Memorandum of Understanding for Joint Venture under English law


____________ (A) and ____________ (B) wish to set out in this Memorandum the principles of a proposed joint venture in the field of ____________________.

Each party has various interests in the field [in the ____________ region.]] The parties wish to establish a 50/50 joint venture to [consolidate their interests in the field] so as to enable them to develop the business more effectively [and to take advantage of the opportunities arising in the field [throughout the ____________ region.]

The parties believe that the joint venture will be in their mutual best interests. They recognise that the various arrangements [regarding their existing interests] will need careful review but each will endeavour in good faith to agree the detailed terms of the joint venture, on the basis of the principles set out in this Memorandum, and to take all necessary other actions in order successfully to establish the joint venture.

Joint Venture Company

  1. The parties intend to establish a 50/50 joint venture company to [manufacture and sell ____________________ as described further in Annex 1 (the Products)].
  2. The parties’ preferred intention is to create a new jointly-owned company into which they would transfer their existing interests. The parties will consider appropriate alternative structures if that becomes necessary or desirable on the grounds of tax and cost efficiency.
  3. The name of the joint venture will be ‘____________’ or such other name as the parties agree.
  4. [The joint venture company’s headquarters will be based in ____________.]

Activities of the Joint Venture

  1. The territory of the joint venture will be [____________] as shown on the [plan][list] set out in Annex 2 (the Territory).
  2. The business of the joint venture will be developing, manufacturing and selling [the Products] [in the Territory]. The business may include other [technologies and products] as the parties may subsequently agree.
  3. The parties shall draw up and approve an initial business plan [to be attached to the Shareholders Agreement]. The board of the joint venture company (the Board) will review the business plan at regular intervals and update it annually.

Interests to be Transferred to the Joint Venture

  1. [The parties will contribute all their relevant interests in the Territory to the joint venture. These include the following existing interests: ____________________.]
  2. [Pending establishment of the joint venture, each party shall ensure that its business and interests to be vested in the joint venture are carried on in the ordinary and usual course. Neither party (nor any member of its respective group) can enter into any new venture or transaction likely to have a material effect on the joint venture without the parties consulting each other beforehand.]


  1. [Each party will make available to the joint venture the benefit of all its existing technology relating to the Products. The parties will discuss the most appropriate structure and arrangements to achieve this. These arrangements will include detailed terms covering:

(a)            [royalty or other fair and reasonable commercial terms to be agreed;]

(b)            availability of improvements and new technology developed or acquired by either party specifically relating to the Products;

(c)            improvements and/or new technology developed by the joint venture to be made available (on commercial terms) to [A] and [B] for use outside the Territory;

(d)            appropriate controls to prevent use of the technology by third parties outside the joint venture;

(e)            [A’s] trade marks and name to be licensed to the joint venture.]


  1. The parties will finalise valuation negotiations before signing the joint venture agreements. [A] and [B] will use all reasonable efforts to agree an appropriate valuation process and methodology [in accordance with the outline principles set out in Annex 3]. [The intention is that the parties should jointly appoint an independent valuer to undertake the valuation exercise. The independent valuer would supervise, if necessary, appropriate specialist valuers in particular areas.  The independent valuer must have regard to valuation principles agreed by the parties and to submissions and materials which they provide.]
  2. Each party will make available to the other party [(and the valuer)] all information (including financial information) regarding the interests to be vested in the joint venture as the other party [(or the valuer)] may reasonably request in order to facilitate the valuation process.
  3. If there is a material difference in the valuations of the respective contributions of the parties, the parties will use all reasonable efforts to agree an appropriate cash payment or alternative cost-efficient arrangement for bridging any difference in order to maintain the 50/50 equity relationship within the joint venture.
  4. The parties agree that the definitive legal agreements will set out appropriate warranties and indemnities (subject to limits and qualifications to be agreed) in relation to the interests each party contributes. [There will be appropriate provisions for compensation or value adjustment arising from any material change in the information provided or representations made by each party for valuation purposes.]

Capital and Funding

  1. The two parties will hold equity capital of the joint venture on a 50/50 basis.
  2. It is the intention of the parties that the joint venture should be self-financing and should obtain additional funds from third parties without recourse to its shareholders. Neither party shall be obliged to contribute further funds. Each party nevertheless acknowledges its intention to support the business of the joint venture in accordance with the current business plan, and [will] provide guarantees and undertakings as may reasonably be required to enable the joint venture to obtain funds. Unless otherwise agreed, any new equity capital shall be raised on a 50/50 basis.

Board and Management

  1. Overall management and supervision of the joint venture shall be the responsibility of the Board. Each party shall appoint an equal number of directors to the Board and have equal voting rights. The chairman of the Board shall [not] have a casting vote. A quorum shall require at least one director appointed by each party.
  2. The initial appointments to the Board shall be:
[A] [B]
●  _____________ ●  ____________
●  _____________ ●  ____________
●  _____________ ●  ____________
  1. The first chairman of the Board shall be ____________. The first deputy chairman shall be ____________. [The chairmanship shall rotate between the two parties on a ____ yearly basis.]
  2. The initial senior management appointments shall be:

Chief Executive: ____________;

Chief Financial Officer: ____________;

Chief Operating Officer: ____________.

