A Memorandum of Understanding (MOU) is often the first stage in the process of negotiating a formal agreement, and it sets out the main features that the parties understand will be included in their agreement.
\nIf an agreement is binding, it is legally enforceable. An MOU can be binding or nonbinding, or only binding in part, depending on the exact wording of the MOU. This document is a binding MOU between two entities who wish to separate their business interests and operate independently of each other. The particular nature of the business is described in the Background section of the agreement.
\nThis MOU would be used when a business that has been operated under the umbrella of an organization is to be separated from the organization and operated as a separate business. This agreement refers to a non-profit organization.
\nThis agreement would be signed by the authorized representatives of both organizations.
\nWhen separating business organizations, it is important to specify what assets belong to each organization. This would include assets such as bank accounts, accounts receivable, stock in trade, equipment, intellectual property, customer contracts etc. It is equally important to divide the debts and liabilities and obligations eg. accounts payable, insurance, rent etc.
\nThis agreement sets out which party will have responsibility/ownership of the assets and liabilities of the business. It includes clauses dealing with confidentiality and non-competition.
\nThe core elements of an MOU include Parties, Binding/Non-Binding nature of the agreement, Termination, Terms, Expenses, Confidentiality.
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