5. Spin-off Companies


5. Spin-off Companies


5.1. Demand Driven Formation

  1. If the Company grows too big or demand warrants it, it will be split off into several business units or companies.
  2. The Company will retain 100% ownership of the newly formed entities.


5.2. 80/20 Rule Spin-offs

  1. A spin-off company will be created if an approved 80/20 task pursued by one or several Employees becomes successful, profitable and is a suitable candidate for such spin-off.
  2. The suitability of a company to be spun-off will be decided 2 years after the first launch date of relevant services or products.
  3. The Company has final say on the spin-off suitability but must provide valid and clear arguments if it decides not to create a spin-off company.
  4. The Company will retain 20% stake in the newly formed entity.
  5. The Employees involved in the task will be given 80% stake in the new entity.
  6. Subdivision of the 80% stake between multiple Employees will be negotiated between themselves as they see fit.
  7. If agreement between the Employees can not be reached, the supervisory board shall determine the split ratios after consultation with the relevant people involved.
  8. During formation, the Employees are responsible for setting up the new entity. This includes such things as:
    1. Registration of the company with government agencies. (SARS, etc).
    2. Bank accounts.
    3. Company policies and rules.
    4. IT and basic infrastructure.
  9. The Company may offer incubation services to the new entity and Employees to assist with startup growth. This includes:
    1. Investing equity in the new firm.
    2. Being the first customer of the spin-off to create cash flow.
    3. Providing incubation space. (desk, chairs phones, internet access).
    4. Providing services such as legal, finance, technology, etc.


5.3. Intellectual Property

  1. Separate entities may be created which make use of IP developed within the Company.
  2. In such cases, the IP involved may be:
    1. licensed to the new entity
    2. sold to the new entity

    The choice of which method used is determined by the Company depending on it’s interest in the IP in question.


5.4. Protection of Company Interests

  1. In the case of IP considered important to the Company’s normal business, a source code escrow agreement will be put in place between the Company and the newly formed entity.
  2. The escrow agreement will be put in place to ensure business continuity for the Company should the newly formed entity go bankrupt, fail to maintain or update the software according to the promised software license agreement.