COAL SECTOR IN MONGOLIA

 Coal

Mongolia’s domestic consumption of coal has been increasing by about 200,000 tonnes annually since 2005, reaching nearly six million tonnes last year. Domestically, the majority of the  coal is used  as  fuel  for the country’s thermal power plants. Mongolia’s three energy systems, consisting of six power plants, consume nearly five million tonnes of coal annually, representing more than 80 per cent of the country’s total coal consumption.9

Coal is also used as a direct heating fuel for homes in Mongolia. Administratively, Mongolia is divided into 21 aimags10 and every aimag is divided into a number of soums11. Since only 200 out of Mongolia’s 331 soums and settlements are connected to a power system12, a large amount of households are dependant on coal for heating and cooking. Even though more than one million of the total population of 2.6 million lives in Ulaanbaatar13 , 21 per cent of the capital’s population resides in the ger districts surrounding the city14. Consequently, more than

450 thousand tonnes of coal was used for heating of communal and private houses and gers in

2007 and of this total, over 375 thousand tonnes was consumed by households alone15. The dependency on coal in the ger districts surrounding Ulaanbaatar is polluting the city, especially during colder months, creating a need for alternative cleaner fuels and energy sources.

Figure 2: Development of coal consumption

 

Apart from the six million tonnes of coal consumed domestically, Mongolia exports about three million tonnes of coal annually, mainly to China16. China’s coal consumption has been growing progressively, resulting in increasing imports 17 . According to forecasts by the International Energy Agency (IEA), in the period from 2004 to 2030 China and India account for 72 per cent of the projected increase in world coal consumption18. However, due to the global financial crisis the demand for coal by the industry and the energy sector in China has been decreasing, causing rapidly falling prices for coal in China. The decreasing demand is predicted to continue into 2009, leading to a possible surplus of domestic Chinese coal.

Future consumption

Mongolia’s future domestic coal consumption is largely determined by new energy and coal consuming projects coming on stream, such as the construction of additional coal-fired power plants and implementation of technologies for coal liquefaction (CTL) and coal gasification (CTG). If consumption continues at the same speed as in the past, a growth by about eight per cent can be expected by 2015. However, implementation of new projects will create a different scenario for Mongolia’s future domestic coal consumption.

According to the development plans for Mongolia, several new coal consuming projects are planned to be constructed by 2040 (for more information see Chapter V. Regulation and Policy). The plans allow for a fifth power plant to be up and running in Ulaanbaatar around

2010, using CTG technology to generate electricity. The plant alone is predicted to consume

2.5 million tonnes of coal annually. Additionally there are plans for the construction of a power plant by Shivee Ovoo, with a consumption of an additional 15 million tonnes of coal per year, as well as the implementation of CTL and CTG technologies to produce fuel and power.

Joint Venture Agreement

Joint Venture (JV)

A joint venture is a business deal in which two or more people combine their expertise and share the risk, profits and liabilities. An example of a joint venture is a school district and a city park commission coming together to develop a summer recreation program.

joint venture legal definition

An unincorporated business venture with two or more participants who share the financial risk and gain.

Joint Venture investment & finance definition

An agreement between two or more companies to cooperate on a specific initiative. The joint venture may involve marketing a product, offering a service, or expanding into a new geographical territory. Often, companies undertake joint ventures with companies in other countries as a way to expand into new markets. While the local company will have the business relationships and current business operations, the foreign company may bring a brand name and managerial skills.

joint venture business definition

A business undertaken by two or more individuals or companies in an effort to share risk and use differences in expertise. For example, oil companies often enter into joint ventures on particularly expensive projects carrying a high risk of failure.

An association of two or more individuals or companies engaged in a solitary business enterprise for profit without actual partnership or incorporation; also called a joint adventure.

A joint venture is a contractual business undertaking between two or more parties. It is similar to a business partnership, with one key difference: a partnership generally involves an ongoing, long-term business relationship, whereas a joint venture is based on a single business transaction. Individuals or companies choose to enter joint ventures in order to share strengths, minimize risks, and increase competitive advantages in the marketplace. Joint ventures can be distinct business units (a new business entity may be created for the joint venture) or collaborations between businesses. In a collaboration, for example, a high-technology firm may contract with a manufacturer to bring its idea for a product to market; the former provides the know-how, the latter the means.

