authorities.
66.3. State Property Committee will realize system control and inspection on property safety and protection through checking actual outcome, documentation auditing and accounting on the basis of implementing related laws and the Government resolutions.
66.4. Ministry of Finance together with the State Property Committee shall audit economic and financial activity of a state owned legal person not less than one time in two years, and jointly consider auditing outcome, and take necessary measures.
66.5. Sudden selected audit on how a state owned legal person protects the property can be done by authorities within their competence.
Article 67. Internal control
67.1. An authority of the state owned legal person shall organize everyday internal control on the property safety and protection, and be responsible for this to the state.
67.2. Control through accounting shall be responsibility of an accountant of the legal person.
Article 68. Assistant manager ( in charge of stock)
68.1. A person with duties to account and store stock of state and local property, to maintain it by items and quality, and to hand it by authority decision is an assistant manager (in charge of stock).
68.2. The Government shall make the list of assisted manager (in charge of stock), procedure on choosing of assistant manager and contract with general conditions to be concluded with an assistant manager.
Article 69. Accounting of a state owned legal person
69.1. A state owned legal person shall carry out detailed and summarized accounting on the basis of guaranteed documentation of a primary accounting, and shall make quarterly balance and report to Ministry of Finance.
69.2. In addition to unified forms for required accounting, State Property Committee can issue forms and methodology for reporting which can be necessary for state owned legal persons.
69.3. A general accountant of the state owned legal person shall be skilled person and appointed under agreement with Ministry of Finance.
Article 70. Inventory and its timing for a state owned legal person
70.1. Fixed assets, security and money inventory shall be divided as internal and country-wide.
70.2. Internal stock inventory shall be carried out by administration of a state owned legal person according to the following schedule, and included into quarterly and annual report:
70.2.1. once in year for fixed assets, incomplete investment and construction works, and capital repairs (from December 1 through December 31);
70.2.2. twice in year for raw materials, fuel, spare parts, ready products, goods, and packages (from June 1 and December 1);
70.2.3. once in quarter for incomplete production, semi-processed items and securities (from 25th of last month of a quarter);
70.2.4. monetary capital, petroleum & lubricants, goods, packages and packaging materials at the retailing trade agents (such as shops, cafe, restaurants, hotels and others), (by first day of each month);
70.2.5. younger, labor or pedigree livestock and animals, annually; (by December 15);
70.2.6. settling the accounting of customs, commercial stamp; special taxes and health and social insurance and the other annual fees with the centralized and local budget quarterly (it is obligatory);
(this provision was amended by the law of January 2nd, 2003)
70.2.7. checking the bank account transactions and approve the cash)statement in the bank account quarterly when obtaining the statement on the bank account.
70.3. State Property Committee jointly with finance and statistic organizations shall make the inventory report of the whole country, compensate the lost property, transfer or sale, and liquidate the extra or out of use property and submit report to the Government.
70.4. The State Property Committee shall make inventory of nominal capital and if necessary the turnover capital once in every 4 years, within the 4th quarter of first year of new Government in power.
Article 71. Preparatory requirements for the inventory of property
71.1. The authoritative body and the chief accountant of state property legal persons are required for inventory to complete the followings in advance:
71.1.1. to record any actions(movements and changes)amendments of the nominal capital in the account comprehensive record book and provide it with the complete technical & technological data papers;
71.1.2. to audit the income and expenditure of goods, materials, and valuable items and check the list completed by the liable person with the statement registration book;
71.1.3. to check the raw materials, materials, production and equipment kept at the warehouse and sort out the maintenance;
71.1.4. to transfer to the warehouses the extra items of nominal capital such as raw materials, semi-processed items, productions and second-hand raw materials kept by the industrial branches and units, keep a record-check book on items of out-of-use and determine the percentage of investment for the incomplete works and construction;
71.1.5. to make ready the livestock and animal for inventory by its owners;
71.1.6. to check and confirm the equipment and means of the inventory, make price list and normal amortization standard of the goods;
71.1.7. to sale or liquidate the nominal capital such as raw materials, productions, goods that had been decided to do so by the previous inventory; and
71.1.8. to complete with all debt matters.
