When operating a Mongolian company, it is important to understand the key between two types of Shareholder Meeting. The most common type of Shareholder Meeting is a “Regular Shareholder Meeting, and is required to be held each year to take care of standard operational business of the company.
The second type is a “Special Shareholder Meeting” which is not mandatory each year, but is called only upon special need to address unique or urgent situations.
Here, we will take a closer look at what you need to know about Regular Shareholder’s Meetings for Mongolian companies. In future blog posts, we will take a deeper dive into the specifics of Special Shareholder Meetings.
When should a regular shareholders meeting be convened
Provision 59.4 of the Company Law states “The regular shareholders meeting shall be called by the Board of Directors (in the absence of executive body) and held within four (4) months following the end of each fiscal year of a company.”
A fiscal year is a period the organizations estimate their financial statements and do tax settlements. Countries consider a fiscal year as a period of twelve months, but it does not necessarily overlap with the calendar year. Therefore, the financial year varies between countries. As per Mongolia, the fiscal year commences from January 1st of the year and ends by December 31 of the same year. Therefore, within 4 months following the end of the fiscal year, it obliges the regular shareholder meeting to be convened within April of the year.
The Regular shareholders meeting convened within April of every year by the Board Of Director’s /Executive management, in the absence of Board of Directors/ resolution.
The meeting shall be held at least 40 days after the issuance of the Board of Directors or Executive management decision to convene the shareholders’ meeting. If the company charter defined the meeting to take place in 45 or 50 days, the same shall adhere. In case the company charter does not specify a certain period, it shall adhere 40 days, regulated by law.
In connection with legal requirements, the authorized person is the Board of Directors, and if the Board of Directors absent the executive management is obliged to convene the shareholders meeting, in terms of timeline, it’s obliged to conduct the shareholders meeting within April of every year.
What is the consequence of not convening the shareholders meeting
In case the shareholder’s meeting was not convened within April, the Board of Directors authority expires in entirety, except the right to convene the shareholder’s meeting. From the date, the Board of Directors authority expires the Board of Directors is incapable of issuing any decision and if it issued any decision the contracts and deals it executed shall be invalidated.
Who shall resolve to convene a shareholders meeting
Board of Directors
Executive management (in the absence of Board of Directors)
Mandatory agenda for a shareholders meeting
The mandatory agenda for the shareholder meeting is to review and approve the Board of Directors conclusion on the operational report and the financial statement of the company. The company should responsible the costs associated with the shareholder’s meeting pursuant to the Company law.