All joint ventures are initiated by the parties' entering a contract or an agreement that specifies their mutual responsibilities and goals. The contract is crucial for avoiding trouble later; the parties must be specific about the intent of their joint venture as well as aware of its limitations. All joint ventures also involve certain rights and duties. The parties have a mutual right to control the enterprise, a right to share in the profits, and a duty to share in any losses incurred. Each joint venturer has a fiduciary responsibility, owes a standard of care to the other members, and has the duty to act in Good Faith in matters that concern the common interest or the enterprise. A fiduciary responsibility is a duty to act for someone else's benefit while subordinating one's personal interests to those of the other person. A joint venture can terminate at a time specified in the contract, upon the accomplishment of its purpose, upon the death of an active member, or if a court decides that serious disagreements between the members make its continuation impractical.
Joint ventures have existed for centuries. In the United States, their use began with the railroads in the late 1800s. Throughout the middle part of the twentieth century they were common in the manufacturing sector. By the late 1980s, joint ventures increasingly appeared in the service industries as businesses looked for new, competitive strategies. This expansion of joint ventures was particularly interesting to regulators and lawmakers.
The chief concern with joint ventures is that they can restrict competition, especially when they are formed by businesses that are otherwise competitors or potential competitors. Another concern is that joint ventures can reduce the entry of others into a given market. Regulators in the Justice Department and the Federal Trade Commission routinely evaluate joint ventures for violations of Antitrust Law; in addition, injured private parties may bring antitrust suits.


Properly chosen and implemented, joint ventures can be a great way for your small business to get in on opportunities (and profits) that otherwise you would miss out on. I like to think of them as diamonds on the beach. You see the diamonds lying on the sand but try as you might, you can't pick them up – until you team with someone else who knows the trick of scooping them up.
By teaming up with other people or businesses in a joint venture, you can:

• extend your marketing reach
• access needed information and resources
• build credibility with a particular target market
• access new markets that would be inaccessible without the partner

For instance, suppose you and five other potters form a joint venture to hold a Potter's Fair on a particular date. Because you pool your resources, you're able to do much more advertising and promotion than you would be able to go alone, bringing out crowds of customers for your joint event.

Joint Venture Definition
A joint venture is a strategic alliance where two or more people or companies agree to contribute goods, services and/or capital to a common commercial enterprise.
Sounds like a partnership, doesn’t it? But legally, joint ventures and partnerships are not the same thing.

Joint Ventures versus Partnerships
The main difference between a joint venture and a partnership is that the members of a joint venture have teamed together for a particular purpose or project, while the members of a partnership have joined together to run "a business in common".
Each member of the joint venture retains ownership of his or her property.
And each member of the joint venture shares only the expenses of the particular project or venture.
Tax-wise, there are also differences between joint ventures and partnerships. As a member of a joint venture, you will receive a share of the profits which will be taxed according to whatever business structure you have set up. So, for instance, if you operate a sole proprietorship, your joint venture profits will be taxed just as any other business income would.
Joint ventures enjoy tax advantages over partnerships, too. Capital Cost Allowance (CCA) is treated differently. While those in partnerships have to claim CCA according to partnership rules, those in joint ventures can choose to use as much or little of their CCA claim as they like.
And joint ventures don’t have to file information returns, unlike partnerships.
How to Get a Joint Venture Started

• The first step to creating a joint venture is to set your goals and decide what you want your joint venture to do. If you need help getting started with this, look at the four things a joint venture can do that I've listed at the beginning of this article, pick one, and then develop a goal that is as specific as possible.

• Then it's time to look for the like-minded - people or firms that might be interested in the same goal or goals you want to pursue. Look in the business groups you already belong to, both in person and virtually. Use your social networking connections. Study business listings in the phone book or on Web sites to find those that might share your goals.

• And be open to being asked. Once you start talking to other people about what you might do together, a joint venture idea you haven’t even thought of might pop up - one with a lot of potential.

• Once you've found the people to share in a joint venture, be sure to have it all put into writing in a joint venture agreement. I strongly recommend hiring a legal professional to do this.

So instead of dismissing an opportunity as out of your reach, start thinking instead about how you could participate with a joint venture. Properly planned and executed, joint ventures can help your small business go where it's never been able to go before



 This section applies to accounting for joint ventures in consolidated financial statements and in the financial statements of an investor that is not a parent but that has a venturer’s interest in one or more joint ventures. Paragraph 9.26 establishes the requirements for accounting for a venturer’s interest in a joint venture in separate financial statements.

Joint ventures defined

  Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control (the venturers).

 A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. Joint ventures can take the form of jointly controlled operations, jointl controlled assets, or jointly controlled entities.


Jointly controlled operations

The operation of some joint ventures involves the use of the assets and other resources of the venturers rather than the establishment of a corporation, partnership or other entity, or a financial structure that is separate from the venturers themselves. Each venturer uses its own property, plant and equipment and carries its own inventories. It also incurs its own expenses and liabilities and raises its own finance, which represent its own obligations. The joint venture activities may be carried out by the venturer’s employees alongside the venturer’s similar activities. The joint venture agreement usually provides a means by which the revenue from the sale of the joint product and any expenses incurred in common are shared among the venturers.

