Company Website & Partnership

Discussion in 'Legal' started by jason1981, Nov 19, 2008.

  1. jason1981

    jason1981 UKBF Regular Free Member

    Posts: 6 Likes: 0
    If I have owned a website which I created (without copyright register) and go into partnership 4 years later with 2 other people, what happens if I decide to break the partnership, can they take me to court and claim rights over the website.

    Here are the facts

    * we have verbally agreed a 40/30/30 split in favour of me a year ago

    * myself and another partner have registered a seperate company which will act as the parent of the website in the future

    * we have setup a business bank account related to the parent company and both signed with the bank

    * The parent company, in law, does not own the website. On our parent company website we state that we operate the website, but have not yet signed anything to confirm this in law

    * The partnership and all agreements made over the past year have only ever been verbal. One of the partners may have notes on things discussed but no solicitor has confirmed this

    * Our parent company is registered with another company that deals with accepting payments from the website. In that contract there is mention of the website. Hence, this is our company name, here is the website this company operates.


    I am the creator and founder of the website, I own the server, I made the website (I'm a programmer) and I have access to all the data and domain registration etc.

    There involvement has been purely turning the website into business model through research and new ideas for a change of direction

    Please advise what rights that they have over this website based on what I have outlined above.

    The company does not matter as its worth nothing at the moment, the website is the potential money maker.


    In my opinion, regardless of what has been discussed verbally, as I have not put my signature to paper to agree in law that
    we all have a stake in the website, I should still have full rights, hence I can withdraw and return to 100% stake in the website and cut all access with them
    Posted: Nov 19, 2008 By: jason1981 Member since: Nov 19, 2008
    #1
  2. bwglaw

    bwglaw UKBF Regular Free Member

    Posts: 4,682 Likes: 230
    It does appear that the company have nothing more than an iimplied licence to use the site. However, you will appreciate that all agreements and correspondence need to be looked over to ascertain whether the company/partnership has anything greater than an implied licence to use the site. You will own the copyright unless there is evidence of an express assignment i.e. in writing. The relationship between the partners and the company needs a closer look.

    You may not own the data. The company could argue joint authorship/ownership of the data. You might have access to the domain registration however unless you actually own the domain you would not be entitled to access the registration without the agreement of the registered owner.

    To avert a costly legal battle, perhaps you could consider selling the website to the company
    Posted: Nov 19, 2008 By: bwglaw Member since: Apr 8, 2005
    #2
  3. jason1981

    jason1981 UKBF Regular Free Member

    Posts: 6 Likes: 0
    unless you actually own the domain
    I own the domain, I registered it 3 years ago before I met them

    It does appear that the company have nothing more than an iimplied licence to use the site
    The implied license you mentioned, how can that stand up in court if the website has not been confirmed in law as being owned by the company. How far can they play on an implied license if not in any form of legal agreement other than a website which has been setup in preparation for when we sit down with a lawyer and draw up an official contract tying up our company, my website and the 3 way partnership

    You may not own the data. The company could argue joint authorship/ownership of the data.
    On what basis could they argue joint ownership. What do they need produce to claim rights if the company and website have not been binded together in some kind of legal contract

    P.S - The company has no finance to buy the website. This is very early stages therefor very little income
    Last edited: Nov 19, 2008
    Posted: Nov 19, 2008 By: jason1981 Member since: Nov 19, 2008
    #3
  4. bwglaw

    bwglaw UKBF Regular Free Member

    Posts: 4,682 Likes: 230
    You have a lot of questions to ask which I can only suggest you speak with a solicitor direct because there may be other underlying issues and if there is a current dispute it would be wise to take advice on this also. It is all being well listening to you and answering the questions or providing information but this may be a wasted exercise without knowing what if anything the company claims or argue if there is a dispute therefore my answers to your questions is not likely to be conclusive.
    Posted: Nov 19, 2008 By: bwglaw Member since: Apr 8, 2005
    #4
  5. jason1981

    jason1981 UKBF Regular Free Member

    Posts: 6 Likes: 0
    Yes I will seek advice soon although just trying to get a ball park guide as to whether they can claim any rights on this

    I know there are other elements that will effect judgment but the position they are coming from surely is not strong as the website does not exist in law, and, as I hold they 'keys' how can the claim ownership without contract.

    E.G - If they have rights because we stated verbally, whats to stop them from saying actually, there are 6 other partners and oh by the way, his share is 5% we own the other 95%

    The point I'm making, how can anything done verbally stand in court. Surely the court will only look at legal facts, not one word against another which have taken place in meetings

    Im really looking to find out what they can throw at me to gain any form of control based on the position they are in

    Dont worry I wont hold you to your advice! I just want a general idea

    Someone has mentioned if I register the website name for copyright, they cant touch it as I own the copyright, personally, and they or the company do not
    Last edited: Nov 19, 2008
    Posted: Nov 19, 2008 By: jason1981 Member since: Nov 19, 2008
    #5
  6. FireFleur

    FireFleur UKBF Regular Free Member

    Posts: 1,869 Likes: 440
    You can have a verbal contract.

