Taking Security Under Mongolian Law: An Overview
As the Mongolian economy continues to draw cross-border financing, taking security over Mongolian assets remains a key concern for foreign lenders and international financial institutions. Common collateral includes immovable property, mineral licenses, and both tangible and intangible movables.
This overview outlines the statutory framework under Mongolian law for creating and perfecting security interests.
1. Creating and Perfecting Security Interests
Under Mongolian law, creating a security interest requires a valid underlying claim, an enforceable pledge agreement, and perfection through public registration or physical possession.
A. Immovable Assets (Buildings)
Creation: Mortgages must be established via a written or electronically executed immovable property pledge agreement. The agreement must clearly identify the parties, the immovable asset and its details, including its book value, the secured debt amount, and maturity terms. The failure to include any of these mandatory elements will result in the agreement being void.
Perfection: A mortgage does not take effect until registered with the General Authority for State Registration (“GASR”). Upon registration, GASR enters a formal encumbrance note on the relevant pledge agreement.
Pledge Certificate: Parties may issue a formal negotiable instrument representing the mortgage. This is intended to simplify secondary market sales or assignments, although it has been used rather rarely in commercial secured lending practice.
Key Legislation: Immovable Property Pledge Law (2009); State Registration of Property Rights Law (2018); Civil Code (2002)
B. Land Use and Possession Rights
Under the Constitution of Mongolia, land itself is either state property or privately owned by Mongolian citizens. Corporate entities hold land through land possession rights or land use rights.
Creation: Land possession rights certificates may be pledged to others. Because land plots are classified as immovable property, creating and perfecting security over them follows the same procedure outlined in Section A above. Additionally, land possession rights certificates may not be pledged to a non-Mongolian person or entity.
Perfection: Pledges over land possession rights must be registered in the electronic land database system egazar.gov.mn (“e-Gazar”).
Key Legislation: Land Law (2002); Immovable Property Pledge Law (2009); State Registration of Property Rights Law (2018); Regulation on Granting Certificates for Land Possession and Land Use Rights, approved by Government Resolution No. 121 (2025)
C. Mineral Licenses
Mineral licenses may be pledged to local and foreign banks or non-bank financial institutions (“NBFIs”) to secure project financing. Crucially, a mineral license cannot be pledged on a stand-alone basis, and it must be pledged together with its project documentation, such as geological data, exploration results, and technical and economic feasibility studies, and other assets.
Creation: Must be established through a written pledge agreement.
Perfection: Perfected by registering the pledge agreement with the Mineral Resources and Petroleum Authority of Mongolia (“MRPAM”), which records the pledge details and delivers the physical original license to the lender for safekeeping.
Key Legislation: Minerals Law (2006); Civil Code (2002)
D. Shares
Share pledges are structured differently depending on the company's legal form. Specifically, Mongolian law distinguishes between listed securities, such as public company shares and debt instruments, and unlisted shares in a limited liability company ("LLC"), subjecting each to distinct statutory frameworks for perfection.
Creation: Must be established through a written or electronically executed pledge agreement, explicitly identifying the parties, shares, registration/application details, and the secured debt.
Perfection: Perfected by registering a pledge notice with mpr.gov.mn, the online database for registering pledge notices (“Online Pledge Registry Database”), maintained by GASR. For listed securities, a further filing must be made with the Central Securities Depository of Mongolia (“CSDM”), which will then segregate the pledged shares in the pledgor’s account to prevent unauthorized transfers. Conversely, pledges over unlisted shares do not require submission to or registration with the CSDM.
Key Legislation: Securities Market Law (2013); Movable Property and Intangible Assets Pledge Law (2015); Regulation on Pledging Securities, approved by the Financial Regulatory Commission Resolution No. 382 (2018)
E. Intellectual Property Rights
Pledge over existing or future registrable and non-registrable intellectual property rights (the “IP rights”) (e.g., patents, trademarks, utility models, copyrights, industrial designs) may be created.
Creation: Must be established through a written or electronically executed pledge agreement, explicitly identifying the parties, IP rights, registration/application details, and the secured debt.
Perfection: Perfected by filing a pledge notice with the Online Pledge Registry Database. For certain registered industrial IP rights (e.g., patents or trademarks), registration or recordation of the pledge with the Intellectual Property Office of Mongolia (“IPOM”) may also be required to ensure enforceability against third parties.
Key Legislation: Movable Property and Intangible Assets Pledge Law (2015); Patent Law (2021); Trademark and Geographical Indications Law (2010); Civil Code (2002)
F. Other Movable Assets and Intangibles
A broad range of movable assets and intangibles, including equipment, inventory, vehicles, livestock, bank accounts, future revenues, and receivables, may be pledged.
Creation: Must be established through a written or electronically executed movable pledge agreement, explicitly identifying the parties, movables and intangibles, registration/application details, and the secured debt.
Perfection: Perfection occurs via (1) pledge notice registration filing with the Online Pledge Registry Database; or (2) taking physical possession/control of the collateral.
Key Legislation: Movable Property and Intangible Assets Pledge Law (2015); Civil Code (2002); Regulation on the Registration of Pledges of Movable Property and Intangible Assets Notice, approved by the Ministry of Justice and Home Affairs Decree No. A/50 (2017)
2. Summary of Security Types and Perfection Rules
Asset Type | Perfection Mechanism | Registration Body |
Buildings | Registration with GASR | Department of State Registration of Property Rights of GASR |
Land Rights | Entry into e-Gazar / GASR Registration | Land Administration / e-Gazar |
Movable and Intangible Assets & Receivables | Online Pledge Notice or Physical Possession | Online Pledge Registry Database |
IP Rights | Online Pledge Notice or Physical Possession | Online Pledge Registry Database |
Listed Securities | Online Pledge Notice / CSDM Share Segregation | Online Pledge Registry Database / CSDM |
Shares in LLC | Online Pledge Notice | Online Pledge Registry Database |
Mineral Licenses | Registration with MRPAM / Physical Safekeeping | MRPAM |
3. Priority and Ranking of Security Interests
In Mongolian law, the priority ranking among multiple secured creditors is determined by the universal principle: First in Time, First in Right.
Timestamp Priority: Priorities among validly perfected security interests are determined strictly by the date and time of registration in the public registry (GASR, e-Gazar, Online Pledge Registry Database, and CSDM).
Perfected vs. Unperfected: A perfected security interest supersedes an unperfected security interest, regardless of when the underlying contracts were signed.
Unsecured Creditors: In insolvency proceedings, secured creditors hold priority over general unsecured claims with respect to the collateral.
4. Practical Notes for Creditors
Conduct Registration Searches: Always conduct due diligence across the GASR (Immovable), e-Gazar, and mpr.gov.mn databases to identify existing encumbrances.
Ensure Accuracy in Contract and Registration Details: Every detail in the registration entry must precisely match the details on title certificates and the underlying pledge agreements. Inconsistencies can invalidate a perfection filing.
Include Express Non-Judicial Foreclosure Clauses: To avoid court delays, include explicit out-of-court enforcement provisions in pledge agreements, where the law permits.
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This information has been prepared by Saruul Onch LLC for general informational purposes only and does not constitute legal advice. It does not create an attorney-client relationship between the reader and Saruul Onch LLC. While accurate as of the date of preparation, this information may become outdated due to subsequent changes in law or circumstance, and we assume no obligation to update it. We accept no liability for any action taken, or not taken, in reliance on it.
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