Running your business through two companies can be a smart move - but only if the legal foundations match how you actually operate day-to-day.
A common setup is where one company owns valuable intellectual property (IP) like your brand, software, designs or content, and another company handles trading (sales, staff, customers and invoices). It’s practical, it can help with risk management, and it can make growth (and even an eventual sale) much smoother.
But there’s one document that often gets missed until it becomes a problem: an intercompany IP licence.
This article has been updated to reflect current, real-world business structures and the modern IP risks we’re seeing across New Zealand businesses (especially digital-first brands and service businesses). We’ll walk you through what an intercompany IP licence is, when you need one, what should be in it, and how to set it up properly from day one.
Why Would You Operate Under Two Companies In The First Place?
Most founders don’t set out thinking, “I want a complicated corporate structure.” Usually, it happens for very practical reasons.
Here are some common two-company models we see in New Zealand:
1) The “Trading Company + IP Holding Company” Model
This is the classic setup:
- IP company (HoldCo / IPCo): owns the brand, trade marks, domain names, software, designs, marketing assets and other IP.
- Trading company (OpCo): runs the business operations - employs staff, signs customer contracts, invoices clients, pays suppliers.
Why do people do this? One big reason is risk separation. If the trading company gets sued or goes into debt, the IP (often the most valuable asset) may be better protected if it’s owned by a separate entity.
This approach often sits alongside a broader holding company strategy where the HoldCo owns shares in the trading company and may also hold other assets.
2) The “Legacy Company + New Venture” Model
Sometimes you started in one company, then created another for a new division, a new product line, or a new market - but your branding, website, content or tech is still used across both.
That’s where IP ownership can get messy fast if you haven’t clearly documented “who owns what” and “who is allowed to use what”.
3) The “Founder Company + Operating Company” Model
In early-stage businesses, founders might set up one company to hold IP and founder equity arrangements, and another to run the business.
This is especially common where different investors, co-founders, or business units have different risk profiles. Often these arrangements are tied into a Founders Agreement and longer-term governance planning.
Whatever your reason is, the key thing is this: if one company owns IP and another company uses it, you should paper that usage properly.
What Is An Intercompany IP Licence (And What Does It Actually Do)?
An intercompany IP licence is a contract between two related companies (for example, your IP holding company and your trading company) that sets out:
- what IP is being licensed (e.g. brand name, logos, software, copyrighted materials, domain names, designs)
- who can use it (usually the trading company)
- how they can use it (scope and limits)
- what they must do to protect it (brand rules, confidentiality, security measures)
- whether there’s a licence fee (and how it’s calculated)
- what happens if the agreement ends (termination and transition)
Think of it like this: your trading company might be the “hands” running the business, but your IP company is the “owner” of the valuable intangible assets. The licence is the permission slip - but with real legal weight behind it.
In New Zealand, IP rights commonly include:
- Trade marks (protected under the Trade Marks Act 2002 once registered)
- Copyright (automatic protection under the Copyright Act 1994 for original works like software code, written content, images, videos and designs)
- Confidential information and trade secrets (protected through contract and general legal principles, but you usually need strong confidentiality clauses)
If you want the “intercompany licence” done properly, it’s often structured like a tailored IP Licence, but with additional clauses that reflect the realities of related entities and shared control.
It’s tempting to treat a two-company structure as an internal admin detail. After all, if you control both companies, why would you need a formal licence?
Here’s why: because the law treats companies as separate legal entities - even if you’re the sole director and shareholder of both.
Without a clear intercompany IP licence, you can run into problems like:
1) Disputes About Who Owns The IP (Especially When Things Change)
Everything can feel fine while it’s “just you”. But businesses evolve:
- you bring on a co-founder or investor
- you sell the trading business (or part of it)
- one company takes on debt
- one company becomes inactive
- you restructure or separate business lines
If the trading company has been using the IP for years without a licence, it may later argue it has rights to keep using it - or a buyer may assume IP is included in the sale when it’s not. Either way, it creates leverage issues and slows down deals.
