Joint company projects

[Brown and Boris]

A friend of mine runs another 2-man-band business. I am a techie in my own field and he is a bit of an expert in his particular arena (schools consultant). I had an idea for a new product in his area, from which I have developed a pilot and he is helping refine it before we look to develop a working version. The idea is that we both put a bit of time and a couple of thousand £££ into getting the product finished and in a marketable condition. I thought we could get this far with a letter of agreement in terms of sharing the product IP and the detailed development costs to the first level?

His idea is that we then form a new company with us both as directors but it feels like a sledge hammer to crack a nut because we would cop for the accountants fes, companies house returns etc for a product that may not be a success.

Can we not just draw up a contract between our existing two small companies outlining IP ownership, roles, responsibilities and rewards from the new product? Seems simpler? Is there a better way?

[StevieBee]

Brown and Boris said:

Can we not just draw up a contract between our existing two small companies outlining IP ownership, roles, responsibilities and rewards from the new product? Seems simpler? Is there a better way?

Yes you can but it comes down to how much you trust the other party. However, if you are investing cash then a "special project company" may be the best option as everything is a little more open and fair.

We're looking at doing a similar thing for an overseas project. The SPO will be a non-profit making company but each contributing company charges a management fee to the SPO on top of the services provided with a non-exec director to oversee fairness and the like. The agreement is that what is ever left in the SPO at the end of the project will be divvied out to all partners equally.

[Brown and Boris]

StevieBee said:

Brown and Boris said:

Can we not just draw up a contract between our existing two small companies outlining IP ownership, roles, responsibilities and rewards from the new product? Seems simpler? Is there a better way?

Yes you can but it comes down to how much you trust the other party.

Isn't that what agreements are for, to make things clear, legal and enforceable? I would have thought that being in a SPO could lead to disagrements over who does what, who pays what, who has done what, who takes what out etc. Are there clear roles and responsibilities?

I trust this guy, but business tells me that friendships and trust can be tested when it feels like one is doing most of the work and the other taking half or most of the profits. The alternative is that I acknowledge his contribution with a royalty agreement and a decent commission on anything he sells to schools directly, but keep the IPO and rest of the profits within my company?

[StevieBee]

The SPO example I mention relates to a project that will involve 3, possibly 4 companies so probably not a particularly good example.

A written agreement is fine but experience has shown us that it is worth getting this drawn up by a solicitor.