mineral resources

Mr. Qian, the head of a coal mining company in Hebei Province, recently encountered a dilemma: the company was short of funds and wanted to use the mining rights certificate as collateral for a loan, but at the same time, a foreign company offered 50 million to buy his mining rights.

"If I mortgage my mineral rights to a bank, can I still transfer them?" Mr. Qian called to inquire.

This is a problem that many mining company leaders will encounter. Lawyer Liu Jingzhu from Beijing Yingting Law Firm will give you detailed answers.

Mineral rights under mortgage: can they be transferred?

The answer is: Yes, but there are conditions.

Article 27 of the new Mineral Resources Law clearly stipulates: "Mining rights may be transferred, invested, mortgaged, etc. in accordance with the law." This means that mining rights can be used as collateral and transfer targets at the same time, without legal obstacles.

However, as a kind of security right, mortgage right is established to protect the realization of creditor's rights. If the mortgagor transfers the mortgaged property during the mortgage period, it may harm the interests of the mortgagee. Therefore, the law sets certain restrictions on the transfer of collateral.

Provisions of the Civil Code: What conditions must be met by the mortgagor to transfer the mortgaged property?

Article 406 of the Civil Code stipulates: "During the mortgage period, the mortgagor may transfer the mortgaged property. If the parties agree otherwise, the agreement shall prevail. If the mortgaged property is transferred, the mortgage rights will not be affected."

That is to say:

1.Generally, the mortgagor can transfer the mortgaged property, but the mortgagee needs to be notified;
2.If the mortgage contract has special provisions, for example, if it is agreed that "no transfer is allowed without the consent of the mortgagee", then the agreement needs to be abided by;
3.After transfer, the mortgage remains valid, that is, the mortgagee can still have priority in receiving payment from the transfer proceeds.

Special process for mineral rights mortgage transfer

According to the relevant provisions of the "Measures for the Administration of Transfer of Exploration and Mining Rights" and the new "Mineral Resources Law", the transfer of mining rights needs to be approved by the natural resources authorities.

For the transfer of mortgaged mineral rights, the following conditions need to be met at the same time:

1.The mortgagee agrees to the transfer: This is the most important premise. The usual practice is that after the mineral owner and the buyer sign a transfer contract, the buyer will pay part or all of the transfer money directly to the mortgagee to pay off the debt. The mortgagee will issue a certificate agreeing to the transfer after receiving the payment.

2.Cancellation or change of mortgage registration: Before transfer, the original mortgage registration needs to be canceled, or the mortgage registration needs to be re-established by the new mortgagee (which may be the buyer or the new lending bank).

3.Natural resources department approval: The transfer of mining rights needs to be approved by the natural resources authority, and the approval materials need to include proof that the mortgagee agrees to the transfer.

Practical Operation: Three Common Models

Mode 1: Buyer directly compensates

The buyer pays the transfer payment directly to the mortgagee (bank). After receiving the payment, the bank releases the mortgage and then handles the mineral rights transfer registration. This mode is the simplest and most common.

Mode 2: Transfer after redemption

The buyer pays a "property redemption fee" to the mineral rights owner, who uses the money to pay off the bank loan and release the mortgage, and then handles the transfer. This model is suitable for situations where the buyer's funds are insufficient to pay the entire transfer fee at once.

Mode 3: Transfer with pledge

The so-called "transfer with mortgage" means that the mortgage right continues to exist after the transfer, and the buyer inherits the mortgage debt while inheriting the mineral rights. At present, this method is relatively rare in the field of mining rights, but with the implementation of the new Mineral Resources Law, it may gradually increase in the future.

Lawyer Ying Ting reminds: When transferring mineral rights under mortgage, these pitfalls should be avoided

Lawyer Liu Jingzhu reminds miners and buyers:

Reminder to mineral rights holders (sellers):

1.Transfer proceeds will be used first to pay off mortgage debts: Do not try to transfer transfer funds to avoid debts, otherwise it may constitute fraud;
2.Ensure the mortgagee’s cooperation: Be sure to obtain the mortgagee’s written consent before transfer to avoid subsequent disputes;
3.Pay attention to tax issues: The transfer of mining rights involves corporate income tax, value-added tax and other taxes, so tax planning needs to be done in advance.

Reminder to buyers (transferees):

1.Verify mortgage status of mineral rights: Before signing a contract, you must go to the natural resources department to check the registration information of the mineral rights to confirm whether there are any mortgages, seizures and other encumbrances;
2.Clarify the method of payment for transfer money: It is best to pay the transfer money directly to the mortgagee to avoid financial risks;
3.Verify if the seller has other debts: If the seller has other undisclosed debts, even if the mineral rights are purchased, the original debtors may still have recourse;
4.Confirm that you have mining qualifications: The transfer of mining rights requires corresponding mining qualifications, otherwise the natural resources department may not approve it.

Beijing Yingtong Law Firm has rich experience in the field of mining rights transfer and can provide you with full-process legal services, including due diligence, contract drafting, negotiation, registration, etc.

(This article is for reference only. Please consult a professional lawyer for specific questions. This content does not constitute legal advice.)