Summary of law on asset appraisal
There are total of 28 member appraisal entities, 24 leading appraisers and 291 member appraisers registered in the "Institute of Professional Appraisers of Mongolia".
According to the Resolution No. 06 of the Economic Standing Committee dated January 26, 2021, a working group headed by Kh. Bulgantuya, Member of Parliament was established to prepare for the discussion of the revised draft of the Law on Asset Appraisal and draft supplementary laws that were submitted together with it. The working group discussed and voted on the formulation of 44 controversial proposals on the draft law, 3 sets of drafting proposals, and 10 proposals on the jointly submitted draft laws. It was approved on June 17, 2022, and shall come into effect on January 1, 2023.
An updated Law on Asset Appraisal has been developed to determine and control the legal basis of asset appraisal, regulate the rights, duties, and functions of government organizations, legal entities, and citizens in this field as well as to create an appraisal database.
Preconditions for drafting the Law on Asset Appraisal
The preconditions for drafting the Law on Asset Appraisal are divided into two main parts: legal and practical
- Legal preconditions for drafting the law
Under Article 110 of the "Main directions for the improvement of Mongolian legislation until 2020" was approved by the Appendix of Resolution No. 11 of 2017 of the Great Khural of Mongolia, it stated that "To amend the Law on Asset Appraisal" and paragraph 5.2.11 of the fifth chapter of the "2016-2020 Action plan of the Government of Mongolia" which approved as the Annex of the Government's resolution No. 45 of 2016 "Improving the content and coordination of legal documents by using the unified electronic database in order to detect and eliminate duplicated and conflicting provisions of legal acts and draft new laws and in order to implement the objectives of the International Monetary Fund's Extended Financing Program. Since the enactment of the Law on Asset Appraisal dated 2010, Mongolia's economic structure and business environment, as well as its participation in the international business environment has changed significantly. Due to above preconditions, the relations cannot be fully regulated by the current legislation. Therefore, requirements and demands have been set to clarify the criteria for an appraiser and legal entities that authorized to operate appraisal activity, update some legal terms, improve appraiser's ethics and their responsibilities, and finally upgrade the quality of appraisal reports and the quality control system in order to fully ensure the implementation of the Law on Asset Appraisal.
- Practical preconditions for drafting the law
According to the current Law on Asset Appraisal, a license for asset appraisal is granted only to individuals who have passed the selection process, regardless of whether they engage in www.gratanet.com 3 appraisal activities. The 14% of the license holders do not engage in assets appraisal at all, 41% engage in their activities only occasionally, while the remaining 45% engage in assets appraisal with the license often and the appraisers with that license to carry out their activities as in form of a legal entity. Open the opportunity to be served by a legal entity, citizens and companies prefer their property to be evaluated by a legal entity that is able to take responsibility and prepare errorfree evaluation reports, and on the other hand, it is difficult to control the activities of appraisers. Also, in the event that the license of an appraiser engaged in illegal activities is suspended and revoked, there is no regulation to ensure its implementation, so more organized system should be established by issuing a license of assets appraisal to a legal entity engaged in appraisal activities in accordance with the Law on Licensing and which meet certain criteria. Furthermore, there is a need to introduce more flexible regulations by changing the selection procedure of appraisals as comparing with current effective law. With the development of the market economy, the number of asset appraisals is increasing, but due to weak legal control over appraisers and a lack of understanding of international appraisal standards and methods, the number of asset appraisal disputes is increasing. Since the law itself is fully in line with the needs of the current conditions and community, and legal acts are based on the general principle of non-duplication and non-gapped, there is need to update the Law on Asset Appraisal in order to make the law consistent with the legal principles to be understood as one meaning to all and to create a situation for better enforcement.
The new Law on Asset Appraisal shall include the following regulations with principles:
- The current Law on Asset Appraisal provides for the extension, suspension, or cancellation of service licenses based on the opinion and conclusion of professional organizations. Current regulation makes it difficult to implement the law and make decisions when the opinions submitted by several professional organizations are in conflict with each other. Thus, it is necessary to regulate effective functions of professional organizations in the new law.
- In order to compensate the damage caused to the relevant citizens and legal entities due to errors in the appraisal activity, the legal entity which conducts the appraisal activity shall have a professional liability insurance under the new law.
- For updating and improving the implementation of regulation on creation of a database by professional organizations for use in appraisal activities under the current Law on Asset Appraisal.
- Change the regulation which includes granting a license for asset appraisal to a legal entity that meets certain criteria and requirements for carrying out appraisal activities in accordance with the Law on Licensing instead of a person who has passed the selection process regardless of their engagement in appraisal activities in compliance with the current Law on Asset Appraisal.
- Certain criteria and requirements such as the fact that the Founder and Director of the asset appraisal entity must be an appraiser, have a full-time appraiser and the main activity to carry shall be an appraisal under the new law.
- The documents for granting and extending a license of assets appraisal, as well as for suspension and cancellation shall be included in the new law in accordance with the Law on Licensing.
- The current Law on Asset Appraisal did not regulate the appraisal activities of an independent appraiser in detail. In certain cases, such as an appraisal of assets which affects public interests, privatization of state and local assets, mortgage for sale and credit, calculation of liabilities, withdrawal from enterprises and citizens, it shall be included in the new Law on Assets Appraisal to be evaluated by a legal entity with a license.
- The new Law on Asset Appraisal shall include the issue of quality control of appraisal entities that were not regulated by the current Law on Asset Appraisal. The State Central Administrative Organization in charge of financial and budget issues shall develop and approve the quality control procedure and add new provisions for function of its implementation.
- If the Founder or Shareholder of the appraisal entity is a foreign citizen or entity, at least onethird of the total shares shall be owned by an appraiser who is a citizen of Mongolia in accordance with the new Law on Asset Appraisal.
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