[Successor appointments will be made on the basis of ‘the person best qualified for the position’ regardless of whether the person is currently employed by the joint venture, one of the parties or a third party. Appointments (and removals) of senior management shall be a matter for the parties.]

  1. Certain key decisions affecting the joint venture shall be reserved for mutual agreement between [A] and [B] as shareholders. [Final identification of these matters will be for the definitive agreement but they are likely to include:

–                material change in scope or nature of the business;

–                making (or terminating) any material joint venture, collaboration or technology licence;

–                any material contract or transaction outside the ordinary course of business;

–                major asset or business acquisitions/disposals;

–                appointment/removal of the Chief Executive [and other senior management];

–                capital expenditure in excess of £●;

–                borrowings exceeding an aggregate level of £●;

–                approving the annual budget;

–                changes in dividend policy;

–                material dealings between the joint venture and the [A] or [B] groups;

–                appointing/removing the auditors.]

Shareholders Agreement

  1. The Shareholders Agreement shall also include appropriate provisions on:

(a)            dividend policy (the joint venture shall adopt a maximum distribution policy subject to its internal operation, cash flow and funding requirements and to applicable laws and regulations);

(b)            the joint venture’s auditors (who shall be ____________);

(c)            the financial year of the joint venture (which shall be ____);

(d)            monthly management accounts to be produced in respect of the operations of the joint venture and made available to the Board and the shareholders (together with such additional financial information as they may from time to time require);

(e)            each party to have pre-emption rights if the other party wishes to transfer its shares in the joint venture (which, except for intra-group transfers, shall not be permitted for an initial period of ____ years);

(f)             appropriate undertakings to be given by the parties not to compete with the business of the joint venture [and clarifying the territorial scope of the joint venture business (including in relation to exports outside the territory of the joint venture)];

(g)            [deadlock and] dispute resolution.

Third Party Approvals

  1. The parties will use all reasonable efforts to identify [and obtain] as soon as possible any third party consents or approvals which may be required, including: (i) consents of relevant regulatory authorities; (ii) any tax clearances reasonably required by either party in relation to the proposed joint venture structure; and (iii) consents of [other joint venture partners] [specific major customers].
  2. Material third party consents or approvals will be a pre-condition of completing the joint venture. Each party will endeavour to obtain them as speedily as possible and each will co-operate with the other for this purpose.
  3. [The arrangements set out in this Memorandum of Understanding are subject to the approval of the boards of directors of [A] and [B]. Such approvals will be sought as soon as practicable [with a view to the approvals being obtained by no later than ________.]]

Confidentiality and Announcements

  1. [The Confidentiality Agreement dated _____ shall continue in force.] [Each party shall keep confidential and not disclose to any other person, nor use for any purpose except the purposes of the joint venture, any information obtained from the other party as a result of negotiating, entering into or implementing the joint venture other than information which:

(a)            is required to be disclosed by operation of law or any stock exchange regulations or any binding judgment or order, or any requirement of a competent authority;

(b)            is reasonably required to be disclosed in confidence to a party’s professional advisers for use in connection with the joint venture and/or matters contemplated in this Memorandum of Understanding;

(c)            is or becomes within the public domain (otherwise than through the recipient party’s default).

  1. No public announcement or press release in connection with the subject matter of this Memorandum of Understanding shall be made or issued by or on behalf of either party without the prior written approval of the other, except such as may be required by law, by any stock exchange or by any governmental authority.

[Governing Law

  1. This Memorandum of Understanding is governed by English law.]
  2. A person who is not a party to this Memorandum of Understanding shall have no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms.


  1. Following signature of this Memorandum of Understanding, the parties will proceed as rapidly as possible with the due diligence and valuation process and with preparing and negotiating the legally definitive agreements. [An outline timetable is set out in Annex 4.]


  1. This Memorandum of Understanding represents the good faith intentions of the parties to proceed with the proposed joint venture but is not legally binding and creates no legal obligations on either party (except for clauses [26], [27] [28] and [29].) Its sole purpose is to set out the principles on which the parties intend in good faith to negotiate legally definitive agreements.

Annex 1:         Description of the [Products] [Business]

Annex 2:         The Territory

[Annex 3:        Outline Valuation Principles]

[Annex 4:        Outline Timetable]


This Memorandum of Understanding is signed by duly authorised representatives of the parties:

SIGNED                                                    )        SIGNATURE:     _____________
for and on behalf of                                     )
[A]                                                             )        NAME:              _____________

SIGNED                                                    )        SIGNATURE:     _____________
for and on behalf of                                     )
[B]                                                             )        NAME:              _____________