Operating Under Two Companies? Here’s Why You Need An Intercompany IP Licence

If you run your business across two separate companies - for example, one company owns your brand and tech while another operates the day‑to‑day business - you’re not alone. Many Australian founders adopt this “HoldCo/OpCo” model to separate assets from trading risk.

But there’s a catch. If your operating company is using brand assets, software, content, or other intellectual property (IP) owned by your holding company, you need a formal agreement that permits this. That agreement is an intercompany IP licence.

In this guide, we’ll explain what an intercompany IP licence is, when you need one, the key clauses to include, and how it fits into your broader group structure. We’ll also cover common pitfalls and the simple steps to get yours in place the right way.

What Is An Intercompany IP Licence?

An intercompany IP licence is a legal agreement that allows one company in your group (the licensor) to grant rights to use its IP to another company in the group (the licensee).

That IP can include your brand name and logo, website content, product designs, proprietary software and code, training materials, customer databases, and domain names.

Put simply, it’s the document that makes the everyday use of your IP by the operating company lawful and controlled. Without it, your OpCo may be using assets it doesn’t legally have permission to use - which can create serious risk if there’s a dispute, a tax audit, a sale, or an insolvency event.

If you’re setting up a new group structure, it’s common to incorporate a company that will hold key assets and a separate trading entity to run operations. Many founders also establish a dedicated entity for IP - sometimes as a special purpose vehicle - and then put a formal licence in place from day one.

When Do You Need An Intercompany IP Licence?

You should put a licence in place whenever the entity that owns your IP is different to the entity that uses it.

Common Scenarios

• HoldCo owns the brand and software, OpCo uses them to sell products or services.
• Franchise or multi‑brand groups where a central entity owns IP that multiple trading entities use.
• Joint ventures where one party’s IP is used by a separate operating vehicle.
• Restructures where IP is transferred to a new asset‑holding company to ring‑fence risk.

Even if both companies have the same directors and shareholders, the law treats them as separate legal entities. That means permission to use IP is not implied - it should be granted in a written licence.

If you haven’t yet centralised your ownership of brand assets, it’s wise to consider an IP Assignment to move relevant IP into the chosen owner entity, and then follow up with an intercompany licence to govern ongoing use.

How Does A Licence Fit Into Your Group Structure?

A well‑designed group structure separates valuable assets from trading risk. The typical setup involves a holding company that owns shares in the operating company and may also own key IP. Your structure should be reflected consistently across your documents and practices.

Core Building Blocks

• Company Set Up: Incorporate your holding and operating companies, and ensure the right directors and shareholdings are recorded with ASIC.
• Company Constitution: Establish governance rules that support intercompany arrangements and decision‑making.
• Shareholders Agreement: For multi‑founder or investor‑backed groups, align ownership, control and IP ownership expectations.
• IP Ownership And Protection: Register trade marks for your brand in the correct owner entity via Register Your Trade Mark.
• Intercompany IP Licence: Document the rights and obligations between the IP owner (licensor) and the user (licensee). If you need a purpose‑built document for your group, see Intercompany IP Licence.

This structure is also common when setting up a holding company that manages assets while subsidiaries trade - see our overview on holding companies in Australia.

What Should Your Intercompany IP Licence Include?

Every group is different, but strong licences share some core clauses. Here’s what to consider.

1) Scope Of IP And Permitted Use

Define the IP clearly. List specific trade marks, software repositories, domain names, content libraries, and designs. Then set out what the licensee can do with them, such as “use in connection with the operation of X business in Australia.”

2) Territory, Exclusivity And Sublicensing

Specify the territory (for example, Australia or worldwide), whether the licence is exclusive or non‑exclusive, and whether the operating company can grant sublicences to distributors or franchisees. If sublicensing is permitted, state the conditions and approval process.

3) Fees, Royalties Or Cost Sharing

Even in a related‑party context, consider whether the operating company should pay a licence fee or royalty. This can support transfer pricing and governance requirements. If you opt for a cost‑sharing model (for development or maintenance of IP), detail how costs are calculated and paid.

4) Quality Control And Brand Guidelines

Licensors must protect trade mark integrity. Include brand standards, approval rights for major campaigns, and a right to audit use. Attach brand guidelines as a schedule and require compliance to prevent brand dilution.

5) Ownership And Improvements

State clearly that the licensor retains ownership of existing IP. Address who owns improvements, customisations or derivative works created by the licensee during the term. In many cases, improvements should vest in the licensor, with the licensee receiving rights to use them under the licence.

6) Confidentiality And Data

Add confidentiality obligations to protect trade secrets, source code, algorithms, and any proprietary know‑how. If customer data is involved, align your internal licence with your Privacy Policy and ensure the operating company handles personal information in compliance with the Privacy Act.

7) Maintenance, Support And Updates

For software or technical IP, clarify who is responsible for maintenance, bug fixes, hosting, and updates - and how these services are prioritised and resourced between entities.

8) Warranties, Indemnities And Liability

Include appropriate warranties (for example, that the licensor has the right to grant the licence) and allocate risk through indemnities and caps on liability that make sense for a related‑party context.

9) Term, Termination And Post‑Termination

Set a clear term and termination rights (for cause and for convenience), plus the steps on exit: stopping use of the IP, returning or destroying materials, and removing branding from customer‑facing assets.

