of Collaboration to Establish a Factory (Formation of a new Company)
Agreement is made the ... day of ................ 2000, between M/s. ABC & Co.
Ltd., a company Incorporated in India and having its business address at
........................... (hereinafter called 'the Local Company' of the One Part And
M/s. XYZ and Co. Ltd., a company Incorporated in ...................... and having its
registered office at ......................................... (hereinafter called the Foreign Company')
of the Other Part.
the Local Company is carrying on the business. inter alia of manufacturing ...
foreign company Is carrying on the business inter alia in the manufacture of
Whereas the parties hereto have, after several consultations with each other
shown the intention to co-operate with each other and enter into a joint
venture relationship for the manufacture of ... (hereinafter referred to as
'the Product') for the consideration and upon the terms and conditions herein
Whereas pursuant to the aforesaid intention of the parties hereto they propose
to procure the formation of a Limited Company in India known as .....................under
the Indian Companies Act, 1956, (hereinafter called 'the Company') which would
have an authorised share capital of Rs. ............... (Rupees ........................ ) divided
into ......... ordinary or equity shares of Rs..............each and an issued share
capital of Rs. ...................
It Is Hereby Agreed between the parties as follows: -
> 1. Forthwith
upon the execution of this agreement the parties hereto shall get registered a
Company in the name of M/s. ................. Ltd., (and which name is approved by the
Registrar of Companies at ....................... ) with the said Registrar under the Indian
Companies Act. 1956, In terms of the Memorandum and Articles of Association in
the form of the drafts which have been approved by the parties and shall comply
with the other requirements of such registration.
rights attaching to the shares of the Company have been set out in the draft
Articles of Association referred to in Clause 1 hereof.
of the parties hereto undertakes to the other –
perform and observe and (so far as it is able by the exercise of voting rights
or otherwise so to do) to procure that the Company will perform and observe all
the provisions of this Agreement.
take all necessary steps on its part to give full effect to the provisions of
this agreement, and
prejudice to the generality of the foregoing, to exercise and procure that
every person for the time being representing it will exercise or refrain from
exercising any rights of voting at any meeting of the members or of the
Directors of the Company so as to ensure the passing of any and every
resolution necessary or desirable to procure that the affairs of the Company
are conducted In accordance with this agreement and otherwise to give full
effect to the provisions of this agreement and likewise so as to ensure that no
resolution is passed which does not accord with such provisions.
registered office of the Company shall be at ... ............
parties hereto agree that the share equity In the Company shall be in the
Foreign Company shall hold ... per cent, and
Local Company shall hold percent of the total issued share capital of the
company at any one time throughout the period of this joint venture.
shares issued shall be paid in full in cash and/or in kind to the Company but
no additional shares shall be issued without the prior mutual agreement of the
parties hereto. However. the parties hereto shall have pre-emptive rights in
proportion to the number of shares held by each of them with respect to any new
issuance of shares of the Company, subject to approval of SEBI, if required.
of the parties hereto shall pledge, sell, transfer or otherwise encumber or
dispose of all or any of the shares of the Company without the written consent
of the other party.
provided in the draft Articles of Association referred to in Clause 1 hereof
the number of Directors of the Company shall be ........... of whom ................
will be nominated by the Foreign Company and ... by the Local Company
respectively hereto. Before the commencement of each financial year of the
Company the Directors shall appoint one of their members to be the Chairman of
the Board throughout such financial year and the person so elected shall be
nominated in respect of alternate years by the parties hereto. The chairman
shall have a casting vote at meetings of directors or at general meetings of
the Company. The first Chairman of the Company shall be nominated from the
Local Company. No director so appointed as herein provided shall be entitled to
remuneration whatsoever unless otherwise agreed by the parties hereto.
the event that a director vacates his position at any time for whatsoever
reason the vacancy shall be filled by the nomination of the party whose
nominated director as aforesaid has vacated his/her position.
Board of Directors shall decide the time and venue for convening all meetings
of the Company, provided that they will be held always in India.
general meetings of the Company shall be conducted in the language understood
by the parties hereto and/or the shareholders of the Company but all the
minutes of such meetings shall he written in the English language.
quorum for meetings of Directors of the Company and the procedure for
transacting business at meetings of Directors of the Company shall be as
prescribed in the draft Articles of Association referred to in clause 1.
