Due to the coronavirus and the measures taken, companies face financial difficulties and even consider possible bankruptcy. Suppose your company goes bankrupt. After the bankruptcy, you wish to start a new business again as soon as possible, whether or not within the same industry and/or sector. To do so, you want to use the same trade name, offer the same kind of products under the same brands and use the same technologies. A nice prospect. But you may be prohibited from doing so. This is because the trade name, products, brands and technologies may belong to the bankruptcy estate and have been sold by the liquidator to someone else.
Intellectual property (IP) is one of your company's most important assets. Although IP rights often do not appear on the balance sheet, they are an important part of your company's value. The better your IP is protected, the more valuable it can become. How this is structured is therefore very important when selling your business, but also in the event of (unexpected) bankruptcy and a possible relaunch.
To ensure that an entrepreneur can use the same IP rights after bankruptcy, it is often chosen to accommodate them in a structure. There are then two entities, usually a holding company B.V. and an operating company B.V. The IP rights are then placed in the holding company. The holding company (usually) does not participate in economic transactions, but merely grants the operating company the right to use the IP rights by means of a licence agreement. The operating company is then the company that under this licence may use the relevant trade name, market products under the trademarks and use technologies. Since the holding company (usually) does not participate in economic transactions, there is much less risk of bankruptcy. Such a structure is often set up from the start, but it also happens that such a structure is chosen only after several years of entrepreneurship. With regard to the ownership of IP rights, such a structure is almost always bankruptcy-proof.
The holding company thus grants a licence to the operating company. The licence agreement then stipulates the purposes for which the operating company may use the IP rights, for what duration and in what (geographical) area. The licence agreement will also include when it ends, for example if bankruptcy is filed, and the consequences of terminating the agreement. Therefore, should the operating company go bankrupt, the IP rights will not fall into the operating company's estate. By also including in the licence agreement that it terminates by operation of law if the operating company files for bankruptcy, the holding company can license the IP rights to another operating company again relatively easily.
For you as an entrepreneur, it is therefore important to properly (structured) house your IP rights. This includes looking at any licence agreements and whether and to what extent they provide for bankruptcy of the operating company. If this has not been properly arranged or if nothing has been stipulated in case of bankruptcy, you risk that in case of bankruptcy of the operating company all IP rights fall into the estate and are sold by the receiver to a third party.
If you are in doubt whether you have arranged it properly or would like more information on this topic? If so, please contact us. We can look together with you at the best way to accommodate your IP rights.