    I think you had better sit down with everyone involved, and get it all worked out on paper.

    It sounds like you have put in effort, but also they have. And whilst you have the control, that doesn't mean you have complete ownership.

    It sounds like there is a subtext to all of this that you haven't mentioned.

    But with what you have said it seems like you have some remorse as to the split. If you have been working on a site for 4 years, why give 60% away for very little?

    It sounds like you structured the deal wrong with them. As there is nothing in writing, well apart from this post, then I suppose you could claim your word against theirs, but if it went to court they would ask about the verbal arrangement, and you would have to respond honestly.
    Posted: Nov 19, 2008 By: FireFleur Member since: Oct 29, 2008
    #6
  7. oldeagleeye

    oldeagleeye UKBF Regular Free Member

    Posts: 3,989 Likes: 1,219
    It sounds to me Jason that you want to have you cake and eat it.

    You mention verbal agreements. They are just as valid in law as written ones but as there is no paperwork the precise terms can always be disputed. Beware however if you plan on going that route. You say one partner took notes - did you. If not he is out in front already as being prudent and a more reliable reference. Many people also think that where verbal agreements are concerned that it is extremely easy to lie about events. Come the time that you have to swear oath I assure it ain't easy.

    By far the most important and relevant informtion in your posts however comes from this statement and I quote.

    "There involvement has been purely turning the website into business model through research and new ideas for a change of direction"

    That implies that the web site was not a business before these partners came along with their investment - be it in time - money or ideas and now it seems that you are looking at ways of cutting them out.

    Is that legal. I doubt it. Where there are no test case to quote in British law the judiciary rely on one underlying principle and that is what is 'reasonable'

    Is it reasonable to assume this was a business venture undertaken by all 3 partners. Each contributing to the venture in their own way. Obviously yes. If not the web site what other contribution did you make and even then it would be reasonable to assume that you were making a full commitment. After all. A parent company has been set up. Joint signitures on the bank account. You also say that a payment gateway has been setup on the web site and after all this. After all their investment in turning the web site itself into a business model using their ideas your trying to say that the web site was not part of the deal. Are you saying that they were wasting their time. That they were knowingly agreeing to set you up in another venture in compeition. That simply doesn't make sense.

    I am not a lawyer Jason but I was once invited to become a magistrate and spent several months sitting in on sessions with business friends who were on the bench and frankly I don't think that you would like what I believe would be a universal judgment on this one.

    My personal advice on this one then would be. If you don't like the deal give your partners their money back and compensate them for their involvement. I am sure they would accept. Noone want to run a business where ther are disgrunted partners.

    I have to say however that with a 40-30-30 split it seems to me that jointly they have put more into this venture than you and what you are really worried about is they Kicking you out and should that happen you would want to take the web site with you.

    The trouble is mate - as you said yourself in not so many words. It ain't yours anymore. It has had a makeover using their money and their ideas. Rob
    Posted: Nov 19, 2008 By: oldeagleeye Member since: Jul 16, 2008
    #7
  8. oldeagleeye

    oldeagleeye UKBF Regular Free Member

    Posts: 3,989 Likes: 1,219
    I meant to add that while you may be the major shareholder Jason jointly they can remove you from the board and remove your keys to the office as well as the authority to sign cheques. Never ever dispose of 49% of the shareholding in any business. Rob
    Last edited: Nov 19, 2008
    Posted: Nov 19, 2008 By: oldeagleeye Member since: Jul 16, 2008
    #8
  9. jason1981

    jason1981 UKBF Regular Free Member

    Posts: 6 Likes: 0
    My main reason for the withdraw is one of the partners is working for himself meaning I and another partner are putting in all the time where as he only puts in time when he is not working

    At the moment I am working 12 hours minimum where he is working 4 hours when not in work. I understand everyone has responsibility, as I too have had to make sacrifices but from a business point of view if a partner can not put in the effort, the business will suffer, especially when there is only 3 of us to start

    The other partner lied to me about a deadline we had to hit or we would not get paid. This deadline was something that was 90% on my shoulders because it was completely technical. This meant 7 solid days a week for over a month and long hours each day (12-14 hours). After hitting the deadline I was told it was a lie. I feel as if they are both draining me and those two things alone have made me feel very sour towards the partnership.

    The partnership came about a year ago, only the last 7 weeks have the other 2 partners sprung into action where as the last year I have continued building and maintaining the website which I have worked on for 4 years. Whilst I was doing that, the other 2 partners where still working long hours for other companies aswel as involved in other part time job such as DJ'ing

    I don't want to cut any one out, but I wont carry this on my shoulders and make all the sacrifices while they wait for the cash to role in with unreliable efforts.