Article 72. The rights and duties of the Inventory Commission
72.1. The authoritative body of state property legal institutions shall appoint the Inventory Commission comprising of officials liable for property maintenance and the other professional bodies.
72.2. The Decision to establish the Inventory Commission shall indicate the commencing and ending period of inventory by every branch and sector.
72.3. The State Property Committee shall appoint an assistant representative who supervises & coordinates the inventory process.
72.4. The Inventory Commission has the following duties:
72.4.1. to complete the inventory correctly, properly and in time,
72.4.2. to record the cost of the property, checking it with market price, together with the distributors' invoice in the registration book,
72.4.3. to check good order in warehouses, its property maintenance & protection, initial stage registration, guarantee of the measuring equipment,
72.4.4. The Commission meeting shall discuss the result of inventory, transfer the confirmed inventory registration with relevant facts; papers to the chief accountant on a special list form,
72.4.5. list those property, raw materials, goods that unsuitable for use due to damage, bad quality, broken or bought at a higher price or sold at a lower price comparing to the market price and recommend to compensate or liquidate them from the account.
72.5. The Inventory Commission has the following rights:
72.5.1. To obtain a guarantee from the liable person that all documents on income & expenditure have been transferred to the accountant and check it with the accountant in advance to the inventory,
72.5.2. to demand the relevant bodies to seal the valuable items, cash fund, warehouses and guard them in advance to the inventory;
72.5.3. to halt completely any transactions of raw materials, goods, monetary capital during the inventory process, and to permit certain amount of transaction to keep the normal working condition of the industry.
Article 73. Procedure on providing assets' inventory
73.1. A difference of a balance of current and non-current assets and a balance which shall be according to an accounting registry shall be estimated according to suitable procedures as follows:
73.1.1. deficit not extending a norm of normal deterioration shall be written to industrial, service expenses;
73.1.2. surplus and deficit of value of goods with same types and same prices belonging to one person responsible for it may be mutually compared and closed up;
73.1.3. it is prohibited to close a deficit of value of inventory by surplus of other values, or a deficit accounted on one person responsible for property by surplus of another person responsible for property, or a deficit by surplus of same values appeared in different period of time;
73.1.4. a deficit extending a norm of normal deterioration, harms caused by damages shall be estimated on average market price at present and compensated by guilty individuals. In appearance of on purpose deficit caused or disposed, a case shall be transferred by competent legal person to legal organization within 7 days.
73.2. An accountant of organization shall reflect a balance, a difference of current assets, inventory and values present during ending inventory into an accounting registry within 5 days from the date of approval of report on inventory and revise balances of accounts by comparison.
CHAPTER NINE. LOCAL PROPERTY ITEMS
(the number of this chapter was amended by the law of July 10th, 2002)
Article 74. The concept of the local property items
74.1. The local property items comprises of the common/public property for public use and the local own property.
74.2. The property of local public utility comprises the property that for the public utility of the local population,
Article 75. Obtaining of property for the local property
75.1. The property can be obtained for the local property by the following ways;
75.1.1. Property that created in accordance with the Article 6, paragraphs 1 to 4.
75.1.2. Property that supplied/distributed from the state property in accordance with the laws and regulations,
75.1.3. Property obtained, as share profit, by legal entity with participation of local property,
75.1.4. Property which was created under due process of Laws.
Article 76. Abandonment of the right to ownership of local property
76.1. The right of the ownership of local property shall be abandoned under due process of the Civil Law and other Laws.
Article 77. Powers of the Khural of Representatives of citizens in respect of local property
77.1. The Khural of Representatives of Citizens, as the representative of the population, is the owner of respective aimag, the capital city, soum and districts' property.