In respect of its interests in jointly controlled operations, a venturer shall recognise in its financial statements:

1. the assets that it controls and the liabilities that it incurs, and
2. the expenses that it incurs and its share of the income that it earns from the sale of goods or services by the joint venture.

Jointly controlled assets


Some joint ventures involve the joint control, and often the joint ownership, by the venturers of one or more assets contributed to, or acquired for the purpose of, the joint venture and dedicated to the purposes of the joint venture.

In respect of its interest in a jointly controlled asset, a venturer shall recognise in its financial statements:

1. its share of the jointly controlled assets, classified according to the nature of the assets;
2. any liabilities that it has incurred;
3. its share of any liabilities incurred jointly with the other venturers in relation to the joint venture;
4. any income from the sale or use of its share of the output of the joint venture, together with its share of any expenses incurred by the joint venture; and
5. any expenses that it has incurred in respect of its interest in the joint  venture.

Jointly controlled entities

A jointly controlled entity is a joint venture that involves the establishment of a corporation, partnership or other entity in which each venturer has an interest.  The entity operates in the same way as other entities, except that a contractual arrangement between the venturers establishes joint control over the economic activity of the entity.

Measurement—accounting policy election

A venturer shall account for all of its interests in jointly controlled entities using one of the following

Transactions between a venturer and a joint venture

When a venturer contributes or sells assets to a joint venture, recognition of any portion of a gain or loss from the transaction shall reflect the substance of the transaction. While the assets are retained by the joint venture, and provided the venturer has transferred the significant risks and rewards of ownership, the venturer shall recognise only that portion of the gain or loss that is attributable to the interests of the other venturers. The venturer shall recognise the full amount of any loss when the contribution or sale provides evidence of an impairment loss.

When a venturer purchases assets from a joint venture, the venturer shall not recognise its share of the profits of the joint venture from the transaction until it resells the assets to an independent party. A venturer shall recognise its share of the losses resulting from these transactions in the same way as profits except that losses shall be recognised immediately when they represent an impairment loss.

Investments in Joint Ventures

This section applies to accounting for joint ventures in consolidated financial statements and in the financial statements of an investor that is not a parent but that has a venturer’s interest in one or more joint ventures. Paragraph 9.26 establishes the requirements for accounting for a venturer’s interest in a joint venture in separate financial statements.


Joint ventures defined

Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control (the venturers).

A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. Joint ventures can take the form of jointly controlled operations, jointl controlled assets, or jointly controlled entities


Jointly controlled operations

The operation of some joint ventures involves the use of the assets and other resources of the venturers rather than the establishment of a corporation, partnership or other entity, or a financial structure that is separate from the venturers themselves. Each venturer uses its own property, plant and equipment and carries its own inventories. It also incurs its own expenses and liabilities and raises its own finance, which represent its own obligations. The joint venture activities may be carried out by the venturer’s employees alongside the venturer’s similar activities. The joint venture agreement usually provides a means by which the revenue from the sale of the joint product and any expenses incurred in common are shared among the venturers.

In respect of its interests in jointly controlled operations, a venturer shall recognise in its financial statements:

1. the assets that it controls and the liabilities that it incurs, and
2. the expenses that it incurs and its share of the income that it earns from the sale of goods or services by the joint venture.

Jointly controlled assets

Some joint ventures involve the joint control, and often the joint ownership, by the venturers of one or more assets contributed to, or acquired for the purpose of, the joint venture and dedicated to the purposes of the joint venture

In respect of its interest in a jointly controlled asset, a venturer shall recognise in its financial statements:

1. its share of the jointly controlled assets, classified according to the nature of the assets;
2. any liabilities that it has incurred;
3. its share of any liabilities incurred jointly with the other venturers in relation to the joint venture;
4. any income from the sale or use of its share of the output of the joint venture, together with its share of any expenses incurred by the joint venture; and
5. any expenses that it has incurred in respect of its interest in the joint  venture.

Jointly controlled entities

A jointly controlled entity is a joint venture that involves the establishment of a corporation, partnership or other entity in which each venturer has an interest.  The entity operates in the same way as other entities, except that a contractual arrangement between the venturers establishes joint control over the economic activity of the entity.


Measurement—accounting policy election

A venturer shall account for all of its interests in jointly controlled entities using one of the following


Equity method

A venturer shall measure its investments in jointly controlled entities by the equity method using the procedures in paragraph 14.8 (substituting ‘joint control’ where that paragraph refers to ‘significant influence’).