Local Company will arrange for the necessary accounting and other essential
services and facilities to be provided for the Company on terms to be approved
by the Directors of the Company.
accounts of the Company shall be made upto the 3lst day of March in each year.
annual statement of account of the company shall be audited by an independent
Chartered Accountant to be appointed on the mutual agreement of the parties
hereto. The Company shall issue to the shareholders on a semi-annual basis and
within sixty (60) days of the end of the relevant month the financial
statements together with the report on operations for the period covered by the
financial statements and which shall be submitted In the English language at
the expense of the Company.
15. The Company
shall open a bank account with the Bank of.... and such account shall be
operated by any two (2) Directors of the Company or otherwise as may be
determined by the Directors of the Company from time to time.
Directors shall appoint two (2) Joint Representative Directors for the Company,
one of whom shall be nominated by the Local Company and the other by the
Foreign Company, who shall be responsible for the operation and administration
of the Company in accordance with the decisions of the Directors. The Joint
Representative Director nominated by the Foreign Company shall be designated
the President of the Company and the Joint Representative Director nominated by
the Local Company shall be designated the Vice-President of the Company.
Directors of the Company may appoint a manager for the day to day management of
the affairs of the Company and/or a manager for direction of manufacturing and
sale of the product.
with the approval of the Directors of the Company –
Company shall not engage in any other business than the manufacture of the
company shall not make or incur any commitment for capital expenditure. and
Company shall not enter into any contract or engagement of a material nature
outside the normal course of business.
Agreement shall continue to be in effect so long as both parties remain the
shareholders of the Company in the manner aforesaid unless the same is earlier
terminated as provided here in below by written notice of one party to the
other of its intention to terminate this agreement :
the event that the necessary approvals by the Government authorities for this
joint venture and/or the necessary approvals for the manufacture of the Product
and such other related matters are not obtained within three (3) months from
the date of this agreement or such other period the parties hereto may agree
the event that either party commits a breach of any of the terms of this
agreement, provided that. the other party in writing requires the former to
remedy such breach within ninety (90) days from the date of the notice and the
party receiving such notice has failed to remedy the breach, or
the event of any acts by force majeure which either of the parties are unable
to remedy within ninety (90) days of its happening, or
the event that either party hereto goes into liquidation voluntarily or
compulsorily or enters into composition with its creditors or restructures
Itself or does anything whereby its corporate entity Is so materially changed
so as to adversely affect this joint venture and/or this agreement ; or
the event that there be intervention by the local authorities thereby making
the joint venture not viable to continue ; or
the event that the parties hereto mutually agree to the termination of this
either party hereto gives notice of termination of this agreement as aforesaid
the party giving the said notice shall offer in writing the sale of its shares
in the Company to the other party at the fair market value then prevailing and
if the party receiving the said offer does not accept the offer itself or by
Its nominee or nominees within ninety (90) days from the date of the said
notice then the Company shall be deemed to go Into voluntary liquidation in
which event a liquidator will be appointed for the eventual dissolution of the
Company. For the purpose of this Clause the phrase 'fair market value' shall
mean the price per share as agreed upon by the parties hereto or in the event
the parties are unable to agree within the said period of ninety (90) days the
price per share shall be determined by the Independent Chartered Accountant of
the Company and such determination shall be final and binding on the parties
failure of either party to insist on the strict and punctual performance of the
provisions of this agreement shall not constitute a waiver of or estoppel
against asserting the right to require such performance nor should a waiver or
estoppel in one Instance constitute a waiver or estoppel with respect to a
later breach whether of similar nature or otherwise. Nothing in this provision
shall prevent a party hereto from enforcing Its rights by such remedies as may
be available in lieu of termination of this agreement as specified in Clause 18
the event that there be any term or provision of this agreement becoming
invalid, illegal or unenforceable in any respect after execution hereof such
invalidity or unenforecability shall not affect any other term or provision of
this agreement and this agreement shall be interpreted and construed as if such
Invalidity illegality or unenforecability had never existed and/or contained in
failure or delay of either party hereto to perform any obligation under this
agreement solely by reason of acts of God, acts of Governmental policies
(otherwise than provided herein) riots. wars, strikes, lockouts. accidents in
transportation and/or such other causes beyond the party's control shall not be
deemed to he a breach of this Agreement.
