This is a very common structure for multinational businesses which provide advisory services (such as management consultants, marketing services providers, PR agencies, engineering consultants, architects etc).
And also for software providers, if they also provide software implementation assistance and charge for that separately.
In this kind of scenario, the group entity which acts as ‘lead contractor’ and has the engagement with the third party client, may vary depending on the location of the client and on internal policy considerations (e.g. whether that client is regarded as a ‘global account’ or a ‘local account’).
However, that lead contractor may not have the capacity to deliver the whole of the services, and may need to call on assistance from people employed in other entities.
In legal terms, this is a special kind of arrangement because the intra-group support services are multidirectional. Any given entity may act as ‘intra-group service provider’ in relation to some client engagements. And may act as ‘intra-group service recipient’ in relation to other client engagements.
The intercompany agreement needed to implement these arrangements therefore needs to be multilateral, and needs to set out a framework within which the assistance can be provided and charged for.
As with most intercompany agreement types, the agreement needs to specify:
* the methodology for calculating the fees payable to entities acting as ‘intra-group service providers’;
* the allocation of risk;
* the ownership (as between the relevant group entities) of intangible assets produced in the course delivering the relevant services.
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