Transactions between a venturer and a joint venture

When a venturer contributes or sells assets to a joint venture, recognition of any portion of a gain or loss from the transaction shall reflect the substance of the transaction. While the assets are retained by the joint venture, and provided the venturer has transferred the significant risks and rewards of ownership, the venturer shall recognise only that portion of the gain or loss that is attributable to the interests of the other venturers. The venturer shall recognise the full amount of any loss when the contribution or sale provides evidence of an impairment loss.

When a venturer purchases assets from a joint venture, the venturer shall not recognise its share of the profits of the joint venture from the transaction until it resells the assets to an independent party. A venturer shall recognise its share of the losses resulting from these transactions in the same way as profits except that losses shall be recognised immediately when they represent an impairment loss.

WRONG EXPECTATIONS ARE INFLUENCING MNT APPRECIATION

WRONG EXPECTATIONS ARE INFLUENCING MNT APPRECIATION

According to Bank of Mongolia on April 9, 2012
Bank of Mongolia

Mongolian daily “Udriin Sonin” in relation to MNT starting to appreciate again after
depreciating in the beginning of the year:

Why recently MNT is appreciating?
 Official exchange rate has appreciated YTD 6.5% and 1.2% in last 5 days. Taking into
consideration macroeconomic fundamentals, Mongolia still has external trade deficit and rate of
growth of imports is still 2 times higher than that of exports, total external trade deficit YTD is
409.4 million USD. FX inflow is less than outflow and therefore net FX flow is negative and
imports consumption is growing. Those factors in short term are influencing MNT to depreciate.
 Yet because of supply and demand on FX market and exchange rate expectations there is an
occurrence of MNT appreciation. There are several factors to explain this.
 First of all, in connection with start of spring season, there is expectation that MNT will
appreciate because of cashmere and wool revenues. Public has this expectation even though
cashmere exports revenues occupy very little share of external trade due to increase of mining
exports.
 Secondly, successful sale of DBM’s 580 million USD bonds and MMC’s 600 million USD
bonds on international markets have influenced for rise of expectations of MNT appreciation
among public. However, because Bank of Mongolia will increase foreign exchange reserves in
the amount of sold bonds there will be no exchange rate excessive volatility and proceeds from
these bonds will be spent on projects such building rail and automobile roads, Power Plant No 5
and Sainshand Industrial Hub. Therefore, majority of the proceeds will be spent on the
equipment and raw materials for those projects and by a way of payment for imports will go
back abroad.
 Last influence comes from discussion by certain banks on bonds issuance and this is
influencing market expectation. However, Bank of Mongolia instituted requirements for banks to
ensure prudential FX ratios. In another words, FX position of the banks cannot go above 40% of
a banks’ own equity and this ensures that foreign exchange coming in from bonds issuance will
be kept from conversion.
What position does Bank of Mongolia has on MNT appreciation?
At any given time, Bank of Mongolia adheres to position that foreign exchange rate will
determined flexibly based on macroeconomic fundamental indicators and market supply and
demand. During FX rate excessive volatility , Bank of Mongolia participates in FX market by
intervention. For example, in this week’s first auction Bank of Mongolia participated
and satisfied 94.7% of proposal of banks to sell USD and by second auction satisfied it 100%.
Therefore, because of abovementioned reasons and wrong expectations, tendency for MNT to
appreciate has been observed. Bank of Mongolia will continue do when necessary related
regulation in connection with macroeconomic fundamental indicators and exchange rate
fluctuation.

Rio Tinto, Chinalco complete setting up mining Joint Venture

SHANGHAI - Global mining company Rio Tinto and the Aluminum Corporation of China (Chinalco), China's largest aluminum producer, have finished setting up a joint venture to develop and operate the Simandou iron ore project in West Africa.
The joint venture has already been approved by Chinese authorities, sources from Rio Tino said Thursday.
In July 2010, the Aluminum Corporation of China Limited (Chalco), a listed arm of Chinalco, inked an agreement with Australia's Rio Tinto to set up a joint venture for the development of the Simandou iron ore mine in Guinea, West Africa.
According to the agreement, Rio Tinto and Chinalco will hold 53 percent and 47 percent stakes, respectively, in the joint venture, which translates into a 50.35-percent and 44.65-percent interest in the Simandou project, the sources said. The remaining 5-percent stake will go to the International Finance Corporation, a member of the World Bank Group.
The Guinean government has retained its options for participation in the project and is expected to take up its first share in the near future, the sources said.
A consortium led by Chinalco paid Rio Tinto $1.35 billion for the deal.
The Simandou iron ore project, an unexploited iron ore mine with significant potential, is expected to go into operation by the end of 2014 and start delivery in 2015.
The mine is estimated to have an annual iron ore capacity of approximately 70 million tons.

