A Memorandum of Understanding (MOU) document sets out the preliminary terms of a commercial transaction agreed by the parties in the course of negotiations. This is often used to ensure both parties are on the same page as regards the major aspects of the transaction and prevent misunderstandings. It is also known as a head of term agreement, letter of intent or head of agreement. It can be used in a variety of transactions, such as for mergers and acquisitions, private equity transactions, agreements with suppliers etc. Key elements Names of the parties; including contact numbers, companies involved etc Purpose of the agreement; goals and intentions of the parties; state if parties intend for the MoU to not be legally binding and is subject to a final agreement Responsibilities and roles of the parties; the framework of the negotiations, e.g. stages of negotiation and meeting times Details of the project; other parties involved, deadlines, a summary of the transaction, key issues Duration of the agreement; state the beginning and end date of the MoU, details of termination, notice periods Non-disclosure, confidentiality clauses Why is it important? Having a mutual agreement on the major aspects of the deal prevents the likelihood of any misunderstandings and allows for effective communication.  Thus, MOU is particularly important if you are negotiating a complex deal or are engaged in a matter for a long period of time as it will further reduce disagreements when drafting the final contract. When do you need it? They are used in the beginning stages of negotiations, to agree upon preliminary terms before detailed formal and binding agreements are made. Parties can enter into more than one MOU during negotiations, especially if they are lengthy. Main reasons why people use an MoU: To have a written confirmation and record of the main agreed objectives and terms in a transaction before entering into a legally

What is an indemnification clause? An indemnification clause provides that a party agrees to compensate an individual if they suffer a loss as a result of a specific event such as breach of contract etc. It is an important clause to have in a business contract because it allocates the risks associated with the contract by shifting the liability, to pay for the losses, to the indemnifying party. For this reason, it is one of the most negotiated clauses and you should definitely consider negotiating for one. It is strongly recommended to have your lawyer draft an indemnification clause that fits your business. Example: If you sell your business to another business owner, the indemnification clause can require the seller to indemnify for losses arising out of employee’s lawsuits within 12 months. This protects the new owner from suffering losses before taking over the business. The essential elements of an indemnification clause An obligation to indemnify; this is the obligation to pay for the losses incurredThe Indemnitor; the person who has the obligation to indemnify (pay for losses) The Indemnitee; the person receiving the benefits from the indemnification obligation Why it is important Parties can determine and allocate risks associated with the contract They protect you from lawsuit actions as it is guaranteed that the indemnifier (person paying the losses and providing the indemnity) bears the legal and financial consequences Protects your business from risks involved in the transaction and reduces your liability for unforeseen damages/losses that may arise in future Provides certainty to your exposure to liability and allows you to run your business accordingly, without constantly worrying about repaying financial losses It is a precautionary measure for the indemnifier to understand their potential liability Reasons to not include an indemnification clause It is difficult to predict future events as many

A referral agreement is entered between a supplier/service provider and another company that refers potential clients to the supplier/service provider. It is used primarily when people have business contacts in a certain industry and receive a “Referral Fee’ for making a successful introduction to others. It is also referred to as a business introduction agreement. Once successfully referred, the company receives a commission or referral fee from the supplier/service provider. Most businesses will utilise referrals to gain more consumers/clients, therefore, it is important to formalise this process to reduce issues that may come up in the future. The parties may also enter into a Mutual Referral Agreement whereby each party refers potential clients to the other in exchange for a commission/referral fee. What to include in a Referral Agreement? Relationship between the parties It is important to define the relationship between the parties as an agreement between independent contractors i.e. where you’re the principal and the referral is an agent. Referral Process The parties must agree on the procedure for making a referral. For instance, the parties may decide that the details of the referral must be provided by e-mail. Also, you can define what constitutes a valid referral as every business lead might not generate revenue. Example: Allen runs an online membership service and offers a referral program for members if they successfully refer another potential member to sign up. For Allen, the referral may be valid once the potential member signs up and pays the membership fee. If there is a trial period, Allen may then pay the referral fee to the referral party after the period is over. Whether the referral will be qualified or unqualified? A qualified referral is where the referrer evaluates and investigates the business leaders before they refer them to you. This ensures that the referral is valid and viable. While an

More and more entrepreneurs are ditching the traditional business model and moving their business ideas online. As easy as that may be, you need to be aware of the legal requirements when setting up an online business. Register your business Before running an online business, the first thing to do is set up a company. No matter the type of business you are starting, you will need to register with the government and obtain a license (if required) to run your business in Hong Kong. Besides filing required documents, choosing your business name and completing forms on your business plan, the requirements for business registration vary depending on the business structure (sole proprietorship, partnership, private limited company etc). For more information on the required forms in Hong Kong for all types of businesses, check the Inland Revenue Department website. You need to register your business within 30 days of commencing operations. Once you have registered, you will receive a Business Registration Certificate. The certificate is only valid for one year, meaning you need to renew it every year if you continue to run your online business in Hong Kong To find out more about registering your business, click here. Register the Domain Name A domain name is your online website address (e.g. hire.legal.com). To obtain one, you need to register your domain name by making an application to the domain name registrar in Hong Kong. To find a list of all the domain registrars in Hong Kong, click here. When applying for the domain name, you must show evidence of entitlement to the name, such as the Business Registration Certificate. Your domain name needs to be unique and available. Hence, it should not violate any existing trademarks. It is recommended that when you are choosing a domain name to: Search the company name on the Cyber Search Centre or Company Search Mobile Service under the Companies Registry of the Government of the