As the director of multiple companies, combining your assets into a single firm could reduce costs and admin. Grid Law founder David Walker guides a reader through the process of transferring intellectual property from three separate companies into a single entity.
Question
I am an avid reader of your newsletter and thoroughly enjoy the content shared on your website. Thank you for such a useful business resource!
I read with interest the recent series on IP by David Walker and very much hoped you might be able to point me in the direction of some practical advice on the following matter as it to some extent relates to IP.
I am sole director of three companies: all three are registered with Companies House in England as limited companies, however, two are dormant and just one is actively trading (and is also registered for VAT), although not currently generating a profit.
I’m seeking to reduce my administrative overheads (not to mention costs) and simplify matters by combining the three businesses into one.
I’m uncertain where to start or how to complete this process. I did reach out to Companies House for information but unfortunately, their response was less than enlightening.
As part of this exercise, I want to ensure that the ownership of all existing assets and IP from the two dormant companies is transferred to the trading company. There are all sorts of things that will need to be transferred included logos (which are trademarked), websites, a few books (e-books and printed books) and other written materials.
It’s difficult to put an actual monetary value on these assets but they do represent an investment in potential creative projects which may generate an income in the future.
Do you know of any online resources which might be of use or provide a guide on how to complete this process correctly?
Or are there any government-backed advice services I could approach for information?
I’m rather at a loss to know where to start and my searches to date have drawn a blank, so any advice or information you can provide would be most gratefully appreciated.
Obviously, my main concern is to comply with all relevant rules and legislation but it would also be good to have an awareness of any pitfalls/silly mistakes to avoid.
Answer
Hi,
Thanks for your question.
From a legal perspective, transferring intellectual property is a relatively straightforward process. However, before you can carry out the transfer, you need to fully understand what rights are being transferred.
It looks like you have already made a good start on this, but you will need a complete list of all the relevant intellectual property rights. A separate list will be needed for each of the two dormant companies.
Checklist
1. Trademarks
For the trademarks, list what the trademark is and the trademark number.
2. Logos and slogans
If you have any other logos, names or slogans that haven’t been registered as a trademark list them out and include copies as appropriate. These will be unregistered trademarks but they can still be transferred.
3. Books
For the books, list the titles and any ISBN numbers. If they are published, are they self-published or do you have an agreement with a publisher? If you do, the publisher will need to be informed of your intentions and they will need to agree to this.
For other written materials, if they don’t have a clear title to identify them, give a brief description of what they are.
4. Websites
For the websites, describe them as best you can and also list all the related domain names that you wish to transfer. (You may also have other domain names that have been registered but are not being used. List these too.)
Assignment documents
When you have a complete list of all the assets you want to transfer, we can prepare proper assignment documents. You will need a separate agreement for each company but the terms of the assignment are likely to be the same.
This is one of the rare cases where, legally, you have to have a written contract. Without one, the assignment won’t be legally binding. Then, any intellectual property rights that have not been assigned will be lost when the company is dissolved.
Your lists of all the rights to be transferred will form schedules to these assignments.
As with all contracts, you must give some consideration (payment) for the assignment. From a legal perspective, it doesn’t matter whether the consideration is £1.00 or the full value for the rights (which I appreciate may be difficult to ascertain.)
Creditors
One thing to be careful about is whether there are any creditors of the companies you are closing. If they have been dormant and haven’t traded for a while this is probably unlikely, but it’s important to check.
If either company has any creditors and the intellectual property rights were not assigned for their true value but instead were sold for, say £1.00, this could be seen as a transaction at an undervalue.
The creditors will have then lost out on money that could have been used to pay them. A future administrator or liquidator could then potentially undo the transaction and as a director, you could incur some personal liability for selling the assets too cheaply.
You should therefore discuss this with your accountant before making a final decision on the value of the rights being transferred.
After the assignments have been completed, you will have some administrative matters to attend to.
The Intellectual Property Office
The Intellectual Property Office (IPO) will need to be told about the transfer of ownership of the trademarks. You will need to complete form TM16 (which you can download from the IPO website) and pay a fee. The IPO will then update its database to record the details of the new owner. In your case, this will be the trading company.
The change of ownership of the domain names will also need to be recorded. Whoever you registered the domain names through should be able to help you with this.
Your website hosting company will need to be informed of the transfer and will most likely require the trading company to enter into a new contract with them. This will mean that the trading company is responsible for the ongoing hosting fees.
Once the assignment of all the intellectual property rights has been completed, we can discuss closing the dormant companies.
If you need me to explain any of this in more detail or you need me to prepare the assignment agreements, please let me know.
Kind regards,
David
Sign up to our newsletter to get the latest from Business Advice.