An association of two or more individuals or companies engaged in a solitary business enterprise for profit without actual partnership or incorporation; also called a joint adventure.
A joint venture is a contractual business undertaking between two or more parties. It is similar to a business partnership, with one key difference: a partnership generally involves an ongoing, long-term business relationship, whereas a joint venture is based on a single business transaction. Individuals or companies choose to enter joint ventures in order to share strengths, minimize risks, and increase competitive advantages in the marketplace. Joint ventures can be distinct business units (a new business entity may be created for the joint venture) or collaborations between businesses. In a collaboration, for example, a high-technology firm may contract with a manufacturer to bring its idea for a product to market; the former provides the know-how, the latter the means.
All joint ventures are initiated by the parties' entering a contract or an agreement that specifies their mutual responsibilities and goals. The contract is crucial for avoiding trouble later; the parties must be specific about the intent of their joint venture as well as aware of its limitations. All joint ventures also involve certain rights and duties. The parties have a mutual right to control the enterprise, a right to share in the profits, and a duty to share in any losses incurred. Each joint venturer has a fiduciary responsibility, owes a standard of care to the other members, and has the duty to act in Good Faith in matters that concern the common interest or the enterprise. A fiduciary responsibility is a duty to act for someone else's benefit while subordinating one's personal interests to those of the other person. A joint venture can terminate at a time specified in the contract, upon the accomplishment of its purpose, upon the death of an active member, or if a court decides that serious disagreements between the members make its continuation impractical.
Joint ventures have existed for centuries. In the United States, their use began with the railroads in the late 1800s. Throughout the middle part of the twentieth century they were common in the manufacturing sector. By the late 1980s, joint ventures increasingly appeared in the service industries as businesses looked for new, competitive strategies. This expansion of joint ventures was particularly interesting to regulators and lawmakers.
The chief concern with joint ventures is that they can restrict competition, especially when they are formed by businesses that are otherwise competitors or potential competitors. Another concern is that joint ventures can reduce the entry of others into a given market. Regulators in the Justice Department and the Federal Trade Commission routinely evaluate joint ventures for violations of Antitrust Law; in addition, injured private parties may bring antitrust suits.

The Advantages of Joint Ventures

Properly chosen and implemented, joint ventures can be a great way for your small business to get in on opportunities (and profits) that otherwise you would miss out on. I like to think of them as diamonds on the beach. You see the diamonds lying on the sand but try as you might, you can't pick them up – until you team with someone else who knows the trick of scooping them up.

By teaming up with other people or businesses in a joint venture, you can:

• extend your marketing reach
• access needed information and resources
• build credibility with a particular target market
• access new markets that would be inaccessible without the partner

For instance, suppose you and five other potters form a joint venture to hold a Potter's Fair on a particular date. Because you pool your resources, you're able to do much more advertising and promotion than you would be able to go alone, bringing out crowds of customers for your joint event.

Joint Venture Definition
A joint venture is a strategic alliance where two or more people or companies agree to contribute goods, services and/or capital to a common commercial enterprise.
Sounds like a partnership, doesn’t it? But legally, joint ventures and partnerships are not the same thing.

Joint Ventures versus Partnerships
The main difference between a joint venture and a partnership is that the members of a joint venture have teamed together for a particular purpose or project, while the members of a partnership have joined together to run "a business in common".
Each member of the joint venture retains ownership of his or her property.
And each member of the joint venture shares only the expenses of the particular project or venture.
Tax-wise, there are also differences between joint ventures and partnerships. As a member of a joint venture, you will receive a share of the profits which will be taxed according to whatever business structure you have set up. So, for instance, if you operate a sole proprietorship, your joint venture profits will be taxed just as any other business income would.
Joint ventures enjoy tax advantages over partnerships, too. Capital Cost Allowance (CCA) is treated differently. While those in partnerships have to claim CCA according to partnership rules, those in joint ventures can choose to use as much or little of their CCA claim as they like.
And joint ventures don’t have to file information returns, unlike partnerships.

How to Get a Joint Venture Started

• The first step to creating a joint venture is to set your goals and decide what you want your joint venture to do. If you need help getting started with this, look at the four things a joint venture can do that I've listed at the beginning of this article, pick one, and then develop a goal that is as specific as possible.

• Then it's time to look for the like-minded - people or firms that might be interested in the same goal or goals you want to pursue. Look in the business groups you already belong to, both in person and virtually. Use your social networking connections. Study business listings in the phone book or on Web sites to find those that might share your goals.

• And be open to being asked. Once you start talking to other people about what you might do together, a joint venture idea you haven’t even thought of might pop up - one with a lot of potential.

