A
Preliminary Memorandum of Understanding (model)
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 India for production
of.........................................................................................................................................................
and
have agreed on the following points at the end of their discussions held in the
office of
......................................................................................................................................................,
on
...............................................
.
1. M/s. GM *
shall supply the technical know-how for production of ..................................... . The technical know-how shall comprise the
complete documentation required 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 India as
required to ensure the fulfilment of the undertaking and training of the Indian
technicians in their factory in Germany for the same purpose. The travel costs
by economy 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.
GM
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 GM as and
when required, and the prices to be mutually agreed upon. Complete technical
know-how and documents shall be handed over to IN and/ or the newly formed company in Germany.
2. GM shall be
paid by the newly formed company for its know-how a lumpsum fee of
DM...................................................... . This amount will be paid in three instalments
as follows :
1/3 after the agreement has been filled with
the Reserve Bank of India/ Authorised
Foreign
Exchange Dealer,
1/3 on delivery of technical documentation,
and
> 1/3 on the commencement of
commercial production or four years after the agreement is filed with the
Reserve Bank of India/ Authorised Foreign Exchange Dealer, whichever is
earlier.
3. In addition
to the above lump-sum fee, the GM 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 . GM shall participate in the
equity capital of the new joint venture company to the extent of ................ % of the paid- capital.
______________________________________________________________________________
* GM : name of the German firm, and
*
IN : name of the Indian firm.
5. As envisaged
above, GM will participate in the equity capital as agreed. So long as the aid
agreement of technical know-how is in subsistence GM shall continue to hold the
said shares and shall continue to provide any improvement in the technology for
manufacturing the said products. If,
however, GM decides to withdraw its equity participation after 5 years the
equity shares held by GM shall be offered to IN at a rate to be fixed
by the auditors of the joint venture company. If IN does not indicate its intention to purchase the said shares
within 6 months of the offer given by GM, then GM can dispose of its equity
shares in the open market in accordance with the directions that might be given
by Indian authorities including RBI and normal regulations formulated by Stock
Exchange in this regard.
6. IN agrees to
move the necessary applications before the Government of India authorities for
registration of the joint venture company, for import of capital goods, and for
sanction of the proposed foreign collaboration.
7. IN shall
keep, GM 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. IN shall be
assisted by GM 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 GM shall be given to GM in
photocopy.
9. IN 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 IN and
GM 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.
______________________________________________________________________________
*
The royalty is generally up to 5% for domestic sales and 8% for exports, and
for a period of up to 7 years, and this is automatically approved by the RBI.
For higher rates, approval of the SIA is
necessary. Both the lump-sum and royalties can now be negotiated ‘ net
of tax’, being borne by the Indian firm.
11. This
Memorandum of Undertaking 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
IN For
GM
............................... ..............................
............................... ..............................
Source : Licensing and Joint Ventures in India by Indo-German Chamber of Commerce