Our Mongolian lawyers have recently assisted a client in connection with the planned sale of collateral by auction without obtaining a court decision.
Mongolian law provides for this type of out of court enforcement procedure where stipulated in a mutual agreement. In order to start this process, the Pledgee is required to notify the Pledgor in writing as to the demand for performance of the contractual obligation. The notice period required in 30 days. If there is no reply within 30 days, the enforcement may be registered directly with the national pledge registry which will initiate a sale of the pledged collateral.
The law provides that the auction price shall be agreed upon by the parties to the contract, and if no agreement is reached, it shall be set at 70 percent of the market value determined as determined by an appraisal.
If there is no competition during the auction, or if the winner does not deposit the price offered by him/her in the designated account within the time specified in the contract, the auction will be deemed not to have taken place and a new auction will be held.
A Pledgee is entitled to negotiate an agreement with the Pledgor within 10 days after an announcement that no auction has taken place to have the collateral transferred to its ownership at the first price of the auction.
If the collateral is sold, or the Pledgee takes possession of the collateral as satisfaction of its demand, or the Pledgee does not finally to exercise its right to purchase the collateral the security interest on the collateral shall be terminated.