• Once you've found the people to share in a joint venture, be sure to have it all put into writing in a joint venture agreement. I strongly recommend hiring a legal professional to do this.

So instead of dismissing an opportunity as out of your reach, start thinking instead about how you could participate with a joint venture. Properly planned and executed, joint ventures can help your small business go where it's never been able to go before.

Joint Venture Vs. Partnership Agreement

RESOLUTIONS FOR GENERAL MEETINGS (A class of members (shareholders))

Topics in Corporation

Unentugs Shagdar, PhDLLMMA MPA

2010-03-15

I. RESOLUTIONS FOR GENERAL MEETINGS

(A class of members (shareholders))

This comment provides basic aspect about the sorts of resolutions a company may propose.

A company works by complying with a set of rules as set out in the Companies Acts. They cover two categories of activity. In the first place, they provide the basic "framework" within which all companies must operate. Those rules cannot be changed. They include for example, requirements as to appointment of directors and secretary; filing of accounts; matters to be recorded at Companies House; and many more. In order for everyone involved to understand the Rules, you will have to hold company meetings, which also require company meetings notices.

The Companies Acts (Commercial Act) provide for many areas where you could say "suggestions" are made as to how the shareholders, a class of members and directors run the company. The mass of day-to-day work is regulated only by broad principles. Certain specific matters are regarded as more important and the company must make choices and record them at Companies House. These include for example:

• Who shall be directors?
• Who shall be a class of members?
• What will be the company's rule, resolutions and business year end?
• And what shares have in fact been issued.

This second set of categories is regulated by the company's own "rules" too, as set out in any number of minutes of meetings. Minutes start life as "resolutions, as the following text explains.

Many companies manage quite well with no formal resolutions at all. They leave it to the lawyer or solicitor to sort such formalities. As long as there are no disputes among the shareholders or directors, it works. However, there is no reason why far more detail about what the shareholders, a class of members, and directors have agreed should not be properly recorded in minutes of meetings, if only so that everyone is working towards the same goal.

II. ABOUT SHAREHOLDERS:

Investors who purchase corporate stock enjoy a number of rights pertaining to their ownership. Unlike partnership law, where the owners of businesses are also the primary managers of the businesses, owners of a corporation generally do not run the company. Shareholders in a corporation are shielded from personal liability for the debts and obligations of the corporation. However, shareholders can lose their investments should the corporation fail.

The rights of shareholders depend largely on provisions in a corporation's charter and by-laws. These are the first documents which a shareholder should consult when determining his or her rights in a corporation. Shareholders also generally enjoy the following types of rights:

• Voting rights on issues that affect the corporation as a whole
• Rights related to the assets of the corporation
• Rights related to the transfer of stock
• Rights to receive dividends as declared by the board of directors of the corporation
• Rights to inspect the records and books of the corporation
• Rights to bring suit against the corporation for wrongful acts by the directors and officers of the corporation
• Rights to share in the proceeds recovered when the corporation liquidates its assets

Shareholder Meetings and Voting Rights

Shareholders hold general meetings on an annual basis or at fixed times according to the by-laws of the corporation. The primary purpose of these meetings is for shareholders to elect the directors of the corporation, though shareholders may also vote on a number of additional issues. Persons with authority to do so may also call special meetings on matters that require immediate attention, though only those issues set forth in the notice of the special meeting may be the subject of the vote.

A quorum must be present at the shareholder meeting for a decision to be binding. The typical quorum consists of more than half of the outstanding shares of the corporation. This percentage may be increased or decreased in the by-laws of the corporation. Prior to each shareholder meeting, a list of shareholders eligible to vote must be prepared. Shareholders have the right to inspect the voting list at any time.

Shareholders may appoint proxies to vote their shares, which is common in publicly-held corporations. Most states prescribe few specific rules with respect to the proxy appointment, other than the issue of whether this appointment may be revoked. Proxy appointments must be in writing, and the proxy does not need to be a fellow shareholder. Since the relationship between the shareholder and the proxy is one of principal and agent, the proxy must abide by the instructions of the shareholder.

Shareholders by unanimous consent may conduct business without holding a shareholder meeting. Such actions are more common in closely held corporations, where shareholder actions are typically unanimous. In a larger, publicly held corporation, such actions are much less practical, especially because decisions of the shareholders affect a larger number of people.

Matters, upon which shareholders vote, in addition to the election of the directors, depend on the issues affecting the corporation. The following are the most significant of these matters.

