Model Agreements:

Joint Ventures

Joint Venture: A Preliminary Memorandum of Understanding

A Sample

M/s.  ............................................................................................. 

......................................................................................................

......................................................................................................

Represented by : 

Mr.  ..........................................................................................  and

Mr.  ..........................................................................................

On the one hand                       

and

M/s.   ......................................................................................

.............................................................................................

................................................................... ........ ..................

Represented by :

Mr.  ..........................................................................................  and

Mr.  ..........................................................................................

On the other

have had discussions about a proposed joint venture in (the receiver's country) for production of..............................................................................................................................................                                                                                                                                 

and have agreed on the following points at the end of their discussions held in the office of

............................................................................................................................., on  ...............................................
 

1. Company A shall supply the technical know-how for production of   ..................................... .  The technical know-how shall comprise the complete

    documentationrequired for the production, including technical data of raw materials, technology, engineering, design and layout of plant to ensure commercial production of the product, deputation of technicians to (the receiver's country) as required to ensure the fulfilment of the undertaking and training of the Company B's technicians in their factory in ....(location).... for the same purpose. The travel costs by ...... class air passage as well as the living costs of the technicians covered by such deputation either way will be borne by the new joint venture company.

Company A will help the new company in the selection of the machinery required as also the raw materials to be used in the production. The dies required for the production shall be purchased by the new joint venture company from Company A as and when required, and the prices to be mutually agreed upon. Complete technical know-how and documents shall be handed over to Company B  and/ or the newly formed company.

2. Company A shall be paid by the newly formed company for its know-how a lumpsum fee of ...................................................... .  This amount will be paid in three instalments as follows :

            1/3       after the agreement has been filled with the local authorities

            1/3       on delivery of technical documentation, and

            1/3       on the commencement of commercial production.

3. In addition to the above lump-sum fee, the Company A shall be paid a royalty of   .......................... percent for a period of   ..................... years on the ex-factory value of the licensed products.

4. In order to carry out terms of this undertaking and on signing of the documents by the parties, a joint venture company shall be formed with agreed paid- up capital basis to carry out the terms of undertaking. Company A shall participate in the equity capital of the new joint venture company to the extent of  ................ % of the paid- capital.                                                                                                                                    

5. As envisaged above, Company A will participate in the equity capital as agreed. So long as the aid agreement of technical know-how is in subsistence Company A shall continue to hold the said shares and shall continue to provide any improvement in the technology for manufacturing the said products.  If, however, Company A decides to withdraw its equity participation after 5 years the equity  shares held by Company A shall be offered to Company B at a rate to be fixed by the auditors of the joint venture company. If  Company B does not indicate its intention to purchase the said shares within 6 months of the offer given by Company A, then Company A can dispose of its equity shares in the open market in accordance with the directions that might be given by local authorities in this regard.

6. Company B agrees to move the necessary applications before its Government authorities for registration of the joint venture company, for import of capital goods, and for sanction of the proposed foreign collaboration.

7. Company B shall keep, Company A informed, with the help of a quarterly report or more often if necessary,  of the progress made by them in completion of the formalities associated with the establishment of the joint venture and in implementation of the project.

8. Company B shall be assisted by Company A in competing the official formalities for the establishment of the joint venture by being given the necessary information relevant to implementation of the project. The application forms requiring such assistance from Company A shall be given to Company A in photocopy.

9. Company B shall bear all the initial expenses involved in the formation of the joint venture company. These expenses shall debited to the account of the new joint venture company, and subsequently shared by the two partners in proportion to their share capital in the joint venture company.

10. Both Company B and Company A affirm that they shall implement the project in good faith and shall take all necessary steps to see the project through expeditiously. They shall not negotiate with any other parties for a similar project, and the negotiations in progress, if any, shall be terminated forthwith. 

11. This Memorandum of Understanding shall be valid upto the end of  ......................................., and both the parties hereto shall be free thereafter from their obligations herein written, if the progress achieved until then is not found satisfactory by either of them.

For Company A                                                             For Company B

...............................                                                     ..............................

...............................                                                     ..............................