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The project

Can we create a set of documents that would help an entrepreneurial  team set up a technology driven company to develop their business plan? 

Neal Macrossan wanted to patent the idea of generating incorporation documents interactively and drew attention to himself in a recent decision of the High Court when Mr Justice Mann held that the idea was unpatentable as a computer program. This decision was confirmed by the Court of Appeal on 27 October 2006.  They also considered it excluded from patentability because it was a method of doing business. An application was made to appeal the decision to the House of Lords but on 5 February 2007 they declined to hear it because the petition raised no arguable point of law of general public importance . Nevertheless Mr Macrossan's program is available for you to test at his ukcorporator site. It offers a basic all purpose commodity which aims to be as suitable for a business that will stay small as the technology team I am considering.  Great resources and clear explanations. This gets you economically to the stage of having a properly incorporated company if you cannot afford  to retain a good company secretarial service like Goodwille.

There is a stage when a team needs structure but this is before it seeks serious investment. Its sometimes called the Friends Families and Fools round. The company is most vulnerable at this stage to being preyed on by advisors promising value and the team does need guidance and support. Firm foundations are essential.  The team also needs to understand and be in charge of its own structure.

To keep it simple lets look at the basic company formed under English law and registered at Companies House.  Its easy to buy a company off the shelf but there is a lot that shelf company needs to make it yours:

• a memorandum and articles of association for the public to see how the company is run
• shareholders to own the company and provide the initial funds
• directors to run the company
• a shareholders agreement or investment agreement
• a name

Spend time understanding this framework with your team and you begin to comprehend what a brilliant innovation the company is for allowing a group of investors to combine to share a risk that is kept isolated from their other assets.

Company Law Reform

However company law is in a state of constant evolution  so that even Lord Sainsbury expects users to buy "Butterworths" to know what the law is.  The latest reforms became law on 8 November 2006 as the Companies Act 2006 and the important provision are expected to come into force in October 2007, though the process has already started.  At the same time the disclosure rules that require your company details to be visible on your website came into force on 1 January 2007, although that had to be done by amending the old Act.

This new Act promises fine things for companies that start small, which should still work for those that intend to grow rapidly. One of the best is a library of articles suitable for different businesses rather than the lengthy and ever changing Table A of the Companies Act 1985.

common problems for start up technology teams

Who is the controlling group (directors) that all investors will trust

The name (unimportant in and of itself but essential in the sense that it gives identity to the undertaking and a prudent choice in the beginning can save a lot of trademark problems downstream)

• Who can spend what?
• What happens after the initial kitty dries up?
• Getting the technology into the company.
• What is the common vision and how long do we give it
• How do we split the shares and how many.

This is a work in progress and I would welcome feedback.