• Approval or disapproval of changes in the articles of incorporation
• Approval or disapproval of a merger with another corporation
• Approval or disapproval of the sale of substantially all of the corporation's assets that is not in the ordinary course of the corporation's business
• Approval or disapproval of the voluntary DISSOLUTION of the corporation
• Approval or disapproval of corporate transactions where some directors have a conflict of interest
• Approval or disapproval of amendments to BYLAWS or articles of incorporation
• Make nonbinding recommendations about the governance and management of the corporation to the board of directors

State Laws Governing Shareholder Rights

Since the majority of states have adopted the Model Business Corporation Act, shareholder rights are generally consistent from one state to the next. State statutes should be consulted to determine whether an individual state has granted any specific rights to shareholders of businesses incorporated in that state.

III. ABOUT RESOLUTIONS:

What is a resolution?

A resolution is an agreement or decision made by the directors or members (or a class of members) of a company. When a resolution is passed, the company is bound by it. A proposed resolution is a motion. If the necessary majority is not obtained, then the motion fails.

How is a vote taken?

The vote on a resolution in a general meeting (or in a meeting of a class of members) is taken according to the rules in the company's articles of association. Generally it is by a show of hands. Any member may demand a poll unless the company's articles say otherwise. A declaration by the chairman that the resolution is carried on a show of hands is all that is required for a resolution to be passed. The number of votes for or against need not be counted.

Who must receive copies of a resolution before and after approval?

Notice of the intention to propose a resolution must be sent to company members. If a company has auditors, they must also be sent copies - or otherwise notified of the contents - of all proposed statutory written resolutions. Companies House must be sent a copy of any resolution listed in the list below. The resolution must be: a)In printed form (or in another form approved by Companies House), and; b)Delivered to Companies House within 15 days of the date it was made or passed by the company.

What resolutions need to be sent to Companies House?

A copy of every resolution or agreement listed below must reach Companies House within 15 days after it has been passed, including

Special and extraordinary resolutions:

• Elective resolutions. Some of the resolutions are described more fully below;
• Class resolutions passed by unanimous agreement of all the members of a class of shareholders but which would otherwise have needed to be passed by a specific majority or in another manner must also be sent;
• All resolutions or agreements that effectively bind all the members of any class of shareholders though all those members have not agreed them;
• Directors' resolutions as listed just below;
• Ordinary resolutions as listed just below;
• Resolutions for voluntary winding-up.
  

Special resolutions

A special resolution requires a majority. It is required for important matters such as alterations to the memorandum or articles of association, a change of name, or a reduction of capital to be approved by the court. Korean Commercial Act, when special resolution of company is passed as a written resolution it must state that it is proposed as a special resolution.

A general meeting of a company must be called by notice of at least 2 weeks (21 days in the case of annual general meeting of public company /in US/). The company’s articles may require a longer period of notice. A meeting at which a special resolution (or an ordinary or extraordinary resolution) is to be proposed may be held at shorter notice with the agreement of the members entitled to attend and vote at the meeting. Agreement to short notice of the meeting must be by a majority in number of the member having a right to attend and vote at the meeting, being a majority who:

• Together held not less than the requisite percentage in nominal value of the shares giving voting rights(excluding any shares in the company held as treasury shares), or;
• In the case of a company without share capital, together represent not less than the requisite percentage of the total voting rights at that meeting of all the members

Companies may pass an elective resolution to reduce the majority required to authorize short notice of a meeting and notice of a resolution, to not less than 90%.

When a resolution alters the memorandum, ordinance or articles of association of a company, a copy of the amended document must also be filed at Companies House.

Elective resolutions

These may be passed by private companies only and for five specific purposes. 'Elective resolutions' must be passed by unanimous agreement in general meeting of the company by all the members entitled to attend and vote at the meeting in person or by proxy. A period of minimum 3 weeks' notice of the resolution(s) must be given unless all members entitled to attend and vote at the meeting agree to a shorter period.

Elective resolutions may be used for the following purposes only:

• To amend the duration of the authority of directors to allot securities;
• To dispense with the holding of annual general meetings;
• To dispense with the laying of accounts and reports before the members in general meeting;
• To allow the majority required to authorize short notice of a meeting and notice of a resolution to be reduced from 95% to a lower figure but not less than 90%;
• To dispense with the annual appointment of auditors
  

Written resolutions

A written resolution or a resolution of any class of members may be passed by a company to resolve anything which could have been passed by the company in general meeting. However, this power cannot be used to remove a director or auditor before the end of their term of office.

A meeting is not required and no prior notice is necessary. A resolution may be proposed as a written resolution by the directors or by the members. The private company must send written resolution to every eligible member in hard copy form, in electronic form or by means of a website.

Eligible members are those who, at the circulation date of the resolution, would be entitled to attend and vote at a meeting that would otherwise have been held to pass it. Circulation date of written resolution is the date on which first copy or copies of resolution are sent to the members. The copy of the resolution must be accompanied by a statement informing the member how to signify agreement to the resolution and as to the date by which the resolution must be passed if it is not to lapse. When a resolution of a company is to be passed as a special resolution, it must be stated that it was proposed as a special resolution. In case of written resolution, every member has one vote and if the company has share capital, every member has one vote in respect to each share of stock held by him.