2) Problems During Due Diligence (Investment, Lending, Or A Sale)
When investors, banks, or buyers assess your business, they’ll usually ask:
- Who owns the key IP?
- Is the trading entity legally entitled to use it?
- Are there any restrictions or termination rights?
If your key trade mark or software is owned by an IP company, but the trading company is the one generating revenue, you’ll often need to show a written licence. Without it, the deal can get delayed, re-priced, or restructured.
Your IP holding company should be protecting the brand long-term. But if the trading company can use the brand however it wants without rules, your brand can become inconsistent or exposed.
This matters even more where your trading company employs staff, hires contractors, and runs marketing campaigns - the risk of “brand drift” and accidental infringement rises quickly.
4) Tax And Accounting Complications
We’ll keep this part high-level (because it depends heavily on your situation), but the key idea is:
If one entity owns an asset and another entity benefits from it, there are often questions about whether a licence fee should be charged and how that should be documented and accounted for.
A properly drafted intercompany licence makes the commercial arrangement clearer, which helps your accountant support the positions taken in your financials and tax filings.
5) Director Duties And Decision-Making Risk
Directors have duties to act in the best interests of each company. If your trading company is relying on IP it doesn’t own (and has no written right to use), that can raise governance issues - particularly where there are multiple shareholders or where one company is taking on obligations that affect the other.
This is often where having clean governance documents like a Company Constitution and a Shareholders Agreement helps support the structure overall - but the IP licence is still the key document for “permission to use”.
What Should An Intercompany IP Licence Include?
There isn’t a one-size-fits-all intercompany IP licence. The right document depends on what IP you have, how it’s used, and what your long-term plan is (growth, franchising, sale, investment, etc.).
That said, most solid intercompany IP licences in NZ cover the following:
1) Clear Definitions Of The IP
You want to avoid vague statements like “the IP” without detail. A good licence identifies IP such as:
- registered trade marks and pending applications
- brand assets (logos, taglines, style guides)
- domain names and social media handles (or at least the brand content used on them)
- website content and marketing materials
- software, apps, source code, databases and documentation
- product designs, packaging designs, templates
- training manuals and internal systems
Tip: if you’ve got multiple IP assets, a schedule/annexure that lists them is often the cleanest approach.
2) The Type Of Licence (Exclusive vs Non-Exclusive)
Common options include:
- Exclusive licence: only the trading company can use the IP (even the IP owner may be restricted).
- Non-exclusive licence: the IP owner can license the IP to other parties as well.
- Limited exclusivity: exclusive within a territory, channel, or business line.
For related companies, exclusivity is a strategic choice - it can impact value, deal flexibility, and what happens if one entity fails.
3) Scope: Where, How, And For What Purpose The IP Can Be Used
This is where you get practical. For example, the licence might allow the trading company to use the brand:
- on products and packaging
- on the website and social media
- in advertising and promotional campaigns
- in customer contracts and proposals
It might also restrict usage (for example, no sublicensing, no use outside agreed products/services, or no use after termination).
4) Quality Control And Brand Guidelines
If your IP includes trade marks, consistent usage matters. A licence can include quality control provisions such as:
- mandatory compliance with brand guidelines
- approval rights over major rebrands or new logos
- requirements to use specific trade mark symbols (where appropriate)
This can help protect the long-term integrity of your brand.
5) Licence Fees (Or A Clear Statement That No Fee Applies)
Some intercompany licences charge a fee (fixed, percentage of revenue, cost-plus, etc.). Others do not - especially at an early stage - but it’s still important to state what the arrangement is.
If you’re unsure what’s appropriate, it’s worth getting legal and accounting advice together so the structure makes sense commercially and is properly documented.