Always, if the party is so prevented from performing as herein stated it shall
continue to take all expedient steps and/or actions within its ability to
rectify the situation.
> 24. Except
where the nature of the happening is such as to prevent the party from doing so
the party suffering from the acts by force majeure shall notify the other party
in writing within seven (7) days after the occurrence of such happening.
agreement shall not be construed by either party hereto as constituting each of
them the agent of the other nor the Company as the agent for either of them.
Agreement shall be binding upon and accrue to the benefit of the parties hereto
and their respective successors and assigns but any assignment of this
agreement by one party shall not be effective without the written consent of
the other party being first had and obtained.
costs and expenses incidental to this Agreement shall be paid by the parties
hereto but such payments shall be reimbursed by the Company after the execution
terms and conditions, apart from those contained herein, on which the Foreign
Company has agreed to collaborate and to render necessary help in the
manufacture of the said product by the Company by supplying the know-how and
transferring its patents and trade marks, have been recorded in a draft of the
agreement to be entered into between the Company and the parties hereto and
such draft which is approved by both the parties hereto and is annexed hereto
as Annexure A shall be deemed to form part of this agreement. On the
registration of the said Company the said draft agreement will be got adopted
by the Board of Directors of the Company and shall be thereafter executed by
and on behalf of the Company and the parties hereto so as to be binding on the
parties hereto shall get the Articles of Association of the Company amended, if
required, to make them consistent with the terms of this agreement.
parties hereto covenant with each other as follows
it will carry out the provisions of this agreement in good faith and in the
spirit it is executed.
it warrants and represents to the other party that it has no outstanding
commitments or obligations which would impede its ability and right to enter into
this agreement and/or fulfil its obligations hereunder except for those
disclosed in writing at the time of the execution hereof.
it will indemnify the other party if the aforesaid warranty and/or
representation is found to be false or untrue and save it harmless from all
damages, fines, costs and such other expenses in consequence thereof.
it will not engage or participate in any manner with any other party in any
venture within India which may compete and/or be detrimental to the Company's manufacture
and sale of the Product or the goodwill and wellbeing of the Company generally,
it will do such acts and/or deeds as are necessary and beneficial to the
Company upon the request by the other party hereto.
disputes and/or differences arising between the parties hereto with regard to
this agreement including Annexure A hereto or the duties, powers or liabilities
or either party hereunder or with regard to the construction of any clause
hereof or any act or thing to be done in pursuance thereof or arising out of
anything herein contained whether during the continuance of this agreement or
upon or after its termination by any act of either party hereto or otherwise
shall be referred to a single Arbitrator In accordance with the provisions of
the Indian Arbitration & Conciliation Act, 1996.
notice required or permitted to be given hereunder shall be in writing and may
be given by the personal service or prepaid mall or by electronic transmissions
to the parties hereto at their addresses specified below :
the Local Company: ...
the Foreign Company: ...
any such notice given shall be deemed to have been received by either of the
parties hereto within fourteen (14) days after it has been posted and if it is
sent by electronic transmission it shall be deemed to have been received within
forty eight hours after it has been transmitted. For the purpose of showing
proof of posting and/or transmitting it shall be sufficient to produce a
letter. a telex, a cable and/or a telefax message containing the notice and
properly addressed, posted and/or transmitted to the party intended therefor.
agreement shall be construed and shall take effect in accordance with the law
Witness the Common Seal of the parties hereto have been hereunto affixed, the
day and year first hereinabove written
common seal of M/s. ABC Co. Ltd., is hereunto affixed pursuant to the
resolution of the
of Directors dated ................ in the presence of
Director duly authorised in that behalf
common seal of M/s. XYZ & Co. Ltd.,
hereunto affixed pursuant to the resolution of the
of Directors dated................. in the presence of
.................. a Director, duly authorised In that behalf.