The expenses of the company in circulating the resolution must be paid by the member who requested the circulation unless the company resolves otherwise. A company is not required to circulate a members’ statement if, on an application by the company or another person who claims to be aggrieved, the court is satisfied that the right is conferred by law are being abused.

A provision of the articles of a company is void in so far as it would have the effect that a resolution that is required by or otherwise provided for in an enactment could not be proposed as a written resolution

Class resolution

The resolution may be circulated at the expense of the members making the request, unless the company resolves otherwise.

Shareholder resolutions are voted on at a company's annual general meeting in the same way as other resolutions.

IV. Simplified Procedures related to General meeting of Shareholders under

Commercial Act of Korea

In response to the recent developments of IT technologies, the Commercial Act of Korea was recently revised to allow the procedures for convening the general meeting of shareholders and voting by shareholders to be more simplified, depending on the level of equity of the relevant company. We briefly set forth below more simplified procedures for shareholders meeting notices and shareholders voting as provided for in the current Commercial Act.

Shareholders meeting notification

The convocation of a meeting of shareholders requires notifying each shareholder no later than two weeks prior to date of meeting. In addition to notification by mail, the current Commercial Act stipulates that share holders may be notified using electronic documents if each of\f such shareholders agree thereto, allowing for notification for shareholders meeting by email.

Furthermore, small-or medium-size companies of which total equity capital is less than 1 billon Korean won may omit meeting notification requirements in convening a shareholders’ meeting if all shareholders consent thereto. Specifically, the Commercial Act as emended in 2009 provides for an exception where a small company with shareholders’ equity of less than 1 billon Korean may omit the procedures for convening and holding the meeting may impose a significant burden to the businesses with fewer resources available.

Electronic voting in shareholders meeting

a. General

Before the 209 amendment, the Commercial Act recognized a shareholder’s voting by physically attending the meeting or using a proxy in addition to the vote exercise by way of a written means. However, the Commercial Act as amended in 2009 provides for another means; electronic voting. Although the company may determine whether to use mail and/or electronic voting, mail voting requires a provision in the articles of incorporation, whereas electronic voting may be used by the resolution of the board of directors without any provision in the articles of incorporation. Electronic voting still does not allow the general meeting of shareholders itself to be omitted.

b. How to notify

Any company adopting electronic voting is required to state in the notices of the general meeting of shareholders that votes may be cast using electronic votes may be cast, the period in which votes may be cast, and other technical details of the electronic voting.

c. How to cast votes

Any shareholder intending to cast an electronic vote is required to be authenticated as a shareholder through a publicly recognized electronic signature (a public certificate) as set forth under the Electronic Signature Act, an cast a vote in such manner as provided for by the company as such Internet address as designated be the company. The period in which votes may be cast is prescribed by the company, but must and no later than the day immediately preceding the date of the shareholders meeting. As the disclosure of the results of electronic voting – which is being completed prior to the meeting – may undermine the fairness of the voting at the meeting, the company and person involved in the operation of electronic voting are required to j\keep confidential such results until ballots are counted at the meeting.

d. Mail voting and electronic voting

If a company allows both mail voting and electronic voting, a shareholders is requied to choose only one option in casting the relevant votes.

Written resolution at a small company

The Commercial Act as amended in 2009 stipulates that any small business of which total equity capital is less than 1 billon Korean won may adopt a resolution by a written means in lieu of a resolution of the general meeting of shareholders to make their decisions, the 2009 amended Commercial Act allows any small business of which total equity capital of less than 1 billon Korean won, as is the case with limited liability companies, to adopt a resolution by a written means. “Resolution by written means” in this context refers to the mode where a physical meeting of shareholders is omitted and all shareholders are asked to present their decisions through writing.

Such resolution by written means has the same effect as a resolution adopted at a shareholders meeting.

Very truly yours,

Reference

· 김학민, CEO를 위한 회사법 이야기 / 김학민 저. 서울: 진원사, 2011

· 나승성, 회사법 개설 / 나승성 지음. 파주: 한국학술정보, 2010

· 7인 공저회사법. 서울대 2011

· Company law and commercial reality / by L.S. Sealy Sweet & Maxwell ; Centre for Commercial Law Studies, 1984

· International Convention for the Settlement of Investment Disputes between States and the National of Other States, 1965, (ICSID Convention)

· Lew, J., et al., Comparative International Commercial Arbitration (The Hague: Kluwer Law International, 2003)