By Fiona Dott, solicitor in the Corporate & Commercial team. Article first published in a leading daily broadsheet newspaper.
My venture capitalist company primarily invests in start up businesses and entrepreneurs. I was recently approached by a 15 year old who has come up with a very exciting design and concept for an App. I believe this could be hugely successful and I am very keen to invest but I am wary of working with someone so young. I do not want to be in a position where I could be accused of exploiting him. What are the contractual issues of working with someone so young?
The general rule in England, Wales and Northern Ireland is that children gain legal capacity at the age of 18. A child under this age can enter into and enforce a contract, but cannot generally have that contract enforced against him or her.
The exceptions to this general rule are contracts for necessaries (such as food, drink, lodgings, medicines) and contracts for apprenticeship or education. Children can enter into these contracts and they will be enforceable against the child. However, any commercial contracts which you enter into with the 15 year old entrepreneur are unlikely to fall within these exceptions.
A person must have reached the age of 16 to act as a company director. If the 15 year old proposes to run a business through a company or a joint venture with you, he will not be able to act as director himself. There is no restriction on children holding shares in companies incorporated in England and Wales.
The most significant intellectual property right in the App is likely to be copyright. A child under 18 is able to own and exploit (including by way of royalty payments) copyright.
To reduce the risk of any contract which you conclude with the young entrepreneur being found to be unenforceable against him, you should require the child to obtain independent legal advice and ensure that the contract is drafted in clear and reasonable terms.