77.2. The Khural of Representatives of Citizens shall exercise the following powers to enjoy, use and dispose local properties:
77.2.1. to undertake measures on the maintenance and protection of local properties and supervise control,
77.2.2. to consider and analyze the annual work statement and inventory report submitted by Presidium of the Khural of Representatives of citizens and Governor in exercising their powers to enjoy, use and dispose local properties and to give an instructions,
77.2.3. to consider and approve the list , plan and sources of nominal capitals which are subject to privatization and transfer to others or acquirement. Also, the Khural of Representatives of Citizens approves list of properties which are subject to privatization after consultation with State Property Committee.
77.2.4. to take decisions on establishment, re-organization or liquidation of local properties and supervise control,
77.3. Issues regarding the conveyance of nominal capitals to others and acquirement of new property shall be decided exclusively by the Khural of Representatives of Citizens. In between the sessions of the Khural of Representatives of citizens issues shall be decided by the Presidium of the Khural.
77.4. In between the sessions of the Khural of Representatives of citizens the Presidium of the Khural shall exercise powers provided for in Paragraph 2 of present Law and is accountable to the Khural of Representatives of citizens for its activities. The Presidium of the Khural also appoints a representatives to the share hold entity with participation of local properties and supervises their activities.
77.5. Officer or office shall serve at the Local governing Bodies in charge of local properties.
Article 78. Power of Governors in respect of local properties
78.1. The Governor shall be responsible for fulfillment of the decisions regarding the local properties taken by the Khural of Representatives of citizens in conformity with government policy.
78.2. The Governor shall exercise following powers:
78.2.1. to enjoy, use and dispose local properties within his powers given by the Khural of Representatives of Citizens,
78.2.2. to appoint representative to share hold entity with participation of local properties,
78.2.3. to propose to the Presidium of the Khural a candidates for appointment or replacement of representatives in charge of local properties,
78.2.4. to keep a general register book-record of local properties and to make an inventory of local properties,
78.2.5. to provide local property organization with all necessary belongings,
78.2.6. to handle privatization process of local properties under the control and methodical supervision by specialist of the State Property Committee,
78.2.7. to guide effectively the officers or office in charge of local properties,
Article 79. Property right of legal entity with participation of local properties
79.1. Legal entity, with participation of local property, shall exercise rights provided for in Articles 14, 16, 17 and 21 of present Law.
Article 80. Procedure of enjoyment, use and disposal of local properties
80.1. Matters related to enjoyment, use and disposal of local properties shall be regulated in accordance with provisions of Chapter five of present Law.
Article 81. Privatization of local properties
81.1. The Citizens’ Representatives Assembly shall adopt the method, procedure and regulation of privatizing the local property using the sixth chapter of this law as a guideline
(this provision was revised by the law of June 19th, 1997)
81.2. The Khural of Representatives of Citizens, if it considers necessary, may ask the State Property Committee to handle privatization process.
81.3. The revenue from the privatization of the local property shall proceed to the local budget.
(this provision was added by the law of May 12th, 2000)
CHAPTER TEN. OTHER PROVISIONS
(the number of this chapter was amended by the law of July 10th, 2002)
Article 82. Responsibility to be borne by those infringing the law and regulations
82.1. If those infringing law and regulations on the state and local properties shall not be subject to criminal penalties the authority of the State Property Committee has the right to impose following punishments according to the nature of infringements:
82.1.1. those officials shall be fined 30 000-60 000 togrogs, who are donated, offered as gift, mortgaged, borrowed and invested as property of other legal entity the state property without permission of respective Authorities and losses shall be compensated.
82.1.2. those perpetrators shall be fined 25 000-60 000 togrogs, who are sold and leased state property in an infringing procedures described in present Law and losses shall be compensated.
82.1.3. where there is a breach of 35.3 of this law, the perpetrator shall be fined by the sum up to 60 000 MNT and shall compensate the damages.
(this provision was added by the law of June 19th, 1997)
Article 83. Coming into force
83.1. The Chapter six of present Law enters into force on June 15 of 1996. Other Chapters of present Law enter into force on 1st of August, 1996.
Chairman of the State Ikh Khural of Mongolia N. Bagabandi
   
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