6) Confidentiality, Security, And Data Handling
If your IP includes confidential know-how, customer lists, or software systems, your licence should include confidentiality and security obligations.
And if your trading company collects customer personal information, you’ll also want your privacy compliance to be consistent across the group - including having a fit-for-purpose Privacy Policy and internal processes that match how data is actually shared between entities.
7) Improvements And New IP (Who Owns What Going Forward?)
This is one of the biggest “future disputes waiting to happen” clauses.
If the trading company improves the IP - for example:
- new features added to software
- new brand collateral created
- a refreshed website design
- new product packaging templates
Who owns those improvements?
Your licence should clearly say whether improvements are:
- owned by the IP company automatically
- owned by the trading company but licensed back
- assigned to the IP company under an agreed process
8) Term, Termination, And What Happens Next
Even between related companies, you need to plan for “what if” scenarios. Termination clauses often deal with:
- non-payment of fees
- breach of confidentiality
- insolvency of the trading company
- change of control (e.g. the trading company is sold to a third party)
- expiry and renewal
Just as important is the post-termination process: when must the trading company stop using the IP, what happens to websites/domains, and what transitional rights exist (if any)?
How Do You Set Up An Intercompany IP Licence The Right Way?
If you’re thinking “this sounds like a lot”, you’re not wrong - but it’s very manageable when you approach it step-by-step.
Step 1: Confirm Who Owns The IP Today
Start by listing your key IP assets and checking:
- which company name is on registrations (e.g. trade marks)
- who paid for creation (helpful context, but not always determinative)
- what your contractor and employee agreements say about IP ownership
If you’ve had developers, designers, marketers or contractors involved, make sure ownership is properly captured in writing - otherwise you may not actually own what you think you own.
Step 2: Decide What The Trading Company Needs To Use
Your trading company may not need a licence to every asset. Focus on what it uses to generate revenue and operate:
- branding used in marketing and sales
- systems/software used to deliver the product or service
- templates and materials used with customers
Step 3: Align The Licence With Your Governance Documents
If you have multiple shareholders, investors, or a plan to raise capital, your intercompany licence shouldn’t contradict your broader governance settings.
This is where it can help to check how the arrangement sits alongside your Shareholders Agreement and internal approval rules (for example, who can approve changes to fee arrangements or termination rights).
Step 4: Get The Licence Drafted (Don’t Rely On A Generic Template)
Intercompany IP licences often look “simple” on the surface, but the risk is in the details: improvements, termination, sublicensing, and change of control clauses can have major commercial impacts.
If you want the document tailored to your structure (and drafted in plain English), it’s usually best to have a lawyer prepare an Intercompany IP Licence that matches how you actually trade.
Step 5: Make Sure Your Operational Reality Matches The Paperwork
This part is underrated. Once the licence is signed:
- store it somewhere your accountant and leadership team can access
- make sure invoicing/fee payments (if any) happen as agreed
- ensure staff and contractors are engaged by the correct entity
- ensure brand guidelines and approval pathways are actually followed
A well-drafted licence is powerful, but only if the business follows it in practice.
Key Takeaways
- When one company owns IP and another company uses it, an intercompany IP licence helps document that permission clearly and reduce legal and commercial risk.
- Two-company structures (like an IP holding company + trading company) can be great for risk management and growth, but they need the right paperwork to match how you operate.
- Without a written licence, you can run into disputes about IP ownership and usage rights, especially during investment, lending, restructuring, or a business sale.
- A strong intercompany IP licence should cover the licensed IP, scope of use, exclusivity, fees (if any), confidentiality, improvements/new IP, and what happens on termination or sale.
- Because companies are separate legal entities in New Zealand, “we control both companies” isn’t a substitute for a proper agreement that protects the business from day one.
- It’s worth getting the licence drafted properly rather than relying on a generic template, as small clauses can have big consequences later.
If you’d like help setting up an intercompany IP licence (or reviewing your structure to make sure your IP is protected properly), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