    I have already sacrificed my house and job to work full time on this, if the others are talking about going back to work because they need money, I have issues

    I'm assuming a sob story is of no concern to a court, but just thought I should shed some light as to why I want to do this, as apposed to greed and power trip

    Any more advice?

    P.S - I am willing to give them everything they have put into this project, which has mainly come about the last 7 weeks which will include there research, business model, terms and conditions, deal set up with a merchant and design ideas for the website. The actual product which is the engine of the website (programming code, database, members), which has taken me 4 years to build, I am not prepared to give them as this is something they have not contributed too

    Analogy is like them designing the can of pepsi and how to sell it, but me spending 4 years making the pepsi formula

    That way, if they wish, they can start something up them selves providing they can get a new tech guy
    Last edited: Nov 19, 2008
    Posted: Nov 19, 2008 By: jason1981 Member since: Nov 19, 2008
    #9
  10. edmondscommerce

    edmondscommerce Magento + PHP Expert Full Member - Verified Business

    Posts: 3,475 Likes: 597
    ouch sounds like a nasty situation...
    Posted: Nov 19, 2008 By: edmondscommerce Member since: Nov 11, 2008
    #10
  11. FireFleur

    FireFleur UKBF Regular Free Member

    Posts: 1,869 Likes: 440
    Well, you need to sit down with them and hash out the problems, that is a common thing to do in business.

    If you still have the copyright to the code, and haven't signed that over to the company, well then legally you put your work wherever you like.

    But you cannot include their work in yours, and the sign over could be verbal again.

    Very messy, really the advice of holding onto 51% is good, normally I like a triumvirate of 34% 33% 33% with clear markings of who does what, and how many hours of effort each puts in, for a ground zero project.

    But in your case, 4 years of development (say that equates to 1 year of real graft? perhaps a little less but still 4 years on the web), you should be looking to bring people in on a performance share of revenue with a buy in option on the shares. And look to only give a small part away, but of course you have to value the company at that point, and well the horse has bolted now.

    Actually you should use this as a lesson, and pick up a few books on business. Then sit down with your partners, and have a real session of what people expect of each other. What you may have to realise is you will have to do less work to get the equality, so find yourself another project and let this one tick over at the majority share holder pace.
    Posted: Nov 20, 2008 By: FireFleur Member since: Oct 29, 2008
    #11
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  12. oldeagleeye

    oldeagleeye UKBF Regular Free Member

    Posts: 3,989 Likes: 1,219
    A good post FF and one which highlights one of the most common misconceptions in business - the difference between shareholders and directors when many people seem to believe that the duties and benefits are the same. They are not.

    As shareholders these guys are perfectly entitled to sit on their backsides all day long and demand that you Jason however use your best endeavours in running the company. If they feel that best endeavour on their part is to keep working elsewhere and basically act as non executive directors then that is their privilege too.

    After all they could of course resign. It still wouldn't affect their rights and what's more - if you don't perform given their joint shareholding they could always give you the boot and run the company themselves. As for all this time spent on the web site.

    As soon as you brought these guys in and took their money and ideas they obtained the a right to what was their personal shareholding in both the intellectual and commercial value of the company. You agreed to that mate. You can't go back on it now.

    All you can do is put this down to a lesson learned then - but that does not mean that this is a lost cause. A lady friend of mine inherited her husbands shareholding in a property company and quite rightly assumed that as a shareholder she was not expected to contribute to running the company and she is not stupid in thinking that. She has a wide portfolio of shares in the FT 500 and those companies don't go knocking on her door expecting her to turn up for work every day. She is a shareholder end of story. The partners in her deceased husbands company however expected more and made it known in what were some very unpleasent ways and the woman Anne simply couldn't understand why.

    The problem there was that her husband had played a vital role in soucing suitable land for the property bank and given that she often went on trips with him and knew the business well the other two partners expcted her to contribute to the future profitability of the company. After some months of sitting a home grieving she was more than happy to take the job on. The result a happy team which is rellected in the fact that the company have gone from stength to stength.

    This could all be a simple mis-understanding then. these guys might even regard you as the geek guru in the company and they may feel that as such you would not appreciate their amateur input and so leave it up to you to get on with it. As FF has already said then the best thing to do then is call a board meeting and sit down and discuss what duties are expected of each director. You might find that everyone in fact will be all the more happier for it.

    It doesn't of course solve the underlying problem in that you really should have thought more about the structure of the company at formation and while I am all for the cheap electronic company formation services for individuals - if there is any likelihood of a partnership or other distribution of shares then it is essential to see an accountant. Frankly I would do that now if I were you - and ask him or her to chair the meeting. Most accountants will have come across this sort of problem time and time again and have become good mediators. So good we even have a few accountants on here as moderators - not easy given the big handbags that come out now and then. Best of luck.
    Rob
    Posted: Nov 20, 2008 By: oldeagleeye Member since: Jul 16, 2008
    #12