10) Records, Reporting And Audit

If fees are involved, require periodic reporting and allow a right to audit to ensure the licence is being used within agreed parameters.

These are similar to a standard IP Licence, but tailored to the unique needs and governance expectations of related entities.

What Happens If You Don’t Have One?

Operating without a formal licence can create avoidable risks.

• Unclear Rights: If a dispute arises between founders or directors, the operating company may have no documented right to continue using the IP.
• Due Diligence Red Flags: Investors or buyers often require group IP arrangements to be documented. Missing or vague licences can delay or derail transactions.
• Tax And Transfer Pricing Issues: Related‑party dealings should be on reasonable terms. A written licence helps support your position.
• Insolvency Risk: If the operating company becomes insolvent, a liquidator could challenge informal or undocumented arrangements.
• Brand Integrity: Without quality controls, inconsistent brand use across entities can harm your reputation and undermine trade mark protection.

It’s also important to think about broader security interests. If your licence involves valuable software or equipment, registering interests on the PPSR (Personal Property Securities Register) may be wise in some structures - see What Is The PPSR? for a simple overview.

How To Put An Intercompany IP Licence In Place

Getting a licence drafted and signed doesn’t need to be complicated. A clear process helps you move quickly while staying compliant.

Step 1: Map Your IP And Ownership

List all IP assets (trade marks, domain names, software repositories, brand materials, content, designs, know‑how) and confirm which entity owns what. Where ownership is inconsistent, clean things up with an IP Assignment so that the designated licensor actually owns the IP it will license.

Step 2: Define How The Operating Company Uses The IP

Document the real‑world use cases: what brands go on customer‑facing materials, what systems the team uses, what content is published, and in which markets. This will inform scope, territory and exclusivity in the licence.

Step 3: Decide On Fees And Cost Sharing

Work with your advisors to determine whether to charge a royalty or adopt a cost‑sharing approach for development and maintenance. Either way, keep the terms commercially reasonable and consistent with how you actually operate.

Step 4: Draft And Execute Your Licence

Have a tailored intercompany licence prepared, consistent with your other group documents and governance policies. If you’re formalising a new group model, consider getting both your group agreements and your Intercompany IP Licence sorted at the same time to avoid gaps.

Step 5: Align Your Brand Protection And Policies

Ensure the IP owner entity files any outstanding trade mark applications via Register Your Trade Mark. Update brand guidelines and internal processes so your team knows how to use the brand and software in line with the licence. If staff develop new content or code, make sure your Employment Contract addresses IP created in the course of employment.

Step 6: Keep Records Current

As your business evolves - new products, new markets, or a rebrand - keep your schedules (lists of licensed IP) and brand guidelines up to date. This helps due diligence and keeps everyone on the same page.

Best Practice Tips And Common Pitfalls

Centralise IP Ownership Early

Don’t wait until a raise or exit to tidy up. Transfer ownership of brand assets to your IP owner entity and keep the chain of title clean. Where possible, file trade marks in that entity, not in personal names or your operating company.

Be Specific About Scope

Overly broad or vague licences can create uncertainty. Be clear about what’s licensed and for what purposes. Include schedules that list key assets, and update them as things change.

Include Quality Controls For Trade Marks

Trade mark law expects owners to exercise control over the quality of goods and services offered under their marks. Brand guidelines and approval rights help meet this standard and preserve your trade mark value.

Avoid “Silent” Sublicensing

If your operating company works with distributors, franchisees or contractors, clarify whether they can use the IP and on what terms. If third parties need rights, structure this via sublicences or separate agreements, consistent with your intercompany licence.

Match Legal Docs To Reality

Make sure your licence reflects how you actually operate. If fees are charged in the document, ensure they’re invoiced and recorded. If improvements vest in the licensor, implement a practical process to transfer materials and code repositories.

Keep Group Agreements Consistent

Align your licence with your constitution, shareholder arrangements and any financing documents. Consistency avoids conflicts and speeds up future transactions and diligence.

Other Legal Documents To Consider

An intercompany licence sits alongside a handful of other important contracts and policies. Depending on your business, you may also need:

• IP Assignment: Transfers ownership of IP from the operating company or individuals into the IP owner entity, keeping title clean. See IP Assignment.
• Non‑Disclosure Agreement (NDA): Protects confidential information when working with contractors, partners or potential investors. See Non‑Disclosure Agreement.
• Website Terms And Conditions: Sets rules for visitors and customers on your site or app, limiting liability and setting acceptable use terms. See Website Terms And Conditions.
• Employment Contracts And Policies: Ensures staff IP is owned by the company and includes confidentiality and acceptable use provisions. See Employment Contract.

Key Takeaways

• If your operating company uses brand or software owned by another group entity, you need an intercompany IP licence to make that use lawful and controlled.
• A strong licence clearly defines the IP, permitted use, territory, fees, quality controls, improvements, confidentiality, and termination mechanics.
• Centralise IP ownership and protect it with trade mark registrations, then license it down to the operating company on sensible, documented terms.
• Keep your licence aligned with your Company Constitution and Shareholders Agreement to ensure group documents work together smoothly.
• Document how you actually operate - including fees, reporting, and brand control - and keep schedules updated as your IP evolves.
• Getting your intercompany licence right early supports compliance, reduces risk, and helps future due diligence with investors or buyers.

If you’d like a consultation on setting up an intercompany IP licence for your group, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.