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Senior Partner
Senior Partner, Solicitor
Category: Law
Satisfied Customers: 13323
Experience:  Solicitor with more than 30 years experience
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My question relates to the following situation: I started

Customer Question

My question relates to the following situation:

I started a software venture with a business partner (covered by a signed MOU and NDA) and developed a pilot service. I will call this Venture 1.

Approximately 2 months afterwards, I started to take a very active role in an existing dormant IT company for which I was a director and shareholder, with 2 other directors not involved in Venture 1 in any way. This company had not traded for 2 years. I will call this Venture 2. The other directors had no involvement in Venture 1 and this can be evidenced through emails etc.

My business partner in Venture 1, became a Director and equal shareholder of Venture 2 six months ago, but this was after the MOU and NDA was signed for Venture 1. When my business partner became a director of Venture 2, there was no agreement made as to what IP he brought to Venture 2. In addition, none of the minutes of any board meeting held since the venture 1 business partner joined, have mentioned Venture 1. No equipment or resources from Venture 2 have been used to develop venture 1. I have spent some time on venture 1 in parallel with work on venture 2. No salaries have been paid in Venture 2 and no formal employment contracts exist for any of the directors for venture 2.

My question is, do the other two directors of Venture 2 have a legal claim to any of the Intellectual Property or future revenue generated from Venture 1?
Submitted: 3 years ago.
Category: Law
Expert:  Senior Partner replied 3 years ago.
Thank you for the question. You do not mention what form venture 1 takes. If it is not a company but a partnership between the two and there is an overlap between the projects then there may be some minor risk of claims on future IP development but otherwise based upon what you say there seems to be no basis of claim by the second venture against venture 1.

There is principal that a director may not profit out of his position so if you had been using Venture 2 assets or equipment etc or had come across the venture 1 activity as a result of being a director then you might be accountable . However as Venture 1 preceded your involvement in Venture 2 there can be no claim on this basis.

You do owe fiduciary duties as a director but unless there is an agreement that you will devote the whole of your working time to your job with venture 2 , there is nothing that prevents you form having multiple interests - in fact it is quite common.
Customer: replied 3 years ago.

Many thanks for your answer.


 


Venture 1 is between our two Limited Companies covered by an MOU. At the time the MOU was signed, the idea that they may lay claim to had not been thought of. However, it was being progressed before my partner in venture 1 became a director of venture 2. Again, we have emails between us which evidences this.


 


With regards to overlap. Venture 1 utilises mobile app technology. Venture 2 has also carried out paid work to develop a mobile app. The two apps are in different market sectors and none of the software code has crossed between the two ventures.


 


Could you explain what fiduciary duties are please. The director that indicated there may be a claim, stated that he thought we had developed venture 1 'on venture 2's time'.

Expert:  Senior Partner replied 3 years ago.
Hi A fiduciary duty means that a director must act in the best interests of the company and not just in his own interests. If you had developed Venture one whilst working for Venture 2 that might be a breach.. That would not necessarily mean Venture 2 has a claim to the businees of Venture 1. Of course if you are not being paid what is Venture 2s time?
Anyway if you can establish venture 1 was established first there should not be an issue. However directors should declare other interests to avoid conflicts.

It does sound as if the threat of a claim has no basis
Customer: replied 3 years ago.

Many thanks, this is becoming clearer.


 


There is a final piece of this that is concerning me. Yesterday, the director of venture 2 who stated he may lay a claim to venture 1, has endorsed that my business partner for venture one and I, may work entirely on venture 1 for the next 6 months, whilst the other 2 directors work entirely on venture 2.


 


Do you think, by endorsing and encouraging us to do this, it is an attempt by him to strengthen his claim on a share of venture 1?


 


If you do, what course of action do you recommend? I would rather resign from venture 2, than risk strengthening his claim to venture 1 by me working on venture 1 for the next 6 months, whilst still being a part of venture 2. Or should we get the other venture 1 directors to sign something which states that venture 1 pre-existed and they can lay no claim to any part of it?


 


One last thing which may be important. The 3rd venture 2 director involved in this, said yesterday that he knew 'venture 1 was not venture 2's idea and that it pre-dated my venture 1 partner becoming a director of venture 2. There were no witnesses to this statement, however I immediately recorded exactly what was said, signed it and emailed the statement to myself to record what was said by whom and when.


 


Thanks again.

Expert:  Senior Partner replied 3 years ago.
The first thing I would say is that it was very sensible to make an immediate note of the conversation.

I agree that you should be concerned about the proposal. I am obviously not clear about all the relationships here but if you are not to work on one venture ( 2) for 6 months but only focus on your own venture(1) then will you benefit form (2) .

I think it is very important that you head off the issue by recording in an email now what has been agreed and that Venture 1 is only the two of you and is nothing to do with venture2d get them to acknowledge that.

You can of course agree to merge all these activities but it sounds as if you do not want to

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